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Author: Proselenes Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 91253  
Subject: FOGL - Loligo Date: 21/07/2012 15:10
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As its the next well to spud I have done an in depth, if you wish, an "idiots guide" to the Loligo prospect.


FOGL's Loligo is the single biggest target well to be drilled in 2012.

People are mistaken that Chariots Nimrod is bigger, but its not.

Nimrod is P50 recoverable barrels potential of just 4.361 billion barrels (page 23 of the latest CHAR presentation).

Loligo is P50 recoverable barrels potential of 4.7 billion barrels.

(The 4.9 billion attributed to Nimrod is the "mean" of the P10/P50/P90 figures - when you compare P50 of Loligo to P50 of Nimrod - Loligo is the biggest drill anywhere in the world this year).

And of course its 75% owned by FOGL - the biggest drill and the biggest potential upside in the world this year.

So on we go with the guide.



Loligo will be the first of two drills by FOGL.

Loligo has a P50 Oil In Place (OIP) estimate of nearly 16 billion barrels of oil

In the event Loligo is all oil it is expected the P50 recoverable barrels would be in the region of 4.7 billion barrels.

In the event Loligo is gas it is expected the P50 recoverable gas would be 25 TCF.

There is considerable upside potential to the P50 OIP figure, as of course there is downside as well. Loligo could end up being small or nothing, or indeed it could end up being 25 billion barrels of OIP.

The bare minimum requirement for economic gas development is 5 TCF, however this is not that attractive. The economics of gas development in this location become extremely attractive when you get to 10 TCF recoverable or more. Therefore should Loligo be dry gas it is extremely commercial given 25 TCF P50 recoverable gas estimates.

Loligo has 5 targets, these being T1 at the top, T1 deep, Trigg, Trigg Deep and then Three Bears at the bottom.

The work done by BHP suggests the upper couple may be gas and the lower ones more likely oil. This is why FOGL tried their best to put themselves into a position to drill "Loligo Deep Well" which will go through all 5 sections.

The size of each target zone (based on oil) as we go from top to bottom is :


T1 = P50 OIP of 5 billion barrels = 1.5 billion recoverable barrels.

T1 Deep = P50 OIP of 2.15 billion barrels = 644 million recoverable barrels

Trigg and Trigg Deep = P50 OIP of 3.24 billion barrels = 969 million recoverable barrels

Three Bears = P50 OIP of 5.3 billion barrels = 1.59 billion recoverable barrels


(For a comparison Sea Lion of RKH is OIP of 1.3 billion barrels and circa 400 million recoverable barrels from that OIP figure)

As you can see Loligo is potentially around 12 times larger than Sea Lion.

Loligo has had several 2D seismic studies done giving very good infill data, and 2D with infill is far superior to standard 2D. BHP also did extensive studies and the conclusions are there are strong DHI's for the Loligo prospect - sadly for BHP their South American mining interests were used against them, IIS and IMO, to make them drop their FOGL interest, something they did not want to do but were pressured into. They wanted to retain back in rights given they know how prospective it is, however the Falklands Government refused to allow back in rights and BHP ended up having to let go of the lot in order to preserve and protect their South American mining interests in the face of Argie/Brazil pressure.

RKH recently accepted what I would call a "low ball" offer from PMO, its appears PMO was the only bid on the table at a price level that could be considered to be accepted. There are reasons for a low ball offer, one being presently Sea Lion is a stranded oil find, Sea Lion is not that big, Sea Lion is going to be difficult to develop based on the thin multiple sands (meaning lots of wells needed and difficult EOR (Enhanced Oil Recovery)). But anyway, using the 4.7 US$ a barrel that PMO paid to be conservative you get :

4.7 billion recoverable barrels of which 75% is FOGL interest.
Thats 3.525 billion barrels to FOGL x 4.7 US$ = 10.7 billion pounds sterling.
10.7 billion divided by 320 million shares in issue = 33.5 pounds per FOGL share should Loligo be full of oil and thats based on "low ball" figures.

And that is just the Loligo prospect (FOGL has over a hundred leads in the license areas with potentially 300 billion barrels of OIP and 100 billion recoverable barrels potential).

FOGL is considered the "Jewel in the Crown" of the Falklands, and its no surprise a multi-billion major like EDF farmed into FOGL via Edison.


(Footnote - Loligo has positive CSEM and is a classic Class 3 GoM AVO anomaly with other DHI's (gas hydrates etc..) A brief summary of Class 3,2 and 1 AVO is below...


