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Farm-out Agreement, Falklands Islands

South & East Falkland Islands, FOGL Northern & Southern Area Licences

London - June 2012

Stellar Energy Advisors is pleased to announce the signature of an agreement between Falkland Oil and Gas ("FOGL") and Edison International with respect to exploration licences in the East Falklands Basin.

The transaction comprises a number of elements that, when taken together, represent a considerable investment by Edison International while ensuring FOGL retains a substantial equity position in the licences:

  • Edison will farm-in and earn a 25% interest in FOGL's Northern Area Licences. Edison will contribute its pro-rata share of the costs of the 2012 drilling programme, comprising two exploration wells;
  • Edison will farm-in and earn a 12.5% interest in FOGL's Southern Area Licences and will contribute its pro-rata share of the 2012 work programme;
  • Edison will also pay its pro-rata share of certain historical costs incurred by FOGL during 2011 related to the 2012 drilling programme;
  • Edison's share of historical expenditures, together with its share of the 2012 drilling programme costs, are expected to be of the order of $50 million;
  • In addition Edison will make a separate cash contribution to FOGL of $40 million;
  • In order to obtain the option, Edison had already paid a $3million non-refundable fee.

We anticipate further announcements shortly at the completion of other successful transactions where Stellar has acted as the sole advisor.

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Stellar was the sole advisor to Falkland Oil & Gas Limited.