FOGL.L Regulatory News (FOGL)

21 Dec 2006 07:01

Falkland Oil and Gas Limited21 December 2006 21st December 2006 Falkland Oil and Gas Limited("FOGL" or "the Company") Interim results for the six month period ended 30 September 2006 Highlights • Revised forward programme approved by the Falkland Islands Government - Additional infill 2D seismic, Controlled Source Electro-Magnetic ("CSEM") and sea bottom coring surveys • Work programme to be executed over the coming Austral Summer is specifically targeted at our top 20 prospects • Discussion with potential farminees ongoing • RAB Special Situations (Master) Fund Limited has committed £8 million by way of convertible loan notes in the Company. • Independent technical verification received from TRACS International. Their evaluation focussed on 10 prospects, which they assessed to have a net risked prospective resource potential of 863 million barrels and unrisked net prospective resources of 10,089 MMbbls • Cash balance of £12.6 million as at 30 September 2006 Strategy & Outlook • FOGL is committed to pursuing an aggressive exploration programme which could lead to the development of a new petroleum province in the South Atlantic • Revised work programme designed to de-risk and define prospects ready for drilling • Introduce suitable partners • Secure a rig during 2007 and commence drilling in 2008 Richard Liddell, Chairman of FOGL, said: "FOGL is in excellent shape for 2007. We have secured financing and have twovessels starting work in the Falklands in the near future. The results of theirwork should enable us to confirm our drilling targets, which will facilitate thefarmout process and rig acquisition. The last six months has been a period of further progress for our company. Ournew work programme has been approved and we believe it will provide the mosteffective exploration solution for our acreage and improve our chances forsuccess. This programme is targeted at our larger prospects and we believe thatthe data gained will allow us to define drilling targets and provide potentialfarminees with further confidence in our project. We have a clear focus for the year ahead. The year will be crucial for FOGL aswe drive towards our goal of drilling our first exploration wells in 2008.There is a great deal of important pre-drilling work being undertaken;evaluating the results of our programme, finalising our exploration plans andsourcing a rig. With our strong balance sheet the Board believe that thecompany is well placed and will make further significant progress in the comingyear." 21 December 2006 Enquiries: FOGL Richard Liddell, Chairman 020 7563 1260 Tim Bushell, Chief Executive Officer 020 7563 1260 College Hill Nick Elwes / Paddy Blewer 020 7457 2020 www.fogl.com Interim results for the six months ended 30 September 2006 Operational Update In the last six months FOGL has made significant progress as the Company workstowards its objective of drilling the first exploration wells in the South andEast Falkland licences in 2008. This period has seen us build upon the hugequantity of work that we had already undertaken through our previous extensive2D seismic programmes which identified over 100 prospects and leads on ouracreage. From this position we set out three clear objectives which we have continued toprogress during the period under review: • Define, de-risk and prioritise the top prospects for drilling • Introduce suitable partners • Secure a rig and commence drilling during 2008 With clear sight on these objectives we have designed the exploration strategyand programme and advanced into its implementation. Over the last six months we have continued to investigate the best methods forfurther exploring our licences. Approval was obtained from the FalklandsGovernment, for a revised work programme which will specifically target thelarger prospects in the licence areas. The original licence obligation was tocarry out a 3D seismic programme however, on further consideration; it wasdeemed that such a survey was not appropriate at this time. In our view therevised programme is more suitable, given the scale and number of prospects thatneed to be evaluated prior to drilling. The revised programme comprises three main elements: a Controlled SourceElectro-Magnetic survey ("CSEM"), additional infill 2D seismic and a sea bottomcoring programme. Contracts have been executed with Offshore HydrocarbonMapping ("OHM") for the CSEM and Wavefield InSeis As ("Wavefield") to undertakethe 10,000 km 2D infill seismic survey. The contract for sea bottom coring iscurrently under discussion. CSEM is a relatively new technology which we are excited about using in ourlicenses. It investigates the electromagnetic properties of rocks and has arecognisable response when oil and gas are present. This is an extremely costeffective method of high grading an extensive inventory of prospects and leads.We will acquire CSEM data over many of the larger prospects and based on theseresults we will then direct the infill 2D seismic. These surveys have thepotential to dramatically