25 Aug 2015 07:00
25 August 2015
Falkland Oil and Gas Limited
("FOGL" or "the Company")
Interim Results for the six months ended 30 June 2015
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 Falkland islands, announces its Interim Results for the six months ended 30 June 2015.
Highlights
· Two oil discoveries in the North Falkland basin:
Zebedee well oil and gas discovery announced on 5 April 2015
- Discovered 27.5 metres of net oil-bearing reservoir and 17.5 metres of net gas-bearing reservoir
- Reservoir better developed than anticipated
· Isobel Deep oil discovery announced on 28 May 2015
- Drilled to a depth of 2,527 metres reaching top reservoir on prognosis
- Bottom 24 metres of the well consisted of oil bearing F3 sands
- Has opened up a new play in the previously unexplored southern part of PL004
· Financial Position
- Cash Balance of $40.1 million at period end
· Outlook - 2015 high impact drilling campaign continues
- Operations are ongoing at the Humpback exploration well in the South Falklands Basin. Results are now expected in September 2015.
- Alternate drilling options under consideration for next North Falklands Basin well
· Board changes
- John Martin appointed as Non-Executive Chairman in June 2015
- Non-Executive Chairman, Richard Liddell and Non -Executive directors Stephen Phipps and Ian Duncan retired.
John Martin, Chairman of FOGL, said:
"The first six months of 2015 was a highly successful period which saw significant exploration success for the Company and I am delighted to have joined the Board as Non-Executive Chairman at this exciting time.
"In the North Falkland Basin, FOGL has announced two material oil and gas discoveries. The Zebedee well was an excellent result and one that adds to the proven hydrocarbon resources of the licence and confirms the extension of the Sea Lion discovery and associated reservoirs into PL004b. The Isobel Deep oil discovery opens a new play area with upside potential.
"Drilling on the Humpback prospect in the South Falkland basin is currently on-going and we look forward to receiving and sharing the results of this well following completion of the drilling operations."
"With two successes under our belt already and two more wells to complete, the Board looks to the future with confidence".
- 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 |
Chairman's Report
The first half of 2015 was marked by a very successful start to our 2015 drilling campaign with two material oil and gas discoveries.
Zebedee oil and gas discovery
On 2 April 2015, FOGL announced the results of the 14/15b-5 Zebedee well. 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 hydrocarbon pay of 45 metres. The reservoir in both the Hector and Zebedee intervals was of good quality and the results 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.
Formation pressure measurements taken over the Zebedee interval plot on the same oil gradient as that observed in the Sea Lion field. As such, FOGL considers it very likely that the Zebedee reservoir is in pressure communication with, and has the same oil-water contact as, the Sea Lion field.
The Hector sand, which has not been drilled previously, has been proven to have very good reservoir properties. In addition to the gas discovered in Hector, the flank of the Hector reservoir may well have potential for additional oil resources.
FOGL is currently evaluating the Zebedee results in detail and their impact on potential hydrocarbon resources within PL004b. An independent third party assessment has been commissioned, the results of which will be published in Q4 2015.
Isobel Deep oil discovery
On 28 May 2015, FOGL announced an oil discovery at the Isobel Deep exploration well 14/20-1 in the North Falkland Basin, approximately 30km south of the Sea Lion field. The Isobel Deep exploration well was drilled to a depth of 2,527 metres reaching top reservoir on prognosis. The bottom 24 metres of the well consisted of oil bearing F3 sands. These sands were at a higher than expected reservoir pressure and this resulted in an influx into the well.
Whilst it was not possible to acquire wireline logs over the Isobel Deep reservoir, the presence of oil bearing sands is very positive. FOGL believes these initial results open up a new oil play in this part of PL004 and also significantly reduce the risk on FOGL's other prospects in the adjacent PL005 licence. Further drilling options on Isobel/Elaine are currently being evaluated.
The PL004a licence operator (Premier Oil) currently estimate un-risked Pmean resources for the Isobel/Elaine fan complex of 400 mmbbls. This is in line with FOGL's own resource estimate for the Isobel/Elaine fan complex. FOGL has a 40% interest in this licence and the Isobel Deep discovery.
