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
EPIC : FOGL
Shares in Issue : 320 million
Web Site : http://www.fogl.com/fogl/en/home
Already have an account?
Login here
SirL,
FOGL and BOR have clearly said that if oil finds are made then late 2012 will be more 3D seismic time and then 2013 will bring appraisal of those finds and further exploration based on those finds.
Its therefore very necessary to be aware of the immediate upside potential for de-risking of future top level prospects in the event a similar play type strikes oil.
The lists show the significant upside potential which would be near term, if any of the play types strike oil
chris, 45 days would include a full wireline and P&A time and some moving time.
As they state 45 days per well, 90 days total.
I would expect them to be at TD 1st or 2nd week of March, so not long to go really.
http://en.mercopress.com/2012/02/17/uk-analysts-says-falklands-oil-industry-could-be-worth-180-billion-dollars-in-royalties-and-taxes
"............According to Reynolds the Southern Basin is totally unexplored but the largest prospect in that basin, Loligo (being targeted by FOGL), contains estimated resources of 4,700 million barrels, making it the largest drill target anywhere in the world in 2012 and over ten times the size of the estimated gross 448 million barrels discovered to date at Sea Lion.
But, according to Reynolds there is more to be had in the Falklands than just a speculative punt on exploration drilling.
“The Falklands offers a bit of everything for investors at the moment,” she said.
“Rockhopper provides relatively low-risk development upside, while FOGL is the most compelling of the exploration plays, although Borders and Southern remains very attractive”.
The analyst also says that while Desire Petroleum and Argos Resources are less attractive at the moment, with no near-term activity, both companies could still benefit from regional euphoria in the event of 2012 discoveries."
For anyone who has not read the Edison Falklands write up.
http://www.mediafire.com/?2k3td4ffx531a76
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Will be interesting to see if FOGL farm out before Loligo spuds. There is an option on the present drill contract for a single further option well (making it 5 wells in total).
BOR have funds for 2 and are committed to 2, FOGL have funds for 2 and are committed to 2, and there is one open option.
If FOGL did farm out before Loligo spuds, then we could see FOGL drilling 3 wells this round.
The original contract was for 2 firm plus 3 options. FOGL took two of the options and 1 option is left over.
Fri May 6, 2011 9:25am EDT
ATHENS, GREECE, May 06 (MARKET WIRE) --
DryShips Inc. (NASDAQ: DRYS) (the "Company" or "DryShips"), a global
provider of marine transportation services for drybulk and petroleum
cargoes and off-shore contract drilling oil services, announced the
signing, by its majority-owned subsidiary Ocean Rig UDW Inc. ("Ocean
Rig"), of a new drilling contract for its 5th generation drilling rig
"Leiv Eiriksson" with Borders & Southern Petroleum plc for performance of
exploration drilling offshore the Falkland Islands. This contract
replaces the previous contract with Borders & Southern plc for the "Eirik
Raude." The "Leiv Eiriksson" will perform the scheduled drilling program
in direct continuation after completion of the drilling campaign for
Cairn Energy offshore Greenland. The contract is for a two well contract
for a period of about 90 days, including three further optional wells.
The contract value is approximately USD 80 million..........
.
A farm out deal could really add value to FOGL.
The market is basically giving tiny value to the prospects, so the chance of farming a little out, but getting a 3rd drill fully paid for by the farm in partner during this round of drilling would really add value.
It could be 1 explo and then 2 appraisal wells on Loligo in the event of a find.
Or it could be Loligo then Scotia and then 1 of any type of play that BOR might find oil in - giving FOGL 3 shots on 3 different play types.
Anyone know why the FOGL prospects now have a COS of around 20%? I thought that the CSEM de risked them to about 40%. It was a new technology, maybe its now been disproven?
Cheers!
Gotta be good news RE: political situation!
"Cristina Kirchner has been warned to leave Falkland Islanders to decide their own future as Argentina's president faced a backlash from a group of the South American country's leading thinkers."
http://www.telegraph.co.uk/news/worldnews/southamerica/falklandislands/9098633/Cristina-Kirchner-told-to-leave-Falkland-Islanders-alone-by-Argentinas-intellectuals.html
Buy note out on BOR.
http://www.proactiveinvestors.co.uk/companies/news/39909/
7th March
Borders & Southern Petroleum retains 'buy' rating at Merchant Securities after Darwin well spud
9:17 am by Sergei Balashov
Merchant Securities currently has a 'buy' recommendation and a 218.9p on Borders & Southern
Merchant Securities today repeated its ‘buy’ recommendation and ultra-bullish target price on Borders & Southern Petroleum (LON:BOR) following the start of its hotly anticipated drilling campaign in the Falklands.
