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http://www.offshore.no/international/article/Searching_for_sweet_spots_at_Loligo

Searching for sweet spots at Loligo

Posted 17.09.2012 10:02:54 av John Bradbury

Work is starting straight away to see if the Loligo gas find in the Falklands is commercial.

Tim Bushell, chief executive of Falklands Oil and Gas, which operated the Loligo gas discovery well with 75%, said the although up to 100 metres (328 feet) of hydrocarbon-bearing reservoir has been encountered, further work needs to focus on reservoir distribution, to find the sweet spots within the discovery.

“The initial results of the Loligo well are encouraging,” Bushell declared today. “They have demonstrated that hydrocarbons have migrated into the Tertiary Channel Play. It is also clear that Loligo is a valid trap that contains multiple gas bearing zones, with over 100 metres [328 feet] of hydrocarbon bearing reservoir.”

And he continued: “We now need to focus on reservoir distribution within Loligo in order to find the sweet spots. A work programme will be undertaken to achieve this, assess the resource potential and commercial viability of this discovery.”

FOGL holds 75% equity in the 42/07-01 Loligo discovery well, which was drilled with the Leiv Eiriksson semi-submersible. Edison International holds the remaining 25% in the well.

With the results from the Scotia prospect – the next well on FOGL's South Atlantic drilling programme – Bushell said these should help determine the company's future exploration efforts.

He indicates that the company has the necessary funding in place for further 3D seismic surveys and for drilling again in 2014.

a sensible, concise and considered analysis from FD i thought ...... certainly a damn sight clearer and more intelligible than most of the 1000+ pseudo-science posts from certain quarters ...... and on that slightly acid note, i shall proceed to boarding

Look - the market cannot price this because they do not know if its 1 TCF recoverable or 25 TCF recoverable. All they know now is :

Its huge

FOGL have wisely stated clearly to the effect - the well location was compromised to hit all targets instead of hitting sweet spots. They drilled into the margins (edges) of the structures - but then - what did anyone expect given this was a 5 in 1 that actually got 6 in 1. 6 targets hit and proven hydrocarbon bearing.with 1 single drill - well done FOGL !!!

Until they process the information they have no idea too - but its looking good.

If they process the information and think that the massive structure has very sweet sweet spots (not like the margin area's presently drilled due to the compromised location) they will be able to say in a couple of months "We think the P50 is 15 TCF or 20 TCF or 30 TCF recoverable"

Until they do further work, get the core samples tested, rework the seismic etc..... then this could be 1 TCF or 30 TCF - nobody knows - so the market will be very reserved in its response until more data is available. The market will assume the low case, until a better case is put forward.

5 TCF recoverable is needed for commercial gas development in the Falklands. So far there is only Johnson up north with about 2.7 TCF recoverable.

If Loligo is over 5 TCF it also makes Johnson commercial overnight.

Lots of work to do - and when the results are known and an RNS comes - then you will see the real reaction.

At the moment all we can say is the potential of the East Falklands is now fully proven, there are possibly 80 billion BOE recoverable up for play now - and lets get on with it.

Loligo is huge, it could be highly commercial - wait for the technical update in a couple of months time.

Usual over-inflated claims. Sensible investors would be better off taking note of the Fox Davies comments.

Any production is many years away and will require a massive investment, not least to deal with the environmental safeguards that the authorities will most certainly insist on.

It is the future potential of the east basin plus Scotia that should drive the sp.....in my view this company is way undervalued.....good result this morning not yet priced in by the market which got it completely wrong this morning.....who were the muppets that sold out 60p or less ?....bonkers...

Mr P - "Loligo is huge, it could be highly commercial - wait for the technical update in a couple of months time."
So that's about it from you until late November?

Goldman Sachs comment :

Falkland Oil & Gas (FOGL) has just announced the result of the Loligo
exploration well being drilled in the South Falklands basin. The initial well
results indicate that gas has been encountered within the targeted T1 to T5
reservoir horizons with gas shows (C1 to C5) encountered while drilling
through each horizon. The company notes that owing to the thinly bedded
nature of the reservoir it is difficult at this stage to accurately assess
hydrocarbon saturation and the total net pay and thus further detailed
studies are required to obtain a better understanding of resource potential.

Analysis

FOGL has a 75% interest in the well with its partner Edision International
holding the remaining 25%. We currently value the prospect (c. gross
volume 4.7bn bls) net to FOGL at 135p/share on a risked post funding
basis. This assumes both a gas and oil case split roughly 65%:35%. In the
event of totally de-risking the prospect assuming a gas case, we would
value Loligo at c. £11.75/share.

H

Miss P is in a quandry. She usually claims to have sold out on a spike but wasn't able to do that here. Her - highly questionable - 400,000 share holding is tying up a lot of capital, which would normally be transferred to the next ramp target.

happy days, onwards and upwards.

Just for info if it did come in at 25 tcf it would be the 20th biggest gas field ever discovered, a true giant.