Humpback Drilling ongoing
The Humpback well spudded on 13 June 2015 on licence PL012, testing multiple stacked reservoirs within the Cretaceous Diomedea fan complex. A series of unforeseen equipment and operational issues has resulted in a delay to the completion of the well. These delays are expected to extend the duration of the well from 65 days to approximately 100 days. FOGL anticipates that the results of the well should be available in September 2015 and a further update will be provided once target depth has been reached and wireline logs have been run.
FOGL anticipates that a proportion of the additional costs of this delay will be borne by Noble Energy under a commercial arrangement that is currently being negotiated and the details of which will be announced when finalised.
Forward programme
Following the completion of the Humpback well the Eirik Raude will return to the North Falklands basin. Consideration is currently being given to further drilling at Isobel Deep and this may replace the planned Jayne East well. Any further drilling in the South Falkland basin, as part of the current programme, will be dependent on the Humpback results.
Financials
The loss before tax for the six months was $1.95 million (2014: $1.3 million), with interest earned in the period of $0.1 million (2014: $0.7 million). Foreign exchange gains of $0.1 million (2014: gains of $0.2 million) were incurred, principally resulting from Sterling bank balances held for costs incurred in the UK.
At 30 June 2015 the Company had cash and bank balances of $40.1 million which is sufficient to fund the current proposals approved by the licence holders. FOGL is carried on the Jayne East well by Premier and Rockhopper. The Noble Farm-out agreement, covering the South and East Falkland Basin, provides a partial carry on Humpback.
Outlook
Despite current commodity prices, FOGL has a strong track record, excellent assets with significant upside potential and is well-positioned for growth. As such, the Board of FOGL views the future with optimism.
Falkland Oil and Gas Limited
Consolidated Condensed Statement of Comprehensive Income
For the six months ended 30 June 2015
|
| 6 months ended 30 June 2015 | 6 months ended 30 June 2014 | Year ended 31 December 2014 | |
|
| (Unaudited) | (Unaudited) | (Audited) | |
| Note | $000 | $000 | $000 | |
|
|
|
|
| |
Administrative expenses |
| (1,608) | (1,590) | (3,319) | |
Share based payment charges |
| (548) | (598) | (1,085) | |
|
|
|
|
| |
Loss from operations |
| (2,156) | (2,188) | (4,404) | |
|
|
|
|
| |
Finance income |
| 98 | 703 | 1,093 | |
Foreign exchange gains | 103 | 190 | 79 | ||
|
|
|
|
| |
Net finance income |
| 201 | 893 | 1,172 | |
|
|
|
|
| |
(Loss) before tax |
| (1,955) | (1,295) | (3,232) | |
|
|
|
|
| |
Taxation |
| - | - | - | |
|
|
|
|
| |
(Loss) for the period/ year |
| (1,955) | (1,295) | (3,232) | |
|
|
|
|
| |
(Loss) per share (US cents) |
|
|
| ||
|
|
|
|
| |
Basic and diluted | 2 | (0.37c) | (0.24c) | (0.61c) | |
|
|
|
|
| |
|
|
|
|
| |
All amounts included above relate to continuing operations.
