.

RF, I did not sell out.

Whats the downside if Scotia is a duster ?

Common question.

By my estimates FOGL will now end the 2012 drilling campaign with cash of 220 million US$ (circa 43p a share cash)

In 2013 circa 33 million will be spent on the 3D surveys and admin, this means FOGL enter the 2014 drilling campaign with 187 million US$.

Of course they might have a lot more than that if Noble farm into Loligo/Garrodia/Nimrod in 2013, however, for now, lets pretend they will not.


187 million US$ going into 2014 - so the downside will be circa 58.5 US cents per share or 35.5 pence per share.

This will mean for 2013 they will be "below cash" for a period of time, until 3D costs and admin catch up to bring cash down as they enter 2014 and drilling is back in the near term horizon again.

So, from today, a Scotia duster will see the share price down 50%. A strike at Scotia and you should be looking at 800% rise given the complex which houses Scotia.

Thats the short term potential for the share price imo.

I'm invested too, holding long futures but only a small part of my portfolio. I've already made a fair profit and expect to exit before the result on my remaining futures.

I'd agree 50% downside risk on a duster. Can you post your calculations for a strike that would give us an 800% increase? I'm curious how you get to this figure and what if any premium you've used.

Anyone got a link to the Jefferies note on FOGL ? If so please advise or send me a mail.

I consider myself very lucky Loligo wasn't a duster and probably won't be staying in until Scotia

A quote that I have a question. Don't worry I'm not saying picky

"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."

Proselenes.. I'm not saying you were wrong on the above, but could you please explain why the above didn't come through.

Thanks

Cortez, its very simple, they have not as yet proved they have net pay. Once they appraise Loligo and prove the sweet spots and prove the reserve base then the share price will respond accordingly.

At this moment in time they have gas, it might be massive BUT as far as the market cares, its not proven to be net pay flowing gas and fluids - and so until such time as it is or is proven it will be, the share price will lag way behind.

That gives you a future value - the process is now about proving up that value with 3D work, sidewall cores and appraisal drill.

Scotia drill off and running!!.. Well on time too, was expecting to be nearer end of week..

Spud RNS

I would suggest its going to be 65 to 70 days well operations. Loligo they said 60 days well operations and were done in 52 days (8 day saving).

Yesterday was 1 day for arrival and set up

Drilling time to TD at Scotia should be in the 45 day to 55 day range.

10 days for clean up and testing

10 to 14 days for P&A operation

1 day for pack up and go.


Expect rumours of gas or condensate or oil or duster to start coming from week commencing Monday 19th of November - that is when they will be through the target and approaching TD, if not already at TD.

Mark it in your calenders now ! Big red "Scotia Result Near" circle around the 19th of November.

Scotia - FI 31/12-01 Well Spud

"FOGL is pleased to announce that the Scotia exploration well FI 31/12-01 was spudded on 25 September 2012.

The well is located 315 km east - northeast of Stanley, Falkland Islands and 114 km from the Loligo prospect.

FOGL is the operator of the well, holding a 75% interest, together with its partner Edison International Spa, which holds the remaining 25% interest. Under a farmout agreement announced on 6 August 2012, Noble Energy Inc. will also participate in this well for a 35% interest, thereby reducing FOGL's interest to 40%. The farmout agreement has been approved by the Falkland Islands Government and the changes to the licences will be formally executed in the near future. Scotia is the second of FOGL's two well exploration programme using the Leiv Eriksson semi submersible drilling rig.

The well is designed to test the Scotia prospect within the mid Cretaceous fan play. It is anticipated that the well operations will be around 75 days with a total depth of approximately 5,000 metres."

and the market remains disinterested, at least for now

Been better returns on Argos up 100% doing FFA

No suprise that the market is disinterested, as the drill was already in the price!

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

513 millions US$ per TCF recoverable I think is rather optimistic. Even if the resource base which is unknown at present does contain the amounts of gas COV suggest you still have to consider the flow rate and then the cost of production. No abnormal pressure was recorded during the drill which suggests to me that flow rates are low. Of course even if the resource base is proved if it takes 30 years to extract the resource costs of production will be far higher than a well under good pressure and a shorter life.

greek - i.e. at the bottom end of the recent trading range!

http://www.proactiveinvestors.co.uk/companies/news/48407/falkland-oil-gas-scotia-well-particularly-attractive-says-broker-

......Oriel Securities, which also rates FOGL as a ‘buy’, said that if Scotia is successful the company has a number of ‘follow on’ prospects of a similar size and that it remains well funded.

