Falkland Oil and Gas - 2012 - its over for now

Sunday, Jan 01 2012 by
11

 

Falkland Oil and Gas Limited

EPIC : FOGL

 Shares in Issue : 320 million

Web Site : http://www.fogl.com/fogl/en/home

 


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    Falkland oil and Gas Limited (FOGL) is an oil and gas exploration company operating in the South and East Falkland Basins. The Company’s operations are focused on oil and gas exploration activities in the Falkland Islands. The principal subsidiary of the Company is FOGL Finance Limited, which is 100% owned by the Company. FOGL owns and is the operator of 100% of its license areas. The Falkland Islands comprise some 340 islands, located approximately 480 kilometer from the nearest point in South America. On March 20, 2012, FOGL announced that it had granted an option to enter into a Farm-Out Agreement to an oil industry counterparty. more »

    Share Price (AIM)
    25p
    Change
    -0.3  -1.0%
    P/E (fwd)
    n/a
    Yield (fwd)
    n/a
    Mkt Cap (£m)
    133.4

    Borders & Southern Petroleum plc is an oil and gas exploration company. The Company’s area of activity is in the Falkland Islands. The Company has a 100% interest and operatorship in three production licenses covering an area of nearly 10,000 square kilometers. The acreage is located approximately 150 kilometers south-east of the Islands. The Falkland Islands are located in the South Atlantic, approximately 500 kilometers from the mainland of South America. The Company holds a prospect inventory, which includes reservoir targets in the Tertiary, Late Cretaceous and Early Cretaceous. more »

    Share Price (AIM)
    13.38p
    Change
    0.0  0.0%
    P/E (fwd)
    n/a
    Yield (fwd)
    5.9
    Mkt Cap (£m)
    64.7

    Rockhopper Exploration plc (RKH) is engaged in exploration and exploitation of its oil and gas acreage. RKH has discovered oil in the Falkland Islands. Its Licences include Licences PL023 & PL024, which represents the southern acreage that it holds within the North Falkland Basin and RKH holds these licences 100% and is the operator; Licences PL032 & PL033, which represents the northern acreage that the group holds within the North Falkland Basin and holds these licences 100% and is the operator, and Licences PL003 & PL004. The Company has a 7.5% working interest in licences PL004a and PL003 and is not the operator. The Company also holds a 25% working interest in licence PL004c. In May 2011, RKH concluded a three dimensional (3D) seismic acquisition program. more »

    Share Price (AIM)
    94p
    Change
    0.0  0.0%
    P/E (fwd)
    n/a
    Yield (fwd)
    n/a
    Mkt Cap (£m)
    267.6



      Is Falkland Oil and Gas fundamentally strong or weak? Find out More »


    212 Posts on this Thread show/hide all

    Proselenes 24th Oct '12 193 of 212

    My timeline is :


    Loligo progress was 3rd August spud - 10th Sept at 3900 metres. Loligo mud line was at 1381 metres.

    So, 38 days the average rate was 3900 depth less 1381 mud line divided by 38 days = 66 metres per day average rate including casing runs etc...


    Scotia spud was 25th September. Mud line at Scotia is 1762 meters.

    Target is circa 4900 meters and TD at 5198 meters.

    Based on 66 meters per day from the 1762 meters mud line.

    Target will be hit in 47 days (4900 - 1762 / 66 = 47.5 days)

    TD at 52 days (5198 - 1762 / 66 = 52 days)

    47 days from 25th September is Sun 11th Nov. 52 days is Fri 16th Nov.

    So week commencing Monday 19th November should see "initial wireline results" later in that week, IMO.


    Casing runs will take longer with a deeper well, so its all very rough but should not be far out.

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    dbfromgb 24th Oct '12 194 of 212

    Pro

    If one accepts at face value that they passed the 3300 mark around the 12th October (stated elsewhere as 'incontrovertible') then they are running ahead of schedule. 3300 less 1762 is 1538, divided by 18 days at that point is 85 metres a day. Using your calculations this would equate to entering the target zone after 37 days or TD at 40 days, so late next week.

    Of course the progress report could be wrong, and the second half of the well may be slower than the first half, but early November cannot be ruled out imho. But then of course there is always SW10's law....

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    Proselenes 24th Oct '12 195 of 212

    Yes, if they have hit the 3800 meter mark over the weekend and run the 2nd from last casing, they are averaging around 78 meters a day.......... so it could be early November.


    The Timeline given by Noble is more exciting though, if (and its still a big IF) Scotia does strike oil Noble will move their drilling schedules around and make a rig available for appraisal drilling from Q4 2013.

