TIDMFOGL
RNS Number : 8212F
Falkland Oil and Gas Limited
30 April 2014
30 April 2014
Falkland Oil and Gas Limited
("FOGL" or "the Company")
Final Results for the year ended 31 December 2013
FOGL, the oil and gas exploration company focused on its
extensive licence areas offshore the Falkland Islands, announces
its Final Results for the year ended 31 December 2013.
Robust financial position
-- At 31 December 2013, cash balances were US$151.4m
-- Fully funded for a 5 well drilling programme commencing in 2015
Acquisition of Desire Petroleum
-- The acquisition of Desire Petroleum has created a broader based exploration portfolio
-- FOGL has retained substantial upside exposure to high-impact exploration
-- Gained an interest in the Sea Lion project
-- Successfully farmed-out two of Desire's licences to Premier Oil and Rockhopper Exploration
Scale
-- FOGL is the largest licence holder of the six oil companies
operating in the Falkland Islands with a net interest of over
40,000 sq. km
-- FOGL is the only oil company to have exploration exposure to
both the northern and southern basins offshore the Falkland
Islands
-- The Company has been able to retain a material licence
interest of at least 40%, thereby providing substantial exposure
for shareholders in the event of success
-- The 2015 five well drilling programme will target gross
un-risked resources of more than one billion barrels of oil
New 3D seismic
-- Extensive 3D seismic programme completed, with the
acquisition of over 12,000 sq km of high quality data
-- The new 3D seismic is being used to optimise and select
targets for the 2015 drilling campaign
-- Multiple new prospects have already been identified
Richard Liddell, Chairman of FOGL, said:
"2013 was a year of remarkable achievement during which the
company significantly diversified its portfolio whilst
simultaneously orchestrating farm-out deals to achieve a balance of
upside exposure, risk and funding. During the course of 2015 we
will have exposure to 5 high impact wells within a fully funded
programme and we are naturally very pleased with the opportunity
for value growth which this offers our shareholders, and we are
looking forward to a very exciting period ahead"
Enquiries:
Falkland Oil and Gas +44 (0) 207 563 1260
Tim Bushell, Chief Executive
RBC (Nominated Advisor and Joint
Broker) +44 (0) 207 653 4000
Matthew Coakes / Daniel Conti
/ Jeremy Low
Jefferies Hoare Govett (Joint
Broker)
Alex Grant / Chris Zeal / Graham
Hertrich +44 (0) 207 029 8000
FTI Consulting +44 (0) 203 727 1000
Ed Westropp
The technical information included in this announcement has been
reviewed, verified and compiled by the Company's geological staff,
including a qualified person, Colin More BSc., MSc. (Exploration
Director), who has over 26 years of experience in petroleum
exploration, for the purpose of the Guidance Note for Mining, Oil
and Gas Companies issued by the London Stock Exchange in respect of
AIM companies, which outline standards of disclosure for mineral
projects. Mr. More is a member of the Geological Society of London,
the American Association of Petroleum Geologists and the Society of
Exploration Geophysicists.
Chairman's statement
2013 was a year of distinction for Falkland Oil and Gas (FOGL),
which culminated in the transformational acquisition of Desire
Petroleum. This makes FOGL the most diversified of the Falkland
Island explorers, with exposure to five high-impact wells planned
in the next drilling campaign.
During the year FOGL extended its exploration portfolio into the
North Falkland Basin, successfully farmed-out two of Desire's
licences to Premier Oil and Rockhopper Exploration, and continued
to improve its subsurface understanding by carrying out a major 3D
seismic survey in the South and East Falkland Basins.
A key theme of 2013 was the 3D seismic acquisition programme.
Three separate surveys, totalling over 12,000 sq. km, were all
guided by the results of previous wells and the extensive data
gathered has provided us with valuable insight and focus for the
next round of drilling.
The acquisition of Desire has created a broader based business
not only offering shareholders reduced risk through a more
diversified portfolio, but also retaining substantial upside
exposure to high-impact exploration. In addition, FOGL has gained
an interest in the Sea Lion project, which is currently expected to
commence production approximately four years after the project is
sanctioned.
