OilVoice - Falkland Oil and Gas to Raise £50m for Planned Drilling Programme

Falkland Oil and Gas to Raise £50m for Planned Drilling Programme

26 November 2009

FOGL, the oil and gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, announces its intention to conditionally place 43,478,261 new ordinary shares of 0.002 pence in the capital of the Company ("Ordinary Shares") at a price of 115 pence per share (the "Placing Price") (the "Placing Shares") to raise £50 million before expenses (the "Placing"). The net proceeds will be used to fully fund FOGL's share of the costs of the planned drilling programme.

FOGL also announces that the joint venture between BHP Billiton and FOGL ("the Joint Venture") is in advanced discussions with Desire Petroleum plc ("Desire") to contract the Ocean Guardian rig to drill the first ever exploration well in the East Falklands Basin. Whilst discussions have reached an advanced stage, there can be no certainty that the Joint Venture will contract the Ocean Guardian. The Joint Venture intends to contract a deepwater rig for late 2010.

Placing to raise £50 million
The Company intends to conditionally place 43,478,261 new Ordinary Shares at a price of 115 pence per share to raise £50 million before expenses. Oriel Securities has agreed to use its reasonable endeavours to procure subscribers for the Placing Shares. The Placing has not been underwritten.

The Placing is being conducted, subject to satisfaction of certain conditions, through an accelerated bookbuilding process to be carried out by Oriel Securities (the "Bookbuilding"). The timing of the closing of the Bookbuilding and allocations are at the discretion of the Company and Oriel Securities. Completion of the Placing will be announced as soon as practicable after the close of the Bookbuilding.

Use of proceeds
The net proceeds of the fundraising will be used to fully fund FOGL's share of the costs of a drilling programme which could commence in the first half of 2010 with the Ocean Guardian and will also incorporate a deepwater programme of one committed well and other possible discretionary wells, which the Joint Venture expects to commence later in 2010. The net proceeds will also meet the Company's working capital requirements through to the end of 2011.

Exploration programme expected to commence in first half 2010
The Ocean Guardian has been contracted by Desire to drill a four-well programme and is expected to arrive in Falkland waters in early February 2010. The Joint Venture is in advanced discussions to contract this rig for the third slot in Desire's contracted programme, which it expects will be within the first half of 2010.

If contracted, the Ocean Guardian will be used to drill the Toroa prospect, which lies in water depths of between circa 550 and 730 metres. Some modifications will be required to enable the Ocean Guardian to drill in this depth of water. It is currently expected that the net cost to FOGL of these modifications plus the mobilisation and drilling costs will be approximately £12 million.

The Toroa prospect is situated approximately 140 kilometres (90 miles) south of Stanley, within the Company's 2002 licences. Toroa is a large prospect in the Cretaceous Springhill play. FOGL estimates that the Toroa prospect has mean, gross, unrisked prospective resources (recoverable hydrocarbons) of 1.7 billion barrels and a range between 380 million barrels (P90) and 2.9 billion barrels (P10). The well will be drilled to a total depth of approximately 2700 metres below sea level. The duration of the well is expected to be 35 days. Water depth at the planned location is circa 600 metres.

Deepwater exploration programme expected to commence in late 2010
Due to its location, the Toroa prospect is best drilled by an anchored rig, such as the Ocean Guardian; however, the other prospects which have been site surveyed - Loligo, Nimrod, and Endeavour - all lie in water depths greater than 1,000m and are best suited to being drilled by a dynamically positioned drillship or semi-submersible. The Joint Venture is looking to contract such a rig later in 2010 to complete its minimum work commitment of two wells and possibly drill other discretionary wells.

The net cost to FOGL for the mobilisation of a deepwater rig and the associated drilling programme is currently expected to be approximately £30 million.

Placing Statistics
Placing Price: 115 pence
Number of new Ordinary Shares to be issued: 43,478,261
Percentage of the existing issued share capital represented by the new Ordinary Shares: 42 per cent
Estimated gross proceeds of the fundraising: £50 million
Admission and commencement of dealings in the new Ordinary: 1 December 2009

Shares
The Placing Price represents a discount of 5 per cent. to the average middle market closing quotation of the ordinary shares of the Company for the three months up to and including 25 November 2009 and a discount of 15 per cent. to the closing middle market quotation of the Ordinary Shares of the Company on 25 November 2009, the latest date prior to the announcement.