Also the vast majority of bigger fields are in coutries that we wouldnt want to rely on too much, such as Iran, Russia etc. A field of this size discovered in a friendly part of the western world would be big news to companies in this line of business.

so the Argies are going to become our friends ?

The argies will only ever sabre rattle. Self determination trumps all. They can whinge all they want but it wont make any difference to the outcome of these explorations and possible future commercial activities.

I agree.......Onwards and upwards.

Good morning for me..........My finger was on the button at the opening........Managed to buy at 63p, which was great, as I sold a 1/3rd of my stock last week, bagged some pound notes and now have more shares.

Long term share for me, but I feel the share will be volatile for a couple of weeks until "Scotia is spudded" then share will head north, so I intend to buy and sell with my 1/3rd holding, hoping to bag more shares, and hopefully bank a little profit on the way.

Glad to see "cynic" back buying more shares.........Valued columnist IMO; I enjoy reading all the posts, some good some bad........Everyone is entitled to an opinion. All this said; FOGL is now a big player (IMO)!
PS: I am still a supporter of Pro………..If Pro is a Ramper, he is a very good technical Ramper (IMO).

She is good at copying and pasting.

It never ceases to amaze does it ie: just because the s/p hasn't tanked like a lot of these know alls said it was going to, we now get dorks like blackdown coming out with the environmental safeguards rouse, sometimes you could'nt make it up, they're like a bunch of spoilt brats who can't get their own way and stamping their feet..

My original post on valuing and understanding Loligo is here :

http://boards.fool.co.uk/understanding-loligo-fogl-12614508.aspx


The succulent part is this below :

----------------------------


GAS BASIS - this is a VERY POSSIBLE outcome to the well on success.


T1 = Circa 9 TCF recoverable - P50

T1 Deep = Circa 3.8 TCF recoverable - P50

Trigg and Trigg Deep is circa 5.8 TCF recoverable - P50

Three Bears = Circa 9.5 TCF recoverable - P50


Based on Cove's (COV) sale and therefore using a 513 millions US$ per TCF recoverable and taking 75% of that for FOGL's share and 320 million shares in issue.

T1 = 9*75%*513mUS$/1.55/320m = £6.98 per FOGL share value if P50 size gas
T1 Deep = 3.8*75%*513mUS$/1.55/320m = £2.94 per FOGL share value if P50 size gas
Triggs = 5.8*75%*513mUS$/1.55/320m = £4.49 per FOGL share value if P50 size gas
3 Bears = 9.5*75%*513mUS$/1.55/320m = £7.36 per FOGL share value if P50 size gas

As FOGL already have a farm in partner and reservoirs are going to be, if there, large massive thick sandstones and simple to develop the price should be higher than Sea Lion's 4.7US$ per barrel, however, I will use that for now to be conservative.

If all targets are gas, based on COV price - potential £21.77 per share.


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From todays RNS we would appear to have lost perhaps T1/T1 Deep - but have gained a substantial new reservoir in T5 level (Tertiary 5), however we do not know what it is. T5 could make up for the T1 potential loss - but at this stage it best to ignore T1 and go with no value for T5.


So Triggs + Three Bears and ignoring T5 - falls basically in line with the Goldman Sachs valuation - but with upside on T5 being big and good.

So well done Goldman - pretty good conservative valuation of Loligo going forward, lots of potential upside to that as well.

This potential will not get priced in to any large extent until further technical updates are given and will start to get fully priced in once an appraisal well hits the sweet spots in the channels (as opposed to present compromised location which hit the edges and outside of the channels - outside the main target reservoir thick pay areas).

But anyway - just goes to show what potential is there - and this East Falklands basin is massive.

You can see why its the only area that got farmed into by multi-billion partners BEFORE drilling started.

The big difference between BOR and FOGL is that FOGL already has multi-billion partners.

FOGL is also fully funded for 4 to 5 wells in 2014.

They can do 3D seismic next year and look forward to appraising Loligo and proving its worth - without the need for any fund raisings.

BOR sadly are out of cash with only enough for 3D work. Which means they have a weak hand to play as they have to farm out now or have to issues lots of new shares to raise money.

Not the same with FOGL - fully funded for 3D and also 4 or 5 new wells/appraisals - and on top of that we still have full paid for Scotia well next.

FOGL is a lovely place to be right now.


A friend asked me earlier what they should do with FOGL for the long term - I answered quite simply to them "A nice alternate pension would be making a shareholding account called "FOGL Pension" and then every month buying a few hundred pounds of shares and locking them away in that account - not to be traded or sold. Just keep doing that each month for a few years and you will have a very substantial sum of money in 5 years time imo."

After so much negativity of late, FOGL seems to be on the money. £21.77 a share seems a bit optimistic, but I'll take it thank you very much!

For £21.77 I'll happily roll over my Futures..!!

http://www.fogl.com/fogl/en/home

Then click on Noble Energy farm out prensentation

FOGL are not fully funded for 4 or 5 wells in 2014

FOGL fully funded for 5 wells: 2 wells in 2012 and 3 additional wells in a later drilling campaign