Falkland Oil and Gas finds drilling partner

Falkland Oil and Gas (FOGL) has signed an option agreement which could help pay for a quarter of its drilling programme during 2012.

The farm-out, with an unnamed third party, would also pay £17m towards the £68m costs incurred during 2011 in preparation for drilling.

An initial fee of $6m has been paid to secure the agreement but, disconcertingly, FOGL says: "For corporate reasons unconnected with the proposed farm-out, the counter-party is unable to execute the option at this time, but expects to be able to do so within the next two months."

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Falkland Oil and Gas has licences to the south and east of the disputed territory in the South Atlantic where another firm, Rockhopper, made significant discoveries in 2010, leading to increased tension between the UK and Argentina.

Tim Bushell, Chief Executive of FOGL, said: "We are delighted to have agreed favourable farm-out terms...This provides further external industry confirmation of the technical case and gives us greater flexibility with respect to our drilling plans."

Shares in Falkland Oil and Gas had risen 6.2% by 08:48.

BS