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As expected, straight back into auction.

I think this shows FOGL is not very confident on its own.

yes i did, but i never do "sour grapes" ..... for all that, initial reaction is very muted indeed, so perhaps i'm not so silly

http://www.proactiveinvestors.co.uk/companies/news/44627/falkland-oil-gas-reveals-tie-up-with-french-utility-edf--44627.html

Falkland Oil & Gas reveals tie-up with French utility EDF

8:23 am FOGL says it expects to receive the Leiv Eiriksson rig in July, once fellow Falkland explorer Borders & Southern has completed the Stebbing well FOGL says it expects to receive the Leiv Eiriksson rig in July, once fellow Falkland explorer Borders & Southern has completed the Stebbing well

AIM quoted Falkland Oil & Gas (LON:FOGL) today confirmed that it has sealed a farm-out deal ahead of its upcoming drill programme.

The deal sees French utility firm EDF enter the Falklands.

Via Edison International – a company in which it owns a controlling stake – EDF will pay FOGL’s back-costs in the region of US$50 million and it will pay its own share of the costs for the upcoming drill programme. A US$3 million option fee had already been paid to FOGL.

Edison will own a 12.5 per cent stake in FOGL’s southern licences, which hosts six prospects, and it will own 25 per cent of the northern area licences, where there are five prospects.

Also Edison will pay FOGL an additional US$40 million in cash – with US$20 million being paid on completion of the farm-out and US$20 million due next year.

"We are delighted to have agreed favourable farm out terms with Edison. Edison is an experienced international exploration and production company, now owned by a major European energy company,” said FOGL chief executive Tim Bushell.

“The discussions we have held with Edison over the past few months augur well for a successful relationship.

“This farm out provides further industry validation of the potential of our licences and gives us greater financial flexibility for our future exploration programme."

FOGL says it expects to receive the Leiv Eiriksson rig in July, once fellow Falkland explorer Borders & Southern has completed the Stebbing well – which spudded in early May.

The first well of the programme will be on the Loligo prospect in the Northern licence area. And FOGL says the location of the second well will depend on the results of the first well.

If Loligo is a success FOGL says it will drill either a Loligo follow up well or it will drill the Nimrod Complex. Alternatively it will drill the Scotia prospect. Each of these prospects are located in the Northern licence area.

Meanwhile FOGL says that Borders and Southern’s Darwin gas condensate discovery is positive for its prospects in the Southern licence area. That is because it has demonstrated the presence of mature source rocks and a working hydrocarbon system, it said.

And it says the result has reduced the risks associated with at least six of FOGL’s prospects in the Southern licence area that have similar characteristics to the discovery. These prospects are located around 10 to 50 kilometres from the Darwin discovery, FOGL added.

The company said that further drilling in the current campaign will depend on well results and rig availability.

Lots of words. Lots of oil?

so far, no oil or even gas; just hot air :-)

Still, lots of opportunities to make a few bob pre-spud & pre-TD news. Am out of BOR, but happy to hold FOGL for now.
Clearly EDF don't seem too concerned about the Argentine threat.

Major point here is that FOGL will now end their 2 well drilling with enough cash to drill a 3rd well, if the option can still be taken (depending on when the 2 wells complete) and also have enough money for a full 3D seismic campaign in late 2012/early 2013.

No need to raise money for 12 to 18 months if they so wish.

Which leaves them in a very strong position and allows the share price to rise without fear of any discounted panic placings.

:)

If they hit oil they will have to raise huge amounts of money to appraise the well maybe 800 mill depending on what they hit.

I will be out of the share by then.
If they don’t hit oil they are pooped so I will stay on board for the first well only at this present time.

I have seen the problems RKH have had after hitting oil so far as cynic says they have hit nothing apart from coal.

Happy to hold for now.

People banging on about political issues with Argentina...there are no issues to be had. Anyone with a brain can see Argentina have nothing to stand on.

This will certainly not affect any company in the Falklands area.

http://www.sharecast.com/cgi-bin/sharecast/story.cgi?story_id=20186084


Falkland Oil & Gas:

Jefferies keeps buy rating and 195p target;

Merchant Securities increases target to 400p, buy rating kept.

Interview to listen to :

http://www.proactiveinvestors.co.uk/companies/stocktube/1211/canaccord-says-the-falkland-oil-gas-farm-out-deal-is-overall-good-for-investors-1211.html


And FT comment :

http://blogs.ft.com/beyond-brics/2012/06/26/falkland-islands-geopolitical-footballs-going-home/

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Edison International Spa (majority owned by EDF) are very much into natural gas, not something that should be ignored given the likely gas condensate in the southern licenses - and the potential of oil and gas at Loligo.

Gas at Loligo is commercial, being many many Tcf potential - no surprise to see a gas development/production/storage orientated farm in partner.

http://www.edison.it/en/company/who-we-are/group-structure.shtml

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Could we expect a decent upside if gas is discovered?

have the french stopped selling exorcets to the argies?

PS - Absolutely. Loligo is sooooo big that gas, or condensate or oil or any mixture of them will all be commercial.

T1 (the first target of the 5 in Loligo) is expected to be gas, the lower targets of the first drill more likely oil.

Some interesting comments from TB in this write up :

http://www.usanews.biz/2012/06/falkland-oil-and-gas-sells-exploration.html

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Mr P, the markets don't like political instability, or perceived instability, so the argentine problem, though very minor, is still in investor's minds and remains headline news. I am inclined to take more notice of argie sabre rattling than I am of a broker price target of 400p!!! That is a total stab in the dark figure based on assumptions. A duster or two and that figure will be nonsense.
That said, I naturally hope that we all hit the jackpot and that I eventually qualify for a K2 offshore banking arrangement!

Jefferies note today:
"Who is Edison? Edison S.p.A. is an Italian based upstream producer and electricity generator. It has production of c.50kboepd and reserves of 360mmboe. It has 60 concessions in Italy and 23 outside of Italy, including in deepwater environments. Edison is now majority owned and controlled by the utility EDF.

Why the unusual deal structure? The option to farm out was an unusual structure for upstream deals. FOGL states the reason for the option was because Edison was undergoing a corporate restructuring in which EDF took majority control of the company.
High impact drilling beginning in July. We expect BOR’s Stebbing result imminently, after which the rig will move to FOGL to drill Loligo first, likely followed by Scotia. We carry FOGL’s 75% wi in Loligo at 145p/sh risked, 2900p/sh unrisked. Drilling will likely move to Scotia, 36p/sh risked, 725p/sh unrisked although then drilling program is designed to have some flexibility for the second well if Loligo is encouraging with locations selected for either appraisal locations or lookalike prospects to Loligo.
We view this election positively. This farm out provides independent 3rd party industry validation of FOGL’s prospects and will leave the company with sufficient funding for additional follow on appraisal/exploration including possible 3D seismic or drilling. If the wells are drilled to budget, FOGL now expects to have at least $100m in cash remaining after the 2012 program.

Couple more media write ups :

http://www.bloomberg.com/news/2012-06-26/france-s-edf-buys-into-falkland-oil-wells-amid-dispute.html

http://uk.reuters.com/article/2012/06/26/us-falkland-oil-idUKBRE85P06U20120626

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