FOGL.L Regulatory News (FOGL)

3 May 2005 07:01

Falkland Oil and Gas Limited03 May 2005 Tuesday 3rd May 2005 Falkland Oil and Gas Limited("FOGL" or "the company") Significant increase in number of identified leads Enhanced possibility of a new petroleum province in the South and East FalklandBasins FOGL announces that it has completed its current 9,450 km 2D seismic dataacquisition programme over most of its licence area. The initial interpretationof the preliminary processed records from the survey has proved encouraging andgreatly exceeds the Company's initial expectations. The programme has indicated a larger and more diverse project than originallyanticipated and has identified numerous possible drill targets, with indicationsthat some could potentially be of significant size. FOGL has now identified approximately 130 leads,(1) far in excess of the eight(8) leads identified at the time of its AIM IPO in October 2004. Given thepositive results of the survey, FOGL now plans to increase the scope of itsexploration programme far beyond that envisaged at the time of the IPO. Key points: - Approximately 130 leads identified, a number of which appear capable ofcontaining recoverable reserves in excess of 200 million barrels - FOGL now represents a larger and more diverse project than originallyanticipated - Encouraging signs that oil and gas could be present - Further work is planned targeting defining 20 drillable prospects byabout mid-2006 - FOGL is targeting drilling of the first well in 2007 - Already an enhanced possibility of project success - Licences cover area equivalent to the North Sea Southern Gas Basin andCentral Graben - Cash position of £10.9 million as at 31 March 2005. FOGL is evaluatingits funding requirements and the source of funds for the increased explorationprogramme John Armstrong, Executive Chairman of FOGL, said: "In my opinion, this is the most exciting project I've seen for many years. Theresults of the 2D seismic are encouraging; the number of leads identified hasfar exceeded our most optimistic estimates and we believe it has greatlyenhanced FOGL's prospects. It is clear that the scope of work needed tomaximise the potential of our acreages has increased significantly. "It is important to remember that, while the leads identified to date each haveseismic expression which indicates the possible presence of a drillableprospect, when fully mapped, and with the benefit of further data, such leadsmay not have all the characteristics necessary to become drillable prospects.Nevertheless, the large number of leads distributed across several playtypessuggests that a number of the leads could become technically sound andpotentially economically viable drill prospects. It is the Company's goal toidentify and define 20 such prospects in the immediate future so that they canbe considered for drilling in 2007. "We have made a lot of progress in the six months since our AIM IPO and theresults to date have been remarkable. Although there is a long way to go, itnow seems quite possible that the Falkland Islands could become a new petroleumprovince by the end of the decade." Hydrocarbon Indicators Initial interpretation of the new data gives considerable cause for optimism.The preliminary results of the survey identify numerous Direct HydrocarbonIndicators (DHI's) pointing to the presence of working petroleum systems. TheDHI's include gas chimneys, amplitudes and possibly gas hydrates. The leads arelarge and diverse, with some leads possibly covering areas of 300 to 500 sq km,sufficient to hold large reserves of oil or gas. There is also a wide range ofplay types with several different styles identified. Exploration Programme & Funding Arrangements FOGL plans to conduct further seismic surveys targeting all the leads but withparticular emphasis on the approximately 50 most promising. The aim will be todevelop 20 high quality, technically sound and potentially economically viabledrilling prospects. The Company then intends to develop a multi-well drillingprogramme which may be able to begin in 2007. Full details of the exploration programme are still to be finalised but giventhe increased number of identified leads the company expects to expandsignificantly the scope of the exploration programme. Although FOGL had net cash of £10.9 million as at 31 March 2005, the increasedscope of the programme will require additional funding and the Board iscurrently considering its options. A further statement on the fundingarrangements and the full details of the programme will be announced soon. Potential Resources The extent and depth of the basin suggests that, if it exists, the hydrocarbonresource could be of a major scale. According to estimates by MBA PetroleumConsultants, an independent consultant, 1,250 billion barrels of oil / oilequivalent could have been generated in and in the vicinity of FOGL's licences. Scott Pickford, petroleum engineers, made an independent assessment of theinitial eight (8) leads and concluded that each had the potential to containbetween 200 million and 600 million barrels of recoverable oil(2). It isexpected that Scott Pickford will be contracted to repeat the process and makean independent judgement on the potential resources indicated by the new data.Its findings will be announced on completion of the processing andinterpretation which is expected to be in the third quarter of this year. An overview presentation will be posted on the FOGL website giving a summary ofthe results announced here. Technical information including maps and seismiclines will be posted on the Company's website in the near future. www.fogl.co.uk Enquiries: FOGL John Armstrong, Executive Chairman + 61 (0) 7 3211 1122 (+9 hrs GMT) David Hudd, Deputy Chairman 07771 893 267 College Hill 020 7457 2020 Ben Brewerton (1) a 'lead' is a feature that requires further technical appraisal priorto a decision to drill (2) P50 recoverable oil as estimated by Scott Pickford, a consultancyspecialising in geology, petroleum engineering and economic analyses, in 2004(IPO Prospectus) Notes to Editors Falkland Oil and Gas Limited ("FOGL") is an oil and gas exploration companyfocused exclusively on opportunities offshore of the Falkland Islands. It wasadmitted to London's Alternative Investment Market ("AIM") on 14 October 2004 atan issue price of 40p. The current major shareholders of FOGL are: FalklandIslands Holdings plc (18%), Global Petroleum (16%) and RAB Capital plc (31%). At the time of the admission to AIM, FOGL held a 77.5% interest in sevenoffshore production licences covering approximately 33,700 sq km to the southand east of the Falkland Islands. FOGL holds these licences in a joint venturewith Hardman Resources. In December 2004, FOGL was awarded a 100% licence overan additional 50,000 sq kms adjacent to its existing licence areas. The 83,700sq km area held by FOGL is equivalent to 380 North Sea blocks: as large as theSouthern Gas Basin and the Central Graben combined. www.fogl.co.uk This information is provided by RNS The company news service from the London Stock Exchange