Our financial position is robust and we are fully funded for our
planned exploration programme, which comprises five wells to be
drilled, commencing in 2015. The loss for the year was US$4million
(2012: profit of US$1.1 million), including interest received on
deposits and exchange gains of US$2.4 million (2012: US$5.7
million). At the start of the year cash balances totalled US$174
million. Exploration expenditures totalled US$62.8 million in the
year and the Company had cash balances at 31 December 2013 of
US$151million.
Our goal is to create significant value for shareholders through
the discovery of material hydrocarbon accumulations offshore the
Falkland Islands and we intend to realise this value through a
multi-well drilling programme commencing in 2015. We believe that
we will be able to deliver this from our solid operational platform
and strong financial position. Our objectives are further
underpinned by a proven management team, board and our joint
venture partners and I would like to thank them all for their
energy and efforts in driving the enterprise forward through a busy
year.
Chief Executive's Business Review
During 2013 FOGL made significant progress on a number of fronts
in support of our strategy, which is to create substantial
shareholder value through successful exploration. In order to
achieve this we have successfully maintained scale and materiality,
so that any success will have a significant share price impact. We
have also carefully managed risk in order to mitigate the technical
and commercial challenges of our business model and operating
environment. We remain on target to deliver an exciting inventory
of exploration prospects and a multi-well drilling programme that
can deliver transformational shareholder value.
Scale & Materiality
FOGL is the largest licence holder of the six oil companies
operating in the Falkland Islands with a net interest of over
40,000 sq. km. The size and prospective nature of this acreage has
enabled us to successfully conclude farm-out transactions with well
established, strong international partners including Noble Energy,
Edison International and Premier Oil. As a result FOGL has been
able to retain a material licence interest of at least 40%, thereby
providing substantial exposure for shareholders in the event of
success.
In December 2013, the acquisition of Desire Petroleum was
approved both by our respective shareholders and by the Falkland
Islands Government. This acquisition created the only oil company
to have exploration exposure to both the northern and southern
basins of the Falkland Islands.
Together with our joint venture partners Noble Energy and Edison
International, FOGL has made a major investment in the acquisition
of 3D seismic data. Commencing in late 2012 and continuing into
2014, we acquired 12,000 sq. km of high quality 3D data. This was
in addition to the 4,200 sq. km of 3D data that has previously been
acquired by Desire in the North Falkland Basin. FOGL is actively
using this seismic data to define a large inventory of exciting
prospects. Based on our work to date, we expect that the next
drilling programme will target gross un-risked resources of more
than one billion barrels of oil.
Risk Management
FOGL has continued to successfully manage its risk exposure and
funding through farm-outs. On 9 December 2013, FOGL entered into a
farm-out agreement with Premier Oil and Rockhopper Exploration with
respect to licences PL004a and PL004c. FOGL retained a 40% interest
in both licences and is fully carried through two exploration
wells. Operational skills and competence have also been enhanced as
a result of the Company's farm-outs, by bringing in well regarded
and experienced international operators including Noble Energy and
Premier Oil. The successful farm-outs will also enable FOGL to
drill more wells. The combination of a strong balance sheet and
carried interests means that we are fully funded for our planned
five well drilling programme in 2015.
The acquisition of Desire Petroleum has created a more balanced,
diversified portfolio which offers a range of exciting
opportunities including multiple large 'high impact' prospects in
the South and East Falkland Basins; proven oil resources in the Sea
Lion oil development, and relatively low risk step-out exploration
and appraisal opportunities in the established oil play around the
Sea Lion field. This acquisition has allowed us to lower the
overall risk profile of the portfolio, protect downside risk, as
well as offering a wider range of value creation opportunities.
FOGL now has access to high quality 3D seismic data which will
be used to reduce exploration risk by targeting oil prone prospects
with good quality reservoirs. Advanced seismic analysis, calibrated
using existing well data, will be applied to determine likely fluid
content, hydrocarbon phase, and reservoir properties.
Prospect Inventory
Five prospects will be selected for the next drilling programme,
spread across a risk spectrum of exploration and appraisal
opportunities in multiple basins. In addition, a number of
follow-up locations and prospects will also be matured as drilling
options in the event of encouragement or success.
