.

People should be able to express their views regardless of going long or short.....the idea is to make a few bucks.....I enjoy reading other views than my own...no need to get shirty...

qui?

I like pro, i could POTENTIONALLY be a billionair........who knows.,.

Big vote of confidence in the South Falklands..........

http://www.investegate.co.uk/article.aspx?id=201203200700246704Z


Excellent news.

There is still one option available, this deal will also mean that FOGL easily has funds for 3 drills this time around, therefore potentially allowing them to drill Loligo and Scotia and then one appraisal on either should they strike oil/gas.

20 March 2012

Falkland Oil and Gas Limited

Farmout Option Agreement and rig update

FOGL, the oil and gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, is pleased to announce the execution of an option to enter into a farmout agreement which, if exercised, would provide FOGL with greater financial flexibility in respect of its current and forward programmes.

For corporate reasons unconnected with the proposed farmout, the counterparty is unable to execute the FOA/JOA at this time, but expects to be able to do so within the next two months and prior to the commencement of FOGL's drilling programme.

Summary terms of the FOA

• The counterparty would farm-in to 25% of the FOGL licence areas and would contribute its pro-rata share of the 2012 drilling programme, comprising two exploration wells

• The counterparty would also pay its pro-rata share of certain historical costs incurred during 2011 related to preparation for drilling this year. The costs incurred are estimated to be $68 million gross

• In addition the counterparty would make a cash contribution of $40 million; $20 million on completion (expected to be prior to the spudding of the Loligo well) and $20 million in 2013.

• FOGL will retain licence operatorship

Rig update

The Board of FOGL notes the announcement on 16 March 2012 by Borders & Southern Petroleum plc (B&S) that rig issues which had previously stalled progress on drilling the Darwin prospect had now been addressed and that the company expects another four to five weeks of activity on that well. As a consequence, FOGL now expects to receive the rig around early June following completion of the drilling of B&S's Darwin and Stebbing. This delay has no impact on the contractual arrangement that FOGL has with Ocean Rig to drill two exploration wells, following the completion of the B&S drilling programme.

The Leiv Eiriksson rig could deliver ten times the payload of Sea Lion

The Sea Lion field success by Rockhopper could transform the fortunes of the Falkland Islands. The government, for example, should expect to see $3.9bn in royalties and $6.6bn in tax revenues over the life of the field. To put this in contex,t the government only received $39m in tax and other income in 2009/2010. From another perspective, the population of the Falklands is about 3,000. Divide that number into the $10.5bn income from Sea Lion and it gives each islander a potential bounty of over £2m.

That is a handy sum. But it pales into insignificance compared with what could happen for investors if others strike oil in the Falklands.

So far, recent drilling in the Falklands has been confined to the shallow water Northern Basin. With Rockhopper now focussing on bringing Sea Lion into production, further exploratory drilling in the Northern Basin is unlikely until 2015, so the focus is now on the Southern Basin.

On 31 January BORDERS & SOUTHERN (BOR) spudded its first well in the ocean to the south of the Falkland Islands. It said that this operation would take about 45 days. That means we should now be less than a fortnight from discovering whether it strikes oil. With 2 April marking the 30th anniversary of the start of the Falklands war, and the price of oil edging up towards fresh highs, a storm is brewing and success for Borders & Southern could turn this into a hurricane.

After completing the first well for Borders & Southern the Leiv Eiriksson rig is set to drill three more – one more for Borders and two for Falkland Oil & Gas (FOGL). The biggest of these is the latter’s Loligo prospect which, with an estimated resource of 4.7 billion barrels, is ten times the size of Sea Lion.

It is the second largest exploration prospect to be drilled anywhere in recent years, with its resource potential exceeded only by the 7.9bn barrel Libra discovery off Brazil. In all, the four prospects targeted by the Leiv Eiriksson have estimated potential resources of almost 8 billion barrels, three times current UK oil reserves.

The Argentines pose a risk

Despite the fact that the government of the Falklands takes a lower cut than any government except French Guiana, that would still be enough to virtually submerge the islands beneath a stream of tax revenues and royalties. Edison estimates that success for these four prospects could generate tax and royalties of $177bn, which is about £37.5m per islander.

It may not end there. If the region is as oil-rich as some have estimated there could be 60 billion barrels. Revenues from all that would be worth c.£280m per islander!

Short of laying on direct flights to Las Vegas, it is impossible to see how the islanders could ever get through this kind of money. The Falklands government, with help from the UK, is going to have to come up with a strategy or else Argentina, which last week prevented two cruise ships from docking at its Ushuaia port, apparently because they had previously visited the Falklands, is certain to turn up the pressure.

Could we see another 500% share price gain?

