Falkland Oil And Gas Delays Results Of Toroa Drilling In The Falkland Islands

5th Jul '10 by Stockopedia News

5 comments 7643 reads

Investors anticipating the results of a well being drilled by Falkland Oil & Gas (LON:FOGL) on the Toroa prospect to the south of the Falkland Islands, were left waiting today after the company said that early results from the well were not now expected until next week. FOGL began drilling the Toroa F61/5-1 exploration well in May towards an estimated target depth of around 2,700 metres, with preliminary results scheduled for this week. The company blamed the delay on further delays due to some minor operational issues and weather related downtime. Shares in AIM listed FOGL soared from 199p to 244p during the last week of June but slipped back by 6.5% to 227.7p on the news today.

The Toroa prospect is located in Licence PL15, in which FOGL has a 49% interest alongside BHP Billiton. The company is planning a two-phase drilling programme, starting at Toroa and then moving on to a deepwater campaign, which is currently expected to start in late 2010. Under the terms of its farm-in agreement, BHP Billiton is funding more than two thirds of the total cost of the committed two well programme.

FOGL is one of four listed groups operating in the Falklands, which include Rockhopper Exploration (LON:RKH), Desire Petroleum (LON:DES) and Borders & Southern Petroleum (LON:BOR) . It is using the Ocean Guardian drilling rig, which was initially contracted by Desire Petroleum last year and began work in the region in February. In May, Rockhopper became the first company to strike significant oil, with a discovery at its Sea Lion prospect in the North Falkland Basin.

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landgrab

11th Jul '10

What view does anyone have on this for the coming week.

Last week's 20% surge and following sell-off has encouraged me to question maintaining my current holding in FOGL, but I am still positive on prospects

Nothingventured

12th Jul '10

Shame there wasn't a Sunday Times article revealing all before the RNS!

I hold a few and will wait to see how long it is until there is some more drilling before deciding what to do.

I'm also not sure how much cash the company has to fund further explo, so more research to do I think.

Jim

moniclub

13th Jul '10

FOGL's mid-May AGM was told that the company had $90m cash – enough for three wells. I've seen the cost of Toroa put at roughly $20m. AGM was also told that Billiton was keener than FOGL to drill Toroa first while the company had pushed for/favoured Loligo. Of course, this will require another rig and there is a 4-5 month mobilisation period so drilling clearly won't happen in short order.

FWIW

M.

jonnyt

As I understand it the current rig in the basin wasn't equiped to drill Loligo so it was a case of take a slot to drill a shallow water well or miss out. They took the opportunity and this time it didn't work out. Who knows what will happen when they get a deep water rig on site.

ohisay

There were a couple of broker comments yesterday from FTAlpha.

"FOGL raised £50m last November, with Toroa budgeted at only £12m net to the group, hence the group is still financially viable. However there is likely to be a long wait for the next drilling news as the group’s other prospects are deepwater, with no rig yet contracted – this could easily stretch into next year. Whilst today’s news is clearly very bad for FOGL – we believe the shares could test the 115p/share funding level from last November – any pronounced weakness in the other players should be seen as a buying opportunity, particularly for RKH which has the only confirmed discovery to date."

And Oriel ..

"On discussion with management, they did confirm that the targeted Springhill reservoir sands were present in the well and in decent quality which was a key pre-drill risk alongside source
Toroa was not the partner group’s first choice prospect, its selection dictated by rig constraints, however the well has provided useful geological data which will should help refine future prospects
The rig will now be released to Rockhopper which will drill the Ernest prospect
FOGL’s shares will obviously come under pressure today but we would highlight that exploration is at early stage in this large frontier basin with significant remaining prospectivity"

Falkland Oil and Gas delays results of Toroa drilling in the Falkland Islands

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