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Numis: Borders & Southern (Buy, TP: 175p)

Opening up the South Falkland Basin

In our view, Borders and Southern's Darwin exploration well has proven a working hydrocarbon system in the South Falkland Basin, confirming the existence of an extensive marine source previously known to exist to the East and West of the company's acreage. The Darwin well appears to have hit high quality Lower Cretaceous reservoir, in-line with prognosis, with a thick, homogeneous gas condensate bearing interval.

Clearly, understanding the liquid content of the discovery will be key in determining its value. Based on the aerial extent, net pay and reservoir quality of the Darwin discovery we believe that a commercial stand-alone discovery remains a possibility.
We raise our target price from 86p/share to 175p/share, adjusting our valuation for the possibility of a commercial rich gas discovery at Darwin and a partially de-risked EMV for Stebbing.

• Opening up the South Falkland Basin: In our view, the Darwin well result helps de-risk the South Falkland Basin, confirming the existence of source rock, thick high quality sands and robust play types. Next steps in the SFB exploration programme include two important catalysts: 1) Determination of liquid content at Darwin (expected in approximately five weeks) 2) Testing the fold belt play type. Stebbing is the next prospect in the drilling schedule (expected to spud within one week) - a prospect for which the company estimates a P50 recoverable resource of 1280mmboe.

• Darwin - a potential stand-alone development: In our view, it would be wrong to rule out Darwin as a commercial stand-alone development. Detail released on aerial extent and net pay suggest a material discovery and we estimate recoverable gas at 2.3 to 3.7tcf. In our view, if the gas is sufficiently rich, a >200mmbbl condensate development remains a possibility and could be commercialised. Given the location of Darwin, we believe the most likely stand-alone development concept would involve condensate recovery with 100% of lean gas recycled back in to the reservoir - a development concept analogous to the Bayu-Undan phase I field development in the Timor Sea.

• Valuation: We have adjusted our NAV to include a rich gas discovery for Darwin risked at 50% commercial COS, and included an EMV valuation for Stebbing which now assumes a 30% commercial COS (10% oil case, 10% rich gas, 10% dry gas case). Please see note for full details. Our 175p/share target price stands at a 50% discount to NAV (350p/share) in order to pre-empt the dilutive effect of future share placings and farm-downs.

I have heard there is a chance FOGL will now drill Loligo next.

BOR announced the Darwin results and intention to drill Stebbing, but then did a placing to do additional work on Darwin (which may include more downhole seismic, neutron logs etc....)

It could be, so I heard, that BOR wanted to run loads more tests at Darwin, hence the quick placing. Owing to the need for time to analyze those tests and their implications they may have agreed with FOGL for FOGL to drill next at Loligo.

So at the moment everything is in limbo as FOGL must talk with their potential farm in partner before any announcement can be made.

Interesting, and possible that next is Loligo and then Stebbing. FOGL are drill ready as all their plans were made for May spud, which slipped to June.

http://en.mercopress.com/2012/05/02/with-oil-development-in-mind-falklands-trade-delegation-visits-aberdeen-and-shetlands

http://www.washingtonpost.com/world/europe/uk-foreign-minister-says-argentinas-olympic-ad-in-falkland-islands-is-a-stunt/2012/05/04/gIQAvnzl0T_story.html

Definitely Stebbing next it seems. FOGL paperwork still in process, but all in hand.


http://www.falklandnews.com/public/story.cfm?get=6231&source=3


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http://www.scotsman.com/news/scottish-news/top-stories/oil-capital-s-counsel-for-falkland-islanders-1-2280516

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From the placing RNS - which is the latest RNS and makes the 23rd April 2012 RNS out of date and no longer applicable.

Does anyone think they have done a sidetrack in the last 2 weeks to test the second reservoir and therefore hopefully bring the resource figure upwards and to possibly very commercial levels ?

I remain unconvinced but also would not fall of my chair in surprise if they have done a sidetrack - BOR like to be, lets say, shy in what they release to the public where others would shout.


.......Reasons for the Placing and use of the proceeds

These funds will be used to acquire additional 3D seismic within the Company's existing acreage, to enable further analysis of the results of the Darwin East well and for general working capital purposes, including further contingency funds for the upcoming exploration well...........

