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Re: FOGL.L (Falkland Oil and Gas)
Posted by: Proselenes (IP Logged)
Date: September 17, 2012 12:31PM


Falklands Oil & Gas Makes A Gas Discovery In The South Falkland Basin

September 17, 2012

Disclosure: I am long FLKOF.PK. (More...)

On September 17, Falklands Oil and Gas (FLKOF.PK) announced the results of their Loligo well. The press release stated that all of the sands contained gas with the largest prize coming in the lower T5 zone. FOGL was unable to retrieve fluid samples from any of the zones.

The upper zones are relatively small compared to the size of the T5 zone. The press release details the T5 zone as follows:

Within the T5 target two main hydrocarbon bearing zones were encountered (3,462 to 3,558 metres and 3,608 to 3,705 metres). The net hydrocarbon bearing reservoir in these two zones was 46 and 59 metres respectively. Porosities ranged between 23% and 30%, averaging 24% and hydrocarbon saturations between 40% and 75%.

Since the T5 zone is the main zone of interest, I would like to try and quantify the amount of gas there using simple original gas in place (OGIP) calculations. Certain things will have to be assumed for a simple lack of data. My assumptions are as follows:
I will assume a reservoir pressure of 5,500 psia. This is more or less a saltwater gradient and is likely correct or actually conservative. An actual pressure that is higher will increase the OGIP volumes.
I am also assuming 250F reservoir temperature. This is simply an educated guess.
Gas Gravity of 0.8
Z-Factor of 1.05 based on correlations using the above pressure/temperatures with a corresponding formation volume factor of 0.00680438 RB/SCF
I have assumed an area of 200 sq km. This is simply a very conservative guess based on the size range given for the upper zones (250-600 sq km).

Net pay height was given as a combined 105m (343 ft). Porosity is given as 24%. We will take the mid point of gas saturation which is 58%.

OGIP can be calculated as Area * Height * Porosity * Gas Saturation / Formation Volume Factor.

Combining all of the above into the OGIP calculation, I come up with 27 TCF gas in place for the T5 interval. Assume a 75% recovery factor and the FOGL WI of 75% and FOGL's reserves just from the T5 sand could be 15 TCF. Compare this to the 2011 reported US proved reserves of a few large companies:
ExxonMobil (XOM) 26 TCF
Chesapeake (CHK) 15.5 TCF
BP (BP) 13.5 TCF
Devon (DVN) 9.5 TCF
Anadarko (APC) 8.4 TCF

Clearly if T5 is actually this big, it is a game changer. It will put FOGL on the same level of reserves as the $14B Chesapeake Energy. On the flip side, there are portions of this press release that are disappointing. FOGL was unable to gather fluid samples or pressure data. These are huge pieces of information especially in a gas reservoir. I can't comment on why exactly they were not able to recover data. Typically permeability would be associated with these two data points. A low permeability reservoir could cause issues with FOGL, however one would expect a Tertiary formation with 24% porosity to have some decent permeability. In the coming weeks, the sidewall cores and related data will give us a much better picture of what FOGL actually has.

Until then, FOGL will plug the Loligo well and move the rig to drill the Scotia prospect, which has been advertised as potentially 1.1B bbls of prospective resources. FOGL has a 40% WI in Scotia and believes the oil story there is not compromised based on the gassy Loligo results. Look for Scotia results in roughly two months.

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Re: FOGL.L (Falkland Oil and Gas)
Posted by: Proselenes (IP Logged)
Date: September 23, 2012 09:02AM

Rig is on the move to Scotia now. FOGL estimated 60 days of well operations at Loligo - with the rig now on the move they managed it in 52 days - the P&A operation appears to have gone really well (6 days instead of 10). Thats 8 days saved on the total allocated time - and 8 days time saving is a wonderful thing at over a million dollars a day. Well done FOGL and the crew of the LE rig !

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Re: FOGL.L (Falkland Oil and Gas)
Posted by: Proselenes (IP Logged)
Date: September 23, 2012 10:24PM

Scotia well.

As of this moment in time the rig has about 16 miles to go to get to the Scotia location.

