Falkland Oil and Gas Announcements

RNS Number : 0151E Falkland Oil and Gas Limited 23 September 2008  
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23 September 2008

Falkland Oil and Gas Limited
("FOGL" or "the Company")

Interim Results for the six months ended 30 June 2008

FOGL, the oil and gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, announces Interim Results for the six months ended 30 June 2008.

Highlights

Drilling preparatory work is continuing
Site surveys expected to commence in November 2008
Environmental impact assessment underway
Determining the initial prospects in readiness for drilling
Cash balance of £11.3m as at 30 June 2008
Richard Liddell, Chairman of FOGL, said:

"All the work streams required ahead of drilling are now in progress. We are working closely with our partner, BHP Billiton, to identify the prospects that will be drilled in the forthcoming drilling programme, which is planned to commence in second half 2009."

Enquiries:
Falkland Oil and Gas
+44 (0) 207 563 1260
Tim Bushell, Chief Executive
 
Oriel (Nominated Advisor)
+44 (0) 207 710 7600
Richard Crawley / David Arch
 
Financial Dynamics
+44 (0) 207 831 3113
Ben Brewerton / Ed Westropp
 
 
Chairman's Statement

During the first six months of this year FOGL and its partner BHP Billiton, has been focused on the preparatory work for the forthcoming drilling programme. An environmental impact assessment has been initiated and a site survey programme is planned to commence in November 2008. These are important steps in providing greater detail on the key areas of the licences and will feed into the final drilling programme.

One of the most important decisions in the near future will be the selection, and order, of the prospects to be drilled. Whilst no final decisions have been made regarding this selection, it is likely that Loligo will be one of the prospects tested in the initial drilling programme. Loligo is one of a number of prospects within the Tertiary channel play system, it has been well defined by seismic surveys and it has exhibited a positive CSEM anomaly. It is also of considerable size: FOGL estimates most likely un-risked reserves of 3.5 billion barrels of oil*, and clearly, a successful result with Loligo would have a significant impact on FOGL. 

Efforts to secure a suitable rig are in progress and it is currently expected that a drilling programme will commence in the second half of 2009. The rewards for success could be substantial, given the large resource volumes of the prospects being targeted.

Financials

FOGL started the period with £12.5 million in cash, of which £0.67 million was invested in the exploration programme and £0.75 million was used to cover operating costs. The loss before tax for the six month period was £1.1m. At the end of the period the cash balance was £11.3 million of which £8.7 million are held as US dollars. 

Outlook

BHP Billiton is currently reviewing a number of potential rig options and an announcement will be made as soon as a rig is secured.

Notes
*    The results of the Company's technical evaluation have been reviewed, verified and compiled by the Company's geological staff, which includes a qualified person, Colin More BSc., MSc. (Exploration Manager), who has over 25 years of experience in petroleum exploration, for the purpose of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in respect of AIM companies, which outline standards of disclosure for mineral projects

  Consolidated Condensed Income Statement
for the six months ended 30 June 2008

6 months ended
30 June
2008
6 months ended
30 June
2007
 year ended 
31 December
2007

(Unaudited)
(Unaudited)
(Audited)

Note
£
£
£
Administrative expenses 
(849,508)
(670,569)
(1,768,316)
Loss from operations 
(849,508)
(670,569)
(1,768,316)
Finance income 
192,669
282,108
456,871
Finance costs 
(460,908)
(185,056)
(571,326)
Loss before tax 
(1,117,747)
(573,517)
(1,882,771)
Income tax expense 
-
(58,028)
(70,946)
Loss for the financial period 
(1,117,747)
(631,545)
(1,953,717)
Attributable to: 
Equity shareholders 
(1,117,747)
(631,545)
(1,953,717)
Loss per share 
Basic and diluted loss per share on loss for the period 
2 
(1.21p)
(0.69p)
(2.12p)
All amounts included above relate to continued operations 

  Consolidated Condensed Balance sheet 
at 30 June 2008

At 30 June
2008
At 30 June
2007
At 31 December
2007

(Unaudited)
(Unaudited)
(Audited)

£
£
£
Non-current assets 
Property, plant and equipment 
54,080
82,549
74,393
Deferred exploration expenditure 
16,588,150
19,745,443
15,914,105
Current assets 
Trade and other receivables 
95,680
595,262
193,712
Cash and cash equivalents 
11,331,919
7,939,949
12,461,430
Total Assets 
28,069,829
28,363,203
28,643,640
Non-current liabilities 
Convertible Loan Notes 
(6,474,394)
(4,211,436)
(6,013,486)
Current liabilities 
Trade and other payables 
(455,289)
(1,385,572)
(453,049)
Corporation tax liability 
(83,189)
(156,649)
(83,189)
Total Liabilities 
(7,012,872)
(5,753,657)
(6,549,724)
Net assets 
21,056,957
22,609,546
22,083,916
Capital and reserves 
Called up share capital 
1,846
1,839
1,846
Share premium account 
23,631,383
23,481,391
23,631,383
Other reserves 
2,500,975
1,916,755
2,500,975
Retained earnings 
(5,077,247)
(2,790,439)
(4,040,288)
Equity attributable to shareholders 
21,056,957
22,609,546
22,083,916
  Consolidated Condensed Cash flow statement 
for the six months ended 30 June 2008