reduce the exploration risks, and also determine thebest prospects for drilling. We are also planning to acquire sea bottom cores. These will be targeted at anumber of possible oil seeps that have been identified from seismic data andsatellite imagery. We hope to recover 'live' oil samples. This woulddemonstrate that oil has been generated and that it has migrated within theSouth and East Falkland basins. The preparatory work on these programmes is already underway. The 2D seismicprogramme is expected to commence in mid December, the CSEM survey in January2007 and the sea bottom coring in February 2007. FOGL has also gained an extension to the work programme for its 2002 Licencesfrom the Falkland Island Government. In accordance with our licence agreementswe have had to relinquish part of these licences; however we still retain asignificant acreage position which contains all of the most prospective targets. Since we last reported we have continued to make presentations to a number ofprospective farm-in partners. Nearly all of these companies were major oilcompanies and the discussions progressed well. A great deal of interest wasshown by these companies in our acreage, but to date no farm-in deal has beenagreed. However, dialogue continues and our revised work programme has been veryfavourably received by these companies. We believe the results of thisprogramme are likely to appeal to a wider range of potential farminees andshould provide a basis for further discussions with potential partners in thecoming year. Our goal remains to drill the first exploration well on our licences in 2008,however in order for this to take place we need to secure a rig. We areexamining a number of options: • Combining with the other oil and gas operators in the Falklands region with a view to building a consortium to create a drilling campaign that provides a more attractive proposition to rig contractors. • Ceding an equity stake in FOGL or an interest in the licences in exchange for providing a rig. • Obtaining a rig through a farm-in partner. We believe that we will be able to secure a rig for our 2008 drilling programmeduring the course of 2007. Post Balance sheet events In October TRACS International ("TRACS") completed an independent review on ourinterests in the East and South Falkland licences. TRACS completed a review ofwhat they believe are the Company's top ten prospects as regards potential sizeand greatest chance of success. Following evaluation of the prospects TRACSreported that FOGL has Unrisked Net Prospective Resources (best estimate) of10,089 MMbbls based on the portfolio of 10 prospects reviewed. The estimatedranges of Prospective Resource volumes are summarised in the table below. Unrisked Net Volume Risked Net Volume Classification Low Est. Best Est. High Est. Low Est. Best Est. High Est. MMbbls MMbbls MMbbls MMbbls MMbbls MMbblsProspective Resources 5202 10089 20148 435 863 1761 The full report by TRACS is available on FOGL's website. On 29 November the Company announced that it had entered into an agreement withRAB Special Situations (Master) Fund Limited ("RAB SSMF") for RAB SSMF to invest£8 million by way of convertible loan notes ("Notes") in FOGL. It is intendedthat RAB SSMF will subscribe £2 million on completion of the finaldocumentation, £2 million on 23 February 2007, £2 million on 30 April 2007 and£2 million on 24 September 2007. On issue of the Notes RAB SSMF will receive6,000,000 warrants, exercisable in whole or in part over a 6 year term, toacquire one Company Share per warrant at a price of 100 pence per Share (subjectto adjustment). The issue of these Notes will provide the Company withadditional cash resources for the funding of its ongoing exploration programme. Financials At 30 September the Company had cash reserves of £12.6 million. As announced in our Preliminary results in July we are planning to change ourfinancial reporting onto a calendar year basis, a similar regime as adopted bythe majority of companies in our industry. As such our next accounting periodwill be the nine months ending 31 December 2006. Outlook The next 18 months are crucial for the FOGL as we continue to pursue anaggressive exploration programme. This programme is designed to confirm thepotential of our licences and provide prospective partners with the confidenceto invest in the region, thus achieving our second objective. With this in place, the final task will be to secure a rig. Whilst continuing toinvestigate a number of options we are confident that we will achieve this anddrill the first exploration wells in 2008. Richard Liddell Tim BushellChairman Chief Executive Unaudited Profit and Loss Account for the 6 months ended 30 September 2006 Restated Unaudited Unaudited Period 6 months ended 6 months ended 30 September 30 September 2006 2005 Note £ £ Administrative expenses (875,314) (696,186) Operating loss (875,314) (696,186) Interest income 281,648 361,163 Loss on ordinary activities before taxation (593,666) (335,023) Tax on loss on ordinary activities (81,494) - Loss on ordinary