Falkland Islands: FOGL Enters Heads of Agreement for Rig Contract

 

FOGL, the oil and gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, has conditionally placed 45.7 million new ordinary shares of 0.002 pence in the capital of the Company at a price of 70 pence per share  to raise £32 million before expenses .

The net proceeds of the Placing, together with FOGL’s 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’s planned 2012 drilling programme.

FOGL also announces that it has signed heads of agreement with Borders & Southern Petroleum plc (“B&S”) (“B&S Heads of Agreement”) to share a rig to drill in the first half of 2012 (the “Rig Contract”).

Placing to raise £32 million

Oriel Securities Limited (“Oriel Securities”), on behalf of the Company, has conditionally placed 45,714,281 new Ordinary Shares at a price of 70 pence per share to raise Ł32 million before expenses. The Placing has not been underwritten. Completion of the Placing will be conditional, inter alia, on signing of the Rig Contract and admission of the Placing Shares to trading on the AIM market of the London Stock Exchange plc (“AIM”) (“Admission”).

Deepwater exploration programme expected to commence in first quarter 2012

FOGL has signed the B&S Heads of Agreement outlining the key terms relating to the sharing of a rig to commence drilling the Loligo prospect in the first quarter of 2012. FOGL is also considering taking up the second option slot in the drilling contract in the event that it is able to secure either a farminee and/or additional funding. The rig is currently expected to arrive in the Falkland Islands in the fourth quarter of 2011. FOGL expects to access the rig for the third well slot in the combined B&S and FOGL programme and commence drilling in the first quarter of 2012.

FOGL intends to drill its next well on the Loligo complex (a prospect within the Tertiary Channel play which has estimated Pmean reserves of 4,700 mmbbls). The Loligo complex comprises several reservoir objectives which have previously been referred to as the Loligo prospect, together with a number of additional underlying reservoir targets.

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’s wells. 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’s 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). A summary of all of the FOGL prospects which are potential drilling options and on which site surveys have now been acquired are given in Appendix 1. FOGL is also continuing its farm-out discussions with interested parties. FOGL believes that a suitable farminee would further strengthen its financial position and allow an additional well to be drilled as part of this campaign.

Use of proceeds

The net proceeds of the Placing, together with FOGL’s 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’s planned 2012 drilling programme, to fund long lead drilling equipment for two exploration wells and to meet the Company’s working capital requirements.

FOGL has the financial resources to drill a well on the Loligo complex to penetrate reservoirs containing 46% of the estimated Pmean reserves. The Placing will allow the well to target three deeper independent reservoir objectives named ‘Trigg’, ‘Trigg Deep’ and ‘Three Bears’.These targets contain the remaining 54% of the Loligo complex’s estimated Pmean reserves.

Tim Bushell, Chief Executive of FOGL, said:

“I am delighted to have entered into a heads of agreement for a rig contract to enable us to commence our deepwater exploration programme. 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.

“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.”

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Source: FOGL, April 20, 2011;