6 months ended
30 June
6 months ended
30 June
Year 
ended
31 December

2008
2007
2007

(Unaudited)
(Unaudited)
(Audited)

£
£
£
Operating Activities

Loss for year before taxation
(1,117,747)
(573,517)
(1,882,771)
Finance income
(192,669)
(282,108)
(456,871)
Finance expense
460,908
185,056
571,326
Cash flows from operating activities 
Loss from operations 
(849,508)
(670,569)
(1,768,316)
Adjustments for: 
Depreciation 
20,480
18,792
38,082
Foreign exchange differences
-
(4,707)
42,116
Share-based payments 
80,788
65,114
137,437
Cash flow from operating activities before changes in working capital 
(748,240)
(591,370)
(1,550,681)
Decrease in trade and other receivables 
98,032
2,091,241
2,523,765
Decrease in trade and other payables 
2,241
(5,497,330)
(5,128,733)
Cash generated from operations 
(647,967)
(3,997,459)
(4,155,649)
Income taxes paid 
-
(183,638)
(270,016)
Net cash outflow from operating activities 
(647,967)
(4,181,097)
(4,425,665)
Cash flows used in investing activities 
Interest income 
192,669
282,108
456,871
Purchase of property, plant and equipment 
(168)
(1,230)
(12,364)
Deferred exploration expenditure 
(674,045)
(7,087,299)
(10,971,657)
Reimbursement of past costs
-
-
6,383,601
Net cash used in investing activities 
(481,544)
(6,806,421)
(4,143,549)
Cash flows from financing activities 
Proceeds from issue of convertible loan notes
-
4,000,000
6,000,000
Issue costs of convertible loan notes
-
(2,155)
(2,155)
Issue of ordinary share capital
150,000
Net cash inflow from financing activities 
-
3,997,845
6,147,845
Net decrease in cash and cash equivalents 
(1,129,511)
(6,989,673)
(2,421,369)
Cash and cash equivalents at start of period 
12,461,430
14,924,915
14,924,915
Effect of exchange rate changes on cash and equivalents

4,707
(42,116)
Cash and cash equivalents at end of period 
11,331,919
7,939,949
12,461,430
  Statement of changes in equity
for the six months ended 30 June 2008
6 months ended
30 June
6 months ended
30 June
year ended
31 December

2008
2007
2007

(Unaudited)
(Unaudited)
(Audited)

£
£
£
Opening balance 
22,093,916
21,908,824
21,908,824
Total recognised losses for the period
(1,117,747)
(631,545)
(1,953,717)
Fair value of share based payments
80,788
65,114
137,437
Share options taken up
-
-
150,000
Issue of convertible loan notes 
-
1,267,153
1,851,372
Closing balance 
21,056,957
22,609,546
22,093,916

  Notes forming part of the interim report 
for the six months ended 30 June 2008

1. Accounting policies 
The consolidated unaudited interim financial information set out in this report is based on the consolidated financial statements of Falkland Oil and Gas Limited ("FOGL") and its subsidiary company (together referred to as the 'Group'). The accounts of the Group for the 6 months ended 30 June 2008 were approved and authorised for issue by the Board on 17 September 2008. These accounts have been prepared in accordance with the accounting policies that are expected to be applied in the Report and Accounts of FOGL for the year ending 31 December 2008 and are consistent with International Financial Reporting  Standards adopted for use in the European Union. 

Basis of preparation 
The accounts have been consolidated in order to incorporate FOGL Finance Limited, a wholly owned subsidiary. 

The financial information for the six months ended 30 June 2008 and 30 June 2007 is unreviewed and unaudited and does not constitute the Group's statutory financial statements for those periods. The comparative financial information for the full year ended 31 December 2007 has, however, been derived from the statutory financial statement for that period.  The statutory accounts for the year ended the 31 December 2007 have been filed with the registrar of Companies. The auditors' report on those accounts was unqualified, did not include any references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 237(2)-(3) of the Companies Act 1985.

The financial statements are presented in Pounds Sterling and all values are rounded to the nearest pound (£) except when otherwise indicated. 

The financial statements have been prepared under the historical cost convention, except for financial assets, which are carried at fair value. 

The Company has certain contractual agreements with other participants to engage in joint activities that do not create an entity carrying on a trade or business of its own. The Company includes its share of assets, liabilities and cash flows in joint arrangements, measured in accordance with the terms of each arrangement.

2. (Loss) per share 
The basic loss per share is calculated on a loss of £1,117,747 (2007, loss of £631,545) and on 92,325,706 (2007, 91,950,706) ordinary shares, being the weighted average number of ordinary shares in issue during the period. There is no difference between diluted loss per share and the basic loss per share as the Group reported a loss for the period. 

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