FOGL.L Regulatory News (FOGL)

28 Mar 2007 07:04

Falkland Oil and Gas Limited28 March 2007 Falkland Oil and Gas Limited("FOGL" or "the Company") Preliminary results for the nine month period ended 31 December 2006 Highlights • Infill 2D seismic survey commenced in December 2006 with over 6,000 kms acquired to date. • Controlled Source Electro-Magnetic ("CSEM") survey commenced in February 2007. • Discussions are continuing with a number of potential farminees. • TRACS International completed an independent review of what it considers to be the Company's top ten prospects. TRACS reported that FOGL has unrisked net prospective resources of 10,089 Million barrels (MMbbls). • £8 million fund raising through a convertible loan note issue to RAB Special Situations (Master) Fund Limited ("RAB SSMF") in 4 tranches arranged in December 2006. • Cash balance of £14.9 million as at 31 December 2006 - includes £2 million first tranche subscription for loan notes. Strategy & Outlook for 2007 • FOGL is continuing to pursue an aggressive exploration programme which could lead to the development of a new petroleum province in the South Atlantic • The work programme is designed to reduce the exploration risk and to identify the best prospects for the future drilling programme • Introduction of suitable farm-in partners • Evaluation of rig options to secure a rig and to commence drilling in 2008 Richard Liddell, Chairman of FOGL, said: "FOGL has made significant progress during the period and we have a clear focusfor this crucial year in the Company's development. Our new surveys are underway as we aim to further define the prospects on ouracreage enabling us to commence a drilling campaign in 2008. It is expectedthat these surveys will provide us with a number of options as we progress ourdiscussions with potential farm-in partners and rig owners. The Board is confident that our strategies will lead to the drilling of thefirst exploration well on our licences in 2008." 28 March 2007 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 KBC Peel Hunt - Nominated Advisor Jonathan Marren/ Matt Goode 020 7418 8900 www.fogl.com Preliminary results for the nine months ended 31 December 2006 Chairman's Statement Introduction In the period under review FOGL has made significant progress towards itsobjective of drilling the first exploration wells in the South and East Falklandlicences during 2008. Building upon the huge quantity of work that waspreviously carried out, FOGL has commenced two surveys, the results of which areexpected to provide further definition and de-risking of the prospects andprovide locations for drilling. John Armstrong has decided to step down from his position as a non-executiveDirector of the Company effective 16th May 2007 in order to concentrate on hisother business activities. John was the founding Chairman of the Company. TheBoard would like to take this opportunity to thank John for his invaluable inputand contribution over the years as well as all his efforts to establish theCompany in 2004. We wish him well in his new ventures. Overview A great deal of work had been previously carried out by FOGL on the licenceareas identifying over 100 prospects and leads, but 2006 saw the Company take afurther strategic decision in this area. In the second half of the calendar year the Company, with the agreement of theFalkland Islands Government, revised its work programme. This revisedprogramme, which is already in progress, was devised to specifically target thelargest prospects using several different exploration technologies. Thus FOGL started this reporting period with the clear objective of drilling thefirst exploration well on its acreage in 2008. As a result, 2006 was seen as animportant preparation stage, paving the way to achieve this goal throughdefining, de-risking and prioritising the prospects, introducing a suitablepartner and securing a rig. In line with our strategy FOGL's data rooms were opened and a number ofpresentations were made to prospective farm-in partners. Whilst to date none ofthese companies has agreed to join the project, a great deal of interest wasshown in our acreage and discussions with a number of potential partners arecontinuing. It is also noteworthy that potential farminees have expressedsupport for our revised programme. The final part of the Company's strategy is to secure a rig for our drillingprogramme. A number of options were pursued during 2006 and continue to beinvestigated. Financials During the period FOGL also announced that it had reached agreement with RABSpecial Situations (Master) Fund