Falkland Oil and Gas Limited
Consolidated Condensed Statement of Financial Position
At 30 June 2015
|
|
| At 30 June 2015 (unaudited) | At 30 June 2014 (unaudited) | At 31 December 2014 (audited) | |
| Note | $000 | $000 | $000 | ||
Assets |
|
|
|
| ||
|
|
|
|
| ||
Non-current assets |
|
|
|
| ||
Intangible assets | 3 | 298,917 | 228,973 | 240,293 | ||
Inventory |
| 6,508 | 4,597 | 8,576 | ||
Property, plant and equipment | 5,679 | 8,481 | 12,340 | |||
|
| 311,104 | 242,051 | 261,209 | ||
|
|
|
|
| ||
Current assets |
|
|
|
| ||
Trade and other receivables |
| 3,466 | 2,824 | 646 | ||
Cash and cash equivalents | 4 | 40,092 | 68,656 | 35,462 | ||
Cash on deposit | 4 | - | 40,000 | 60,000 | ||
|
| 43,558 | 111,480 | 96,108 | ||
|
|
|
|
| ||
Total assets |
| 354,662 | 353,531 | 357,317 | ||
|
|
|
|
| ||
Liabilities |
|
|
|
| ||
|
|
|
|
| ||
Current liabilities |
|
|
|
| ||
Trade and other payables |
| (6,288) | (2,300) | (7,536) | ||
|
|
|
|
| ||
Net current assets |
| 37,270 | 109,180 | 88,572 | ||
|
|
|
|
| ||
Net assets |
| 348,374 | 351,231 | 349,781 | ||
|
|
|
|
| ||
Capital and reserves |
|
|
|
| ||
Called up share capital |
| 18 | 18 | 18 | ||
Share premium account |
| 369,632 | 369,632 | 369,632 | ||
Retained deficit |
| (21,276) | (18,419) | (19,869) | ||
Total Equity |
| 348,374 | 351,231 | 349,781 | ||
Falkland Oil and Gas Limited
Consolidated Condensed Statement of Cash Flows
For the six months ended 30 June 2015
|
| 6 months ended 30 June 2015 (unaudited) | 6 months ended 30 June 2014 (unaudited) | Year ended 31 December 2014 audited |
|
| $000 | $000 | $000 |
Operating activities |
|
|
|
|
Loss on operating activities |
| (1,955) | (1,295) | (3,232) |
Total finance income |
| (98) | (703) | (1,093) |
Foreign exchange (gains)/losses |
| (103) | (190) | - |
Depreciation and amortisation |
| 63 | 44 | 98 |
Share based payment charges |
| 548 | 598 | 1,085 |
Net cash flow from operations |
| (1,545) | (1,546) | (3,142) |
|
|
|
|
|
(Increase)/Decrease / in trade and other receivables | (2,820) | 81 | 3,310 | |
(Decrease) / Increase in trade and other payables | (1,248) | (18,428) | (6,735) | |
Net cash provided (used in) operating activities | (5,617) | (19,893) | (6,567) | |
|
|
|
|
|
Investing activities |
|
|
|
|
Exploration & evaluation expenditure |
| (49,626) | (22,435) | (39,586) |
Inventory |
| - | (1,094) | (5,073) |
Purchase of property, plant and equipment |
| (139) | (358) | (5,811) |
Cash on deposit |
| 60,000 | 40,000 | 20,000 |
Interest received |
| 98 | 703 | 980 |
Net cash provided /(used in) investing activities | 10,333 | 16,816 | (29,490) | |
|
|
|
|
|
Financing activities |
|
|
|
|
Issue of ordinary shares |
| - | - | - |
Costs related to issue of ordinary shares |
| - | - | - |
Net cash used in financing activities |
| - | - | - |
|
|
|
|
|
Net Increase/(decrease) in cash and cash equivalents | 4,716 | (3,077) | (36,057) | |
|
|
|
|
|
Cash and cash equivalents at the start of the period/ year | 35,462 | 71,409 | 71,409 | |
Effect of foreign exchange rates |
| (86) | 324 | 110 |
|
|
|
|
|
Cash and cash equivalents at the end of the period/ year | 40,092 | 68,656 | 35,462 | |
Falkland Oil and Gas Limited
Consolidated Condensed Statement of Changes in Equity
For the six months ended 30 June 2015
| Share capital | Share premium | Retained deficit | Total equity |
| $000 | $000 | $000 | $000 |
|
|
|
|
|
Balance at 1 January 2014 | 18 | 369,632 | (17,722) | 351,928 |
Total comprehensive loss for the period | - | - | (1,295) | (1,295) |
Share based payment charges | - | - | 598 | 598 |
|
|
|
|
|
Balance at 30 June 2014 (unaudited) | 18 | 369,632 | (18,419) | 351,231 |
|
|
|
|
|
Total comprehensive loss for the period | - | - | (1,937) | (1,937) |
Share based payment charges | - | - | 487 | 487 |
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2014 (audited) | 18 | 369,632 | (19,869) | 349,781 |
|
|
|
|
|
Total comprehensive loss for the period | - | - | (1,955) | (1,955) |
Share based payment charges | - | - | 548 | 548 |
|
|
|
|
|
Balance at 30 June 2015 (unaudited) | 18 | 369,632 | (21,276) | 348,374 |
Falkland Oil and Gas Limited
Notes forming part of the Interim Results
For the six months ended 30 June 2015
1. Accounting policies
The consolidated condensed unaudited interim financial information set out in this report is based on the financial statements of Falkland Oil and Gas Limited ("FOGL"). The condensed financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2014, which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The financial statements of the group for the 6 months ended 30 June 2015 were approved and authorised for issue by the Board on 26 August 2015. These financial statements have been prepared in accordance with the accounting policies that are expected to be applied in the Report and Accounts of the group for the year ending 31 December 2015 and are consistent with International Financial Reporting Standards adopted for use in the European Union.
