Well, here's a company that does what it says on the tin! Falkland Oil and Gas Limited (FOGL) is exploring for oil and gas in the South and East Falkland Basins. It has an aggressive exploration programme, and is now drilling its first wells, hoping to develop “a new hydrocarbon province in the South Atlantic” [1] .
The Falkland Islands have a mixed history when it comes to oil exploration. In the late 1990s Shell, Lasmo and Amerada Hess all drilled in the area, making a number of discoveries. But none of the discoveries were of a large enough size to justify development. This is going to be a high cost producing region, after all - it's deep water, and it is, quite literally, miles from anywhere - which explains the difficulties most companies have had getting a rig for their drilling programmes.
Investors may be interested to note that CEO Tim Bushell has previous experience in the Falklands, admittedly in the North Basin rather than the south and east side where FOGL is looking - he was working with Lasmo at the time. He later headed up Paladin Resources' Norwegian operations - exploration director Colin More also hails from Paladin, having also managed exploration in China and India for Cairn Energy.
When it published its 2008 annual report, FOGL had four initial prospects, representing 8 billion bbls potential mean reserves between them. Management estimates that a discovery as small as 100 mmbbl would be viable at oil prices as low as USD 25 a barrel [2] .
Next year should see the beginning of the drilling programme; FOGS brought BHP Billiton in as a partner (and as operator) in 2007, and BHP will pay 68% of the cost of the first two wells. BHP is a well regarded company, so its involvement is an encouraging sign. It's in for 51%, and has an option to increase its take to 65% (for an initial payment of USD 10m reimbursing FOGL's expenditure on the development).
The big milestone though is “Secure a rig” [3] , and that's been a major stumbling block for FOGL. For most of its prospects it needs either fifth/sixth generation semi-submersibles or drill ships - and they have been in high demand, particularly from discoveries offshore Brazil. There are up to 35 rigs that might be suitable -…
