Questor share tip: Falkland Oil & Gas shares are one to avoid Other well drilled this year also found uncommercial gas. There was no sign of the hoped-for billion or so barrels of oil. This followed a slump in its shares in July 2010 after its Toroa well proved to be dry. FOGL is fully funded to drill three more wells even after spending the expected $35m (£21.9m) on seismic studies in 2013. There is definitely oil in the area. Rockhopper has made significant discoveries and Premier Oil has been farmed in to help with the next stage of development of Rockhopper's discovery. However, oil will not be easy to extract, given the weather challenges in the South Atlantic and the depth under the sea, which is about 3km. The performance of FOGL highlights the risk of investing in explorers that do not have revenues from production to provide cash flow to invest in its drilling campaign. Cash burn can be very high and such companies often have to repeatedly place shares to raise funds to carry on drilling - especially after a series of "dusters" or dry wells. Private investors are locked out of such placings and this means that their stake is diluted - potentially on multipleoccasions. FOGL has raised £80.5m in placings over the past two years alone compared with its current market capitalisation of about £95m. This is why Questor rarely recommended pure exploration plays. In August this year, Noble Energy farmed into FOGL's licence. This followed a similar deal with Italian oil group Edison in June. Both these companies will be part-funding drilling and other exploration activity. Noble alone is expected to invest $180m to $230m in costs for drilling and seismic studies over the next three years. FOGL currently has about $220m of cash, worth 43p a share. This is higher than the group's market value which means any future discoveries are priced "for free." However, FOGL could burn through this cash relatively quickly. Although there is a chance that FOGL will find a commercial discovery, private investors should stay away as the risks to capital are too high.