Falkland Oil and Gas (FOGL) says it has more than enough cash to fund its planned expenditure for 2012, even if it does not find a partner to take a share of its assets and planned expenditure.
The explorer, focused on licence areas to the South and East of the Falkland Islands, said it had around $184m in cash at the end of March. Forecast expenditure for 2012 is around $140m on the assumption that two exploration wells will be drilled: the first on Loligo and the second on Scotia. This cash position does not take into account the farm-in option which, if exercised, would add materially to the company's financial flexibility.
The company said in March that it has granted an option to an industry counter-party to farm-out a maximum of 25% of its licences. This farm-out will, if completed, bring to FOGL a pro-rata share of the drilling costs of the two wells, a contribution towards certain past costs and an additional cash contribution of $43m. "This would provide us with a substantial buffer against unforeseen cost escalation and provide funds for further exploration," the group said.
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The group announced a loss before tax of $6.64m for 2011, versus a loss of $3.74m the year before, as the company booked a $1.57m loss on a loan note conversion to equity while foreign exchange rate movements deepened losses by $1.07m.
"We are looking forward to the 2012 exploration drilling programme," said Richard Liddell, Chairman of FOGL.
"The Loligo well, with prospective resources of 4.7bn barrels, will be one of the highest impact exploration wells to be drilled by an independent E&P [exploration and production] company this year. Either of the likely second well targets have a resource potential of over 1bn barrels. Any degree of success on these wells will be a transforming event for FOGL," he added.
JH