The note from Merchant Securities was in response to the spudding of the Darwin well on January 31. This is the first ever de............
Broker views on the farm in news today :
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 ($95m) maybe used on 3D seismic (1xNorth and 1xSouth) or on a 3rd well.
> The rig is due back in Norway by October so there is a window for a 3rd FOGL well.
> This is only an option at the moment.
GLA & DYOR
MV
Edison update on FOGL 22nd March 2012. PDF can download on the link below
http://www.mediafire.com/?lxp8286btbd3rbj
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The Argentinian claims on the Falklands were being discussed on Breakfast TV today.....
The Argies have now opened a new front in their attacks:
Argentina threatens to sue banks helping Falklands oil explorers as trade war with Britain escalates
A group of British and American banks have been threatened with legal action by the Argentine government for advising and writing research reports about companies involved in the Falkland Islands’ £1.6bn oil industry.
More to come, I suspect.....
ee
Well, all ahead for next week. Tuesday onwards should see the fun start, its week number 4 next week for the BOR Darwin drill, of the given 4 to 5 weeks from 16th March RNS, and so news at any time then for BOR with a large impact on FOGL.
A lot of people have shorted FOGL as a way to hedge against BOR failure, should the BOR well come in good I can see a very sharp and very fast move upwards on FOGL, of the same proportion as BOR even.
Farm in news is also just around the corner, looking very likely its going to be Cairn taking a cut of the FOGL licenses.
I am guessing the timing of the 20th March Farm Out Potential RNS was done because on the 21st of March there was a meeting of the FIG, where one of the topics was an add on to the FOGL drilling program.
http://www.epd.gov.fk/wp-content/uploads/1.0%20March%20agend...
So given the change was likely, imo, the application to drill a 3rd well, if the farm out goes ahead, its why they RNS'd on the 20th March.
The farm out (gaining 95 million US$ cash for 25%) means FOGL can :
Drill 3 wells and do a 3D seismic study starting Q4 and still, after all that is paid for, including demob costs - have well over 100 million US$ in the bank - therefore meaning there is no need for any fund raising until the 3D is complete in 2013 and a new CPR is done.
If FOGL only drill 2 wells and do 3D in Q4 they will end up with nearly 150 million US$ cash in the bank as they issue their CPR in 2013, meaning they could fund another 2 wells in later 2013 with their farm in partner without the need for any further fund raising.
A very nice position to be in, and lets hope the farm out going ahead news is coming very soon.
And worst case would therefore be, Loligo and Scotia both fail - FOGL give up and do no 3D, they would have circa 195 million US$ cash at the end of drilling 2 wells and could return to shareholders. 195 million US$ = 38p a share cash left over if the farm in goes ahead and FOGL drill only 2 wells and fail on both.
It means therefore you could be looking at 5000% or more gains - or worst case cash in bank value and fall of less than 50% from todays buy in price.
50% down to cash leftover value if both wells fail or 5000% or more up - those odds do like mightily attractive - perhaps why I am so long in FOGL.
Have to redo my sums a little now with confirmed news on cash.
".................FOGL's cash position at the end of March 2012, was approximately US$184 million. Forecast expenditure for 2012 is approximately US$140 million on the assumption that two exploration wells will be drilled, the first on Loligo and the second on Scotia. This cash position does not take into account the farm-in option which, if exercised, would add materially to FOGL's financial flexibility................"
Cash now is 184 million US$
Expenses for 2 wells is 140 million US$.
Now if the farm out goes ahead.
Cash will be 279 million US$.
Expenses for 2 wells would be 105 million US$.
So after drilling 2 wells (with farm out) FOGL will be left with cash of 174 million US$ or say 33 pence a share.
So the downside to cash in the bank if both FOGL wells fail is 33p a share - so you get 50% downside if they both fail and over 5000% upside if they are a success.
Very nice position.