Falklands : Hydrocarbons Daily Record (24 September 2007)
Submitted by Falkland Islands News Network (Juanita Brock) 25.09.2007 (Article Archived on 09.10.2007)
Profit-taking helped to decrease the price of crude today.
HYDROCARBONS DAILY RECORD: MONDAY, 24 SEPTEMBER 2007
By J. Brock (FINN)
At 1830hrs LMT on Monday, 24 September 2007 Light Sweet Crude was trading at $80.95 down 67 Cents on the New York Mercantile Exchange. Brent Crude was trading at $78.91 down 39 Cents on London’s ICE Futures Market.
ANALYSIS:
Profit taking was the cause of today’s decrease in crude prices.
THE MARKETS: 20 SEPTEMBER 2007:
FTSE100: 6,405.90 up 9.21, FTSE250: 11,040.80 down 53.92, SmallCap: 3,804.70 up 30.15
DJI: 13,759.06 down 61.13, NASDAQ: 2.667.95 down 3.27, S&P500: 1,517.73 down 8.02
INTERNATIONAL DEVELOPMENTS:
(India)
The Government of India has given ONGC six more months to complete the first phase of exploration for oil and gas at that company’s Cauvery deepwater block. The government gave ONGC the conditional mandate to complete the activity with the provision that if the proposal to merge the exploratory phases comes into effect soon, the Government could either decide on granting the extension or allow ONGC the benefit of merger. ONGC has been given in-principle go-ahead to complete the activity by March 2008.
LOCAL DEVELOPMENTS:
Borders & Southern Petroleum PLC
(“Borders & Southern” or “the Company”)
3D Seismic Agreement and Subscription for New Ordinary Shares
Borders & Southern is pleased to announce that it has signed a Seismic Agreement with Petroleum Geo-Services ("PGS") to conduct a 3D survey within its South Falklands Basin Production Licences. PGS is a technology focused oilfield service company principally involved in the worldwide provision of a broad range of geophysical and reservoir services including seismic data acquisition, processing, interpretation and field evaluation. The Agreement is on attractive terms and represents the most extensive 3D seismic study ever conducted in this area.
The 3D survey area will measure approximately 1,500 sq km and will be located over some of the Company’s high-graded leads that were identified on the earlier 2D seismic data. The 3D will provide detailed information on the reservoir distribution and structural integrity of the leads and will allow the Company to assess some of the amplitude anomalies associated with the structures. Ultimately the 3D will allow the Company to rank its prospects and define drilling locations.
PGS will be using its vessel Ocean Explorer, with six solid streamers, to acquire the survey. It is anticipated that the survey will commence in October this year and, depending on weather conditions, last approximately four months.
Separately, the Company announces that it has signed a Subscription Agreement with PGS under which PGS has subscribed for 16,656,670 new ordinary shares of 1 pence each (Ordinary Shares) in the Company to raise $10 million. The subscription price was 30p per share (the same price as the Company’s recently completed Placing that raised £15 million). Following the Subscription, there will be 194,344,170 ordinary shares outstanding in the Company which will result in PGS holding 8.57% of the total.
Chief Executive Howard Obee commented, “We’re delighted to have signed a Seismic Agreement with one of the world’s leading geophysical services companies at a price we believe to be competitive. This is a large and complex 3D survey which will allow us to fully evaluate some of the exciting prospects that have been identified on our 2D data. We’re also very pleased that PGS have been sufficiently impressed by our acreage that it has chosen to subscribe for a material equity stake in the Company. We look forward to a fruitful working
Rune Eng, Group President PGS Marine, commented “Equity stakes in smaller exploration companies like Borders & Southern Petroleum PLC have proven to be one effective way of leveraging our seismic capabilities. We are very excited to work with Borders & Southern on this project and we hope to help them uncover valuable new technical information in their held acreage area.”
EXTRACTS FROM A FOGL PRESS RELEASE:
Note: The full press release can be seen on http://www.fogl.com.
