Falklands Oil and Gas (FOGL) has executed a farm-out agreement with Edison International under which Edison will farm in and earn a 25 per cent interest in FOGL's northern area licences.
Edison will also farm in a 12.5% interest in FOGL's southern area licence and pay its pro-rata share of certain historical costs incurred by FOGL during 2011 related to the 2012 drilling programme, which are expected to be of the order of $50m.
Edison will contribute its pro-rata share of the costs of the drilling programme, which comprises two exploration wells.
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In addition, Edison will make a separate cash contribution to FOGL of $40m, $20m of which will be made on completion of the agreement, with the remaining $20m in 2013. In order to obtain the option, Edison had already paid a $3m non-refundable fee.
FOGL will retain operatorship of the northern and southern area licences.
The farm out has been approved by the Falkland Islands government.
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