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Post from marlonmonkey over at III.




Silverfoil..as requested..sorry to anyone easily bored it is a bit waffle-filled.

The Falklands Campaign; where are we now?

Silverfoil asked an excellent question as to where we are with regards to the Falklands campaign with all five “explorers” and their partners.


Starting with Rockhopper Exploration:

Rockhopper entered the 2010 campaign with enough funds to drill two targets (Sealion and Ernest) and a tiny share of the DES acreage. In the words of Sam Moody they “hit the jackpot”. The share price as the OG arrived in the Falklands was around 50p and today it sits at £1.60. Some jackpot?

Rockhopper overturned massive odds, firstly in making the Sealion discovery, and secondly in finding that it stretched 10-20km further south into an area not covered by the 3D seismic. This enabled them to deliver a 300-500mmb discovery. They appraised, flowed it and called it commercial, farmed it out and will develop it…all for a share price trebling…it’s a harsh world.

When the 14-2 result came, ANYTHING was possible. Every sand encountered was charged with oil..WOW. Who could ever have imagined that we would find an OGC and an OWC within the range of charged sands of the 14-2 well/ In some ways 14-2 was misleadingly good as it promised so much.

Make no mistake, sometime in 2018-2019 RKH will be the proud owners of 30,000bpd production at a very low tax and duty rate. This is a reasonable mid-sized oil company and is worth multiples of today’s mcap..it will get there.

The next steps for RKH:
1) How do we add to the reserves?
2) How can we add to the 30,000bpd?
3) How can we ensure a seamless and flawless production process?

It would seem that reserves are for show, production rate (income) is for dough, but nonetheless Dave Bodecott has stated that his job is to increase the contingent resources owned by Rockhopper exploration. In my opinion Rockhopper have four avenues to pursue to achieve this:

I) Further appraise and book the resources attributable to the satellite discoveries
II) Explore their remaining acreage
III) Farm into one or other of the two NFB explorers
IV) Go look elsewhere (African AMI, SFB, AN other)

Not only are the satellite appraisals an easy way for DB to meet his objectives, it is almost essential for a coherent Field development plan. As I have said on many previous occasions, I am more aligned with the Senergy analysis than the Gaffney Cline, purely as GC have used a maximum radius methodology and Senergy a fully mapped pick. Either could be right, but first we need more drills and an assessment of “how do you solve a problem like Desire?” More on that subject later. There could be as much as 50mmb net to RKH here.

Rockhopper’s remaining acreage is IMO nothing special. It is ok. Clearly if they can find good reservoir sands in Chatham, then that prospect has a reasonable chance of success…you can then assume that other prospects in the North-South channel and fan play of late F2-early F3 age, might work. The promising 1-2m pay in the 15-4 well certainly bodes well for the Chatham South fan and possibly the George South B. We will see, again another 50-100mmb net to RKH if it is successful.

Other prospects which might work for Rockhopper are the fans north of Sealion B30, S2, the downthrown prospects, the pinch-out prospects including Jason and possibly the Berkeley prospect overlaying Johnson.

IMO, Johnson needs other big gas discoveries to make it viable...see below!
So, all that leaves Rockhopper with a strong position going forward but currently a weak mcap, looking at the fundamentals it would seem a bargain:

£450m market capitalisation
150mmbs of contingent resources (must be approaching reserves status)
Fully funded to first oil
30,000bpd production from c2019
Tax and duty payable at 36%
First mover advantage in the NFB
Cash of $300m, free carry on 3*40% exporlation wells
Significant exploration upside with appraisals of the satellite fields and further exploration.



So, Desire Petroleum

What a terrible, terrible campaign that was!! Unlucky and incompetent in equal measure…with the redemption at the end.

Liz proved once again that deep in the Jurassic and pre-rift there is gas, wet gas and dry gas. This is a recurring theme of all the campaigns and will “one day” make the Falklands a major global LNG producer in my opinion.

The bad news of the Liz well was the Barremian Liz target, pretty much didn’t exist. For all the high amplitude and 3D seismic, when DES got to drill it, the reservoir quality was poor to non-existent…same goes for the deeper Beth. For all the Danny Forsten saga, and the collapse of the sp, the abiding result from the Liz well is that the main target wasn’t present. This doesn’t bode well for other targets sourced from the west over the intra-basin high, simply the sand deposition didn’t occur as projected.

DES’s mistakes predate the campaign though. We already know that North of the 2004 3D seismic there is oil in Casper and Shona, and now the best future targets are South of the 3D seismic in Elaine and Isobel. All those looking to suggest that “things would have been different under Colin”, DES’s woes go right back to 2004 and the choice of where to run the 3D.

