MercoPress. South Atlantic News Agency

Falkland Islands’ 2012 oil exploration drilling round announced by FOGL

FOGL and B&S hold licences to the South and East of the Falklands

Falkland Oil and Gas Ltd plans to raise £32m through a placing of shares at 70p each, with the money earmarked for the oil and gas exploration company’s 2012 drilling program, according to a release from the company heavily involved in exploration to the South and East of the Falkland Islands.

The shares are being placed at a 14% discount to the closing mid-market share price on the day before the announcement of the share issue. The issue is not being underwritten.

The net proceeds of the placing, together with FOGL existing cash resources and the proceeds of the settlement with BHP Billiton announced on 31 March 2011, will be used to provide additional drilling options for FOGL planned 2012 drilling program.

FOGL said its deep water exploration program is expected to start in the first quarter of 2012 and to that end the company has signed a preliminary agreement with Border & Southern Petroleum (B&S) to share a rig to commence drilling its Loligo prospect close to the Falkland Islands.

FOGL expects to access the rig for the third well slot in the combined B&S and FOGL program. FOGL is considering a second drilling slot and, should it do so, there are a number of options for the second well, depending principally on the results from Loligo itself and from B&S wells.

The rig is currently expected to arrive in the Falkland Islands in the fourth quarter of 2011.

The release point out that if Loligo proves successful, FOGL could drill an appraisal well on Loligo, or alternatively another prospect within the Tertiary Channel play such as Nimrod (Pmean reserves of 1,500mmbbls) or Vinson (Pmean reserves of 733 mmbbls).

If the Loligo results are disappointing, the most likely drilling candidates are within the Mid Cretaceous fan play, with the Scotia prospect (Pmean reserves of 1,060 mmbbls) being FOGL preferred option. In the event of success for B&S on its Darwin prospect, FOGL may consider drilling the nearby Inflexible prospect (Pmean reserves of 250 mmbbls).

FOGL is also continuing its farm-out discussions with interested parties and believes that a suitable ‘farminee’ would further strengthen its financial position and allow an additional well to be drilled as part of this campaign.

FOGL’s Northern Licence is due to expire on 15 December 2011. FOGL has discussed its planned drilling campaign with the Falkland Islands Government and is confident that it will be able to obtain an extension of the licence to cover the planned programme on terms that are acceptable to FOGL.

“I am delighted to have entered into a heads of agreement for a rig contract to enable us to commence our deepwater exploration program. The successful fund raising puts us in a strong position to fully evaluate the Loligo prospect and also provides us with the financial strength to develop additional drilling options”, said Tim Bushell, FOGL CEO.

“We are also excited by the results of our recent technical work which has identified two new prospects within the Hersilia complex. Seismic amplitude analysis (AVO), together with the encouraging reservoir results from the Toroa well, has substantially reduced the risk on Scotia and Hero, which each have over 1 billion barrels of potential prospective resources. Site surveys have been completed over these two prospects and we are about to acquire new 2D seismic data over the area to aid final prospect selection” underlined CEO Bushell.