Limited ("RAB SSMF") for RAB SSMF to invest £8million in the Company by way of convertible loan notes. The agreement alsoprovided for the issue of warrants to RAB SSMF which carries the right tosubscribe for 6 million shares at 100p per share over the next 6 years. At 31 December the Company had cash reserves of £14.9 million, which includesthe initial £2 million investment from RAB SSMF which was due on completion ofthe above agreement. The combination of the cash position and the loan notesmeans that FOGL is fully funded for its 2007 planned work programme. This is the first set of results following our change to a calendar year end inline with most companies in the sector. It is expected that we will bereporting our interim results for the six months ended 30 June 2007 aroundSeptember 2007 and a full updated calendar of corporate dates is available onthe Company's website: www.fogl.com Outlook FOGL operates in a vast area which is as yet un-drilled, but highly prospective.The Company has entered into an exciting, yet crucial phase of its developmentwith significant progress being made in the last year. The Company's operational focus is clear and defined, and the surveys which arecurrently being undertaken have the potential to provide the Company withnumerous options and opportunities for the future. This is an important period and FOGL has clear priorities. Your Board remainsconfident that in the year ahead significant progress will be made towards theCompany's goals, creating value for shareholders. Richard LiddellChairman Preliminary results for the nine months ended 31 December 2006 Chief Executive's Review Introduction The period under review has been one of intense activity for FOGL. We haveagreed the route forward and have now embarked upon the surveys which we believewill further de-risk our licence areas and provide us with the best prospects todrill in 2008. Work Programme During the last year, having gained the necessary approvals from the FalklandIslands Government, the Company set out to implement the revised forwardprogramme of Controlled Source Electro-Magnetic survey ("CSEM"), a 2D infillseismic survey and a sea bottom coring programme. This programme was decided upon as being the most efficient way forward, giventhe large size of the basin and number of prospects that needed to be evaluated. The first two of these surveys are now underway with the third phase, sea bottomcoring, due to commence later in 2007. Infill 2D Seismic Survey The Company has contracted Wavefield InSeis AS to undertake this survey. Theprogramme was commenced by the vessel Bergen Surveyor on 19 December 2006 andapproximately 10,000 kilometres will be shot. To date approximately 6,000 kilometres have been acquired. The results of theCSEM survey will also be utilised to assist in the planning of the later stagesof the 2D seismic survey, where a one kilometre by one kilometre seismic gridwill be acquired over the most promising prospects. The 2D seismic survey isexpected to take approximately five months to complete. CSEM Survey This survey, which is being carried out by Offshore Hydrocarbon Mapping plc ("OHM"), commenced on 3rd February 2007 using the CS Teneo survey vessel. Progressof the survey has been slower than expected due to unusually poor weather, butOHM has been able, despite this, to acquire 4 CSEM lines out of an expectedtotal firm programme of 8 lines. The second phase of the programme will commencenext month, when the remaining 4 lines will be acquired. The lines acquired todate cover 6 different prospects. It will take up to 3 months to fully processand interpret these data, but preliminary results indicate several promisinganomalies. Sea Bottom Coring This survey is designed to target a number of possible oil seeps that have beenidentified on seismic and satellite data. The objective of this coring programmeis to attempt to recover "live" oil samples which would demonstrate that oil hasbeen generated and has migrated within the basin. It is anticipated that thissurvey will be acquired in the second half of 2007. We expect to make further announcements on the results of these surveys asappropriate. Independent review of interests In October TRACS International ("TRACS") completed an independent review of ourinterests in the East and South Falkland licences. TRACS completed a review ofwhat it believes 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 of 10,089 MMbbls (bestestimate) based on the portfolio of 10 prospects reviewed. The estimated rangesof Prospective Resource volumes are summarised in the table below. Unrisked