There is no doubt that the Rachel wells were unlucky, there would appear to be three different failure modes across six different horizons, it would have been the make of the NFB had Rachel come in at either the F1, F2 or F3 levels. Rachel really was “KEY”, as before then the dream of billions of barrels was on..since then, we have hoped for a billion or so.

DES made a fatal error with their failure mode analysis, it left them with more drill slots than sensible targets, in this period of inactivity that “crime” seems all the more heinous. They then gave up >100mmbs for $20m in their desperate scrambling to get a score on the board. Not completing that 3D back in 2004 got a bit expensive huh DES?

However, all things pass, and Jacinta and Ninky are consigned to the dustbin, 60% of Casper and Casper South are given away, but DES do have up to 85mmbs on their books.
So what to do next?

I never thought I would say it, but since the 15-4 result DES have seemed to be doing the right things, their presentations have approved, they are focusing on the large high COS prospects, and are looking to sell their share of Sealion and Caspers. GOOD.
I am personally very positive about DES’s prospects. The general consensus suggests DES have 4% of Sealion, no cash and are good at finding water. I see it as something different:

DES has circa 15-20% of the Sealion complex which they want to sell and some large high COS prospects in the East Flank fairway.

How or what deal is done between DES and RKH/PMO to resolve the Sealion Field Development Issue, whether a third party is interested in taking Des’s share, how DES can become involved in the next campaign to further explore Jayne, Pam , Anna, Elaine, Isobel will remain to be seen. I definitely see greater upside potential in the DES acreage of PL03 and PL04 than in the RKH acreage of PL032 and PL33.

Further to obvious upside of the larger targets, I am also very positive concerning the Chatham South, and to a lesser extent the George South B prospects, which DES own 40% of, as discussed in the RKH section. I could easily see Area PL04b returning 100-120mmbs to Desire…if only they’d had the 3D in 2004!



Argos Resources:

The quiet man of the NFB. They have watched and waited, and watched and waited. It is often forgotten that Argos Evergreen took part in the 1998 and oil shows were seen in a couple of the wells.

For me, they could watch and wait another decade for Johnson, which I believe they own the greater portion of, it’s not a priority unless someone else moves first.

Argos need the North South propagating channels and fans to work as a play type. At the moment it is far from clear that they will…but they might!

Starting with Kratos, down through Rhea, Poseidon, Selene, George Central, right into Pam..this play type could yield 300-500mmbs if it is successful. However the risks are many.
1) Reservoir quality unproven as we saw with the western fed play Liz, high amplitude didn’t necessarily give thick reservoir.
2) Northerly extent of the late Cretaceous source rock F3 age unproven, for Rhea/Poseidon to work the source rock needs to be mature in the Berriasian and Hertogovinian rather than Barremian.
3) The area is significantly faulted and therefore the trap sizes are small, a double edged sword as it should mean that many traps will be sealed, but also could be a hindrance to migration.

The good news is that RKH are keen to explore this play type in their acreage (George and Chatham) which could give ARG a reasonable guide as to where to start looking.

Argos also have large targets (Helios) in the western graben…low COS but might be of interest to someone..(my view is that there are larger and higher COS targets in the SFB, so Helios wouldn’t be high up the list of priorities)…remember Jacinta!

I think ARG need to drill before 2015, so need a partner to assist in their exploration. I would favour RKH/PMO as tie-back of multiple “smallish” north south channels would suit a top-up scenario to the FPSO 1. But, we will see who offers the best deal.




BORders and Southern

Borders sourced a rig, took it down to the Falklands, proved a mature source rock, proved reservoir quality sands, made a large rich gas condensate discovery, opened up a late Cretaceous fairway…AND LOST 75% of their market cap…it’s a strange world.

The “truth” is that just as a £600m mcap for Desire was crazy during Rachel, the £600m mcap of BOR during Darwin was equally daft. BB rumours and parrots, Barmen and the like…and of course a BUY rec in ShareHUB…

Stebbing was unlucky…what if they farm out 50%, go back and Stebbing deep is oil…they are the cruel breaks in life!

It looks as though the late Cretaceous fairway is open for gas and condensate..is it open for oil?
What does a condensate production scenario look like?
What does a gas recycling plan look like?
What share of Covington and Chaffers will a farm-in partner want?
How far up the Noble priorities are Thulla and Inflexible? They have committed to an SFB well in the next campaign..this will help BOR should it be positive.

Borders certainly look cheap at their current mcap, given the discovery that they have made and the fairway they have opened up. However, it is a harsh world and it remains to be seen what terms a farm-in partner will want.

Borders have added value to the acreage, they have proven a working hydrocarbon system with their shareholders money. They have a duty to ensure that any farm-out deal reflects that.

