Borders & Southern: Currently Drilling For Over 1 Billion Barrels Of Oil In The Falklands

Jun. 4.12 | About: Borders & (BDRSF)

Borders & Southern (OTC:BDRSF) is a UK company exploring for oil offshore of the Falkland Islands. They are listed on the London Stock Exchange under the symbol BOR and US investors can participate on the pink sheets through the symbol BRDSF. BRDSF is currently trading around $1. Their two main prospects (100% working interest in both) are named Darwin and Stebbing.

In April, during drilling of the Darwin well, Borders ran up to about double the current price on rumors of an oil find. The stock subsequently took a dive after Borders announced a gas condensate discovery. I think a lot of the dive was due to the market not believing that the size of the find could be commercial on its own. Borders is awaiting gas analysis to determine liquids content and gas properties.

The more important finds from the Darwin well have to do with rock properties and the fact that a working hydrocarbon system is in the area. The reservoir at Darwin is nearly 70m of net pay and sports an average porosity of 22%. Reservoir quality should be better with less compaction. Borders has long stated that both Darwin and Stebbing are independent prospects except for the fact that they both rely on the same source rock. Darwin has proven that the source rock is mature and able to produce hydrocarbons. Stebbing is shallower than Darwin and therefore, the source rock may very well be in the oil window.

The Stebbing well was spud mid May. Borders have said the well should take approximately 50 days to finish which would put the TD date around the end of June. There are rumors of delays, due to rig equipment, floating around on the message boards, but I have not seen any announcement from Borders regarding any delays.

The P50 prospective recoverable resources for the Stebbing well are listed at 1.28 billion barrels. Typical values for an NPV10 value for projects of this type are $10/bbl. A delineated, derisked Stebbing that found 1 billion barrels would be worth somewhere on the order of $10 billion dollars. Borders currently has a market cap of $444 million. This gives Borders tremendous upside to the tune of 20x the current price.

On the other hand, a duster would send the stock down by probably 50% or more. While they do have other prospects, Darwin and Stebbing are their main prospects. Plus the other prospects are in the same area and likely would depend on the same source rock. Depending on other exploration in the basin and the Darwin gas analysis, they may be able to make a basin wide gas project economical.

Falklands Oil and Gas (OTCPK:FLKOF) will have the drilling rig next after the Stebbing well is drilled. Falklands is drilling their Loligo prospect which is thought to have around 5 billion barrels of recoverable resources. I have written an article on Falklands which can be seen here.

These stocks are not for the faint of heart. They can be up 5% one day and down 10% the next. An oil find will supercharge your account with massive returns just like a dry hole can devastate it. Offshore exploration is risky and on poor results, the value of the stock could drop by half or more. Make sure you are playing with money you can afford to lose. Make sensible decisions to protect your investment and don't get caught up in the day to day gyrations. The big move will happen when well logs are announced.

Disclosure: I am long OTCPK:FLKOF.

Additional disclosure: I am long Borders through their London listing, BOR, and long Falklands through their London listing of FOGL and the pink sheets FLKOF