24 September 2007
Introduction
The last six months have seen significant progress as the Company has carried out its exploration programme designed specifically to de-risk the prospects on its acreage and produce a prioritised list of drilling prospects. The Controlled Source Electro-Magnetic survey (“CSEM”), as well as the infill 2D seismic survey have been completed Initial indications have been encouraging and we expect to announce the results of these surveys later in the year.
Operations
CSEM survey
This survey commenced in February and involved the acquisition of seven lines in two phases by Offshore Hydrocarbon Mapping plc. The second phase which involved three lines over six prospects was completed in late August. Processing of these data is expected to take six to eight weeks. Initial results from both phases of the survey are very encouraging with positive CSEM anomalies being recognised over a number of the Company’s best prospects.
2D Seismic survey
FOGL commenced its most recent 2D seismic survey in December 2006 and this was carried out by Wavefield InSeis AS. The survey which was completed in May 2007 has led to the acquisition of a further 9,950 km of seismic data. Processing of these data has already commenced, but it will take several months to complete; early indications are that the data that has been gained in this survey will provide much higher definition of the Company’s high-graded prospects. The Company now has a total of 32,500 km of 2D over its acreage.
Sea Bottom Coring
Sea Bottom Coring is planned to take place in the 4th Quarter of 2007.
The forward plan is to integrate the results of these surveys with the Company’s existing data in order to produce a prioritised list of the best prospects for drilling.
Financials
During the half year, exploration expenditure amounted to £8.4 million and total cash outflow during the period was £11.3 million. Cash balances at 30 June 2007 amounted to £7.9 million (31 December 2006: £14.9 million). The expenditure was funded by the reduction in the company’s cash balances and by further draw downs totalling £4 million from RAB Special Situations (Master) Fund Limited (“RAB SSMF”) under the £8 million Convertible Loan Note Agreement announced last year. The last remaining tranche of £2million due under the Agreement will be drawn down in September 2007.
Post Balance sheet events
On 23 July we announced that we were in advanced discussion with a major company with a view to them gaining an interest in the Company’s assets. These discussions are still progressing and we hope to be able to provide an update in due course.
FOGL is also pleased to announce that it now holds a 100% stake in the Falkland licences granted in 2002 which now amount to 14,500 sq km, after Tullow Oil plc relinquished its 22.5% stake which it gained through its acquisition of Hardman Resources in 2006. Under the terms of the Joint Operating Agreement this interest reverts to FOGL without any payment. The increased stake provides us with further flexibility in dealing with our licences in which we will have an undivided 100% interest.
Notes forming part of the interim report for the six months ended 30 June 2007
1. Accounting policies
Accounting policies adopted under IFRS
These interim financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”).
The basis of preparation and accounting policies used in preparing the interim accounts for the six months ended 30 June 2007 are set out below. The basis of preparation describes how IFRS has been applied under IFRS 1, the assumptions made by FOGL about the Standards and Interpretations expected to be effective, and the policies expected to be adopted, when the FOGL issues its first complete set of IFRS financial statements for the year ending 31 December 2007.
Basis of preparation
The financial information for the six months ended 30 June 2007, six months ended 30 September 2006 and the 9 months ended 31 December 2006 is unaudited and such accounts do not constitute full statutory accounts of the Company.
The accounting policies which follow set out those policies which are expected to apply in preparing the financial statements for the year ended 31 December 2007. These policies have been followed in producing these interim statements.
The financial statements are presented in Great British Pounds (‘GBP’) and all values are rounded to the nearest pound (£) except when otherwise indicated.
The financial statements have been prepared under the historical cost convention, except for financial assets, which are carried at fair value.
The comparative figures for the 9 months ended 31 December 2006 are not the statutory financial statements of FOGL for that financial period. Those financial statements, which were prepared under UK Generally Accepted Accounting Principles, have been reported on by the Company’s previous auditors and delivered to the registrar of companies. The report of the auditors was unqualified and did not contain references to any matters to which the auditors drew attention by way of emphasis without qualifying their report.