    They show continuous appraisal/explo (and also development) drilling non stop from Q4 2013 onwards should Scotia strike oil.

    Fingers crossed.




    .

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    Proselenes 25th Oct '12 196 of 212

    News out. Guess TD will now be circa 1st of Dec and not 17th Nov with the delay.


    3D in the north from late Nov and in the southern licenses from later Q1 2013.

    Both northern and southern licenses extended.

    2 week delay on Scotia now due to BOP issue.

    http://www.investegate.co.uk/Article.aspx?id=201210251000025183P

    .

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    Proselenes 26th Oct '12 197 of 212

    All we can be sure is that the cost of this delay to FOGL is minimal

    Noble are paying 60% of Scotia costs for their farm in, and Edison paying 25% - so FOGL only pay 15%.

    Even if the overrun cost 7m US$, that would equate to just 1m US$ as FOGL 15% share.

    Given the quickness in finishing Loligo this might mean FOGL's cash balance at finishing Scotia could be 119m US$ and not the 120m US$ I expected post Loligo drill finishing quick.

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    Proselenes 26th Oct '12 198 of 212

    Location decided. Job done, Falklands will have a new deepwater port.

    For those who said "Falklands has not got a deepwater port capable of supporting O&G industry and they need Argentinean ports"........... your answer cometh.


    http://www.penguin-news.com/index.php?option=com_flexicontent&view=items&id=453%3Aport-william-is-site-for-new-port



    .

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    emptyend 26th Oct '12 199 of 212
    2

    In reply to Proselenes, post #198

    For those who said "Falklands has not got a deepwater port capable of supporting O&G industry and they need Argentinean ports"

    DID anyone actually say that?

    I would have thought the suggestion that Argentinian ports would be helpful had very much more to do with shortening supply lines for a whole range of essentials, rather than the lack of a deepwater port. Ports will be built in places like the Falklands IF there is enough business there to justify them - its never been a matter of lack of sites, AFAIAA.

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    Proselenes 26th Oct '12 200 of 212

    EE - yes, been said in the past. As has there is no oil, as has oil will never be developed.


    Chart view :

    http://www.tradingresearchpoint.co.uk/2012/10/26/trading-trigger-alert-falklands-oil-gas-fogl-above-55p-targets-75p/

    .

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    Proselenes 1st Nov '12 202 of 212
    2

    Gulf Keystone has a net of 4.3% of their oil (WI/PSC/KRG special tax). Taking into account a 25% recovery factor (high for the location) and taking their 13 billion barrels OIP figure this gives :

    13 billion barrels OIP with 25% recovery factor = 3.25 billion and then times 4.3% = 140 million barrels is the net barrels to GKP.

    GKP market cap is say 1.7 billion pounds (now at 188p a share) and net take is 140 million barrels of oil. So presently they are valued at 12.14 pounds per barrel (excluding corporate tax on profits)

    -------------------------------------

    Scotia P50, if it strikes oil, the big if, would be net FOGL of 400 million barrels of oil (from OIP of 1.212 billion barrels. Royalty is 9% so that would reduce this down to 364 million barrels (excluding corporate tax on profits).

    It becomes apparent immediately that GKP have 140 million barrels net and FOGL could have 364 million barrels net using the same metrics (work in and royalties/special tax).

    FOGL also has far bigger follow on leads than GKP has, 30 billion OIP in follow on leads if Scotia is good.

    If you were to value each FOGL barrel on the same basis as the "present" value of a GKP barrel that would be 364,000,000 x 12 pounds = 4.368 billion pound market cap for FOGL if Scotia comes in and is appraised.

    So taking a whopping 50% discount for FOGL on the GKP present valuation per barrel (appraising would have to be done), you get a 2 billion market cap for FOGL, or 10 times the current price, just for Scotia.

    That would also equate the same way utilising a standard 8 US$ x 400 million barrels = 2 billion pounds market cap.


    RKH achieved a price of US$4.69 per 2C barrel of oil for Sea Lion. This was considered a low ball offer by many, the reasons could be :

    1/ Oil is waxy, sub 30 API.
    2/ Thin and layered sands in many places at Sea Lion makes Enhanced Oil Recovery (EOR) more difficult.
    3/ High water saturation is some areas again will make EOR difficult.
    4/ RKH had no farm in partners and no funds to develop - backs against the wall stuff.


    For FOGL.

    1/ Any oil is expected to be circa 30 to 32 API at this location.
    2/ Based on Toroa and Darwin the mid-Cretaceous sands appear to be thick and of good quality, singular sandstone bodies, not layered like the Tertiary (Loligo and Stebbing).
    3/ FOGL have farm in partners in place, both multi-billion market cap (EDF and Noble).


