Falkland Oil and Gas (FOGL) confirmed on Monday it was holding talks with potential partners to look for oil and gas in the Falkland Islands and announced that the exploration rig slated to drill four wells in Falklands’ waters is expected in the Islands in late January 2012.
FOGL “continues its discussions with a number of oil companies who have expressed an interest in participating in the company’s exploration drilling program, and a successful conclusion to these discussions would provide greater flexibility to the Company's drilling program” said the Monday release.
Likewise according to a combined program with Borders & Southern, another Falklands’ hydrocarbons exploration company, FOGL will have access to the Leiv Eriksson rig for the third and fourth slots and expects to commence drilling in the second quarter of 2012 on its Loligo prospect in FOGL Northern Falkland licence area.
Following a detailed review of its budgets and assumptions, “FOGL has identified various drilling options and, based on geological, commercial and financial factors at the relevant time will decide which options to progress”.
FOGL remains funded to drill a well on Loligo and a second well on another Tertiary Channel target such as Nimrod or Vinson. Based on the latest projections, a second well is fully funded only in the event that a shallower well is drilled on Loligo.
According to FOGL current technical preference for the second well would be the Scotia prospect in the Mid Cretaceous Fan play. However, “the feasibility of this option is dependent upon the Company securing additional funding and the priority of the Scotia prospect may change if information obtained from the Loligo well provides further justification for the drilling of a well on either Nimrod, Vinson, or a second well on Loligo”.
FOGL may also consider drilling the Inflexible prospect if the results of the well drilled by Borders & Southern on its Darwin prospect are encouraging.
Separately, and further to the heads of Agreement signed with BHP Billiton in March 2011, “FOGL reports that an assignment agreement for the Northern licence area has been signed by FOGL and BHPB. This agreement has also received the approval of the Falkland Islands Governor. Whilst finalizing this agreement it was agreed that BHPB would not to have the option to farm back into the Loligo development area”.
FOGL CEO Tim Bushell said preparation for the forthcoming drilling campaign continues apace with the objective of providing as much flexibility as possible.
“We are in the fortunate position of having a number of high potential prospects across a range of different play types, from which to select the second well target. We will be able to take advantage of information gained from both Loligo and the wells being drilled by Borders & Southern in making this decision”, said CEO Bushell.
FOGL is an AIM listed oil and gas exploration company operating in the South and East Falkland basins, potentially a new petroleum province in the South Atlantic.
The South and East Falkland basins are completely separate and geologically distinct from the North Falkland basin. The South and East Falkland basins cover a much larger area and have a significantly thicker sedimentary section, potentially allowing for the development of a variety of hydrocarbon 'plays' at different stratigraphic levels; but the basins also lie in deeper water (500 - 1800 meters). Geological analogues for the South and East Falkland basins are the passive margin basins of West Africa and Brazil.
FOGL has contracted the Leiv Eiriksson which is currently operating in Greenland for Cairn Energy where it is finalizing work on the last well in their drilling program. It will then depart for the Falkland Islands and the transit time is approximately 60 days. On arrival in the Falkland Islands it will commence a 2 well program for Borders & Southern, drilling the Darwin and Stebbing prospects. FOGL will then use the rig to drill 2 wells, the first being on the Loligo prospect.
Shares in FOGL closed at 62 pence on Friday, valuing the firm at £ 128.5 million pounds (203 million dollars).