“FOGL has the highest impact exploration programme in the UK listed E&P sector,” Oriel analyst Richard Griffith said in a note..............

http://oilbarrel.com/media/pub/var/release_downloadable_file/40361.pdf


FOGL spuds Scotia

FOGL announced that on 25 September 2012 the Scotia exploration well was spudded. FOGL is operator and holder of a 40% interest. The remaining interests are held by Noble Energy Inc. (35%) and Edison International Spa (25%), subject to finalisation and governmental approvals.

The well has a target depth of 5,000m and FOGL estimates that depth will be reached in the first half of December 2012.

 Our 152p/share target price and BUY recommendation are premised principally on our estimate of a 16.6% chance of success (for liquids) at Scotia. We have assumed that if hydrocarbons are encountered there is a 50% chance that they are liquids. Given the gassy nature of Darwin (condensate) and Loligo (wet gas, although analysis is ongoing) there is downside risk to our assessment of the probability of finding liquids.

We maintain our view that Scotia is a particularly attractive because i) the source rock control is excellent (and thought to be oil prone), ii) the scale is extraordinary (circa 1.1 bn bbls of gross prospective resource) and iii) it is a play opener.

Scotia is 114km away from Loligo. It is a Cretaceous target (fan) the source rock is expected to be Aptian. It exhibits a strong amplitude anomaly that conforms to structure.

Investors should be aware of the high risk nature of drilling in frontier basins.

Todays Edison update on FOGL (PDF)

http://www.edisoninvestmentresearch.co.uk/researchreports/FOGL250912update.pdf

.

And my update on Loligo.........(any errors apologies in advance)


Loligo results.......................


So let’s start at the start and work through to the end. Before the drill started we knew

Loligo - Class 3 AVO - this means "unconsolidated sands" with porosity normally of more than 25%. These "bright spots" are normally gas or very high GOR oils (wet gas or condensate etc..).

Unconsolidated means the sands are, if you like, loose and are not "sandstone" - this highly important factor has been "avoided" by most media and brokers when it holds the key as to the likely reason no fluid sample was possible and the company refers to "not having the correct equipment" on board. More on that later.

Loligo - P50 recoverable basis estimates of 4.7 BBOE (Billion Barrels of Oil Equivalent) - so everyone was fully aware this was potentially a gas discovery before the drill started turning, indeed BHP stated they believed (when the initial drill was to be Loligo NW, the shallow one) and that T1 and T1 deep would be gas.

Drill location - FOGL were attempting to drill 5 separate targets with just 1 drill. They had done 2D seismic with further infill and the idea of the Loligo well was to prove that there were multiple stacked reservoirs and these reservoirs contained hydrocarbons.

There was little point running an expensive 3D survey over Loligo if it contained nothing of interest. Therefore a well location was selected which could penetrate all 5 targets with a single drill - albeit the locations drilled through on all of the reservoirs would be very sub optimal at the location chosen, they wanted to test all the targets and prove their existence, and hydrocarbon fill, before spending more money with 3D seismic survey and then appraisal drilling.


Appraisal drill - FOGL have only one alternate location at Loligo approved for drilling, this is the shallow well Loligo NW which would only penetrate T1 and T1 deep, its location does not in any way penetrate Trigg, or Trigg Deep or Three Bears and possibly not T5 sands. This was the only location they could have drilled as a follow on appraisal as it is the only other approved drilling target at Loligo with the Falklands government under the current FOGL EIS.


