TIDMFOGL
RNS Number : 7551L
Falkland Oil and Gas Limited
30 April 2015
30 April 2015
Falkland Oil and Gas Limited
("FOGL" or "the Company")
Final Results for the year ended 31 December 2014
and Board Changes
Falkland Oil and Gas Limited (AIM:FOGL), the oil and gas
exploration company focused on its extensive licence areas to the
North, South and East of the Falklands islands, announces its Final
Results for the year ended 31 December 2014.
Highlights
-- Successful preparation for the Q1 2015 drilling campaign
- Major 3D seismic acquisition programme completed in February
2014
- Interest of at least 40% in each licence ensures shareholders
will have substantial equity exposure in the case of success
- FOGL is the largest licence holder of the six oil companies
operating in the Falkland Islands with over 40,000 km(2) of
prospective acreage
-- Robust Financial Position
- Cash Balance of US$95.5million at year end
- Fully funded for 2015 drilling programme
-- Outlook - 2015 high impact drilling campaign continues
- Zebedee well oil and gas discovery announced on 5 April
2015
- The Noble/Edison/FOGL joint venture agreed to defer the
drilling of the second well in the South Falkland Basin, leaving
FOGL in a stronger financial position
- Isobel Deep exploration well in the North Falklands basin
underway
-- Board changes
- Non-executive Chairman Richard Liddell has elected to step
down from the Board at the forthcoming AGM
- John Martin former Senior Managing Director in the Oil &
Gas group at Standard Chartered Bank to be appointed as
Non-Executive Chairman following the AGM
- Non-Executive Directors Stephen Phipps and Ian Duncan to
retire from the Board with immediate effect
Richard Liddell, Chairman of FOGL, said:
"2014 was a year of significant progress for FOGL; with the
completion of a large 3D seismic programme and the contracting of a
deep-water rig for the 2015 drilling campaign paving the way for
our most exciting drilling programme to date.
"In the South and East Falklands Basin, we and our partners were
able to identify a number of highly prospective drilling targets,
including the high impact Humpback prospect which will be drilled
as part of the 2015 drilling programme.
"In the North Falkland Basin, FOGL was very pleased to announce
the Zebedee oil and gas discovery in April 2015 and drilling of the
Isobel Deep prospect is currently underway.
"I would like to thank the retiring directors for their
contributions to the Company. Over the last year Stephen and Ian
have provided invaluable advice and guidance to the Board of FOGL.
But I would also like to thank them for their huge contribution as
directors of Desire Petroleum, as without their pioneering efforts;
there would be no oil industry in the Falklands today.
"Having served 10 very fruitful and satisfying years as Chairman
and led the Board through the successful development of the Company
to the robust position in which it is today, I have decided not to
seek re-election at the forthcoming AGM. I consider that this is an
appropriate time to hand over the reins for the next stage of
FOGL's exciting journey. I leave the Company in excellent shape
with a significant oil discovery at Zebedee, a fully funded four
well drilling programme underway, and a strong statement of
financial position.
"Finally I would like to wish John and the rest of the Board all
the best for the future prosperity of the Company."
- Ends-
Enquiries:
Falkland Oil and Gas Limited
Tim Bushell, Chief Executive +44 (0) 20 7563 1260
RBC Capital Markets (Nominated Advisor and Joint Broker)
Matthew Coakes / Daniel Conti +44 (0) 20 7653 4000
Numis Securities Limited (Joint Broker)
John Prior / Ben Stoop / Paul Gillam +44 (0) 20 7260 1000
FTI Consulting
Ed Westropp / George Parker +44 (0) 20 3727 1000
Additional Information
John Edward Martin (age 65), FOGL Independent Director
Current directorships
Non-Executive Director of Total E&P UK Limited
Senior Vice President of the World Petroleum Council
Past directorships
Former Senior Managing Director in the Oil & Gas group at
Standard Chartered Bank
Non-Executive Director of Total E&P UK Limited
Save for the above, there is no further information that is
required to be disclosed in accordance with Rule 17 and paragraph
(g) of Schedule 2 of the AIM Rules for Companies with respect to
the appointments.
Chairman's Statement
2014 saw a number of major achievements, with the completion of
a large 3D seismic programme and the contracting of a deep-water
rig for the 2015 drilling campaign.