They have to take part in the next campaign, they have to find oil or prove a commercial quantity of condensate, otherwise life will become very difficult, as dilution/farm-out will return ever decreasing % share of discoveries.





Falkland Oil and Gas

I think that FOGl have played the most sensible game of all the FI explorers. They haven’t left themselves open to shittte or bust, by getting excellent farm-in partners BEFORE the exploration results kick-in. It might have marginally limited the upside, but I believe has set a platform that it will be difficult to fall through based on one or two bad results.

The Darwin result is good for FOGl, they have lookalike prospects in Thulla, Inflexible and Cornwall. The Toroa well proved reservoir quality sands in the Springhill and Mid cretaceous aged sands, and Loligo proved a working hydrocarbon system in the Tertiary. All good stuff.

Of course the missing word is OIL. Maybe Scotia will oblige.

The good news for FOGL is that their cash base after Scotia is $200m and their farm-in partners have committed to another campaign…what would DES, ARG or BOR give to be in that position right now?

It is difficult to fully evaluate FOGL prior to the Scotia result:
1) Very strong cash position
2) 2 very strong industry partners
3) Multiple lookalikes to a large gas condensate discovery
4) Potentially an enormous gas discovery in Loligo
5) Commitment to a multi-well campaign in 2014-15
BUT NO OIL!!

Loligo appears to be an exciting gas discovery. I hope that someone with the necessary cash agrees.

Can the South and East Falklands basins thrive on Gas and gas condensate discoveries, there would appear to be many of these. Will anybody dip their hands into their deep pockets and decide that this is the best way to spend $20billion? It’s an unknown, there are examples of smaller and more expensive developments, and other examples of large fields left dormant. We can but wait and see…or at least those of us around in the 2020s can!
Oh for an oil discovery, or at least the compelling evidence of oil maturity. I would imagine that the Scotia well will drill into the Aptian source rock and add valuable data to the maturity model, irrespective of the Scotia result.

In summary…What a couple of years…

The Sealion result was misleadingly good…perhaps the subsequent good results at 15/4 and Darwin have been undervalued. Overall, we have a commercial oilfield development in the NFB and undoubtedly further upside to come.

We also have gas, wet gas, gas condensate…pretty much every time you stick a drill in the ground…it seems harder to find oil than we’d like.

So, the first priority of commercial development is ticked off, the Falkland Islands will be self-sufficient and prosperous for generations, I couldn’t be happier for them.

Whether any of the five pioneering explorers will share in a new province and make their way from AIM to FTSE100..who knows, RKH are on a path, FOGL have protected themselves…the other three need partners, and what those partners want for their support will be a big question.

Cynic, you haven't a clue on Falklands.

????????????????????? what on earth is that about??????????

I shouldn't worry about it. Many of the posters on this thread have't got a clue either.

Cynic,

Just lately all you appear to do is criticise others.
Marlonmonkeys post was an excellent read but although you criticises all I see as a reply is a one liner of no content.
I very much doubt you even read it, as if you had 'You would know what it was about'.
Yes, it is extremely long, but if anyone is serious about Fogl they would have taken time to read it.
I am not saying that you should agree with the posts comments, but at least try to quantify your comments.
To me the post was well worth reading, whereas I find your recent posts not worth the effort.
The squelch button rides again, purely to save my valuable time.

greek - you are quite right that i never read post 2160, but then i made no comment about it either!

Todays presentation :


http://files.shareholder.com/downloads/ABEA-2D0WMQ/2074476913x0x604773/91d68f22-d086-4f31-92e2-f089ded3f296/2012_10%20Exploration%20Conf%20Call%20[Final].pdf


Looks good, they do like Scotia prospect.

30% Geologic Chance of Success.

I had heard they were looking for a rig even now, this is confirmed it seems as they are looking at appraisal drilling end of 2013 going on until next round of exploratory drilling in late 2014.

Perhaps only 12 months without any drilling in the South Falklands now, after Loligo proved the hydrocarbons are there.

Very active - non stop drilling and appraising program from late 2013 onwards for years.........

Highlights of the broadcast (you can listen yourself on the link from Nobles website) :

Falklands.

They describe it as a "highlight” and "potential game changer".

It will provide a 40% increase in their global net acreage.

30 leads in lower cretaceous alone.

Noble contractually obliged to drill two more wells.

Will become operator in north part of the acrege in March 2013, southern part by March 2014.

They will have TWO seismic boats active in 2013. 1,500-2,500 sq miles of 3D.

Area offers early entry scale of, among others, Angola, GoM, Med and Norweigan North Sea.

AVO will be an important technical tool (one of their expertise).