South and East Falkland Basins
Diomedea Fan Complex
The Toroa well proved thick, good quality, mid Cretaceous sands
on the edge of the Fitzroy Basin. These sands have been
re-deposited in the Diomedea area as deep-water channels and fans.
A large 3D seismic survey was acquired in 2012/13 to explore this
play. Interpretation is ongoing, and many features have been mapped
within this play. To date, two prospects, Finback and Humpback have
been high graded as potential drilling targets. Several additional
prospects have also been mapped and these could provide follow-on
opportunities in the event that initial drilling results are
encouraging. Regional studies undertaken by Noble Energy and FOGL
suggest that the source rocks within the Diomedea area may be
conducive to oil generation.
Cretaceous Fault Blocks
The Darwin exploration well, drilled by Borders and Southern in
2012, is located in the South Falkland Basin and discovered a rich
gas condensate in good quality mid Cretaceous sands within a
'tilted fault block' structure. Numerous, similar features had been
mapped on 2D seismic by FOGL in the adjacent licences. In 2013 a 3D
seismic survey was acquired to better define some of these
prospects and leads. Interpretation is still underway, but several
potential drilling targets have already been identified within this
area. Whilst Darwin encountered gas-condensate, our regional
studies suggest that oil may also be present in this area, owing to
the complex hydrocarbon generation and migration history in the
South Falklands Basin.
Hersilia Fan Complex
The Scotia well, drilled in 2012, was drilled on the eastern
margin of this system, which lies within the Volunteer Basin.
During 2013 and 2014 a large 3D seismic survey was acquired over
the main area of interest. The plays in this area are similar to
those expected in the Diomedea area. Prospect mapping has yet to
commence, but a number of leads, including Hersilia, West Hersilia,
Hero and Challenger have been identified on the basis of existing
2D seismic data. Whilst Scotia encountered gas, it is predicted
that the source rocks are less deeply buried towards the edge of
the basin and may be oil, rather than gas generative, in the
vicinity of Hersilia and West Hersilia.
Loligo and the Tertiary channel play
The Loligo well drilled in 2012, proved the presence of large
amounts of gas in this play. The reservoir quality at the Loligo
well location was however, poor. The recently completed northern
area 3D seismic survey may provide more insight into whether better
reservoir is present away from the well location, particularly in
the northern part of the Loligo complex. In addition to Loligo, a
number of other similar prospects remain to be tested in this play
including Nimrod, Vinson and Nautilus.
North Falkland Basin
Zebedee
The Sea Lion Field was discovered by Rockhopper Exploration in
2010 with the 14/10-2 well. In December 2011 a final appraisal well
was drilled on the field (well 14/15-4a) which proved that Sea Lion
extended into licence PL004b (FOGL 40% equity). A further appraisal
well (Zebedee) is scheduled to be drilled in 2015. This well has
the potential to extend the proven Sea Lion reservoirs to the south
and substantively increase the amount of Sea Lion resources within
the PL004b. The Zebedee well will also, target a number of stacked
exploration objectives.
Jayne East
Jayne East is located in PL004c and the well will intersect a
number of stacked targets. The primary objective is to test the F2
(Sea Lion equivalent reservoir sequence) sands and these include
the known Beverley and Casper South fans, which are oil and gas
bearing on the west flank.
Isobel/Elaine
The Isobel and Elaine prospects are located in PL004a. This part
of the basin is untested and the well will target a number of
stacked exploration objectives. The primary objectives are Elaine
South and Isobel Deep fan systems. Any success at this location
will also reduce the risk on other prospects lying even further to
the south, such as Helen.
Ann/Orca South
The Ann and Orca South prospects are a combination of two
geological plays. One play is similar to that penetrated at the Liz
location, but less deeply buried and so with potentially better
reservoir properties. In addition, there is a shallower prospect
defined by a 4-way dip closure which is also, supported by a
seismic amplitude anomaly.