The acquisition of Desire Petroleum in 2013, means that FOGL has
a more balanced, diversified portfolio, which offers a broader
range of exciting opportunities. These include proven oil resources
in the Sea Lion oil development, and relatively low risk
opportunities in the established oil play around the Sea Lion
field.
In the South and East Falkland Basins new plays have been
identified in the 3D datasets acquired in 2013 and 2014. Multiple
prospects exist within each new play which provides enormous upside
in the event of any drilling success. In the North Falkland Basin
three drilling locations on the Zebedee, Isobel Deep and Jayne East
prospects were agreed with our Joint Venture partners building on
the knowledge and successes from the 2010-2012 drilling
campaign.
With strong focus on operations and planning for our multi-well
drilling programme that commenced in March 2015, FOGL is the only
company drilling in both the northern and southern basins, and the
largest licence holder of the six oil companies operating in the
Falkland Islands with a net interest of over 40,000 km(2) . 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. Our 2015 four well drilling programme, for
which we are fully funded is targeting gross un-risked resources of
more than one billion barrels of oil.
The loss for 2014 was US$3.2million (2013: US$4 million),
including interest received on deposits and exchange gains of
US$1.2million (2013: US$2.3 million). At the start of the year cash
balances totalled US$151.4 million. Exploration expenditures
totalled US$40 million in the year and the Company had cash
balances at 31 December 2014 of US$95.5million.
FOGL has substantial partners and a strong financial position,
so it is well placed to capitalise on drilling success and on the
other opportunities that have been identified across our extensive
licences offshore the Falkland Islands.
Having served 10 very productive years as Chairman and taking
into account the considerable progress the Company has made during
that period and its current strong position, this is a good time to
hand over and I have therefore decided not to seek re-election at
the Company's 2014 AGM, and to resign from the board.
Stephen Phipps and Ian Duncan, non-executive Directors of the
Company since the completion of the Desire Petroleum acquisition in
December 2013, have also announced their intention to resign as
Directors of the Company. Since joining the FOGL board, they have
provided an excellent contribution in particular with the
post-acquisition transition and the assimilation of Desire's
assets.
We plan to appoint Mr. John Martin to the Board as my successor.
John has recently retired after eight years as a Senior Managing
Director in the Oil & Gas group at Standard Chartered Bank.
Prior to that he spent 26 years with ABN Amro specialising in the
oil and gas sector. He is currently a non-executive Director of
Total E&P UK Limited and Senior Vice President of the World
Petroleum Council.
Richard Liddell
Chairman
30 April 2015
Chief Executive's Business Review
Key achievements during the year:
-- In February 2014, we announced that PGS had completed the
final part of a 12,000 km(2) 3D seismic survey over FOGL Southern
Basin Licences.
-- On 3 June 2014, Premier and Noble signed a contract with
Ocean Rig to utilise the Eirik Raude rig for a firm six well
programme.
Prospect Inventory
South and East Falkland Basins
During the course of 2014 a full re-evaluation of the south and
east Falkland basin was conducted by Noble Energy, which
incorporated all existing well results, the 2D seismic and the new
3D datasets. The key conclusion of this work is that, although gas
was found in the Loligo and Scotia wells, the main hydrocarbon
phase in the Diomedea area is expected to be oil.
Several large prospects have been identified within the Diomedea
Fan Complex. From these, the Humpback prospect was selected as the
prime target for the first well in the South Falkland Basin. FOGL
estimates gross unrisked mid-case prospective resources for
Humpback of 510 million barrels.
If the result from Humpback is encouraging, there is significant
follow-on potential. Noble estimates over a billion barrels of oil
in this play alone. Other plays within the Diomedea Fan Complex,
with similar potential, have also been identified on the 3D seismic
data.
A number of attractive prospects have been identified on the 3D
data acquired over the Fault Block play adjacent to the Darwin gas
condensate discovery. Two prospects, Scharnhorst and Nurnberg were
high-graded for further technical evaluation. The Scharnhorst
prospect is broadly analogous to the Darwin discovery and as a
result of seismic amplitude and AVO studies, FOGL has increased its
gross unrisked mid-case prospective resourcesestimate from 188 to
355 million barrels. Detailed seismic analysis has demonstrated a
subtly different seismic response to that of the nearby Darwin
condensate discovery, which could be interpreted as an 'oil'
response.
In the eastern portion of the FOGL licences, multiple prospects
have been identified with the Hersilia Fan Complex on the most
recently acquired 3D data. The combined gross resource in these
prospects is in excess of 2 billion barrels of oil equivalent.
