FALKLAND Oil and Gas reported an increased annual loss for 2011 of $6.64m, compared with $3.74m in 2010, but said it had more than enough cash to fund its exploratory drilling programme off the Falkland Islands this year, reports Emily Gosden for the Telegraph.

It expects to begin drilling at its Loligo prospect in June, after Borders & Southern finishes using the Leiv Eiriksson rig for drilling its two wells.

"The Loligo well, with prospective resources of 4.7bn barrels, will be one of the highest impact exploration wells to be drilled by an independent E&P company this year," Richard Liddell, Chairman of FOGL, said. "Either of the likely second well targets have a resource potential of over 1bn barrels. Any degree of success on these wells will be a transforming event for FOGL."

Tim Bushell, chief executive of FOGL, said he thought it "unlikely" that all four wells drilled by his company and by Borders & Southern would turn out to be "bone dry". He insisted it was not a "make or break" year, as FOGL expected to have a "reasonable cash position" left at the end of the drilling programme.

Gosden reports that Mr Bushell said that he remained unfazed by the recent escalation in Argentine threats against the British oil companies, or its sending of legal declarations to the financial institutions who advise them.

"We see the political risk as being pretty minimal and we are quite comfortable with how our operations are running. That's not affected at all by the political noise next door," he said.

He said that FOGL had not received a letter from the Argentine Embassy recently but that it had been sent the so-called "letters of discomfort" previously and had never responded.

Companies who had partnered with FOGL or offered service contracts had also been sent them in the past. "It's fairly innocuous - it's just designed to be slightly disruptive," he said. "So far, we are not aware of any service provider or contractor being scared off from working in the Falklands."