Pre-drill named targets (shallowest first and deepest last) -

T1 = 1509 million recoverable BOE = 9TCF recoverable
T1 Deep = 644 million recoverable BOE = 3.8 TCF recoverable
Trigg and Trigg Deep is 969 million recoverable BOE = 5.8 TCF recoverable
Three Bears = 1588 million recoverable BOE = 9.5 TCF recoverable

T1 and T1 deep are in the T1 level (Tertiary 1)
Trigg and Trigg Deep are in the T2 level (Tertiary 2)
Three Bears is in the T3 level (Tertiary 3)

No targets were named pre-drill in the T4 or T5 level, this is because they are often "hidden" on seismic by the ones above and so are generally only found should you drill into them,

This has been the case with many "giant" discoveries offshore Brazil - not visible on seismic as hidden by the reservoirs above and only discovered by drilling into them.

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So - let’s get on to the results of the drilling :

T1 Target - firstly, let’s look at where the rig (the red X) intercepted the T1 target, in white, at this well location. All of these are very rough estimates by me.



As can be seen, the well location is on the edge of the anomaly, had the drill been 20 kilometers north west it might have hit a sweet spot with very thick net pay (that where Loligo NW well was designed to test). Given this very distal location of the Loligo drill its unsurprising that the sands were low net pay and had fine grain sands in them. You will note FOGL say in their RNS "distal" and "outside of channel" - this relates of course to the well location being right at the very edge

AT THIS POINT I WILL MAKE A COMPARISON - had Shell drilled 5 kilometers east in one of their earlier Falklands drills they would have hit Sea Lion. They had oil shows and give up and were "just 5 kilometers out". Here we are talking the Loligo well location is 20 kilometers away from the pre-drill estimated central point of T1.

Shell’s well location and they missed Sea Lion by a few kilometers is in the pic below.



Back to T1, strong C1, C2, C3, C4 and C5 shows were seen in T1. This points to a very wet gas, or possibly condensate. C1 is dry gas, C2 to C5+ are the liquids. C5 to C1 ratio definition gives you the condensate quantity in the gas - and I believe the very worst outcome for Loligo is a valuable giant wet gas discovery - at best it’s a very valuable giant condensate and wet gas discovery.

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T1 Deep Target - firstly, let’s look at where the rig (the red X) intercepted the T1 Deep target, in pink, at this well location. All of these are very rough estimates by me.



As can be seen, the well location is on the edge of the seismic anomaly, had the drill been 10 kilometers north east it might have hit a sweet spot with big net pay. Given this very distal location of the Loligo drill its unsurprising that the sands were low net pay and had fine grain sands in them. You will note FOGL say in their RNS "distal" and "outside of channel" - this relates of course to the well location being right at the very edge

AT THIS POINT I WILL MAKE A COMPARISON - had Shell drilled 5 kilometers east in one of their earlier Falklands drills they would have hit Sea Lion. They had oil shows and give up and were "just 5 kilometers out". Here we are talking the Loligo well location is 10 kilometers away from the pre-drill estimated central point of T1 deep.

Strong C1, C2, C3, C4 and C5 shows were seen in T1 Deep. This points to a very wet gas, or possibly condensate. C1 is dry gas, C2 to C5+ are the liquids. C5 to C1 ratio definition gives you the condensate quantity in the gas - and I believe the very worst outcome for Loligo is a valuable giant wet gas discovery - at best it’s a very valuable giant condensate and wet gas discovery.
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Trigg Target - firstly, let’s look at where the rig (the red X) intercepted the Trigg target, in bright green, at this well location. All of these are very rough estimates by me.



I really am not sure on the size or location of Trigg where the drill was done, as far as I can make out there was a slim section of Trigg around this area (the bigger Trigg slice was south west) and this slim area is where the drill went into. Trigg was the smallest of all the pre-drill targets named.

Strong C1, C2, C3, C4 and C5 shows were seen in Trigg. This points to a very wet gas, or possibly condensate. C1 is dry gas, C2 to C5+ are the liquids. C5 to C1 ratio definition gives you the condensate quantity in the gas - and I believe the very worst outcome for Loligo is a valuable giant wet gas discovery - at best it’s a very valuable giant condensate discovery
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Trigg Deep Target - firstly, let’s look at where the rig (the red X) intercepted the T1 Deep target, in dark green, at this well location. All of these are very rough estimates by me.



