Interactive Investor

"Tide turning" for Falkland Oil and Gas

16th April 2013 08:57

Darshini Shah from interactive investor

Falkland Oil and Gas on Tuesday confirmed it had completed a 3D seismic survey over the Diomedea Fan within its southern area licences in the Falkland Islands.

A total of 5,235 square kilometres of full fold seismic data had been acquired, more than originally anticipated, but within budget.

The data will now be processed and a fast-track product will be available for interpretation in approximately four months. It is anticipated that the final processed data will be available in the fourth quarter of 2013. The fast-track data will be used to commence prospect mapping and well planning.

According to the company, initial test lines from the survey indicated "excellent" data quality and imaging of the Cretaceous target interval.

The oil and gas exploration company also announced a second 3D seismic survey had just commenced. This survey will cover a minimum area of 1,000 square kilometres and will target a number of prospects and leads in Falkland Oil and Gas's southern licence area, immediately to the west and north-west of Borders & Southern Petroleum's Darwin gas-condensate discovery. A further announcement regarding this survey will be made once acquisition is completed.

Finally, Falkland Oil and Gas is currently reviewing tender offers with respect to a third 3D seismic survey to be acquired in the northern licence area in the fourth quarter of 2013.

Analyst view

Analysts at FoxDavies questioned whether the "tide was turning" for the company, saying the announcement from the seismic acquisition programme should be the prelude to the next phase of drilling in the South Falklands Basin.

"While we have been lukewarm on the prospects for the South Falklands Basin in the context of the fact that the Falklands Islands government has imposed a blanket ban on onshore oil and gas development and the [basin] is gas prone, more recently we have been hearing more positive noises from the Falklands that a well-managed development could be entertained and that the [government] believes that there is 'plenty' of room in remote locations for a development," they commented.

FoxDavies reiterated its 'hold' recommendation on the stock, with a 55p price target.

The broker also suggested that once a go-ahead was given from the Falklands Islands government, the share price of Borders & Southern would increase. FoxDavies had a 'hold' recommendation on Borders & Southern, with an 18p price target.