activities after taxation (675,160) (335,023) Loss for the period (675,160) (335,023) Loss per ordinary share - Basic and diluted 2 (0.73p) (0.38p) There were no recognised gains or losses in the period other than those dealtwith in the profit and loss account above. The operating loss for the period arose from continuing operations. Unaudited Balance Sheet at 30 September 2006 Restated Unaudited at Unaudited at 30 September 30 September 2006 2005 Note £ £ £ £Fixed assetsIntangible assets 9,078,269 4,823,615Tangible assets 108,230 68,097 9,186,499 4,891,712 Current assetsDebtors 321,374 451,627Cash at bank and in hand 12,643,836 17,585,232 12,965,210 18,036,859 Creditors: amounts fallingdue within one year (494,449) (112,409) Net current assets 12,470,761 17,924,450 Net assets 21,657,260 22,816,162 Capital and reservesCalled up share capital 4 1,839 1,835Share premium account 4 23,481,391 23,386,963Profit and loss account 4 (1,825,970) (572,636) Shareholders' funds 21,657,260 22,816,162 Unaudited Cash Flow Statement for the 6 months ended 30 September 2006 Restated Unaudited Unaudited 6 months 6 months ended ended 30 September 30 September 2006 2005 £ £ Net cash outflow from operating activities (881,181) (1,550,860)Returns on investments and servicing of financeInterest received 281,648 361,163 Capital expenditure and financial investmentExpenditure in respect of intangible fixed assets (726,690) (1,956,779)Expenditure in respect of tangible fixed assets (5,216) (66,695) Cash outflow before financing (1,331,439) (3,213,171) FinancingIssue of ordinary share capital - 10,000,000Issue costs - (281,573) - 9,718,427(Decrease) / increase in cash in the period (1,331,439) 6,505,256 Reconciliation of operating loss to net cash outflow from operating activitiesOperating loss (875,314) (696,186)Depreciation 18,401 9,875Fair value of share based payments 80,468 56,079Decrease/(increase) in debtors 673,464 (376,193)Decrease in creditors (778,200) (544,435) Net cash outflow from operating activities (881,181) (1,550,860) Reconciliation of movements in shareholders' funds for the 6 months ended 30 September 2006 Restated Unaudited Unaudited 6 months 6 months ended ended 30 September 30 September 2006 2005 £ £ Loss for the financial period (675,160) (335,023)Fair value of share based payments 80,468 56,079New share capital subscribed (net of issue costs) - 9,718,427 Net (decrease)/increase in shareholders' funds (594,692) 9,439,483Opening shareholders' equity funds 22,251,952 13,376,679 Closing shareholders' funds 21,657,260 22,816,162 Notes to the interim results 1. Basis of financial information The interim financial information in this announcement has been prepared on thesame basis and using the same accounting policies as were applied in theCompany's statutory financial statements for the year ended 31 March 2006 withthe exception of the accounting for share based payments. With effect from 1 April 2006, the Company has adopted FRS20 Share BasedPayments. Under FRS20, an expense is recognised in the profit and loss accountfor share based payments, calculated on their fair value at the date of grant.The adoption of FRS20 has given rise to a charge of £80,468 for the period ended30 September 2006. The equivalent charge for the period ended 30 September 2005is £56,079 and the comparative figures have been restatedaccordingly..Compliance with FRS20 has reduced 2005 interim shareholders' fundsby £nil and increased the 2005 interim loss by £56,079. The net loss for 30September 2006 has been increased by £80,468. The financial information for the 6 months ended 30 September 2006 is unaudited.In the opinion of the directors the financial information for this period fairlypresents the financial position, results of operations and cash flows for theperiod in compliance with Falkland Islands company law and UK generally acceptedaccounting principles. The auditor's report on the statutory financial statements for the year ended 31March 2006 was unqualified. 2. Loss per share The calculation of basic loss per ordinary share is based on a loss of £675,160(6 months ended 30 September 2005: loss £335,023) and on 91,950,706 ordinaryshares (6 months ended 30 September 2005: 87,843,137 ordinary shares), being theweighted average number of ordinary shares in issue during the period. There isno difference between the diluted loss per share and the basic loss per sharepresented as the company reported a loss for the period and, in accordance withFinancial Reporting Standard Number 22, the share options in issue are notconsidered dilutive. 3. Dividends The directors do not recommend the payment of a dividend. 4. Capital and reserves Called up Share Profit and share premium loss account capital account Total £ £ £ £ At 1 April 2006 as restated 1,839 23,481,391 (1,231,278) 22,251,952Loss for the period - - (675,160) (675,160)Fair value of share based payments - - 80,468 80,468 At 30 September 2006 1,839 23,481,391 (1,825,970) 21,657,260 This information is provided by RNS The company news service from the London Stock Exchange