As can be seen, the well location is outside the edge of the seismic anomaly, had the drill been 5 kilometers SSW it might have hit a sweet spot, or 15 kilometers SW it might have hit another sweet spot. Given this very distal location of the Loligo drill its unsurprising that the sands were low net pay and had fine grain sands in them. You will note FOGL say in their RNS "distal" and "outside of channel" - this relates of course to the well location being right at the very edge - in the case of Trigg Deep I think they are outside, very distal.

AT THIS POINT I WILL MAKE A COMPARISON - had Shell drilled 5 kilometers east in one of their earlier Falklands drills they would have hit Sea Lion. They had oil shows and give up and were "just 5 kilometers out". Here we are talking the Loligo well location is 15 kilometers away from the pre-drill estimated central point of Trigg deep in a westerly direction (not the separate Trigg Deep West).

Strong C1, C2, C3, C4 and C5 shows were seen in Trigg Deep. This points to a very wet gas, or possibly condensate. C1 is dry gas, C2 to C5+ are the liquids. C5 to C1 ratio definition gives you the condensate quantity in the gas - and I believe the very worst outcome for Loligo is a valuable giant wet gas discovery - at best it’s a very valuable giant condensate and wet gas discovery.

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Three Bears - firstly, let’s look at where the rig (the white X) intercepted the Three Bears target, in red, at this well location. All of these are very rough estimates by me.



As can be seen, the well location is on the edge of the seismic anomaly, had the drill been 10 kilometers north east, or 10 kilometers north west or 15 kilometers south west it might have hit a sweet spots. Given this very distal location of the Loligo drill its unsurprising that the sands were low net pay and had fine grain sands in them. You will note FOGL say in their RNS "distal" and "outside of channel" - this relates of course to the well location being right at the very edge

AT THIS POINT I WILL MAKE A COMPARISON - had Shell drilled 5 kilometers east in one of their earlier Falklands drills they would have hit Sea Lion. They had oil shows and give up and were "just 5 kilometers out". Here we are talking the Loligo well location is 10 kilometers away from the pre-drill estimated central point of T1 deep.

Strong C1, C2, C3, C4 and C5 shows were seen in Three Bears. This points to a very wet gas, or possibly condensate. C1 is dry gas, C2 to C5+ are the liquids. C5 to C1 ratio definition gives you the condensate quantity in the gas - and I believe the very worst outcome for Loligo is a valuable giant wet gas discovery - at best it’s a very valuable giant condensate and wet gas discovery.
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T5 - this was an unmapped potential - it is hidden below the other reservoirs and so although they knew there was potential for there to be reservoirs in T5, they would have to drill through to hit them to prove they are there.

Given nobody knows the shape or size of this, it’s no surprise that it hit an area of thicker net pay - simply it’s not been struck at a distal location and appears to be more nearer the centre of whatever the size of this is.

=========================================================================


In summary - all of the upper targets were drilled knowingly at distal locations - this was because the main objective of this well was to prove the existence of the reservoirs and to discover what hydrocarbon type was in them and to prove traps and seals effective, and in a single well try to hit all 5 upper target zones in one go. They actually hit 6 targets in one go with the additional T5 in there.

On this basis the well was a total success :

Charge = Proven
Seal = Proven
Reservoirs = Proven
Structure = Proven

Success on all the technical levels means they can now spend the money on a 3D survey over the Tertiary and Mid-Cretaceous targets in early 2013 (estimated net cost to FOGL is 30 million US$) - they can process this new 3D with their existing data set, their drilling log data, their sidewall core data and can then, later in 2013, come up with a full review of Loligo - allowing them to quote expected resource size, expected GOR etc...

At a glance all targets hit right on the edge – see pic below :




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Questions to ask :

Resource size ? As all reservoirs are proven this all comes down now to 3D seismic results to get a good figure. It could be 10 TCF recoverable, it could be over 50 TCF recoverable with the add on of T5. The range presently is vast as much more data is needed. I will plump now to suggest that Loligo, late in 2013, will have a P50 figure recoverable of over 30 TCF, thats 5 billion BOE.