Net Volume Classification Low Est. Best Est. High Est. MMbbls MMbbls MMbbls Prospective Resources 5,202 10,089 20,148 The full report by TRACS is available on FOGL's website. Farm - in process One of the Company's key objectives as part of the strategy to develop theCompany's licences to their full potential is to gain a suitable farmineepartner. During the period the Company opened its data rooms and madepresentations to a number of prospective farminee partners, the majority ofwhich were major or super major oil companies. Whilst, as yet, no partner has been secured, the discussions during the yearprogressed well and were largely positive. The Company continues to havedialogue with a number of these companies and the results of FOGL's aggressivework programme are expected to be favourably received by these companies. FOGLenvisages that further presentations and discussions will take place once theresults of these surveys are completed. Rig options The Company's objective remains to drill the first exploration well on ourlicences during 2008. FOGL management is examining a number of options toachieve this goal: • Combining with the other oil and gas operators in the Falkland region with a view to building a consortium and creating a drilling campaign that provides a more attractive proposition to rig contractors. • Ceding an interest in the licences or equity stake in FOGL in exchange for providing a rig. • Obtaining a rig through a farm-in partner. Although the rig market remains tight a number of possible rigs have beenidentified and negotiations have commenced in an attempt to secure one forFOGL's drilling campaign. Conclusion The period ahead is crucial for the Company. As the results from the currentwork programme come through it is expected that our strategic goals in the formof potential farminees and rigs will also be realised. The Company remainspositive as to achieving its stated objectives. Tim BushellChief Executive Unaudited Profit and loss account Restated Unaudited Audited Nine months Year ended ended 31/12/2006 31/03/2006 £ £ Note Administrative expenses (1,462,525) (1,540,756) Operating loss (1,462,525) (1,540,756) Interest income, net 433,265 718,754 Loss on ordinary activities before taxation (1,029,260) (822,002) Tax on loss on ordinary activities (84,703) (227,742) Loss on ordinary activities after taxation (1,113,963) (1,049,744) Loss for the period (1,113,963) (1,049,744) Loss per ordinary share - Basic and diluted 2 (1.21) p (1.17) p 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 Restated Unaudited Audited 31 December 31 March 2006 2006 £ £ £ £ NotesFixed assets Intangible fixed assets 11,326,049 8,351,579 Tangible fixed assets 100,111 121,415 11,426,160 8,472,994 Current assetsDebtors 2,717,477 994,838Cash at bank and in hand 14,924,915 13,975,275 17,642,392 14,970,113 Creditors: amounts fallingdue within one year (5,864,040) (1,191,155) Net current assets 11,778,352 13,778,958 Creditors: amounts fallingdue after more than one year (1,295,688) - Net assets 21,908,824 22,251,952 Capital and reservesCalled up share capital 4 1,839 1,839Share premium account 4 24,130,993 23,481,391Profit and loss account 4 (2,224,008) (1,231,278) Shareholders' funds 21,908,824 22,251,952 Unaudited Cash flow statement Audited Unaudited Restated Nine months Year ended ended 31 December 2006 31 March 2006 £ £ Net cash (outflow) from operating activities (1,197,204) (1,578,624)Returns on investments and servicing of financeInterest received 412,294 686,856Corporation tax (186) (30,000)Capital expenditure and financial investmentExpenditure in respect of intangible fixed assets (199,778) (5,352,912)Expenditure in respect of tangible fixed assets (6,536) (131,205)Advance paid to contractor - (511,675)Cash outflow before financing (991,410) (6,917,560) FinancingLong Term Convertible Loan, net of costs 1,941,050 -Issue of ordinary share capital - 10,087,000Issue costs - (274,141) 1,941,050 9,812,859 Increase in cash in the year 949,640 2,895,299 Reconciliation of operating loss to netcash outflow from operating activitiesOperating loss (1,462,525) (1,540,756)Depreciation 27,840 21,067Fair value of Share Based Payments 121,233 112,158Decrease / (Increase) in debtors 277,888 (375,831)(Decrease) / Increase in creditors (161,640) 204,738Net cash (outflow) inflow from operating (1,197,204) (1,578,624)activities Reconciliation of movements in shareholders' funds Audited Unaudited Restated Nine months Year Ended ended 31/12/2006 31/03/2006 £ £ Loss for the financial period (1,113,963) (1,049,744)Fair value of Share Based Payments 