Farm-out Agreement Update

28 Nov 2007 07:00

Falkland Oil and Gas Limited28 November 2007 Falkland Oil and Gas Limited FOGL Partner increases interest in exploration agreement Falkland Oil and Gas Limited ("FOGL") is pleased to announce that BHP Billitonhas decided to exercise its option to increase its interests in FOGL's 2002 and2004 licences to the South and East of the Falkland Islands. Highlights: • BHP Billiton will increase its interest to 51% from the 40% announced on 2 October 2007 • FOGL retains a very substantial stake in the licences • BHP Billiton will pay FOGL an additional US$2.75 million in reimbursement of historical costs • The decision by BHP Billiton to increase its interests in our licences further confirms our view of the significant petroleum potential of the South and East Falkland Basins. Details of the agreement Under the terms of the farm-out agreement announced on 2 October 2007 BHPBilliton had the option to further increase its interest in the licences. BHPBilliton has decided to exercise this option by increasing its interest to 51%.Consequently, BHP Billiton will pay four thirds of 51% (approximately 68%) ofthe costs of the near term work programme, including the drilling of twoexploration wells and all other associated work to the completion of thisdrilling work. In addition, BHP Billiton will pay FOGL a further US$2.75million in relation to certain costs already incurred by the company. At end2007 FOGL's forecast cash position is £12.2 million (US$25 million). As such,FOGL is now funded through a significant proportion of the near term explorationprogramme, which will include the drilling of the first two exploration wells. Since announcing the agreement with BHP Billiton, FOGL has had discussions witha number of other parties potentially interested in farming in to the area.FOGL will now look to advance these discussions, but with the clear intent ofretaining a material interest in its licences. Tim Bushell, Chief Executive of FOGL commented: BHP Billiton's decision to increase its interests in our licences furtherconfirms our view that the South and East Falkland basins are highly prospectiveand have the potential for the discovery of significant volumes of oil and gas. 28 November 2007 Note to investors: FOGL is planning to make an announcement on its 2007 exploration results andoperational plans shortly. Enquiries: FOGL 020 7563 1260Tim Bushell, Chief Executive KBC Peel Hunt (Nominated Adviser) 020 7418 8900Jonathan Marren / Matt Goode College Hill 020 7457 2020Nick Elwes / Paddy Blewer www.fogl.com www.bhpbilliton.com This information is provided by RNS The company news service from the London Stock Exchange