Spud will therefore be this week for Scotia.

Scotia is

50 deg 23' 54.50" South
53 deg 37' 11.61" West

Water depth is 1762 meters (thats your mudline)
TD is estimated at 5198 meters.

Total drilling depth is therefore 3436 meters.

Based on Loligo progress they should be at TD and stopping drilling in around 45 days to 55 days range - total well operations should be in the 60 to 65 days range (which includes wireline work and P&A and rig on the move)

Scotia is targeting oil, believed to be around API 30 if found as per pre-drill prognosis (gas signatures have also been seen at this location so gas or gas/condensate is also possible).

.......The Mid Cretaceous Fan Play is well developed in the northern part of the FOGL acreage. This geological play was developed when the Falklands were still attached to the southern part of the African continent. A large amount of sediment, sourced from the continent and the Falklands Plateau area to the north, built up in near shore shallow seas. When a drop in sea level occurred, these sediments were deeply eroded and the reworked sands were shed far offshore into deep water. Several prospects have recently been mapped in this play in the northern licences. These are Hersillia, Scotia and Hero.

The Scotia prospect is located in quadrant 31 (PL027).Although the area had been mapped on seismic data before, it was only when the entire data set was reprocessed in 2008-09 that Scotia stood out as an attractive prospect.A distinctive sandy unit on laps the base of the old shelf. The formation dips to the south, which controls the spill point of the prospect, but it relies upon the pinchout of the sands in other directions to define the trap.

The prospect has a strong element of structural control and is supported by a conformable AVO anomaly. The primary target is in Albian age sands (about 100 million years old). The source rock for the oil sits just below this target and FOGL anticipates oil generation in the area. However, FOGL also recognises gas signatures on the seismic data and so either ‘phase’ is strictly possible. The Scotia well location sits in 1810 metres of water. The target is about 3,290 metres below the sea bed and the TD of the well is estimated to be at 3,440 metres below the sea bed. The Scotia well location lies approximately 330 kilometres east of Stanley...........

The Scotia well is targeting P50 recoverable barrels of just over 1 billion
(so thats over 3 billion barrels in place (for those that like OIP figures and not recoverable barrels), FOGL have 40% share and so net to FOGL on a P50 basis would be 400 million recoverable barrels (net to FOGL would be about the same size as Sea Lion in total for PMO/RKH)

The drilling program is running at approx 980K US$ per day (based on BOR Darwin costs of 96 million dollars for 98 days rig use) for everything needed.

Loligo cost would be 55 days @ 980K US$ per day of which 75% is the cost to FOGL, so Loligo will have cost FOGL circa 40.43m US$.

This saving in time/money should help push the leftover cash up from 212m US$ stated at Noble farm in to circa 220m US$ post Scotia (it no delays) or circa 43 pence per share.

The Scotia well is being paid for 60% by Noble, 25% by Edison and 15% by FOGL.

Estimated well operations time of 65 days and on the move would work out the net cost to FOGL for the Scotia well on a 15% contribution basis of about 9.6m US$.

Any time saving here will have minimal impact of cash going forward owing to FOGL only contributing 15% costs on this well for their 40% share of it.

Total drilling cost for the 2012 campaign should work out :

Loligo 40.43m US$
Scotia 9.6m US$
Mob/Demob 15m US$ (FOGL share)

Total cost for 2012 drilling campaign of circa 65m US$.

End of 2012 drilling campaign should be circa 220m US$ left over cash (circa 43p a share cash at 1.6 exchange rate)

According to Noble/FOGL the 2013 Seismic will cost net 65m US$ and FOGL share will be circa 30m US$. Admin costs circa 3m US$ in 2013.

So 220m less 30m for seismic less 3m for admin will leave FOGL entering 2014 with circa 187m US$ cash.

Well costs going forward will be circa (net to FOGL).