The Directors are in the process of assessing the impact of the new standards, amendments to existing standards and interpretations in order to determine their impact on the Group. Based on the Directors assessment so far, the effect of the changes is considered likely to affect disclosure only.
Basis of preparation
The financial information for the six months ended 30 June 2015 and 30 June 2014 is unreviewed and unaudited and does not constitute the group's statutory financial statements for those periods. The comparative financial information for the full year ended 31 December 2014 has been derived from the statutory financial statements for that period. The statutory accounts for the year ended 31 December 2014 have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified.
The financial statements are presented in United States Dollars and all values are rounded to the nearest thousand dollars ($'000) except when otherwise indicated.
The Group 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.
Falkland Oil and Gas Limited
Notes forming part of the Interim Results (continued)
For the six months ended 30 June 2015
2. Loss per share
The loss per share is calculated on the reported loss for the period of $1,955,000 (2014: interim loss of $1,295,000, year end 31 December 2014: loss of $3,232,000). The weighted number of shares and the weighted average number of diluted shares is set out below. There is no difference between diluted loss per share and the basic loss per share for the periods ended 30 June 2015 and 30 June 2014 as the group reported a loss for these periods. There is also no difference between the basic and diluted earnings per share for the year ended 31 December 2014.
|
|
|
|
| 6 months ended 30 June 2015 (unaudited) | 6 months ended 30 June 2014 (unaudited) | Year ended 31 December 2014 (audited) |
Weighted average number of ordinary shares | 533,527,186 | 533,344,494 | 533,344,494 |
Conversion of Share options | - | 182,692 | 182,692 |
|
|
|
|
Weighted average number of diluted shares | 533,527,186 | 533,527,186 | 533,527,186 |
|
|
|
|
|
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|
|
3. Intangible assets
| Exploration & appraisal expenditure | ||
| $000 | ||
Cost |
| ||
Balance at 1 January 2014 | 205,455 | ||
Additions | 31,112 | ||
Transfers from PPE | 3,726 | ||
|
| ||
|
| ||
Balance at 31 December 2014 (audited) | 240,293 | ||
|
| ||
Additions | 58,624 | ||
|
| ||
Balance at 30 June 2015 (unaudited) | 298,917 | ||
|
|
| |
Falkland Oil and Gas Limited
Notes forming part of the Interim Results (continued)
For the six months ended 30 June 2015
4. Cash and cash equivalents
| At 30 June 2015 | At 30 June 2014 | At 31 December 2014 |
| $000 | $000 | $000 |
| (unaudited) | (unaudited) | (audited) |
Cash at bank and in hand | 40,092 | 68,656 | 35,462 |
Term deposits | - | 40,000 | 60,000 |
|
|
|
|
Total Cash at bank | 40,092 | 108,656 | 95,462 |
5. Interim Statement
Copies of this Interim report for the six months ended 30 June 2015 will be available from FOGL's UK office Floor 8, 101 Wigmore Street, London, W1U 1QU, and on the company's website www.fogl.com.