FOGL announced certain changes to its license arrangements with the Falkland Islands Government.
Northern license area
Due to the tight rig market it is increasingly unlikely that the next phase of the drilling program will commence in 2010 as required by the current terms of the licenses. Following recent discussions, the Falkland Islands Government ("FIG") has agreed to extend the first phase of the northern 2004 licenses by one year, so that they will now expire on December 15, 2011. No additional work obligations or acreage relinquishment will be required in respect of this license extension and the existing Phase 1 work commitments remain unchanged.
Southern license area
Separately, BHP Billiton has advised FIG and FOGL that it has elected not to enter the second phase of the southern 2002 licenses which commences on December 3, 2010.
FOGL believes, based on the drilling results from the Toroa well analyzed to date, that these licenses are still prospective. Furthermore, we are still awaiting the analysis of some key well data and these results are now expected to be available in October. FOGL has identified a number of prospects and leads which may prove to be of interest, particularly in the event of drilling success in the deepwater area of the northern licenses, or in the south, where the licenses are contiguous with acreage held by Borders and Southern Petroleum.
Having fulfilled all the work obligations of Phase 1, FOGL has therefore decided to enter the second phase of these licenses. This will entail the drilling of a single exploration well by December 3, 2015. BHP Billiton will assign its 51% license interest to FOGL which takes FOGL's interest back to 100%. FOGL expects to take over the operatorship of these licenses during the next few months.
Assignment of interest and change of operatorship are conditional on the approval of FIG.
Tim Bushell, Chief Executive of FOGL, said, "We welcome the Falkland Islands Government's understanding in agreeing to extend the license terms. We intend to continue actively exploring the southern licenses and with our joint venture partner, to secure a deepwater rig to resume drilling in the northern licenses as soon as possible."
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