Appraisal well, why not drill it ? That is easily understandable, they had only one location approved by the Falklands government that could be drilled instantly, that was Loligo NW. The location of Loligo NW as below pic, is likely to be sweet spot T1 and maybe good for a section of T1 deep, but it would miss Trigg, Trigg Deep, Three Bears and possibly T5 as well. So given the only approved possible appraisal well location would miss most of the targets and given Noble want to drill Scotia and have previously announced that Scotia would be drilled in Q4, it’s easy to see why the drill is now spudding Scotia and not drilling what would be a very poorly located appraisal location for most of the targets. The fact they declined to drill what would have been a very poorly located appraisal for the deeper targets is not detrimental, its common sense to now wait for 3D seismic results and pick confirmed sweet spots from 3D. Would the market be happy if they drilled T1 in a sweet spot and got condensate and that the end of the drilling until 2014 and no Scotia drill. Or does the market prefer to put Loligo on the back burner until after 3D is done and get off and drill Scotia for a billion recoverable barrels potential now – and high chance of oil. The only approved well location able to be drilled with no delay was as below :

What is good about "Wet Gas" ? "Wet gas" as by its name contains lots of liquids, and these liquids are very valuable. You have dry gas - this is the least valuable of all. Dry gas is C1. The more liquids you have in the gas then the more valuable the gas discovery is, all the way up to being a full on "condensate" discovery. Loligo has hit wet gas, given the strong shows of C1 all the way to C5. Given the very poor well location it’s not been possible to get fluid samples so as yet we do not know if this is a very wet gas discovery or a condensate discovery, or if say T1, T1 Deep, Trigg, Trigg Deep are wet gas and Three Bears is condensate etc....

All we can say is that its "wet gas" and that "wet gas" is far more valuable than your bog standard C1 dry gas. The more valuable liquids you have the more profit you make and so not only does the commercial threshold for size reduce, the point at which you start making mega returns on your initial infrastructure investment also lowers.


So why no fluid sample ? I will lay some "blame", imo only that is, here on FOGL management, this was a Class 3 AVO anomaly, which means "UNCONSOLIDATED SANDS" with roughly 25% or more porosity.

They will have (should have) planned for unconsolidated sands with the wire line test equipment but got caught out I think with the fine grain nature of the distal locations.

Unconsolidated sands are a real bugger for wire line sampling - as its in effect if you like “loose sand” and can instantly clog up the tool if there are fines (this is known as "PLUGGING").

They may have thought a larger grain would have been here and thought they could "get away with it" but got screwed because it was not unconsolidated large grain, it was unconsolidated with fine grain and that likely plugged their wire line sampling tools instantly and that means no fluid samples and no pressure data.

Because it’s also unconsolidated sands and not sandstone (consolidated sands) there is a chance also that packer seal might have failed and the only pressure measure you will get will be the drilling mud pressure and not the formation pressure. So again that can be a cause for failure to get formation pressures.

So, some blame I attribute to the FOGL boys, sorry lads, but you should have been ready for unconsolidated sands of all types for fluid sampling – fine grains should have been planned for.

The distal location of the well explains why its fine grain, but really that should have been planned for with special filters/special equipment for fluid sampling and pressure testing of fine gain unconsolidated sands.

So with fine grains “plugging” your wire line sampling tool you will get no fluid samples and no pressure data. This is pretty basic stuff and I am surprised that none of these so called “research” houses have even tried to explain it – FOGL were explicit on the “fine” in the RNS – that is the key imo.


Distal ? Fine sand ? Outside channel ? This relates to the way the reservoir was formed. When you get to the edges of something the water speed is slow and in slow water the fine particles will settle, in the middle the water speed is much faster and only heavier particles will fall, small particles remain floating in the water until the water speed slows down enough to let them settle. Its why on a river bed you will see sand and small particles on the banks of a river as the water speed is slow and you will find pebbles and rocks and the heavy and bigger sized stuff in the middle of the river where the flow rate is fast. This Loligo drill has hit most targets right on the edge (and that is the way it had to be in order to hit 5 in 1) and therefore finding fine grains on the edge is not really a surprise with a dollop of hindsight.

Think of a hydrocarbon reservoir as an upside down pudding bowl if you like, the edges are thin and marginal and the central area is the thick net juicy pay. Distal means "far away from the centre" and its why you see FOGL say "distal" and "Outside channel" in the press release. Look how close Shell were to finding Sea Lion, but because they drilled outside the main area they got low pay and oil shows – had they moved just a couple of clicks east they would have hit Sea Lion.