1. AVO Class 3 Gas Sand: ------- (FOGL's Loligo and CHAR's Nimrod are both Class 3)

• Unconsolidated sand, porosity greater than 25%, usually Tertiary in age.
• Gross interval velocity usually less than 8,500 ft/sec (2,650 m/sec). Gas and oil zones are bright spots on the stack section and on all offset (angle) stacks.
• AVO: The reflection amplitude, with respect to background, increases slightly with increasing offset distance or angle.
• Note: A Class 4 Gas Sand has same the characteristics as a Class 3 Gas Sand except the reflection amplitude decreases with increasing offset, caused by a hard shale or carbonate (shear velocity higher than gas sand shear velocity) on top of the sand.

------------------------------------------------

2. AVO Class 2 Gas Sand:

• Moderately consolidated sand, porosities 15% to 25%.
• Gross interval velocity in range of 8,500 ft/sec to 12,000 ft/sec (2,650 m/sec to 3,650 m/sec).
• Acoustic impedance of gas sand and encasing shale about equal.
• AVO is strongly more negative with increasing offset distance or angle.

-----------------------------------------------------

3. AVO Class 1 Gas Sand:

• Very consolidated sand, porosity less than 15%.
• Gross interval velocity usually greater than 12,000 ft/sec (3,650 m/sec).
• On stack seismic data, a large positive amplitude for a wet sand decreases to a smaller positive amplitude for a gas sand ("dim spot").
• AVO is less positive with increasing offset (angle) and may have a phase change at far offset distances.

The boundaries between classes are gradational, and therefore it may be necessary to evaluate amplitude anomalies in two classes.
• AVO: The reflection amplitude, with respect to background, increases slightly with increasing offset distance or angle.
• Note: A Class 4 Gas Sand has same the characteristics as a Class 3 Gas Sand except the reflection amplitude decreases with increasing offset, caused by a hard shale or carbonate (shear velocity higher than gas sand shear velocity) on top of the sand.
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Author: MangoTree Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80340 of 91253
Subject: Re: FOGL - Loligo Date: 21/07/2012 16:38
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As its the next well to spud I have done an in depth, if you wish, an "idiots guide" to the Loligo prospect.

Are you suggesting that the readers of this board are idiots..??
-:)


MT

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Author: GlasgowegianProf Big funky green star, 20000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80341 of 91253
Subject: Re: FOGL - Loligo Date: 21/07/2012 17:00
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M

Are you suggesting that the readers of this board are idiots..??
-:)


I doubt it..as I think that you obviously do too. Mind you Pro could, from some of the historical comments made against some of his posts in the past, be surely forgiven for thinking that.
:-(

FWIW I found the post one of the most helpful and informative posts that I have seen on here for a while. It certainly encourages me to continue clutching on to my small holding in FOGL. There was no discussion of the risk of holding. As a known investor in FOGL, I presume that Pro is leaving that to others.

ATB
Tom

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Author: citymj Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80342 of 91253
Subject: Re: FOGL - Loligo Date: 21/07/2012 17:42
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I feel that Proselenes' guide is principally of interest to those of us who can be categorized as "Armchair Drillers", and will surely never be exposed to the challenges of choosing and drilling a well in the middle of the South Atlantic Ocean.

After allowing myself to be carried away with thoughts of multiple plays containing megatons of product, I came back to earth, or rather to sea floor, and reminded myself:-
A. What we know is that there are 'some' hydrocarbons in the Basin
B. we also know that IF they are to be found at LOLLIGO, the quantities will probably be very large
C. But the best marker of the odds is the current share price
D. In three months time, give or take, the Market will know a lot more, and may deign to share the news with us hoi polloi
E. in the meantime, we can bet on what the other punters are up to, week by week, but that is surely a game for the true racing men, who can factor in leaks, rumours of leaks, positive and negative ramps and all the rest.

So, it amounts to this:
If the price goes up enough before the hard news, I might sell part to lock in some profit, but if it goes down I know that I will hold to the bitter end in ( forlorn ) hope that it turns out not to be so bad after all.

Anyone got a better practical strategy?

MJ

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Author: manzanilla Big funky green star, 20000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80343 of 91253
Subject: Re: FOGL - Loligo Date: 21/07/2012 18:14
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Anyone got a better practical strategy?

Sell if you hold already then buy in on a good result.

manzanilla

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Author: PeterGray Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80344 of 91253
Subject: Re: FOGL - Loligo Date: 21/07/2012 18:34
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Anyone got a better practical strategy?

I will be very surprised if the FOGL share price is not higher between now and Loligo TD. I bought about twice what I'm prepared to risk on the result just after the placing and will probably sell half somewhere between spudding and TD. If things go as I hope/expect I should end up with an approximate free carry on what I hold through to the result. Depending on how risk averse I'm feeling nearer the time, and the SP, I may adjust the proportion I sell to bank a profit in addition.