Given the results of the Scotia well, the joint venture deems it
vital to try to distinguish the likely hydrocarbon phase in order
that oil, rather than gas filled reservoirs can be targeted. As a
result the Starfish prospect has been high graded as a potential
oil prone target. FOGL estimates gross unrisked mid-case
prospective resources for Starfish to be 402 million barrels.
However the technical work was not sufficiently well advanced to
merit the inclusion of any of these prospects in the 2015 drilling
programme.
North Falkland Basin
In the North Falkland Basin final locations for the wells on
Zebedee, Isobel Deep and Jayne East prospects were agreed by the
joint venture partners. The combined gross resource estimates for
these three prospects is in excess of 600 million barrels. Any
success across these three wells has the potential to enhance the
development economics of the Sea Lion area. The joint venture
partnership is also considering potential follow-up appraisal
locations to take advantage of successful wells in the initial
drilling programme.
The 14/15-5 'Zebedee' exploration well, located in PL004b and
operated by Premier was spudded on 6 March 2015. On 2 April 2015 it
was announced that the well was an oil and gas discovery.
The well discovered 27.5 metres of net oil-bearing reservoir and
17.5 metres of net gas-bearing reservoir. The well penetrated
multiple targets in the Cretaceous F2 and F3 formations with a
total net pay of 45 metres. The pay is primarily located within the
Hector sand, which contains 17.5 metres of net gas pay and the
Zebedee sand, which contains 25.0 metres of net oil pay. The
reservoir in both the Hector and Zebedee intervals is of good
quality and the results are better than FOGL's pre-drill
expectations. Oil was also encountered in a 5 metre sand (2.5
metres of net oil pay), lying below Hector which may be a southern
extension of the Beverley sand encountered in the 14/15b-4 well. In
addition, a 3 metre sand lying below the Zebedee sand, containing
good oil shows, is thought to be equivalent of the Sea Lion Main
sand.
Pressure measurements taken in the Zebedee interval plot on the
same gradient as those observed in the oil leg of the Sea Lion
field. It is likely therefore, that the Zebedee reservoir is in
pressure communication with, and has the same oil-water contact as
Sea Lion. Good oil shows were recorded in a number of the deeper F3
targets, but at this location the sands are not well developed.
FOGL was very encouraged by the positive results of the well. This
was the first test of the Hector sand which has excellent reservoir
properties. Although only gas was penetrated at the well location,
it is possible that oil resources are trapped downdip in a similar
fashion to the other reservoir units in the area.
FOGL will now evaluate these results and their impact on
potential hydrocarbon resources. It is expected that the Zebedee
results will demonstrate that a significantly larger proportion of
greater Sea Lion hydrocarbon resources lie within PL004b and that
the overall field is bigger than previously estimated.
The Isobel Deep well (in which FOGL has a carried 40% working
interest) was spudded on 8 April 2015 and results will be announced
in May 2015.
FOGL also continued to evaluate its broader prospect inventory
within the North Falklands Basin. As a result of this work, the
Susan prospect, located in PL005 (FOGL 100%), has been identified
as a potential future-drilling target. Susan is situated on the
east flank, in an analogous geological setting to the Sea Lion
field and Isobel/Elaine prospects. The Susan reservoir sequences
are slightly older than those being targeted by the Isobel deep
well, however success at Isobel, would reduce the risk on Susan.
FOGL estimates gross unrisked mid-case prospective resources for
Susan to be 340 million barrels.
Sea Lion
The Sea Lion field straddles Licences PL032 (Premier 60%,
Rockhopper 40%) and PL004b, where FOGL holds a 40% interest. FOGL
estimated that a substantial proportion of the total Sea Lion
resources and associated reservoirs, were located within PL004b and
this has now been confirmed by the results of the Zebedee well.
Premier Oil, which operates both licences, is proposing a
multi-phased development concept, targeting the northern part of
the field in the first phase. It is anticipated that the Field
Development Plan will be submitted in 2016, with project sanction
coming later in the year. Initial production from Sea Lion is
expected to commence three to four years after project sanction.
Discussions with our PL004b partners and the Falkland Islands
Government, regarding potential unitisation and other commercial
solutions, took place during 2014. It was agreed that these
discussions should be put on hold until the results of the 2015
drilling programme are known and incorporated into a better
appreciation of the resource distribution within the Sea Lion
reservoir complex.