    The 4.69 US$ value is not applicable to FOGL, imo, owing to the prevalent conditions that forced what I call a low ball offer from PMO for Sea Lion.

    Some people would argue that 8US$ in the ground is too high, I think not given the follow on leads and the major partners in bed already - the follow ons from Scotia is literally 30 billion barrels OIP and likely more once 3D is done and more prospects found and firmed up.


    Its all speculation and fantasy stuff until the Scotia result is in. The chance of success is obviously less than the chance of failure. However, should the drill come in with oil then there will be a serious rerating of the share price.

    Noble has already intimated that if Scotia strikes oil they will divert one rig down to the Falklands and commence (drilling to start Q4 2013) a multi-year non stop appraise and explore campaign, 365 days a year, multi year non stop drilling. With over 10 billion barrels of oil recoverable in follow on "Scotia type" leads (30 billion OIP) and possibly even more when 3D is done and processed - you can see why.

    It could be a duster, but for those who wish to dream a little, there is no better prospect on the market for big time re-rating in the months ahead, if you are willing to take high risk you might get a big reward, with the downside protection being cash leftover of 40p a share if its a duster).

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    Proselenes 6th Nov '12 203 of 212
    2

    Word is BOP is fixed and now drilling ahead again.

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    Proselenes 19th Nov '12 204 of 212
    3

    As the result is now very very near its worth going through the data and coming up with a potential "most likely" result.

    From the data of the DSDP wells, Toroa well, FOGL's concerns on lateral seal, Noble's concerns over no 3D etc... you can come up with the following as a most likely result.


    Good top seal encountered, good sandstone encountered, traces of oil however lateral seal failure and no big accumulation at this location.


    For me that would be the "most likely" result, with positives of good reservoir sandstone being found and the first confirmations that the Aptian source rock has generated oil, but the negative of no oil accumulation at this located due to lateral seal failure (the oil has migrated elsewhere).


    That would be a good result for FOGL if oil generation is confirmed, albeit a big let down none has been left here at this Scotia location due to sideways seal failing. It would allow Noble to take over the license confident oil has been generated and is around there somewhere, and allowing them to do the 3D work and come back with FOGL and Edison to drill again once the 3D is done and processed. FOGL have done well with the farmouts and conserving huge amounts of cash, because if the most likely result is the actual result then they are still in a good position, cashed up and able to drill plenty more wells with no dilution.

    You have to take your hats off to the FOGL board for their farmouts and strategy, done their very best in protecting shareholders value whilst allowing them to be exposed to major upside potential. Even if the "most likely" result comes in then FOGL have over 40p a share cash to move forward with.


    Whilst everyone wishes for a super oil strike of net pay and everyone fears a complete duster - its quite possible the median type result will come out, IMO.

    Just my thoughts, I do not have access to the well results, just a little speculation on my part.

    Personally I would love the last stock I write about in detail on various internet boards to be an oil strike (taking a rest from now on from all the bickering and childish behavior of the internet boards) , but personally I feel the "most likely" is probably more what should be expected at best.

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    Proselenes 22nd Nov '12 205 of 212
    3

    My guess to Scotia.

    One thing you will find is that gas stays close to source, oil migrates furthest away from source rock, albeit at a slow rate of progress.

    The target at Scotia is sat right above the source rock.

    My honest assessment would be, as I said before, that the top seal (was not that questionable) is good, and this has trapped gas in the upper levels.

    However, the lateral seal (the sideways seal) has failed (the big risk for Scotia) and the oil has migrated away to somewhere else on the license area (hopefully reservoired).

    This would leave an area of gas in the upper section where its managed to get trapped as its above the side seal level, but the main area is devoid of oil accumulation as its leaked away and migrated off somewhere else, maybe leaving some traces.

    Always remember oil migrates furthest away from the source rock but very slowly. Gas moves quick but travels not so far.

    This would be a decent result for FOGL, proving oil generation and opening the doors to 3D seismic and then more drilling in 2014 with a good chance of success. However short term it would not be the super result that many punters are looking for - who want a major oil discovery and will sell pretty quick a gas discovery RNS as they will not be holding FOGL through thick and thin until next drilling, they will be selling and buying back in 2014.

    Just imo - good luck !!


    I am now taking a break from the bulletin boards. If you want to you can find me on twitter @proselenes

    .

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    marben100 26th Nov '12 206 of 212
    3

    Comment from @WShak1 on twitter:

    FOGL , pumped for months, has now been dumped. May strike lucky (who knows?) but promoters haven't made what they wanted from hype.

