Falkland Oil and Gas (FOGL) announced Friday morning that it has raised $75 million (£48.5 million) via a placing of its shares to investors.
FOGL, whose exploration activities take place in the South and East Falkand basins to the east of the Falkland Islands in the South Atlantic, said the fund raising will allow it to undertake its preferred drilling strategy on its upcoming two-well drilling program.
The firm is currently awaiting the arrival of the Leiv Eiriksson (UDW semisub) to the Falkland Islands, which is expected to occur within the next 10 days. It will have access to the rig for the third and fourth slots in the combined Borders & Southern and FOGL drilling program and expects to begin drilling its Loligo prospect in the Northern license area in early May 2012.
FOGL was already funded to drill a shallow well on Loligo and a second well on another Tertiary Channel target. However, its preference is to drill a deeper well on Loligo that will target additional reservoirs and to have the financial flexibility to drill a mid-Cretaceous Fan prospect as the second well.
The favored mid-Cretaceous Fan prospect is Scotia, which the company has assessed to have a prospective resource of over one billion barrels of oil equivalent.
Westhouse Securities – a London-based investment bank that follows FOGL (whose shares are quoted on London's Alternative Investment Market) – said in a research note on the company Friday that "FOGL has made a good decision to raise additional funding" and that this allows "maximum flexibility for siting its two wells based on the evolving geological understanding of its prospects rather than financial constraints".
However, Westhouse also warned that the company's shares continue to reflect "the reluctance in the market to value exploration in the sector, particularly in regions such as the Falklands where potential development faces additional political challenges". Argentina continues to claim sovereignty over the Falkland Islands despite losing a war with the UK over the territory in 1982.
Investors who took part in the placing included Falkland Island Holdings, which now holds 4.4 percent of the business after purchasing shares valued at $1.3 million (£860,000). A fellow AIM-quoted company, Falkland Islands Holdings' is involved in a variety of business activities within and around the Falkland Islands including shipping and fishing.
"It has always been part of Falkland Islands Holdings' strategy to assist, and to seek to benefit from, oil exploration and development in the Falkland Islands through our support services businesses there, as well as through our substantial shareholding in FOGL," said its chairman David Hudd in a statement Friday.
"With the Leiv Eiriksson oil rig arriving in the Falklands later this month, we believe that this is an opportune time to increase our exposure to FOGL's drilling program without compromising the financial strength of the group."
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