121,233 112,158Discount on convertible notes 649,602 -New share capital subscribed (net of issue costs) - 9,812,859Net (reduction in) / addition to shareholders' (343,128) 8,875,273equity fundsOpening shareholders' equity funds 22,251,952 13,376,679Closing shareholders' equity funds 21,908,824 22,251,952 Notes to the Preliminary Results 1. Basis of financial information The December 2006 period end financial information in this announcement has beenprepared on the same basis and using the same accounting policies as wereapplied in the Company's statutory financial statements for the year ended 31March 2006 with the exception of the accounting for share based payments. The financial information for the period ended 31 December 2006 is unaudited anddoes not constitute the Company's statutory accounts. The financial informationfor the year ended 31 March 2006 is derived from the statutory accounts for theyear which have been delivered to the Registrar of Companies but have beenrestated following the adoption of FRS20. The auditors have reported on the yearended 31 March 2006 accounts; their report was unqualified. The statutoryaccounts for the period ended 31 December 2006 will be finalised on the basis ofthe financial information presented by the Directors in this preliminaryannouncement and will be delivered to the Registrar of Companies. In the opinionof the Directors the financial information for this period fairly presents thefinancial position, results of operations and cash flows for the period incompliance with Falkland Islands Company law and UK generally acceptedaccounting principles. With effect from 1 April 2006, the Company has adopted FRS20 Share BasedPayments. Under FRS 20, 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 £121,233 for the periodended 31 December 2006. The equivalent charge for the year ended 31 March 2006is £112,158 and the comparative figures have been restated accordingly.Compliance with FRS20 has reduced 2006 shareholders' funds by £Nil and increasedthe loss for the year ended 31 March 2006 by £112,158. The net loss for theperiod ended 31 December 2006 has been increased by £121,233 and as a result theloss per ordinary share also increased to 1.17 pence per share. The prior yearcharge of £112,158 had no impact on tax on loss on ordinary activities. The financial statements fall within the scope of the UK Oil Industry AccountingCommittee's Statement of Recommended Practice "Accounting for Oil and GasExploration, Development, Production and Decommissioning Activities" and havebeen prepared in accordance with its provisions. In common with many exploration companies, the Company raises finance for itsexploration and appraisal activities in discrete tranches. Further funding israised as and when required. The Directors are of the opinion that the Company has adequate financialresources to enable it to undertake the current planned programme of explorationand appraisal activities over the next twelve months. However the Directors mayseek to secure additional funds to expand the work programme or pursue furtheropportunities and are also seeking to secure the engagement of a partner toparticipate in the work programme. Whilst the Directors are confident thatfurther funding or a suitable partner will be available, there can be noguarantee that this will be the case. Copies of full accounts will be posted to all shareholders. Further copies willbe available from the Company's head office at 32-34 Wigmore Street, London W1U2RR, from the date of posting. Telephone: +44 (0)20 7563 1260. 2. Loss per share The calculation of basic loss per ordinary share is based on a loss of£1,113,963 (Year ended March 2006: loss of £1,049,744) and on 91,950,706 (Yearended March 2006: 89,824,422) ordinary shares, being the weighted average numberof ordinary shares in issue during the period. There is no difference betweenthe diluted loss per share and the basic loss per share presented as the Companyreported a loss for the period. The loss per share for the year ended 31 March2006 has been restated as a result of the implementation of FRS20. 3. Dividends The directors do not recommend the payment of a dividend 4. Capital and reserves Called up Share ProfitReserves Share premium and loss Capital account account £ £ £ At 1 April 2006 1,839 23,481,391 (1,231,278) Loss for the period - - (1,113,963)Discount on convertible notes - 649,602 -Fair Value of Share Based Payments - - 121,233 At 31 December 2006 1,839 24,130,993 (2,224,008) This information is provided by RNS The company news service from the London Stock Exchange