Falklands : FOGL publishes Final Results for the year ended 31 December 2012
Submitted by Falkland Islands News Network (Juanita Brock) 05.05.2013 (Article Archived on 02.06.2013)
Falklands Oil and Gas Limited has announced the appointment of RBC Europe Limited, trading as RBC Capital Markets, as Nominated Adviser and Joint Broker with immediate effect.
FOGL publishes Final Results for the year ended 31 December 2012
FOGL Appointments Nominated Adviser and Joint Broker
By J. Brock (FINN)
Falklands Oil and Gas Limited has announced the
appointment of RBC Europe Limited, trading as RBC Capital Markets, as Nominated
Adviser and Joint Broker with immediate effect.
FOGL has announced its Final
Results for the year ended 31 December 2012. At 31 December 2012, cash balances were US$174
million with a further US$45 million due from the farm-outs. The overall profit for the year was US$1.1
million (2011: loss of US$6.6 million)
Resources are in place delivering value growth
are fully funded for planned work and extensive 3D seismic surveys in progress
to optimise target selection for next drilling campaign
Industry endorsement is secured with an endorsement
of asset value and potential through farm-out transactions with established
international players, Noble Energy Falklands Limited and Edison International
S.p.A and a position maintained as the largest acreage holder (40,000sq km
gross) in the Falkland Islands with a substantial interest retained post
FOGL has encreasing operational capability as
operator, successfully drilled two deep-water exploration wells safely, on
schedule and within budget and demonstrated year round drilling is possible,
with minimal weather downtime and benefitting from Noble's operating experience
and track record
A working petroleum system proven with the Loligo
Complex estimated to hold significant in place gas volumes, between 50 and 100
trillion cubic feet (TCF). Results from
Loligo, Scotia and Toroa have significantly advanced subsurface understanding
and there are substantial areas remain prospective for oil rather than gas
Outlook for the future is substantial with focus
on further de-risking of assets through an extensive 3D seismic programme
covering over 10,000sq km, Initial 5,235sq km 3D survey over the Cretaceous
aged Diomede a Fan Complex completed in April 2013, A 1,000sq km survey over
the Cretaceous fault block area underway, Further large 3D survey in
the Northern Licence Area planned for 4Q 2013 and Defining targets for
exploration drilling during H2 2013
Richard Liddell, Chairman of FOGL, said:
"In 2012 FOGL made great progress towards
its objective of making commercial discoveries within our licences. As operator
two deep-water exploration wells were drilled, safely, within budget and on
schedule. Both wells significantly de-risked the East Falkland basin and, in
the case of Loligo, demonstrated significant in-place gas volumes within multiple
reservoirs. Post well drilling analysis indicates that significant potential
for oil discoveries still exists within our licences.”
He went on to say that major farm-out agreements
were secured with two substantial international E&P companies with strong
exploration track records. At the same time FOGL retained a very substantial
interest in its extensive acreage.
“FOGL is fully funded for an extensive 3D
seismic survey covering some 10,000sq km and a three well exploration
programme,” he continued.
“With our partners, we have an ambitious work
programme designed to further de-risk our prospect inventory and in particular,
focus on the oil potential within our licence areas. This will lead to the
identification of new targets and further exploration drilling in 2014/15.
To date we have acquired 35,000km of 2D seismic,
drilled three wells, and as a result proved a working petroleum system. Now
with our new partners we are funded to shoot over 10,000sq km of 3D seismic and
drill three further exploration wells. We remain optimistic about the
potential of our licences"
In 2012, Falkland Oil and Gas Limited ('FOGL' or
'the Company') as operator drilled two deep-water exploration wells offshore
the Falkland Islands. These wells were drilled safely, without incident, on
schedule and within budget. This is a significant achievement for a small
independent exploration company and is testament to the quality and
professionalism of the technical team and our contractors.
Both wells encountered gas, and together with
the two wells drilled by Borders & Southern Petroleum Plc (B&S), they
have demonstrated beyond doubt that there is a working petroleum system in the
South and East Falkland basins, thus confirming the prospectivity of our
Profit for the year was US$1.1 million (2011:
loss of US$6.6 million), including interest received on deposits and exchange
gains of US$5.7 million (2011: US$1.2 million).