Peter

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Author: repobear Big red star, 1000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80345 of 91253
Subject: Re: FOGL - Loligo Date: 21/07/2012 18:37
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Sell if you hold already then buy in on a good result.

Is a pretty sure way of making money on this one because then you have only the political, financial and operational risks to deal with;-)

There is no way such huge potential upside on this one will be reflected immediately in the current market. The drilling and resultant financial risk is the greatest stumbling block here. I'd rather have 50-75% of something with a 60% chance of big success than 100% of something with a 10-15% chance of success.

Of course if you buy at the right prices and sell in the pre drill excitement after pumping in on every board for all it's worth and then buy on success the odds are even better.

DYOR,

repo

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Author: Proselenes Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80347 of 91253
Subject: Re: FOGL - Loligo Date: 22/07/2012 02:49
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Peter,

The trouble for some here is, unlike BOR, you have a board of directors who are open to communication imo. They have already intimated they may well issue an RNS after each target section is completed.

That means 5 RNS, one for T1, one for T1 deep, one for Trigg, one for Trigg Deep and one for Three Bears. So there could be 5 results here - and that will surely catch the traders out, which is good thing. Also the deepest target "Three Bears" is also the most likely to be oil. Or there could be 3 RNS, one for all T1, one for all Trigg and one for Three Bears, or there might be a single one. Nobody knows and thats quite refreshing and will add to the excitement.

On top of that Loligo is so big that gas or even gas condensate would be commercial due to size - so pretty much any result apart from water or duster is going to get things excited (10 TCF recoverable in the South Falklands is very very attractive commercially to exploit - although as small is 5 TCF recoverable is economically viable).

And on top of that, their next drilling target Scotia, has a much higher CoS than Loligo (thanks to recent work and results) and even that is over a billion barrels recoverable.


BOR was 60p ahead of drilling Darwin. It rose, it fell.

BOR was 60p during Stebbing drilling.


This should indicate to people FOGL is now 70p to 80p levels ahead of Loligo. It might rise or fall......

But FOGL should again be 70p if Loligo fails, ahead of drilling their next well at Scotia. (which even after drilling they will have cash leftover of 100 million US$)

Which makes it pretty risk free for Loligo if you are not margined up and are holding real stock and can wait for the "Scotia bounce back" if Loligo fails.

And of course if you got in in the 40's and 50's earlier on you will still be well into profit come the time of Scotia drill, even if Loligo fails.


For the record "I have no plans now to sell any of my 400K FOGL stock holding before the Loligo results". Some of us are quite calm and have put a strategy into place which allows us to be confident now, even on a Loligo failure, that the share price will be equal to or above the average price of the holding before/during the second "Scotia" target drilling.

The six "P"'s - Proper Planning Prevents P... Poor Performance :)

"Risk" some people can take it, others cannot. Those that can take "risk" plan for it, accept it and get on with it because the rewards are there to be had. Others cannot accept risk and will strive to fight against those who do take risk - because they know the rewards are massive but are unwilling or unable to take risk.

Personally I fully accept the risk, I have planned for it and I hope to reap rewards due to it, but if risk becomes real I accept I will lose a lump, its not something you want to do, but its ok, that part of the risk/reward ratio is accepted.

And then there is gambling.........

25% chance of success, 75% chance of failure.

There is no lottery, no casino, no football pools that offers 10 to 20 times profit on your stake on a 25% CoS with the backup your stake will likely (at this share price level) not be lost and only, at worst, lose a little value from todays share price given the upcoming Scotia well after Loligo, should the bet fail.

Damn impressive odds and back up - but you will only get a single company having 75% of a potential 16 billion to 25 billion OIP discovery in a British protectorate area with excellent fiscal terms "once in a blue moon" and yes, I see a blue moon about to rise, its time.


.

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Author: repobear Big red star, 1000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80348 of 91253
Subject: Re: FOGL - Loligo Date: 22/07/2012 07:23
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pro,

Good post. Your longer ones are so much better than the others.

repo

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Author: Proselenes Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80356 of 91253
Subject: Re: FOGL - Loligo Date: 23/07/2012 04:43
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For those who require more technical details on the well, let me expand.


The well is "Loligo A" (also known as "Loligo Deep")

Well location is South 51 deg 10'23.79" / West 54 deg 40'48.29"

License area is PL028

Water depth at this location is 1,381 meters.

Depth of well is 4,092 meters.

Drilling period is expected to be 45 to 50 days (although could be as short as 35 days or as long as 65 days).