But corporate investors in the oil sector are used to political risk – although BHP Billiton is thought to have pulled out of its joint venture with Falkland Oil & Gas for fear of offending South America, Rockhopper is confident of striking a farm-out deal for the development of Sea Lion, with the UK’s Premier and Cairn and the USA’s Anadarko and Noble Energy rumoured to be in the frame.

Assuming that it can bring Sea Lion into production within its 2016 targeted time frame, Edison argues that its shares can double from here. But the biggest near term potential undoubtedly lies with the Southern Basin licence holders Borders & Southern and Falkland Oil & Gas.

In the month after the Sea Lion discovery, Rockhopper's share price gained 644%, as the market not only took on board the significance of this find but also started to price in the possibility of more.

“This” says Edison, “is not uncommon and forms the basis for what we can expect the other Falklands explorers to do if they have equally encouraging discoveries… it is therefore not unreasonable to assume that share price gains running in excess of 500% could be possible with both companies. The large size of the prospects… are of a magnitude that is difficult for investors to comprehend…”.

The oil gamble of the decade is upon us – if you want to place your bets, you had better hurry. The moment of truth is nearly here.

Falkland Oil and Gas (BUY, 250p) (FOGL LN, 65.5p, ▲ 8.0 %) Unknown Party Farms-in. The Company has granted an as yet undisclosed party the right to Farm in to its acreage, which is expected to be exercised within the next 2 months. FOGL will retain licence operatorship; the counterparty would farm-in to 25% of the FOGL licence areas and would contribute its pro-rata share of the 2012 drilling programme, comprising two exploration wells; the counterparty would also pay its pro-rata share of certain historical costs incurred during 2011 related to preparation for drilling this year. The costs incurred are estimated to be $68mm gross. In addition the counterparty would make a cash contribution of $40mm; $20mm on completion (expected to be prior to the spudding of the Loligo well) and $20mm in 2013. This is good news for FOGL as it not only dilutes the Company's risk exposure, but adds value to the Company. The favourable terms of the proposed deal should provide FOGL with greater financial flexibility as it presses ahead with its drilling programmes later

http://www.oilvoice.com/n/FoxDavies_Daily_Monitor_3Legs_resources_Sterling_Energy_and_Chariot_Oil_Gas/1577ef0e4936.aspx

Cannacord view from FT Alphaville (www.ft.com)


The farm-out option agreement announced by Falkland Oil & Gas (FOGL) underlines the corporate interest and geologic potential of the South Falkland Islands. However, given the counterparty is still unknown, and the farm-out is still an option agreement as opposed to an executed transaction, this may prevent markets from fully recognising the value of FOGL’s assets at this time. We remain positive on the FOGL story as we await drilling to commence in Q2/12 on the Loligo prospect and reiterate our SPECULATIVE BUY recommendation.

FOGL has granted an industry counterparty an option to enter into a Farm-out Agreement (FOA) and an associated Joint Operating Agreement (JOA). For corporate reasons unconnected with the proposed farm-out, the counterparty is unable to execute the FOA/JOA at this time, but expects to be able to do so within the next two months and prior to the commencement of FOGL’s drilling programme.

If the option is exercised the counterparty would farm-in to 25% of the FOGL licence areas and would pay its share of historical costs and its share of the 2012 drilling programme.

In addition, the counterparty would make a cash contribution of US$40 million, US$20 million on completion (expected to be prior to the spudding of the Loligo well), and US$20 million in 2013.

For consideration of the option FOGL will receive an option fee of US$6 million, which FOGL will retain if the option is not exercised before the spudding of the Loligo well (expected in June 2012). If the option is exercised, US$3 million of the option fee will be offset against the first US$20 million of cash consideration referred to above, whilst FOGL will retain US$3 million.


And Jefferies view

Effective $60m cash for 25% of FOGL’s acreage. If exercised, the farm-out option will see the farm-inee pay 25% of the $68m in licence back costs ($17m) plus $43m in cash including option fee paid. FOGL and farm-inee would pay their WI share of the 2012 working program of c.$140m for 2 wells (75%/25%). The cash will be paid $20m on completion, $20m in 2013 plus $6m for the option fee (of which $3m would offset the cash due in 2012). At implied 2:1 carry on 2 wells, we view these terms as attractive compared to other industry farm-outs of frontier acreage.

Preserves cash, valuable risk mitigation, additional industry validation. This
transaction increases FOGL’s estimated capital buffer from c.$35-40m to c.$130-$135m, providing significant downside protection if FOGL experiences material unplanned time/ cost overruns like Borders & Southern (BOR LN, 70p, Buy) has encountered. FOGL would be funded for a follow on well (possibly in the current campaign) or seismic. Securing a farmin also provides industry validation to FOGL’s acreage and while we do not know who the farm-inee is, we know it is an industry player that has $95m potentially available for frontier exploration drilling, implying a relatively large, well-financed industry partner.

