.

Gas prices are low at the moment, especially in the US, because of a glut of gas following the shale boom. Oil is more highly prized. Also, the Falkland Islands are 11,000 miles from Japan, the world’s biggest consumer of liquefied natural gas (LNG), so the latest find is not exactly close to market.

Shares in all the companies exploring around the Falklands have been volatile. As they have no revenues because they are yet to start producing oil there have also been a number of placings to fund their programmes. Some would argue too many.

FOGL’s last fundraising was in January this year, when it raised almost £50m. The problem with placings from a private investors’ point of view is that they do not get to participate. This means their holdings are diluted – and there’s nothing that can be done to maintain their equity investment at the same level.

The other problem with pure explorers is that there is no guarantee that the company will strike oil.

Hydrocarbons are found in about one in seven wells drilled, so the odds are pretty equal to a flutter on the greyhounds. In this respect it is more akin to gambling than investing, that’s why Questor is cautious on companies with no cash coming through the door.

Oil explorers can sort out this cash problem through farm-ins, where other groups stump up the cash for a stake in the discovery. Indeed, last month Noble Energy said it would farm-in for 35pc of all FOGL’s licences (not including the well that found gas this week and another called Nimrod) for $25m (£15.4m).

There may or may not be substantial amounts of commercial oil sitting in basins near the Falkland Islands. However, from an investment point of view, Questor thinks this does not really matter. FOGL has no production, no cash flow and no significant resources. The entire valuation of the business – which stands at £225m – is based on its exploration potential in the Southern Falkland Basin. This is too much of a gamble in a race where there are a number of horses and lots of pitfalls.

This is not even considering the political risk from Argentina, which is likely to step up its rhetoric should commercial discoveries be made.

The rating is therefore avoid.

an interesting read hyleo, and certainly i agree that buying into E&P companies that have no proven assets is a gamble .... that is why only a very small small amount of one's portfolio so should be so based ..... however, certain people on this board clearly think that betting one's shirt is a great macho posture that is worth the strong risk of losing great slabs of money

Depends if you are making great slabs of money to be able to put down large wonga on a huge pay out if all goes well. :-))

now try that in english ...... i suspect that it in no ways detracts from my comment basis about % of portfolio

''Money''. Agree with what you say cynic.

The Questor article is riddled with inaccuracies - totally riddled with them - the writer should hang their head in shame.

For example : ................ Indeed, last month Noble Energy said it would farm-in for 35pc of all FOGL’s licences (not including the well that found gas this week and another called Nimrod) for $25m (£15.4m)................


That is total codswallap - Noble are paying back costs and cash and paying 25% of the well costs at Scotia. Far in excess of $25m that the Questor article says - they must be short to post such an article with so many mistakes in it. Extremely poor research - tut tut Questor - are you boys short ?

the tenet of the argument remains sound .... FOGL have found nothing of value to date

Frankly...don't go my newspaper tips...they are nearly always crap....the only time you went with them was in the boom years (if there were any)...then the share that was tipped would take off......otherwise they are nearly always late as we already know if the share is good or not......FOGL has potential and in my view have a very large gas discovery under their belt.....BOR have one as well....and RKH have oil.....lot more to be discovered.....might be with Scotia......or it might be more gas, which means it would be worth their while for sure to appraise later....

But it dos'nt stop you from jumping on the "momentum" band wagon does it cynic..
Or am i been a cynic..

Doesn't make sense... why not analyse it quick or it is trying to deviate our attention to Scotia as it has bad news from its analysis...


FOGL said it had not been possible to determine if the gas had any liquid content and it has decided not to drill another well at Loligo until the current results have been analysed. Instead the well will be plugged and abandoned and the next drilling will take place on the Scotia prospect.

You've turned into a right Diva this morning Hlyeo98...look they did not have the right equipment to run the tests....this was an exploration well.....through 5 targets...it turns out all were gas bearing, with very strong shows...it is almost impossible to have all the testing equipment for oil and gas ready for an exploration well...that is why appraisal wells come later....

hyleo, again, after the Noble farm out it was agreed that Scotia would be the next well - so Scotia is the next well.

Loligo they will want 3D over it, thats going to take 6 months to 9 months to get and process, so Loligo full update will be 9 months away imo.

There she is in all her beauty - Scotia.

Class 2 AVO.



Class 2 AVO indicates moderately consolidated sands, porosity should be in the 15% to 25% range.

The Toroa well went through the mid-cretaceous sands and found very good sands, which greatly derisked the porosity and permeability aspects of the reservoir potential at Scotia.

Based on good quality proven mid-cretaceous sands, class 2 avo I would suggest the chance of striking reservoired hydrocarbons at Scotia is high, the reservoir sands risk is much lower than Loligo (owing to Toroa results) - it really, IMO only, boils down to what phase the hydrocarbons are - gas or gas/condensate or oil.

Fingers crossed its oil.

I thought the chance of sucess at Scotia was 16.6%....

Now now Shortie, you should realise proramper's geology knowledge, experience and exploration expertise far exceeds that of the real professionals. Cue the poodle for response!

The CoS is based upon.

Seal

Charge

Structure

Reservoir.


Loligo had seal, charge, reservoir and structure - therefore at the end its CoS was 100%.

People on here were quoting 10% CoS, some 20% - but in the end it was a 100% on all levels as it found reservoired hydrocarbons - good charge, good seal, good structure and with some optimal well placement after 3D, there will be good reservoir too, imo.

Most people have not got a clue how to work out CoS.

Toroa results........The prospect was a great big ruddy coal field no gas and no oil just coal and lots of it.

As for chances of hitting oil i think one broker said 16.5 % COS.....that is a broker saying that ..... i would like to think a little more but the chances are not high at all its a 1 in 5 but she is big if they are lucky.

So the share price will be 30p or £4+ at the end of the drill.

i don't need to work out CoS as industry norm (approx 5/1) is common knowledge ...... the norm will then vary up or down depending on a number of factors, not least of which is subjective view as of course is the interpretation of the word "success"

Proselenes - 13 Jan 2012 13:00 - 107 of 2065

FOGL CoS is not low.


Toroa was 3.8% CoS and it failed.

Loligo, back in 2006, pre CSEM, pre more seismic studies etc.. had a CoS of 11.5% as rated by TRACS (Nov 2006).

At the AGM recently the board said the CoS was now, after all the new work from 2006, at the 20% level for Loligo.

Scotia well, given the excellent sands at Toroa and the implications for Scotia deep well, is also around 20% CoS imo.

cynic, its quite easy really.

Seal / Charge / Reservoir / Structure

If all 4 were 100%

It would be 100 x 100 x 100 x 100 = 100,000,000

If as I suggest for Scotia is 60 Seal / 80 Charge / 80 Reservoir / 60 Structure

Then you get 60 x 80 x 80 x 60 = 23,000,000

So the CoS is therefore 23% (23,000,000 is 23% of 100,000,000).


Its all quite quite simple - nothing complex in it.