Anticipated Hydrocarbons is Oil, of between API 18 to API 25.

42" hole with 36" casing down to 1486 meters MD.

26" Hole with 20" casing down to circa 2126 meters MD.

This casing point is directly above the T1 target reservoir.

17.5" hole with 13.375" casing to circa 2926 meters MD

12.25" hole with 9.625" casing to TD at circa 4118 meters MD.

Contingency will be in place to drill with a smaller hole and smaller casing size should there be a need to due to potential pressure imbalances.

That is the planned drilling/casing but things may change depending on the actual geology encountered.

No flow testing will take place on any discovery made, the well will be Plugged and Abandoned when drilling and wireline testing is complete.

This (Loligo) is a "Tertiary Channels Play type".

BOR's Darwin well was a Springhill Play type.

BOR's Stebbing was a Fold Belt play type.

Should FOGL drill Scotia after Loligo that will be a "Mid-Cretaceous Play Type"

PDF info on Loligo in the link below :


http://www.mediafire.com/?grxp4zjbpsgg975



What is the best result ?

Personally I would like to see around 15 TCF in the upper zones and then 2 billion barrels of oil in the lower ones. That is the perfect result as the oil would go into mid term production plans, and 15 TCF of gas is very attractive as well financially, so that would also go in mid-long term production planning.

Such a result would then make all other oil and all other gas prospects likely commercial - therefore making the whole basin very prospective for gas and oil.

Would not complain too much if it were 4.7 billions barrels of oil, or no oil and a whole 25 TCF recoverable of gas, its just from the prospective of developing oil and gas in the South Falklands there is a need for a whopping great gas find (more than 10 TCF) and also a significant (more than 500 million barrels recoverable) oil find. Loligo could tick both the boxes with one drill, fingers and toes crossed............


IMO/NAG/DYOR etc...

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Author: SirLurkalot Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80390 of 91253
Subject: Re: FOGL - Loligo Date: 23/07/2012 12:02
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Just as a comparison, would I be right in thinking each of the recent large E Africa gas discoveries has been in the area of 4TCF recoverable, and there have been six or ten of them to get to a total of about 30TCF recoverable discovered so far? Has anyone got more accurate figures on the quantity of gas discovered off Moz and Taz recently? What was the exit $/boe for Cove's gas reserves?

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Author: partlypaid Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80394 of 91253
Subject: Re: FOGL - Loligo Date: 23/07/2012 15:09
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Just as a comparison, would I be right in thinking each of the recent large E Africa gas discoveries has been in the area of 4TCF recoverable, and there have been six or ten of them to get to a total of about 30TCF recoverable discovered so far? Has anyone got more accurate figures on the quantity of gas discovered off Moz and Taz recently?

Isn't it more like 100TCF, with 20TCF on the Taz side and 80TCF on the Moz side (50 Anadarko, 30 ENI)?

What was the exit $/boe for Cove's gas reserves?

No idea, but they probably had 4-5TCF of resources?

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Author: Proselenes Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80398 of 91253
Subject: Re: FOGL - Loligo Date: 23/07/2012 16:34
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Cove had between 2.295 TCF and 5.1 TCF of potential recoverable gas (their 8.5% share)

So if we use a mid figure of 3.7 TCF recoverable.

Takeover was 1.9 billion US$

So circa 513 million US$ per TCF recoverable.

Would imply if Loligo were 25 TCF recoverable of which net to FOGL is 18.75 TCF it would be worth around 9.6 billion US$ or circa 19.3 pounds per share.

Cove has upside, FOGL would have masses more upside potential than Cove.


Very rough figures and calculations but it gives a flavour.

On a boe basis Cove had circa 618 million boe recoverable so the purchase price was circa 3.07 US$ per boe if you want it that way around.

If my figures are wrong then sorry, just quickly written this and its open to mistakes.

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Author: Proselenes Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80433 of 91253
Subject: Re: FOGL - Loligo Date: 24/07/2012 16:32
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Edison Reserach update on FOGL.

http://www.edisoninvestmentresearch.co.uk/search/Falkland%20...

.

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Author: Proselenes Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80580 of 91253
Subject: Re: FOGL - Loligo Date: 31/07/2012 06:58
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Rig is now underway, moved about 50km over night in the direction of Loligo.


http://www.marinetraffic.com/ais/default.aspx?mmsi=308243000...


The fun now begins for FOGL..............

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Author: Back2Value Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80585 of 91253
Subject: Re: FOGL - Loligo Date: 31/07/2012 08:21
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...and the related RNS, which will be updated when Loligo spuds:

http://www.investegate.co.uk/Article.aspx?id=201207310754118...

B2V

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