Worst case – $6m cash if the option lapses – valid until Loligo spuds. The option agreement is valid until the Loligo well spuds, currently expected in early June. FOGL states the counterparty expects to be in a position to execute the farm-in agreement within this timeframe. However, if the option is not exercised, FOGL will retain the $6m option fee paid. If the option is exercised, half the fee will be offset against the $20m cash due in 2012.

Implied valuation 65-165% more than current market implied. The $60m cash
for 25% of the asset implies the gross assets are worth $240m (before the $35m net capex the farm-inee would fund in 2012). Using FOGL’s current cash of $225m, we estimate the market is attributing c.$90 to FOGL’s assets implying a transaction premium of 165% above the current market value. Alternatively, if we use the farm-in cost plus 2012 capex as the implied asset value, gross implied value is $380m. Excluding the capex FOGL will spend on drilling in 2012, we estimate FOGL’s current implied asset value is only $230m, implying a transaction premium of 65% above the current market value.

Flexibility for FOGL to renegotiate if Borders has success near their southern
acreage. If Borders is successful in either Darwin or Stebbing, the option includes terms to lower the farm-inee’s interest in the Southern Licences or increase the amount paid.

Drilling delayed by unplanned downtime on Borders drill, early-June anticipated spud. Borders announced last week the drilling of its Darwin prospect has
taken longer than expected due to mechanical issues on the rig. This has delayed FOGL’s anticipated spud date from May to June.

Continues to be preferred frontier exploration exposure. While FOGL’s drilling
remains high risk, we believe this farm-out option validates the upside potential of this block.

We estimate the implied read-through of this deal is c.90p/sh (excluding all cash to be spent in 2012), a nearly 50% premium to the current share price. We see unrisked upside potential of FOGL’s 2 wells in 2012 of c.50x the current share price on a completely derisked basis.

Farm out presentation link :

http://www.fogl.com/fogl/uploads/companypresentations/FOGL_FarmOutPresentation_March2012.pdf


Write up from MaxValue on what was said in the Conference Call about the Farm Out.


> They are already fully funded for the 2 wells. These wells will meet both Phase 1 and Phase 2 commitments.
> Currently they have a contingency on these wells of 30% (enough for 5/6 weeks).
> The farm out will provide a contingency of 120%.
> The farm in party (an international E&P) doesn't want to make an announcement due to an unrelated internal corporate issue they are dealing with.
> The deal is expected to complete in the next month or 2.
> FOGL are still talking to other parties as there was interest from a number of players.
> They choose this party as they are ready to proceed, had a good technical fit and is financially robust (others wanted to take operatorship or wanted a larger share).
> Depending on the results of the wells in the existing campaign (FOGL and BOR) the additional funds ($95m) maybe used on 3D seismic (1xNorth and 1xSouth) or on a 3rd well.
> The rig is due back in Norway by October so there is a window for a 3rd FOGL well.
> This is only an option at the moment.

GLA & DYOR

MV

Just to add some speculation from the rumour mills.

Tullow appears to be the favourite for the farm in, with Cairn a close second.

Will be interesting to see, if it goes ahead, who it is in the end.

Would prefer Andarco or another American company. That way Obama may get off the fence and support the UK.

can't see how fogl would fit with tlw nor why on earth they would be tempted ..... cne may be desperate for anything .... meanwhile goody gumdrops as bor drifts away

Edison update on FOGL 22nd March 2012. PDF can download on the link below

http://www.mediafire.com/?lxp8286btbd3rbj

.

Bounce back from being oversold.

I would expect rumours from the BOR drill from around 9th of April - then it gets interesting.

Argies seem to be upsetting everyone at the moment - always a sign of a government desperately in trouble when they upset everyone else then cry how its all others fault, just like CFK is doing now......

http://en.mercopress.com/2012/03/24/us-relation-with-argentina-souring-congress-to-cut-special-trade-benefits

.

http://www.irishtimes.com/newspaper/world/2012/0327/1224313954479.html

.

http://epetitions.direct.gov.uk/petitions/31848

.

Well, late next week is the first time there could be potential rumours as the drill bit could enter into the upper of the target zone at Darwin for BOR. Should be entering either late next week or early the week after, and so the fun begins.

From the Telegraph:

FALKLAND OIL AND GAS

Market cap: £206m

Described by one analyst as the “sleeping giant” of the frontier exploration companies on Aim, its giant Loligo prospect will be its first target