Could this be a condensate discovery in future ? Certainly could be, once they get the 3D done and integrate this all into their data sets and pick out the sweet spots it’s very possible we will see an appraisal well being declared "condensate discovery". At very worst I see Loligo being a very “wet gas” discovery.


How come BOR got a condensate strike and FOGL not ? Darwin is a small size reservoir (P50 now is around 190 MMBOE) and Loligo is a monster (P50 around 4700 MMBOE).

Being 25 times bigger and 600 sq kilometers in places it would be mighty expensive to do 3D first and then discover its full of water. The idea was to run 2D and infill and then drill it to discover if reservoirs were there and what was in them, and then if results are positive do a 3D survey and then drill sweet spots. This is what has happened and now 3D is planned next stage.
BOR at Darwin, due to its small size, were able to do 3D and drill a sweet spot first time around. Trouble is Darwin is small and so it’s not recognized as a commercial discovery with condensate as a standalone, it needed to hit oil due to small size.

Trouble at Loligo is its big and so 3D will only be done now its confirmed containing C1/2/3/4/5 - so you have to wait longer for a sweet spot drill now – however size does matter, so you wait longer but gas or wet gas or condensate are all commercial if, as is expected, Loligo turns into a huge monster with its sweet spots.

CSEM and Nimrod/Garrodia ? The CSEM response of Loligo and Nimrod were of the highest levels - real first class positives. Loligo is now proven that these signals are correct - it contained hydrocarbons. Nimrod has potential for 1.5 BBOE (9 TCF recoverable) and given its strong CSEM response also appears to be well derisked now as another condensate or wet gas reservoir of substantial size (do not forget South Falklands only needs 5 TCF recoverable to be commercial for dry gas). Garrodia is of unknown size but again now looks very derisked given the CSEM response there. Loligo/Nimrod/Garrodia are all Tertiary channel plays in relatively close proximity. Production pipeline from Loligo can pass through Nimrod/Garrodia on their way back to the Falklands Islands.

CSEM pic below :

Going forward - cash levels ? I have corrected some errors in an earlier post I made and put it here :

The drilling program is running at approx 980K US$ per day (based on BOR Darwin costs of 96 million dollars for 98 days rig use) for everything needed.
Loligo cost would be 55 days @ 980K US$ per day of which 75% is the cost to FOGL, so Loligo will have cost FOGL circa 40.43m US$.

This saving in time/money should help push the leftover cash up from 212m US$ stated at Noble farm in to circa 220m US$ post Scotia (it no delays) or circa 43 pence per share.

The Scotia well is being paid for 60% by Noble, 25% by Edison and 15% by FOGL.
Estimated well operations time of 71 days (45 drilling, 10 testing, 14 P&A, 2 arrive/depart) and on the move would work out the net cost to FOGL for the Scotia well on a 15% contribution basis of about 10.4m US$.

Any time saving here will have minimal impact of cash going forward owing to FOGL only contributing 15% costs on this well for their 40% share of it.

Total drilling cost for the 2012 campaign should work out roughly :

Loligo 40.43m US$
Scotia 10.4m US$
Mob/Demob 30m US$ (FOGL share)
Total cost for 2012 drilling campaign of circa 81m US$.

End of 2012 drilling campaign should be circa 220m US$ left over cash (circa 43p a share cash at 1.6 exchange rate)

According to Noble/FOGL the 2013 Seismic will cost net 65m US$ and FOGL share will be circa 30m US$. Admin costs circa 3m US$ in 2013.

So 220m less 30m for seismic less 3m for admin will leave FOGL entering 2014 with circa 187m US$ cash - so if Scotia is a duster and the market wishes to assign zero value for Loligo the share price will be in the 35.5p to 43p range until the Loligo update comes later in 2013.

Well costs going forward will be circa (net to FOGL).

45m US$ per Loligo/Nimrod/Garrodia Tertiary well) (75% net FOGL).
28m US$ per well anywhere else (40% net FOGL).
With a circa 14m US$ mob/demob charge (60m split into 30m to BOR and 30m to FOGL/Noble/Edison)

FOGL could drill 3 Loligo drills in 2014, or 5 Mid-Cretaceous wells in 2014, which is why you see them say the plan is 3 to 4 wells - likely, imo, 1 Loligo appraisal in 2014 and 3 Mid-Cretaceous.

