27 November 2012
Falkland Oil and Gas plc
("FOGL" or "the Company")
Scotia (FI31/12-01) Well Results
FOGL, the oil and gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, announces the results of the Scotia exploration well.
FOGL is the operator of the well, holding a 40% interest, whilst Noble Energy Inc. holds a 35% interest and Edison International Spa, holds the remaining 25% interest. Under the terms of the farm-out agreements, FOGL is paying 15% of the costs of this well.
Well 31/12-01 was drilled to a depth of 5,555m. The well penetrated the mid Cretaceous aged reservoir objective on prognosis. The Scotia objective had been identified on the basis of its seismic amplitude response. Strong gas shows (C1 to C51)were encountered whilst drilling the target section. Interpretation of wireline log data indicates that the target interval 4719m to 4769m comprises 50m of hydrocarbon bearing fine grained sandstones and claystones. The wireline logs indicate that, at this location within Scotia, the sandstones form fairly poor quality reservoir, although some zones have up to 20% porosity. Other thin hydrocarbon bearing sandstones were encountered beneath the main target in the interval 4900m to 5164m. Subsequent evaluation of the main interval using a wireline formation testing tool did not flow hydrocarbons, indicating that the reservoir has low permeability.
The well was deepened below the main target in order to penetrate and sample Cretaceous aged source rocks. Rock cuttings and sidewall core samples have been obtained from several potential source rock intervals and these will be sent to the laboratory for detailed analysis. The results should provide vital information on the quality and maturity of these source rocks and also provide a better understanding of the distribution of oil and gas within this part of the South and East Falklands basin. A further announcement on the results of this work will be made in the first quarter of 2013.
The Scotia well has proven a working hydrocarbon system in the mid Cretaceous Fan play and has also demonstrated that Scotia is a viable stratigraphic trap. Whilst reservoir quality at this particular location was poor, it should be recognised that the seismic amplitude anomaly that defines Scotia covers an area of approximately 350 square kilometres. As such, further technical work is required to assess just how representative this result is, and whether or not better quality reservoir may exist elsewhere within Scotia.
The well data will be invaluable for calibrating the forthcoming 3D seismic programme. The 3D seismic will be used to map sand fairways in the play and, when combined with detailed analysis from the Scotia well, should allow identification of better quality reservoir and differentiation between oil and gas prospects.
FOGL now intends to plug and abandon the well and this is expected to take approximately 10 days. On the basis that the well is completed within this timeframe, it is estimated that the Company's cash balance post the 2012 drilling campaign will be approximately US$220 million.
The PGS M/V Ramform Sterling is expected to arrive in the Falklands and commence 3D seismic acquisition imminently. A further update on this work will be provided in due course.
Tim Bushell, Chief Executive of FOGL said:
"The results of the Scotia well provide further endorsement of the hydrocarbon potential of the South and East Falkland Basin andhave proven the presence of hydrocarbons within the mid Cretaceous Fan Play."
"We now plan to fully evaluate the results of the Loligo and Scotia wells. The forward programme will focus strongly on three key themes:
· The evaluation of source rock potential and hydrocarbon migration in order to define potential oil bearing prospects
· The identification of good quality reservoir within the Tertiary and Cretaceous prospects and plays
· The potential commercialisation of gas and associated liquids in the South and East Falklands basin."
"During 2012 we have drilled two encouraging wells, both of which found hydrocarbons and were completed safely and within budget. They reinforce our confidence in the potential of the basin."
Falkland Oil and Gas
+44 (0) 207 563 1260
Tim Bushell, Chief Executive
Oriel (Nominated Advisor and Joint Broker)
+44 (0) 207 710 7600
David Arch / Gareth Price / Ashton Clanfield
Jefferies Hoare Govett (Joint Broker)
+44 (0) 207 029 8000
Alex Grant / Chris Zeal / Graham Hertrich
+44 (0) 207 831 3113
Ben Brewerton / Ed Westropp
1) C1 to C5: Refers to the composition of a 'wet gas' including both methane (C1) and more complex alkanes including Ethane (C2), Propane (C3), Butane (C4) and Pentane (C5). The gas detection equipment used on the rig can only detect up to C5.
The technical information included in this announcement has been reviewed, verified and compiled by the Company's geological staff, including a qualified person, Colin More BSc., MSc. (Exploration Director), who has over 26 years of experience in petroleum exploration, for the purpose of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in respect of AIM companies, which outline standards of disclosure for mineral projects. Mr. More is a member of the Geological Society of London, the American Association of Petroleum Geologists and the Society of Exploration Geophysicists.