At the start of the year cash balances totalled
US$81.4 million. Exploration expenditures totalled US$82 million in the year,
but as a result of farm-outs and a share placing raising US$75.1 million, the
Company had cash balances at 31 December 2012 of US$174 million plus a further
US$45 million receivable from the farm-outs.
Chief Executive's Business Review
For the Company 2012 was a momentous year, as we
drilled exploration wells on the Loligo and Scotia prospects, both of which are
located in the northern part of the East Falkland Basin
The selection of the two prospects was based on
a number of criteria, but in particular, both exhibited favourable seismic
amplitude responses, which were believed to be an indication of the presence of
hydrocarbons. A prime objective of the drilling programme was to verify this
hypothesis and determine the hydrocarbon phase (gas or oil) within these
reservoir targets. The final Loligo well location was selected because it
enabled us to test six different reservoir objectives with a single well.
The two exploration wells (Loligo and Scotia)
encountered hydrocarbons, while B&S has made a gas-condensate discovery in
the southern part of the basin with their Darwin well. These three well results
clearly prove that the South and East Falklands basins have a working petroleum
Both wells were drilled with the Leiv Eirikssen,
a deep-water harsh environment drilling rig. Drilling operations continued
through the austral winter, yet weather down-time accounted for less than two
days of the total programme.
Well 42/07-01 was drilled to a depth of 4,043
metres. The well demonstrated the presence of mature source rocks, active
hydrocarbon migration and a viable stratigraphic trap. Gas bearing zones were
encountered over a 1,300 metres vertical interval from 2,420 to 3,720 metres.
The well penetrated six Tertiary aged reservoir
objectives on prognosis. These comprised the T1, T1 deep, T2 (Trigg), T2 deep
(Trigg deep), T3 (Three Bears) and T5 targets. Petrophysical analysis of the T1
to T3 intervals inclusive (2,420 to 2,885 metres) indicated porosities ranging
from 18% to 35% in the gas bearing zones. 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% and
hydrocarbon saturations between 40% and 75%. Attempts to obtain pressure data
and collect fluid samples were unsuccessful, probably due to the fine grained nature
of sediments in the gas bearing zone.
The six reservoir horizons encountered in the
Loligo well comprised very fine-grained sandstones and siltstones. FOGL
interprets that these sediments were deposited either outside, or at the distal
(outer) end of the slope channel system. In order to select a drilling location
that could penetrate all six reservoirs, certain compromises had to be made.
Critically, it was not possible to select a drilling location that intersected
the multiple objectives and at the same time was optimally located at any one
of the target horizons. As a result, it is likely that the well did not
penetrate any of the main channel systems that are believed to be present
Detailed technical work is now underway to
better define reservoir distribution within the Loligo Complex, and more
precisely map the channel systems. This work may be augmented by the
acquisition of 3D seismic in Q4 2013.
Well 31/12-01 was drilled to a depth of 5,555
metres. The farm-outs with Noble and Edison, meant that FOGL, with a 40%
working interest, paid only 15% of the costs of this well.
Gas bearing sands were encountered in the main
target. This demonstrated that Scotia is a viable stratigraphic trap with
active hydrocarbon migration and good top, bottom and lateral seals.
However, the reservoir intersected by the well was tight (low permeability).
The Scotia objective had been identified on the
basis of its clear seismic amplitude response. Interpretation of wireline log
data indicated that the target interval 4,719 metres to 4,769 metres comprised
50 metres of hydrocarbon bearing fine-grained sandstones and claystones. Other
thin hydrocarbon bearing sandstones were also encountered beneath the main
target in the interval 4,900 metres to 5,164 metres.
The well was deepened below the main target in
order to penetrate and sample Cretaceous aged source rocks.
Subsequent analysis of rock cuttings and
sidewall core samples indicated that reservoir quality had been impaired as
result of secondary cementation, which had significantly reduced both porosity
Analysis of the Cretaceous aged source rock
intervals penetrated by the well is on-going but initial work indicates the
presence of good quality source rocks, with total organic contents of up to 4%
with mixed type II and III kerogens (organic matter).