Further appraisal drilling may be required in PL004b in order to
determine the extent and total resource potential within the
licence and inform the scope of the second phase of field
development. The Zebedee well was a very important next step in
this process.
Risk Management
The acquisition of Desire Petroleum created a more 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 and offer a
wider range of value creation opportunities.
FOGL has extensively used high quality 3D seismic data to reduce
exploration risk. Advanced seismic analysis on these datasets,
calibrated with existing well data, has been used to estimate
likely fluid content (oil, gas or water), and reservoir
properties.
On 13 April 2015 it was announced that Noble and its joint
venture partners FOGL and Edison had elected to defer a potential
second well in the South and East Falkland Basin. After taking a
number of factors into account FOGL agreed to a proposal from Noble
that they utilise the 6th drilling slot in the programme to drill a
well in the North Falklands Basin. As a result, FOGL will be in a
stronger financial position at the end of the current drilling
programme.
This revised drilling programme will mean that the southern area
joint venture partners have more time to fully assess the Humpback
results and if there is some encouragement, plan further
exploration and appraisal wells. The joint venture may then be able
to take advantage of lower drilling costs in the future. This
course of action will also allow the complete technical assessment
of the Scharnhorst and Starfish prospects in light of the Humpback
drilling results. This will determine if they are suitable
candidates for future drilling.
This decision does not impact any existing agreements between
FOGL and Noble. In the event that another exploration well is
drilled after Humpback, within the joint venture's licence area,
FOGL would still retain a partial carry of the drilling costs under
the terms of the Noble farm out agreement.
Argentina legal issue
It is well documented that Argentina claims sovereignty over the
Falkland Islands and the surrounding maritime areas. The Argentine
government has recently stated that it intends to take legal action
against companies and individuals with regards to this claim.
Neither FOGL, nor any of its Directors have received any written
notification or legal documents from the Argentine Government with
respect to such actions. FOGL's position on this issue is clear.
The Hydrocarbons Law (Law No 26.659) enacted by the government of
Argentina does not apply to the Falkland Islands or its surrounding
waters, and is therefore unlawful. Any attempts to enforce
Argentine domestic legislation in relation to the Falkland Islands
continental shelf are an unlawful assertion of extra-territorial
jurisdiction. As such, Argentina's action is contrary to the UN
Convention of the Law of the Sea. It is also unlawful interference
with the right of the Falkland Islanders under the UN Charter to
self-determination, their right to develop their hydrocarbons
resources and the peaceful development of their economy.
Drilling preparations
During 2014 steps were taken to enhance logistical support by
the provision of a new floating dock within Stanley harbour. This
dock, named the 'Noble Frontier', was installed during the course
of 2014 and is located in close proximity to the existing oil
industry supply bases. 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.
Environmental impact statements for all the drilling programmes
were prepared and submitted to the Falkland Islands government.
These submissions are based on extensive field studies including
sea bed imaging, habitat mapping and sea bed sampling. The results
and data from these studies have been made available to
environmental research bodies to increase the baseline knowledge of
the special environment on and offshore the Falkland Islands.
Outlook
2015 will be an extremely active and exciting period for FOGL,
as we continue with our 2015 drilling programme. The Isobel Deep
well is currently underway and the results are expected in May
2015. The Eirik Raude will then move to the South and East
Falklands Basin to drill the high impact Humpback well. Operations
on this well are expected to take just over 2 months, with the
results anticipated in August 2015. The rig will then return to the
North Falkland Basin for FOGL's final well in the programme on the
Jayne East prospect.
We are currently evaluating the results of the successful
Zebedee exploration well and an independent resource assessment of
this discovery has been commissioned, the results of which will be
available later this year.
Tim Bushell
Chief Executive Officer
Falkland Oil and Gas Limited
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2014
Audited
2014 2013
$'000 $'000
Other Administrative expenses (3,319) (5,345)
Charge for share based payments (1,085) (1,033)
-------- --------
Total administration expenses and loss
from operations (4,404) (6,378)
Finance income 1,093 2,353
Foreign exchange gains 79 20
-------- --------
Total finance income 1,172 2,373
(Loss) for the year before taxation (3,232) (4,005)
Taxation - -
(Loss) for the year attributable
to the equity holders of the
parent (3,232) (4,005)
-------- --------
Other comprehensive income - -
-------- --------
Total comprehensive (expense)
for the year attributable to
the equity holders of the parent (3,232) (4,005)
(Loss) for the year per ordinary share
- basic and diluted (0.61c) (0.94c)
-------- --------
The loss for the year (2013: loss for the year) arose from
continuing operations.