    Caveat Emptor.

    | Link | Share | 1 reply
    peterg 26th Nov '12 207 of 212
    3

    In reply to marben100, post #206

    Well, I'm certainly not, nor ever have been a "promoter" of FOGL, but I am still in profit here. I've booked some, having reduced to 33% of my original holding at various times overt the past couple of months. I'll probably hold what I still have, and would expect in the worst case to end up about quits in case of a poor result, once the dust has settled. Clearly not what I would have hoped for, but I've had exposure to considerable upside, and still have some, and look likely to come out of it having lost little or nothing, and may yet make a decent profit. That's a satisfactory investment in my book.

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    Fangorn 27th Nov '12 208 of 212

    Down 43% at 8.30am on poor result.
    Can't say I'm surprised.

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    Fangorn 27th Nov '12 209 of 212
    1

    Gas shows but poor reservoir quality.

    http://www.investegate.co.uk/falkland-oil-and-gas-%28fogl%29...

    Well 31/12-01 was drilled to a depth of 5,555m. The well penetrated the mid Cretaceous aged reservoir objective on prognosis. The Scotia objective had been identified on the basis of its seismic amplitude response. Strong gas shows (C1 to C51)were encountered whilst drilling the target section. Interpretation of wireline log data indicates that the target interval 4719m to 4769m comprises 50m of hydrocarbon bearing fine grained sandstones and claystones. The wireline logs indicate that, at this location within Scotia, the sandstones form fairly poor quality reservoir, although some zones have up to 20% porosity. Other thin hydrocarbon bearing sandstones were encountered beneath the main target in the interval 4900m to 5164m. Subsequent evaluation of the main interval using a wireline formation testing tool did not flow hydrocarbons, indicating that the reservoir has low permeability.

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    Proselenes 28th Nov '12 210 of 212
    4

    Told you it was gas :) !

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    Proselenes 1st Dec '12 212 of 212
    2

    Final summary thoughts at the end of the drilling, thought I'd do one having written so much during the past 12 months.


    ARG - most overvalued Falklands stocks - tiny amount of cash and very high share price/market cap. Is going to have to raise money, meaning dilution of some sort, I would guess farm out and placing. Wait for the placing before buying in - FOGL was around 65p and then dropped to 43p for the placing. I'd expect a similar 30% to 50% fall in the ARG price when any placing happens.

    DES - aster, say no more.

    RKH - looking cheap but its a long term one - anyone suggesting putting money into FOGL and "waiting a few years for next drilling" is mad, if you are doing that then stick it in RKH.

    BOR - low on cash, a questionable commercial condensate discovery (as condensate is expensive to develop thanks to the need for dry gas reinjection - you cannot just produce condensate like oil). The whole SFB is now questionable as to whether it holds any oil at all - might all be gas and condensate. If Noble/Edison are committed long term to the SFB there might be a farm out imo, if there is a lack of any farm out it means the industry is not interested and BOR will have to raise money by placings (again) if they want to drill more, that means share price weakness for a long time to come.

    FOGL - not in a good place, two wells in the East Falklands have delivered 2 very bad reservoir formations, on top of Stebbing also finding very bad reservoir. Loligo update (and that was really bad reservoir where not even a puff of gas come out) will not be until Q3 2013 imo. Short term the only news is the "source rock samples" from the Aptian at Scotia, thats in Q1 2013 and that could be very bad if the source rock is deemed only to be mature for gas, not oil.

    At the moment there is a lot of "dead cat bounce" ramping of FOGL - telling people to buy for the long term. These people have been buying at 30p to 32p - they are looking for a 10% rise to 33p to 36p level at which they will sell the lot. Same happened with CHAR which recovered a bit and then fell back as those saying buy now, sold the moment it got up a little.

    All I would say is be careful, ahead you have imo :

    Q4 - no news
    Q1 2013 (late) news which might say oil possible, or badly it might say "no oil" in the license area.
    March 2013 - Tax year end selling - lots of losses to be taken for CGT.
    May to August - summer doldrums where AIM generally has a bad time and falls.
    September - chance for Loligo news and seismic news.

    For me I am not writing FOGL off, but I am not holding. I will wait for news from the source rock samples in Q1 2013, then if thats bad then I lose interest (as may Noble and Edison) if its good then I will wait for tax year end selling, summer doldrums and buy some FOGL July 2013 ahead of 3D news, but only if the Scotia source rock samples are good, if they say gas I will not bother.

    There are too many other good potentials for big gains out there to lock your money in FOGL for a year or more and miss out on many other things.

    Just imo - signing off from FOGL now, finally.

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