This well revealed that the geothermal gradient
was higher than expected. This had an impact on source rock maturity. Our
pre-drill evaluation of the source rocks suggested that they had been buried to
a depth and temperature ideal for the generation of oil over a very wide area,
but the drilling results indicate that the 'oil window' (as opposed to gas
generation) is more restricted than previously thought. However, conditions
still appear to be conducive for oil generation over substantial areas of our
Edison International S.p.A
In June 2012, a farm-out agreement was entered
into with Edison. Edison earned a 25% interest in FOGL's Northern Licence
Area and a 12.5% interest in FOGL's Southern Licence Area, and contributed its
pro-rata share of the costs of the 2012 drilling programme and also certain
other historical costs. In addition, Edison made a separate cash contribution
to FOGL of US$43 million as part of the farm-out agreement.
Noble Energy Falklands Limited
In August 2012, a farm-out agreement was entered
into with Noble. Noble farmed into both the Northern and Southern Licence Areas
for a 35% interest, except for two excluded areas (the Loligo and
Nimrod-Garrodia Complexes). Noble took over operatorship of the northern
licences in March 2013 and will become operator of the southern licences in
As part of the farm-out arrangements, Noble paid
60% of the Scotia well costs, including associated costs incurred during 2011
and in January 2013 made a US$25 million cash contribution towards exploration
costs. Noble will also pay 60% of the costs of a future Southern Licence Area
commitment well and 45% of a third exploration well. Noble's total investment
over a three year period is currently estimated to range between US$180 million
and US$230 million.
The drilling of the Loligo and Scotia wells has
fulfilled the Phase 1 and Phase 2 drilling commitments for the Northern Licence
Area and these have no further commitments or relinquishments until their
expiry in December 2016.
FOGL has also reached agreement with the
Falkland Islands Government with respect to extending the duration of the
current phase (Phase 2) of the licences. Licence durations can be extended by
undertaking further discretionary work such as 3D seismic surveys or drilling
of exploration wells.
As a result of the Diomedea 3D survey, the
southern licences will be extended by two years, so that they now expire in December
2017. If any commercial hydrocarbon discoveries are made in this period they
may be retained for 35 years or until the end of field life.
2013 3D Seismic Survey Programme
A substantial 3D seismic programme is currently
underway in the Company's licence areas. The principle aim of these
surveys is to identify targets for the next drilling campaign and they will
also have a particular focus on targeting oil prone prospects and ensuring such
prospects have good quality reservoirs. In addition, the data will be used to
identify fluid content and reservoir properties (e.g. porosity) using seismic
amplitude analysis (AVO). This work will benefit significantly from having well
information from Loligo, Scotia and Toroa to calibrate the dataset.
PGS's vessel the M/V Ramform Sterling has
already completed the first 3D seismic survey over the Mid Cretaceous Diomedea
Fan Complex within the Southern Licence Area. A total of 5,235sq km of full
fold seismic data have been acquired. The Diomedea Fan Complex is a large Mid
Cretaceous aged deep-water fan system, covering an area of approximately
7,000sq km. A number of prospects and leads have already been identified on
existing 2D seismic within this fan complex. The 3D seismic survey will enable
these prospects to be mapped in much more detail.
The data will now be processed by PGS, the
seismic contractor, and a fast track product is expected to be available for
interpretation in August 2013 and it is anticipated that the final processed
data will be available in Q4 2013. The fast track data will be used to commence
prospect mapping and well planning. Initial test lines from the survey indicate
excellent data quality and imaging of the Cretaceous target interval.
A second 3D seismic survey, over the Cretaceous
fault blocks located in the South Falkland basin, started in April 2013. This
survey is designed to cover a number of prospects and leads that lie adjacent
to the B&S Darwin gas-condensate discovery, which has an estimated, most
likely, recoverable resource of 200 million barrels. FOGL has identified, on
existing 2D seismic data, a number of prospects and leads such as Inflexible,
Scharnhorst and Nurnberg that could be analogous to Darwin.
A third 3D survey to be acquired within the
Northern Licence Area is currently in the planning stage. A number of tender
offers for this work from suitably qualified contractors are currently being
It is expected that the three seismic surveys
will cover more than 10,000sq km. This data will play a vital part in planning
the Company's future exploration drilling programme.
Next Drilling Campaign
The next drilling programme is currently being
planned and will be operated by Noble. Noble have already established a
technical and operations team for the Falklands and are actively seeking a
suitable drilling rig that is able to start drilling in the second half of
The full press release can be read at: