.

From III

Re: Going Second, Seismics - BHP I spoke to FOGL a while back (didn’t catch the person’s name but he appeared well informed and very confident). I queried why BHPB no longer retained the option to farm back in on a discovery and whether FOGL still had access to the escrow cash. He confirmed that they still had access to the escrow cash to drill Loligo.

He explained that FIG effectively vetoed the decision to allow BHPB to retain back-in option (not hard to work out why given BHPB’s poor record in FI). He stressed this was good news for FOGL’s farm in discussions with other potential partners as the BHPB back-in option had clearly presented a complication.

Now owning a 100% FOGL was in a much stronger position to negotiate a new farm-out deal. I asked why this situation had not been made clearer in the RNS dated 21/11/2011 (link below) as it was clearly excellent news – we get to keep BHPB’s cash and create a clean slate to negotiate a new farm-in.

He said neither FIG nor FOGL wanted to give the impression that they were (I quote) “rubbing BHPB’s nose in it”.http://www.investegate.co.uk/Article.aspx?id=201111210700134113SI would also add that despite never being keen on the politics (with Argentina sabre-rattling) BHPB clung on to their interest in Loligo until the very last and even then did not relinquish it voluntarily.

Simple question – why?

Please note no new information was released to me during this discussion, it was simply clarification of the RNS above which I queried.

Leiv Eriksson.

2123Nm, 203 DEGREES
13d 14h 38mins (at 6.5knots)
ETA: 2012-01-21 08:28 (UTC)
Port Stanley

It looks like FOGL is being heavily short sold at the moment, as people gamble that there will be no farm out and FOGL will need to raise some extra funds to drill 2 deep wells, and will do so before BOR finish their first drill.

That means if a farm out is announced expect a very strong rally upwards and the shorts close their positions rapidly.

Either the shorts are right and will get their stock back in a placing, or there will be a helluva shorts closing rally before too long.

perhaps you're grasping at straws ..... a damn-fool buy imo

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i am not a holder of fogl in any respect and have no wish to be
i only hold rkh in this region, and am currently showing a very nice profit

logic is as follows, and as posted a couple of weeks back ....

if fogl fluke a find - chances are usually something like 5:1, but in unknown territory, more realistic to say 8 or 10 or even 12:1 - then rkh will also benefit
there will also be plenty of opportunity to jump on board after the event.

if fogl get a duster or a non-commercial find - the most likely outcome - then fogl will be badly hit, but rkh will only a dip a bit

i don't play roulette, even when the odds are a bit better than at that that mug's game

1 in 10 chance of hitting oil with only enough money for 1 drill at moment.

I did suggest it was being shorted ahead of a placing and there we go.

Excellent now that we can drill deep Loligo, deep Scotia and still have plenty of funds at the end of that.

FOGL now go into this with 100% of Loligo and 100% of Scotia - and that means massive upside if either of those two strike oil :) !!

No farm out needed now.

Away we go............ bring on the rig.

I thought it pretty certain they wanted to drill Scotia given the excellent sands found in the Toroa near shore well, it meant that a big risk for deepwater wells targeted the same sands was greatly reduced, hence the need to drill Scotia second after Loligo.

Todays placing is no surprise and it means they now drill Loligo and Scotia with 100% ownership and no farm in.

Given the dilution from todays placing the risked and unrisked with the new shares in issue figure is as follows :

Loligo risked per share is now £13.13
Loligo unrisked per share is now £89


FOGL main prospects risked is now £44.71 per share
FOGL main prospects unrisked is now £303 per share.


First up, Loligo now represents £89 a share unrisked upside based on a low in the ground valuation of the potential 4.7 billion recoverable barrels of oil on P50 figures.

Rig is arriving very soon and drilling starts for BOR within weeks.

This is going to fly when Loligo spudding nears............

RKH 38p to 500p.

FOGL could go 50p to 2000p - such are the massive massive size of the FOGL drills compared to tiddler RKH.

2000p here we go again!!

3 guesses as to which line represents FOGL

LOL

RKH is now POST drill - and will now go down and down over the coming months.

FOGL is now PRE drill - and will go up and up in the coming months.

I will post your chart back to you in June cynic - and laugh and laugh :)

Worth re-reading this now, and the implications of Scotia which I predicted would be drill number 2.

http://boards.fool.co.uk/nfsc-2012-write-up-fogl-falkland-oil-and-gas-12443771.aspx?sort=whole

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if you're right I am delighted for you and everyone else, but you seem to delude yourself and forget that FOGL is all blue sky with the very high risk that that implies - viz DES!

The overhang from this placing will need to clear - it will take time, the spudding of BOR's first well will provide impetus to buy FOGL.

With the new placing shares now :

BOR is funded for 2 wells.

FOGL is funded for 2 wells.


FOGL's prospects are 4 times the size of BOR's - and yet BOR market cap is now (taking in the placing shares) twice the size of FOGL.

So BOR is twice as expensive with a quarter of the potential. That means FOGL is cheap and will undergo a big re-rating once the overhang is clear.

FOGL COS is only 10% very poor, very slim chance of hitting oil

BOR COS is over 20% hence have a better chance of hitting oil hence higher market cap higher.

http://ftalphaville.ft.com/blog/2012/01/13/832461/markets-live/



Falkland Oil And Gas Ltd (FOGL:LSE): Last: 46.75, down 3.75 (-7.43%), High: 52.00, Low: 43.00, Volume: 14.89m

BE Sector watcher’s had a look at this one.

BE

48.5m equity issue at 43p/share, a 15% discount to yesterday’s closing price. It’s a big raise, with the new shares representing 54% of the existing shareholder base. Although FOGL already had around £70m at interim results in mid-year, the additional cash will make a material difference to its impending drilling campaign in the southern Falklands. Previously the group only had sufficient cash to drill two shallow wells, whereas now it can drill much deeper prospects. We estimate that the wells will cost around $60-70m each. The first well, Loligo, is targeting 4.7 billion barrels of hydrocarbons, over half of which is in the deeper targets (which admittedly look more gas-prone than oil-prone).

On an assumed NPV of $10-12/barrel, an oil discovery therefore has the potential to be worth $50-60bn, i.e. a quite staggering amount in the context of FOGL’s market cap of around $250m. The group will drill its two wells immediately following two from Borders & Southern, which is due to take delivery of the Liev Eiriksson deepwater rig later this month. Hence over the next six months or so, there will be a total of four wells being drilled in the basin, targeting around 7-8 billion barrels of hydrocarbons. Whilst clearly high risk, I’d be tempted to take small positions in both FOGL and BOR.

PM (Banks underwriting unicredit rights expect 90-95% take up — bank consortium source — rts)

PM Tight discount that for Falklands

BE Yeah – that’s what I thought.

Very high volume turn over off FOGL shares today Marky and a lot of the placing shares will have already been sold and bought by the 18th.

The CoS is very low, like all these wildcat Wells, but the sp should surely rise into BOR/FOGL spud time as the upside of another Sealion stroke of luck will pull in a lot of punters....how many shares you hold at drill results time is the normal issue!

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.