45m US$ per Loligo/Nimrod/Garrodia Tertiary well) (75% net FOGL).
28m US$ per well anywhere else (40% net FOGL).
With a circa 15m US$ mob/demob charge (or 7.5m if BOR also use the same rig)

FOGL could drill 3 Loligo drills in 2014, or 5 Mid-Cretaceous wells in 2014, which is why you see them say the plan is 3 to 4 wells - likely, imo, 1 Loligo appraisal in 2014 and 3 Mid-Cretaceous.

Once the 3D is done and all processed I would expect FOGL to farm down the Tertiary at Loligo/Nimrod/Garrodia in late 2013 to Noble as well to the same level (eg give up 35% and go down to 40% net to FOGL) and allow them to gain additional cash from past costs and a free carry on a lump of the next wells.

Such a move will give Noble incentive to farm in, and allow FOGL to be in a position to undertake say a 10 well drilling program (from late 2014) without the need for any fund raising.

I have some time this week I hope, to do a full write up on Loligo results, if not this week then next.

Stocks Discussed: FOGL.L,
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Re: FOGL.L (Falkland Oil and Gas)
Posted by: Proselenes (IP Logged)
Date: September 25, 2012 09:09AM


FOGL spuds Scotia

FOGL announced that on 25 September 2012 the Scotia exploration well was spudded. FOGL is operator and holder of a 40% interest. The remaining interests are held by Noble Energy Inc. (35%) and Edison International Spa (25%), subject to finalisation and governmental approvals.

The well has a target depth of 5,000m and FOGL estimates that depth will be reached in the first half of December 2012.

 Our 152p/share target price and BUY recommendation are premised principally on our estimate of a 16.6% chance of success (for liquids) at Scotia. We have assumed that if hydrocarbons are encountered there is a 50% chance that they are liquids. Given the gassy nature of Darwin (condensate) and Loligo (wet gas, although analysis is ongoing) there is downside risk to our assessment of the probability of finding liquids.

We maintain our view that Scotia is a particularly attractive because i) the source rock control is excellent (and thought to be oil prone), ii) the scale is extraordinary (circa 1.1 bn bbls of gross prospective resource) and iii) it is a play opener.

Scotia is 114km away from Loligo. It is a Cretaceous target (fan) the source rock is expected to be Aptian. It exhibits a strong amplitude anomaly that conforms to structure.

Investors should be aware of the high risk nature of drilling in frontier basins.

Stocks Discussed: FOGL.L,
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Re: FOGL.L (Falkland Oil and Gas)
Posted by: Proselenes (IP Logged)
Date: September 25, 2012 09:18AM


......Oriel Securities, which also rates FOGL as a ‘buy’, said that if Scotia is successful the company has a number of ‘follow on’ prospects of a similar size and that it remains well funded.

“FOGL has the highest impact exploration programme in the UK listed E&P sector,” Oriel analyst Richard Griffith said in a note..............

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Re: FOGL.L (Falkland Oil and Gas)
Posted by: Proselenes (IP Logged)
Date: September 25, 2012 09:53AM

Edison 25th Sept 2012 update on FOGL



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Re: FOGL.L (Falkland Oil and Gas)
Posted by: Proselenes (IP Logged)
Date: September 25, 2012 10:10AM

And my thoughts on the Loligo results are here :



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Re: FOGL.L (Falkland Oil and Gas)
Posted by: Proselenes (IP Logged)
Date: September 26, 2012 12:54AM

Someone asked if I could put the Loligo post into a PDF, so I have.

For those not interested, just ignore. For those interested a PDF link is below.



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Re: FOGL.L (Falkland Oil and Gas)
Posted by: Proselenes (IP Logged)
Date: September 27, 2012 03:08PM


It's not how much gas, but where

A new discovery in the Falkland Islands outdoes Israel's Leviathan reserve for size, but that isn't necessarily reflected in the price.

27 September 12 19:20, Amiram Barkat

First surprise: Israeli gas reserve Leviathan is, as is well known, the biggest deep-water gas discovery in the past decade. Then again, maybe it isn't. Over the Jewish New Year, Leviathan lost the title to a new reserve, discovered on the other side of the world. The reserve is about 100 kilometers east of the Falkland Islands, in a license area known as Loligo. The amount of gas and oil in the reserve has not yet been announced, but, according to preliminary estimates, made before drilling commenced, it could hold 25 TCF (trillion cubic feet) of natural gas, which compares with just 17-20 TCF for Leviathan.