Falkland Oil and Gas Limited
Consolidated Statement of Financial Position
For the year ended 31 December 2014
Audited
2014 2013
$'000 $'000
Non- current assets
Intangible assets 240,293 205,455
Inventory 8,576 3,501
Property, plant and equipment 12,340 8,165
261,209 217,121
Current assets
Trade and other receivables 646 3,956
Cash and cash equivalents 35,462 71,409
Cash on deposit 60,000 80,000
96,108 155,365
Total assets 357,317 372,486
Current liabilities
Trade and other payables (7,536) (20,558)
Total liabilities (7,536) (20,558)
--------- ---------
Net current assets 88,572 134,807
--------- ---------
Net assets 349,781 351,928
--------- ---------
Capital and reserves attributable to equity
shareholders
of the Company
Share capital 18 18
Share premium 369,632 369,632
Retained deficit (19,869) (17,722)
Total equity 349,781 351,928
--------- ---------
Falkland Oil and Gas Limited
Consolidated Cashflow Statement
For the year ended 31 December 2014
Audited
2014 2013
$'000 $'000
Cash flows from Operating activities
(Loss) for the year before income
tax (3,232) (4,005)
Adjustments for
Total Finance income (1,093) (2,379)
Depreciation 98 42
Share based payment expense 1,085 1,033
---------------------- ----------
Net cash flows used in operating
activities before changes in
working capital (3,142) (5,309)
Increase/ (Decrease) in trade
and other receivables 3,310 (2,884)
Decrease in trade and other
payables (6,735) (117)
---------------------- ----------
Net cash flows used in operating
activities (6,567) (8,310)
Cash flows from Investing activities
Interest received 981 1,033
Purchase of property, plant
and equipment (5,811) (8,140)
Joint venture partners' contributions
to back costs - 45,000
Expenditure in respect of intangible assets (39,586) (67,268)
Inventory (5,073) -
Cash on deposit 20,000 (80,000)
Net cash acquired with subsidiary - 5,676
Movement in restricted cash - 10,803
---------------------- ----------
Cash (used in) from investing
activities (29,490) (92,896)
Cash flows from Financing activities
Issue of ordinary share capital - -
Costs related to issue of ordinary
share capital - (1,752)
---------------------- ----------
Net cash (used in) financing
activities - (1,752)
Net (decrease) in cash and cash
equivalents in the year (36,057) (102,958)
Cash and cash equivalents at
start of year 71,409 174,095
Effect of foreign exchange rate
changes on cash and cash equivalents 110 272
Cash and cash equivalents at
end of year 35,462 71,409
---------------------- ----------
Falkland Oil and Gas Limited
Consolidated Statement of Changes in Equity
For the year ended 31 December 2014
Group
Share capital Share premium Retained deficit Total
equity
$'000 $'000 $'000 $'000
Balance at 1 January
2013 11 275,840 (14,750) 261,101
-------------------------- -------------- -------------- ----------------- --------
Total comprehensive
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
-------------------------- -------------- -------------- ----------------- --------
Total comprehensive
loss for the year - - (3,232) (3,232)
Share based payments - - 1,085 1,085
-
Balance at 31 December
2014 18 369,632 (19,869) 349,781
-------------------------- -------------- -------------- ----------------- --------
The Group's financial statements have been prepared and approved
by the Directors in accordance with International Financial
Reporting Standards ("IFRS") and International Financial Reporting
Interpretations Committee ("IFRIC") interpretations, issued by the
International Accounting Standards Board ("IASB") as endorsed for
use in the EU and applicable Falkland Islands Law and Regulations
that are applicable to companies that prepare their financial
statements under IFRS.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2014
or 31 December 2013, but is derived from the audited accounts for
those years. Statutory accounts for 31 December 2014 will be
available towards the end of May 2015. 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
FR GMGZDVLFGKZM
Falkland O&G (LSE:FOGL)
Historical Stock Chart
From Apr 2024 to May 2024
Falkland O&G (LSE:FOGL)
Historical Stock Chart
From May 2023 to May 2024