Liz
The 14/19-1 Liz well encountered two separate hydrocarbon
intervals, comprising over-pressured gas condensate, and a deeper
dry gas. The commerciality of gas and gas condensate in the North
Falkland Basin is unclear at present. Future commercialisation will
depend on the possible development of other gas resources in the
area.
Sea Lion
The Sea Lion field straddles blocks PL032 and PL004b. FOGL, as a
result of the Desire acquisition, holds a 40% interest in PL004b.
FOGL estimates that approximately 30% of the Sea Lion oil-in-place
is located within PL004b. Premier Oil, who operate both licences,
are proposing a two phased development concept, targeting the
northern part of the field first. Currently it is anticipated that
the Field Development Plan will be submitted in 2015, with project
sanction coming later in the same year. Initial production from Sea
Lion is expected to commence approximately four years after the
project is sanctioned.
Further appraisal drilling is required in PL004b in order to
determine the extent and total resource potential within this
licence and inform the scope of the second phase of field
development. The Zebedee well will be a key next step in this
process. In the event that Zebedee is successful, this will
demonstrate that a larger proportion of Sea Lion hydrocarbon
resources lie within PL004b and that the overall field is bigger
than currently estimated. Given that FOGL has a significant stake
in Sea Lion through its interest in PL004b, we have initiated
unitisation discussions with the other field owners.
Operations & drilling preparations
During the reporting period three large 3D seismic surveys were
acquired. The surveys were completed on time and in budget. PGS
have operated all three surveys, which have been conducted safely
and without incident. FOGL would like to thank PGS and their
employees for their contribution to the success of this programme
and the excellent safety, environmental and operational performance
achieved.
An environmental baseline and geochemical survey has recently
been completed using the MV Poseidon. This vessel collected sea
bottom samples from all three South Falkland Basin 3D areas and
then continued to the North Falkland Basin to survey the
Isobel/Elaine prospect. The data collected is essential material
for inclusion in the environmental impact statement which is a key
step in the government approval process for 2015 drilling.
In preparation for the next drilling campaign Noble Energy has
taken steps to enhance logistical support by the provision of a new
floating dock within Stanley harbour. This dock, named the 'Noble
Frontier', will be installed during the course of 2014 and is
located in close proximity to the existing oil industry supply
base.
This additional infrastructure is another important step for the
oil industry, as it further enhances its ability to explore for,
develop and produce hydrocarbons in the offshore areas around the
Falkland Islands.
Outlook
The year ahead will be a busy period for FOGL as we prepare for
the next drilling programme. Prospect identification, based on the
very large, recent 3D surveys, is ongoing and this will continue
into the summer of 2014. The sheer size of the surveys and the
number of plays and prospects under consideration has driven
selection of the final well locations into Q3 2014.
The 3D seismic survey over the Hersilia Fan complex was
completed on 24 February 2014. The early completion of this survey
allowed the site survey programme to be extended over this area,
which in turn potentially facilitates early drilling on prospects
identified on this 3D.
Negotiations are currently progressing with a number of parties
to secure a suitable deep-water drilling rig. The drilling
programme is expected to commence in in the first half of 2015. In
the South Falkland Basin it will include two deep-water wells
operated by Noble Energy. In the North Falkland Basin three wells
are planned, all operated by Premier Oil. These include exploration
wells on the Zebedee, Jayne East and Isobel/Elaine prospects. The
final drilling order has yet to be agreed.
Falkland Oil and Gas Limited
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2013
Audited
2013 2012
$'000 $'000
Other Administrative expenses (5,345) (3,515)
Charge for share based payments (1,033) (1,087)
-------- --------
Total administration expenses and loss
from operations (6,378) (4,602)
Finance income 2,353 2,807
Foreign exchange gains 20 2,846
-------- --------
Total finance income 2,373 5,653
--------
(Loss)/Profit for the year before
taxation (4,005) 1,051
Taxation - -
(Loss)/Profit for the year attributable
to the equity holders of the
parent (4,005) 1,051
-------- --------
Other comprehensive income - -
-------- --------
Total comprehensive (expense)/income
for the year attributable to
the equity holders of the parent (4,005) 1,051
(Loss)/Profit for the year per ordinary
share - basic and diluted (0.94c) 0.33c
-------- --------
The loss for the year (2012: profit for the year) arose from
continuing operations.