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Pro trying to twist things again ....read the last RNS u Thicky it tells you in black and white.

The Company now intends to complete wireline logging operations, plug and abandon the well in line with regulatory requirements and move to the Stebbing prospect, the second well in the current drilling programme. An announcement will be made once this well has spudded.

The thing that could support the sidetrack theory is that the initial Sun article said "1 billion barrels" but then it was updated to say "1 Billion barrels over 2 reservoirs".

That kind of suggests their "source" said hang on, the 1 billion is over Darwin East and Darwin West, not just Darwin East when asked to clarify.

If that were the case then a quick fund raise and running a sidetrack could make sense to bring Darwin West into play and therefore push the resource figure to 1 billion boe levels.

Which would make the Sun article pretty much spot on, apart from they should have said BOE (Barrels of Oil Equivalent) and not "black stuff".

This is from DES, the sidetrack actually only took 12 days (15th Oct finishing off logging to 27th Oct sidetrack completed).

The sidetrack started straight away on finishing logging, so no extra permissions needed it seems.


........................The Rachel well has provided much new valuable data on the distribution of the reservoir targets within the Eastern Flank play and in particular the calibration of the 3D seismic data for sandstone prediction. Our understanding of this play type is rapidly evolving but one of the biggest remaining uncertainties relates to the oil charging mechanism from the mature oil source rock to the fan sandstones. Based on the latest information from this well, potential sandstones have now been identified downdip from the existing location, closer to the mature oil source rock, significantly reducing the oil charge risk. As a result the well will be sidetracked to this location to evaluate the prospectivity. The sidetrack will commence when the present logging operations are complete. The total depth of the sidetrack is planned to be 3,418 metres measured depth (2,970 metres vertical depth) with an offset of circa 1.2 kilometres from the total depth of the original vertical well. The sidetrack will be designated 14/15-1Z and is expected to take 20 days and the Company will make a further announcement upon completion of this sidetrack................

Stebbing to be spudded next, and should be next news.

Yep, Stebbing is next.

The question being raised is have they, in the last 2 weeks, run a sidetrack from Darwin East well into Darwin West to test the Darwin West structure ?

Its like jackanory a different story evey day....of course all made up in his small little mind.

I can't imagine they'd do that prior to announcing wireline logging results. I don't see how Rachel compares to Darwin for a sidetrack either without Regulatory Approvals, the drilling rigs are different as are the depths being worked in. No point speculating just yet until results are known and we know what grade of condensate has been found indicating if Darwin is a standalone development.

How very separate is Stebbing from Darwin in geological terms and what sort of distance are we talking about......is my question ?...

RF see here http://ar10.bordersandsouthern.com/media/pdf/at_a_glance.pdf page 2. I think there very different.

Darwin is a tilted fault block. The reservoir is interpreted to be Lower Cretaceous shallow marine sandstone. The prospect has a flat spot, amplitude conformance to structure and an AVO anomaly. The company’s P50 recoverable resource estimates for the amplitude anomaly alone are 300 million barrels. P50 recoverable resource estimates for the entire structure down to the mapped spill point are 760 million barrels.

Stebbing is a thrust-cored anticline. Stacked reservoirs are interpreted to be Upper Cretaceous and Tertiary deep water marine sandstone. The prospect has AVO anomalies in the Tertiary. The company’s P50 recoverable resource estimates for the combined two reservoir intervals are 1,280 million barrels.

These prospects are completely independent except that they require the same source rock to be present throughout the area.

Circa 25 nautical miles apart RF for distance.

Stebbing is shallower and less likely oil thats been overcooked and gone to condensate/gas. Also its slightly into the oil mature window as well.

it must be disconcerting for holders of both BOR and FOGL to see sp dropping by a further 5% albeit that the market is generally pretty pissy all round

on the other hand, those promoters of GOO could well be viewing beachy head with some interest

Pissy for oilies, but have taken a nice profit on Advanti so can't complain. Held GOO for years now, averaging some 10p a share and had written this equity off along time ago... Lets see it Z34 farmout can get me out evens although I won't hold my breath.

Wrong thread I know but I fancy going long on BNC right now, just a pure punt, any views cynic?

Updated destination is Stebbing 3.

The LE rig is on its way and will arrive today, so spud over the weekend it looks like.