The Company has certain contractual agreements with other participants to engage in joint activities that do not create an entity carrying on a trade or business of its own. The Company includes its share of assets, liabilities and cash flows in joint arrangements, measured in accordance with the terms of each arrangement, which is usually pro rata to the Company’s interest in the joint arrangement.
Significant accounting policies
The accounting policies adopted in the preparation of the interim financial statements will be consistent with those that will be followed in the preparation of the company’s annual financial statements for the year ending 31 December 2007, including the adoption of the following amendments mandatory for annual periods beginning on or after 1 January 2007:
International Accounting Standards (IAS/IFRS) Effective date
• IFRS 7 - Financial Instruments 1 January 2007
• IAS 1 - Amendment – Presentation of financial statements: capital disclosures 1 January 2007
International Financial Reporting Interpretations Committee (IFRIC) Effective date
• IFRIC 7 - Applying the restatement approach under 1 January 2007
IAS 29, ‘Financial reporting in hyperinflationary economies’
• IFRIC 8 - Scope of IFRS 2 (Share Based Payments) 1 January 2007
• IFRIC 9 - Reassessment of embedded derivatives 1 January 2007
• IFRIC 10 - Interim financial reporting and impairment 1 January 2007
The adoption of these amendments did not affect the company’s results of operations or financial positions.
The IASB and IFRIC have issued the following standards and interpretations which are effective for reporting periods beginning after the date of these financial statements:
International Accounting Standards (IAS/IFRS) Effective date
• IAS 24 - Amendment – Borrowing costs 1 January 2009
• IFRS 8 - Operating segments 1 January 2009
International Financial Reporting Interpretations Committee (IFRIC) Effective date
• IFRIC 11*- (IFRS 2) Group and treasury share transactions 1 January 2008
• IFRIC 12*- Service concession arrangements 1 January 2008
* These have not been endorsed by the EU. The Company is evaluating the impact of the above pronouncements but they are not expected to be material to the company’s earnings or to shareholders’ funds.
Notes forming part of the interim report for the six months ended 30 June 2007
2 (Loss) per share
The basic loss per share is calculated on a (loss) attributable to shareholders of the company and on ordinary shares being the weighted average number of ordinary shares in issue during the period. The diluted earnings per share is calculated on (loss) attributable to equity shareholders and on the weighted average diluted number of ordinary shares during the period.
There were no potential dilutive shares in issue during any of the above periods.
3 Transition to IFRS
The financial information for the six months ended 30 September 2007 and the nine months ended 31 December 2006 and the opening balance sheet at 1 April 2006 have been prepared in accordance with International Financial Reporting Standards (IFRS) for the first time.
The Company’s transition date to IFRS is 1 April 2006. The rules for first-time adoption of IFRS are set out in IFRS 1 ‘First time adoption of international reporting standards’. In preparing the IFRS financial information, these transition rules have been applied to the amounts reported previously under generally accepted accounting principles in the United Kingdom (‘UK GAAP’). IFRS 1 generally requires full retrospective application of the Standards and Interpretations in force at the first reporting date.
FOGL’s Chairman Remarked:
“ FOGL has made significant progress over the last six months both operationally and strategically.
Operationally we have completed two major offshore data acquisition programmes, delivered on our key commitments and are on target with our strategic goal of identifying the best prospects for drilling.
The Company has also progressed its key objectives. We are optimistic that our recent exploration programme has gone a long way to de-risking our prospects and we are now also in advanced discussions with a potential farm-in partner.
This is an exciting period for FOGL and its shareholders; one which brings us closer to realising the potential of the region.”
RELEVANT SHARE PRICES 24 SEPTEMBER 2007:
TLW: 600.00 down 7.00, DES: 28.25 down 0.25, FOGL: 160.00 down 3.50, RKH: 50.50 unchanged, BOR: 32.00 unchanged, PRE: 13.50 down 0.25, GBP: 9.13 unchanged, GPK: 420.00 unchanged.
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