They are hoping that Scotia will be a discovery, and they can use AVO to derisk further plays.

Timing of investment spending fits well with cashflow

Above ground risk v managemable. Sohistoicted regulation and financial terms positive.

During Jurassic FI attached to southern Africa. Thick wedges of deepwatrer tubidite sand.

Reservoir rocks proven by Darwin. Loligo proved working hydrocarbons system (gas) in northern acreage.

Scotia P75-25 145-960m barrels of oil, CoS at 30%. Primary risk is containment. Same rig as drilled Loligo “discovery”

If Scotia success, will have rigs drilling nearly continuously from late 2013.

Development drilling would begin in 2015. First production 2018/19'

Similar development plan as Noble carried out in equatorial guinea

I think the market likes the firm commitment from Noble to get appraising Scotia from late 2013 and continue appraising and exploration drilling "non stop" for many years...........

Pretty much going to hit the "fast track" appraise and explore button if Scotia hits oil.

First production late 2018 - but loads of exploratory drilling from late 2014 onwards......... after appraisal drilling starting from from late 2013.


I would guess FOGL will fund a lot of that from doing 3D on Loligo and Nimrod and then farming down Loligo/Nimrod/Garrodia from the current 75% - to Noble in return for free carries and reduced contributions on the appraisal of Scotia etc...

Proselenes:

The presentation and the question and answer time was good and encouraging by NOBLE, FOGL BOD’s have chosen well IMO.

I am trying to take a calm view on the Falklands; boy wouldn’t be fantastic IF there is the wonderful black stuff within the Scotia field? But, we need to concentrate on that horrible word.........IF!

Anyway, we will have countless opportunities with FOGL/Borders and Southern/DES/Rockhopper for many years to come…..All IMO.

if my quick scan was correct, you have at least another year in which to consider and contemplate your navel ..... in market terms, 12 months is an awfully long way away with seemingly little or no news in the interim

A COS of 30% is blinking good in my book

mean while rf and co are locked in with an sp drifting down to 50p

If as you state, the share price will drift down to 50p, no problems........Just buy more, hence more profits for the "Piggy Bank", and that’s without an oil find.......Yet!

Quick summary of the Q&A session that someone has done.


1) The first question on the topic was concerning why Scotia is viewed as an oil opportunity, rather than gas.

According to Noble, the gas discovery (Loligo) was in a younger section, whereas Scotia is in a deeper zone. Also, the seismic attributes are indicative. They had expected Loligo to be gas, but very different with Scotia.

2) Another question on seismic.

Will be shooting 3D at end of this year. Noble would prefer to explore after 3D, but was not possible in this case. 2D adds more risk, so really important to get the 3D. If fortunate, and initial well successful, great, but get a better picture with the 3D. Good thing is that Scotia will give some real data, and will set up for a multi-well exploration programme in 2014. Kind of like Noble did it in west Africa.

4) Question on Loligo.

Noble looking for oil, not gas, which was one of the reasons why they did not participate in the first well (which they felt would be gas)

5) Question on NFB, and rig market

Not going into the North Falkland basin. South large enough to keep them busy for a long time. Regarding the Loligo well, they do not have the well results. From own interpretation, they feel there is some encouragement regarding their hopes that Scotia will be an oil well. But they know no more than what is in FOGL's press release.Regarding 2014 programme, they are looking to see what rig might be available--c.20 rigs would fit in that environment, and just canvassing the market at the moment. Still early in the process.

6) Appraisal drilling question

Appraisal would be an appraisal of a Scotia success. If not successful, would start exploration after 3D. Length of drilling programme depends on success.

7) If thin sands came on Scotia, but oil shows, would this be OK?

Anything that indicates oil would be "very interesting". Quite broad possibilities as to what they'll find. 3D will tell them more. But "finding oil would be very encouraging"

Yes we're all waiting with baited breath in anticipation of a successful oil find!!..lol

baited breath rather implies a bad case of halitosis .... try "bated" :-))

Q&A Session

Why does Miss P copy and paste the same old stuff time after time?

Because she doesn't have anything better to do.

Why did Miss P create grannygirl to 'speak' to those she has squelched?

No idea and who cares anyway.

Yesterdays rise was probably a dose of panic by shorters...... they had been increasing their short positions as per below chart and Nobles positive vibes must have kicked them where it hurt and they had to close off quickly some of their positions.

:) LOL


Stock on loan chart below - which will capture a lot of the shorting of FOGL.




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question #1 - why would the average joe want to hang on to fogl (and others) if there is not going to be any meaningful news for another year?

question #2 - how many shares are there in issue for fogl, for if only 3m on loan, that would look to be a piffling %?