agm presentation may 2009...

113 May 2009

AGM presentation

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Preparation for drillingPreparation for drilling

Select best prospects for drilling

Conduct site surveys

Submit environmental impact

assessment (EIA)

Gain drilling consents

Plan logistics

Select and contract rig

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Location mapLocation map

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ProspectsProspects

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Robust prospect economicsRobust prospect economics

• Excellent fiscal terms – corporation tax 26%, Royalty 9%

• Positive economics with a post tax NPV10 of $8/bbl*

• A 500 Million barrel discovery could be worth: ~£14 per share

• A 3.5 Billion barrel discovery find could be worth: ~£100 per share

• A 100mmbbl field is about the minimum fieldsize and would be

economic down to an oil price of c. $25/bbl

* Based on $50/bbl rising to $80/bbl by 2014 (RPS economic analysis for FOGL)

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• Select best prospects for drilling

• Conduct site surveys

• Submit EIA

• Consent to drill

• Implement logistical plans

• Select and contract rig

Colin MoreExploration Director

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Site surveysSite surveys

• Why?– Safety

– Risk mitigation and cost control

– Government requirements

– Insurance

• 3 elements:– Deployment of wave and current meters

– Digital site survey & benthic sampling

– Geotechnical boring

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Current metersCurrent meters

• Long term deployment to assess seasonal variations

• Near surface measurements compliment dataset from 2006-7 seismic survey. Full numerical current models used in EIA

• Currents measured from sea bed to sea floor to assess strength, possible shear forces and potential erosion of blowout preventer (BOP) and conductor at sea bed

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Digital site survey and benthic samplingDigital site survey and benthic sampling

• A large area of multibeam data was acquired over each site to survey for: anchor locations, sea bed stability, wrecks and debris, habitat mapping

• High resolution digital seismic to image top 500m for drilling hazards (buried channels, shallow gas etc.). This will also help refine the mapping of our shallower prospects around potential well locations

• Sea bed sampling for the EIA and to calibrate the multibeam image. Samples obtained from, grabs, drop cores and ROV (remote operated vehicle)

Note: Multibeam image for illustration only – not from Falklands

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Geotechnical boringGeotechnical boring

• Rig mounted on large dynamically positioned vessel

• Survey bored, sampled and analysed 200m of sediment below sea bed

• Provided essential information for design and installation of conductor and riser

• Eliminates requirement for multiple designs and multiple equipment options

• Key data for anchoring

• Mitigates drilling risk and controls costs on high day rate rig

Note: Rig diagram from SPWLA glossary

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Consent to drill & the critical path to drillingConsent to drill & the critical path to drilling

• The East Falklands Basin has not been drilled before and a comprehensive EIA will be required. – Base line studies: mammal and bird observations, sea bed sampling, multibeam

images, metocean studies, ROV samples and video– Environmental Management Plan: oil spill contingency – marine current model – Drilling support operations: helicopters, supply boats, shore base– Emissions, waste management, resources

• Drilling programme and consents (addendum to EIA)– Well design: incorporates data from boring survey – Risk mitigation: boring survey, sea bed sampling, multibeam data and high

resolution seismic– Logistics, supply, storage

• Submit to FIG and release for public consideration, incorporate comments and concerns (3 – 4 months)

• Ready to drill

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• Submit EIA

• Consent to drill

• Plan logistics


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LogisticsLogistics

• Order long lead drilling equipment– Wellheads

– Casing

– Drill pipe

• Establish operations base in the Falklands

• Agree use of facilities– Offices

– Port

– Airport

– Storage

– Access to resources

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• Submit EIA

• Gain drilling consents

• Logistics


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Select and contract a rigSelect and contract a rig

• Minimum 2 well exploration programme

committed to by BHP Billiton

– By end 2010 (in licence terms and in farmout agreement)

• Additional exploration &/or appraisal wells

under consideration

• Timing dependent on rig availability

• Drilling in austral summer preferred, but not essential

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Select and contract a rigSelect and contract a rig

Rig market & drilling costs

• Deep water rig market improving in terms of rig availability

• Deepwater rig rates are starting to fall

• Drilling service & material costs falling

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Select and contract a rigSelect and contract a rig• BHPB are actively seeking a rig

• Type of rig?– Either 5th/6th generation semi-submersible or large drillship

• How many available?– Up to 35 suitable rigs worldwide, but all currently contracted

• Where from?– Brazil, West Africa or in transit

• Rig options?– Direct contract with rig owner – very few available– Sub-let on an existing contract – gaps are appearing– Rig swap– Sharing with other Falkland operators a possibility – but rig dependent

• Current expectation is drilling in late 2009/2010

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FundingFunding

• FOGL is not fully funded through the drilling programme

• Cost of drilling programme still to be defined– Variables include mob/de-mob costs & number of wells

• Funding options under consideration

Another farm-out: – Approached by a number of companies last year– Have now formalised the process, opened a dataroom and have appointed

Stellar Energy Advisors to assist with the process– Discussions with a number of parties are ongoing– Do not expect any conclusion until later this year

or

An institutional equity fund raising

or a mixture of the two

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SummarySummary

• Multi-billion barrel targets to be tested in initial exploration programme

• De-risked prospects

• Drilling programme committed to by BHP Billiton

• Attractive fiscal terms

• Drilling preparations well advanced

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• Some statements contained in this presentation or in documents referred to in it are or may be forward-looking statements. Actual results may differ from those expressed in such statements, depending on a variety of factors.

• Past performance of the Company or its shares is not a guide to future performance.

• Any forward-looking information contained in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect, and accordingly, actual results may vary.

• This presentation does not constitute, or form part of or contain any invitation or offer to any person to underwrite, subscribe for, otherwise acquire, or dispose of any shares in Falkland Oil and Gas Limited or advise persons to do so in any jurisdiction, nor shall it, or any part of it, form the basis of or be relied on in any connection with or act as an inducement to enter into any contract or commitment therefore. No reliance may be placed for any purpose whatsoever on the information or opinions contained in this document or on its completeness and no liability whatsoever is accepted for any loss howsoever arising from any use of this document or its contents otherwise in connection therewith.

• This presentation has been prepared in compliance with English law and English courts will have exclusive jurisdiction over any disputes arising from or connected with this presentation.

DisclaimerDisclaimer

agm presentation may 2009...

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