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Falkland Islands: Edison takes southern basin farmout

Edison International SPA has taken a farmout from Falklands Oil & Gas Ltd. on licenses south and east of the Falkland Islands in the South Atlantic.

Edison will earn a 25% interest in FOGL’s northern area licenses. Edison will contribute its pro-rata share of the costs of the two-well 2012 exploratory drilling program. Edison will earn a 12.5% interest in FOGL’s southern area licenses and contribute its pro-rata share of the 2012 work program.

Edison will also pay its pro-rata share of certain historical costs incurred by FOGL during 2011 related to the 2012 drilling program. Edison’s share of historical expenditures, together with its share of the 2012 drilling program costs, are expected to be about $50 million.

Edison will also make a separate cash contribution to FOGL of $20 million on completion of the farmout agreement and a further $20 million in 2013.

In order to obtain the option, Edison has already paid a $3 million nonrefundable fee. FOGL will remain operator of all licenses.

FOGL expects to receive the Leiv Eiriksson semisubmersible in July 2012 after it has drilled the Borders & Southern Petroleum PLC Stebbing well. FOGL will drill its first well on the Loligo prospect and the second well will be selected based on Loligo results.

If encouraging, it will be either a further well on Loligo or a well on Nimrod. Otherwise, a well will be drilled on the Mid-Cretaceous Scotia prospect. Further drilling in the campaign would be subject to well results and rig availability.

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