The discovery of a new gas reserve of this order of size in Israeli waters would presumably have sent the Tel Aviv Stock Exchange into hysteria. Take for example the Ratio partnership, which holds 15% of Leviathan. This small partnership, which has practically no other assets besides the Leviathan license, has a market cap on the stock exchange of about NIS 2 billion. This market cap expresses investors' expectations of sales of gas to the domestic market and of exports to countries in the Far East and Europe. What should be the value of a company that holds 75% of a reserve 50% bigger than Leviathan? You can only guess.

Luckily, Falkland Oil and Gas (FOGL) holds exactly those rights in the new super reserve Loligo. As if that were not enough, this anonymous company holds rights in a group of Northern Area licenses (40%) and Southern Area licenses (52.5%) in Falklands waters that have not yet been explored. The next drilling, which will take place in the northern licenses, is meant to discover an oil target that could contain 1 billion barrels.

This is where the second surprise comes in. Falkland Oil and Gas is traded on London's AIM exchange at a market cap of £220 million, which is just $350 million, or NIS 1.4 billion. This valuation also includes a handsome cash balance. In the company's financial report for the first half of 2012, it estimates that at the end of its current drilling campaign, it will be left with cash of not less than $200 million.

It is interesting to note that the company's share price has actually fallen since the first announcement of the discovery. This is because investors had expected the discovery of a 4.7 billion-barrel oil reserve, and were disappointed to hear of the gas that had been discovered instead of the black gold.

Now comes the third surprise: it turns out that the potential of the Falklands licenses has been spotted by on-the-ball gas exploration companies. On August 6, Falkland Oil and Gas announced that it had agreed to sell 35% of the rights in its licenses (except for Loligo and Nimrod-Garrodia) to none other than Noble Energy, the US partner in all the Israeli gas reserves.

Another partner well-known in Israel that was quick to take a share of all the licenses of Falkland Oil and Gas was Italy's Edison, which holds 12.5-25% of the licenses. Edison has also expressed in entering the Israeli market, and it is a partner with Delek Group Ltd. (TASE: DLEKG) in bidding for licenses in Cyprus.

The Falkland Islands are remembered for the war over control of them between Britain and Argentina in 1982. Uncertainty still hovers over the islands in the South Atlantic, and this presumably affects the pricing of the risks in the gas discoveries industry. Other risk factors are the distance from target markets for natural gas, and the stormy ocean that makes operation of floating production and liquefaction installations difficult. But still, even taking all this into account, the Israeli Leviathan gas reserve seems expensive in comparison with its distant Falklands counterpart. That too, however, is relative. Two months ago, we reported on the rights held by Cove Energy in gas results offshore from Mozambique, sold at a price several times higher than the market's valuation of Leviathan. It turns out that pricing of gas reserves is mainly a matter of geography.

Published by Globes [online], Israel business news - - on September 27, 2012

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Re: FOGL.L (Falkland Oil and Gas)
Posted by: Proselenes (IP Logged)
Date: October 7, 2012 01:24AM

Noble to discuss their deep oil prospects in the Falklands and other places on Thursday 11th Oct. .


October 5, 2012

Noble Energy Announces Conference Call To Discuss New Venture Exploration Opportunities

HOUSTON, Oct. 5, 2012 /PRNewswire/ -- Noble Energy, Inc. (NYSE: NBL) announced today that it will host a conference call to discuss its new venture exploration program at 9:00 a.m., Central Time, Thursday, October 11, 2012.

The intent of the call is to provide insight into several frontier plays where the company has activities in progress - the deep oil potential of the Eastern Mediterranean, the Falkland Islands, and Northeast Nevada.

The webcast will be accessible on the 'Investors' page of the Company's website, Conference call numbers for participation are 888-401-4691 and 719-325-4766. The passcode number is 5184314.

A replay will be available at the.....................

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