Falkland Oil and Gas Limited
Consolidated Statement of Financial Position
For the year ended 31 December 2013
Audited
Restated
2013 2012
$'000 $'000
Non- current assets
Intangible assets 205,455 58,668
Inventory 3,501 3,518
Property, plant and equipment 8,165 67
217,121 62,253
Current assets
Trade and other receivables 3,956 54,911
Cash and cash equivalents 71,409 174,095
Cash on deposit 80,000 -
Restricted cash - 10,803
--------- ---------
155,365 239,809
Total assets 372,486 302,062
Current liabilities
Trade and other payables (20,558) (40,961)
Total liabilities (20,558) (40,961)
--------- ---------
Net current assets 134,807 198,848
--------- ---------
Net assets 351,928 261,101
--------- ---------
Capital and reserves attributable to equity
shareholders
of the Company
Share capital 18 11
Share premium 369,632 275,840
Retained deficit (17,722) (14,750)
Total equity 351,928 261,101
--------- ---------
Falkland Oil and Gas Limited
Consolidated Cashflow Statement
For the year ended 31 December 2013
Audited
2013 Restated
2012
$'000 $'000
Cash flows from Operating activities
(Loss)/Profit for the year before
income tax (4,005) 1,051
Adjustments for
Total Finance income (2,379) (5,653)
Depreciation 42 26
Share based payment expense 1,033 1,087
---------------------- ---------
Net cash flows used in operating
activities before changes in
working capital (5,309) (3,489)
Increase/ (Decrease) in trade
and other receivables (2,884) 1,687
Decrease in trade and other
payables (117) (269)
---------------------- ---------
Net cash flows used in operating
activities (8,310) (2,071)
Cash flows from Investing activities
Interest received 1,033 2,807
Purchase of property, plant
and equipment (8,140) (24)
BHP Billiton settlement funds - 24,265
Joint venture partners' contributions
to back costs 45,000 55,198
Expenditure in respect of intangible assets (67,268) (73,249)
Inventory - (3,518)
Cash on deposit (80,000) -
Net cash acquired with subsidiary 5,676 -
Movement in restricted cash 10,803 15,722
---------------------- ---------
Cash (used in)/raised from investing
activities (92,896) 21,201
Cash flows from Financing activities
Issue of ordinary share capital - 75,077
Costs related to issue of ordinary
share capital (1,752) (3,287)
---------------------- ---------
Net cash (used in)/from financing
activities (1,752) 71,790
Net (decrease)/increasein cash
and cash equivalents in the
year (102,958) 90,920
Cash and cash equivalents at
start of year 174,095 81,416
Effect of foreign exchange rate
changes on cash and cash equivalents 272 1,759
Cash and cash equivalents at
end of year 71,409 174,095
---------------------- ---------
Falkland Oil and Gas Limited
Consolidated Statement of Changes in Equity
For the year ended 31 December 2013
Audited
Group
Share capital Share premium Retained deficit Total
equity
$'000 $'000 $'000 $'000
Balance at 1 January
2012 7 204,054 (16,888) 187,173
-------------------------- -------------- -------------- ----------------- --------
Profit for the year - - 1,051 1,051
Share based payments - - 1,087 1,087
Shares issued 4 75,073 - 75,077
Cost of issue - (3,287) - (3,287)
Balance at 31 December
2012 11 275,840 (14,750) 261,101
-------------------------- -------------- -------------- ----------------- --------
Loss for the year - - (4,005) (4,005)
Share based payments - - 1,033 1,033
Shares issued to acquire
subsidiary 7 95,544 - 95,551
Cost of issue - (1,752) - (1,752)
Balance at 31 December
2013 18 369,632 (17,722) 351,928
-------------------------- -------------- -------------- ----------------- --------
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2013
or 2012, but is derived from those accounts. Statutory accounts for
2013 will be available towards the end of May 2013. The auditors
have reported on those accounts: their report was unqualified and
did not draw attention to any matters by way of emphasis.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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