Once the 3D is done and all processed I would expect FOGL to farm down the Tertiary at Loligo/Nimrod/Garrodia in late 2013 to Noble as well to the same level (eg give up 35% and go down to 40% net to FOGL) and allow them to gain additional cash from past costs and a free carry on a lump of the next wells.

Such a move will give Noble incentive to farm in, and allow FOGL to be in a position to undertake say a 10 well drilling program (from late 2014) without the need for any fund raising.

And what next for FOGL with Loligo ? : If I were advising the board (which I am not obviously) I would suggest they really take their time with Loligo. There is no fund raising needed, there is no rush to pump out a quick update - it will serve no purpose whatsoever.

Far better to get the 3D seismic survey done, get the cores samples tested fully, integrate the drilling data, core data, recalibrated old seismic and the new 3D seismic and give shareholders a full "Loligo" update that is beyond question sometime in the second half of 2013. An update that is clear, concise, based on new 3D seismic and that is not questionable and will clearly give an idea on the potential size of this massive structure.

Then, based on that report, farm out 35% of Loligo/Nimrod/Garrodia to Noble in return for reimbursement of past costs and also high percentage contributions to a few wells in the late 2014 drilling campaign.

This would leave FOGL in the position to be able to participate in an 8 to 10 well campaign without the need for any fund raising at all.

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And finally to the future - Scotia, good AVO response as below :



Scotia is a Class 2 AVO response - this means "moderately consolidated sands" with porosity of 15% to 25%. In simple terms this is the best type of sandstone - solid formation - high porosity - minimal issues with loose sands.

Scotia is
50 deg 23' 54.50" South
53 deg 37' 11.61" West

Water depth is 1762 meters (that your mudline)
TD is estimated at 5198 meters.
Total drilling depth is therefore 3436 meters.

Based on Loligo progress they should be at TD and stopping drilling in around 45 days to 55 days range - total well operations should be in the 70 day range (which includes wire line work and P&A and rig on the move)

Scotia is targeting oil, believed to be around API 30 if found as per pre-drill prognosis (gas signatures have also been seen at this location gas/condensate is also possible).

.......The Mid Cretaceous Fan Play is well developed in the northern part of the FOGL acreage. This geological play was developed when the Falklands were still attached to the southern part of the African continent. A large amount of sediment, sourced from the continent and the Falklands Plateau area to the north, built up in near shore shallow seas. When a drop in sea level occurred, these sediments were deeply eroded and the reworked sands were shed far offshore into deep water. Several prospects have recently been mapped in this play in the northern licenses. These are Hersillia, Scotia and Hero.

The Scotia prospect is located in quadrant 31 (PL027).Although the area had been mapped on seismic data before, it was only when the entire data set was reprocessed in 2008-09 that Scotia stood out as an attractive prospect. A distinctive sandy unit on laps the base of the old shelf. The formation dips to the south, which controls the spill point of the prospect, but it relies upon the pinchout of the sands in other directions to define the trap.

The prospect has a strong element of structural control and is supported by a conformable AVO anomaly. The primary target is in Albian age sands (about 100 million years old). The source rock for the oil sits just below this target and FOGL anticipates oil generation in the area. However, FOGL also recognises gas signatures on the seismic data and so either ‘phase’ is strictly possible. The Scotia well location sits in 1810 meters of water. The target is about 3,290 meters below the sea bed and the TD of the well is estimated to be at 3,440 meters below the sea bed. The Scotia well location lies approximately 330 kilometers east of Stanley...........

The Scotia well is targeting P50 recoverable barrels of just over 1 billion (so that over 3 billion barrels in place (for those that like OIP figures and not recoverable barrels), FOGL have 40% share and so net to FOGL on a P50 basis would be 400 million recoverable barrels (net to FOGL would be about the same size as Sea Lion in total for PMO/RKH)

Personally I expect them to be through the target and at TD, or very close to it, on Monday 19th November.

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IMO, DYOR, NAG etc... its all my opinion and only that and feel free to bin it, ignore it or whatever you want.