FOGL, Desire Petroleum Join Forces (Falkland Islands)


The boards of FOGL and Desire Petroleum have reached an agreement on the terms of a recommended combination of FOGL with Desire, pursuant to which FOGL will acquire the entire issued and to be issued share capital of Desire in exchange for FOGL Consideration Shares. The Combination values the entire issued share capital of Desire at approximately £61 million, and each Desire Share at 17.76 pence.

“The boards of FOGL and Desire believe that the Combination will diversify the activities of the two companies, resulting in a balanced portfolio with enhanced long-term prospects, a strong balance sheet and improved financing options,” said the companies in a joint statement.

Following the Combination becoming effective, FOGL Shareholders will own 60 per cent. of the Combined Group’s issued share capital, with Desire Shareholders owning the remaining 40 per cent.

The Combined Group will be a balanced, focussed E&P company with exposure to all known major hydrocarbon plays in the Falklands.

FOGL has also signed heads of agreement  with Premier and Rockhopper with respect to a farm-out of licences PL004a and PL004c. Premier and Rockhopper will farm-in to the Licences and, in exchange, will fund the Combined Group’s share of the cost of two exploration wells, one on each of the Licences.

Completion of the Farm-Out is subject to, inter alia, the Scheme becoming effective, any required approvals from the Falkland Islands Government and completion of definitive documents in respect of the Farm-Out.

The Combination and the Farm-Out together will enable the execution of an enhanced drilling programme of five wells in the next drilling campaign, including: two wells in the South Falkland Basin, partnered with Noble Energy and Edison International; and three wells in the North Falkland Basin, one of which will target the Zebedee prospect.

The next drilling campaign is expected to be fully funded from existing cash, the Farm-Out and other previously completed farm-out agreements.

Following implementation of the Combination, the management team of the Combined Group will comprise Tim Bushell as Chief Executive Officer and Colin More as Exploration Director. Richard Liddell, Non-Executive Chairman of FOGL, will continue as Non-Executive Chairman of the Combined Group. In addition to Mr. Liddell, the Board of the Combined Group will comprise Timothy Jones (Non-Executive Director of FOGL), David Hudd (Non-Executive Director of FOGL), Tim Bushell and Colin More, as well as Stephen Phipps (Desire’s current Chairman), Ian Duncan (Desire’s current Chief Executive Officer) and Robert Lyons (a current Non-Executive Director of Desire) who will all join the Board of the Combined Group as Non-Executive Directors.

Commenting on the Combination, Tim Bushell, Chief Executive of FOGL, said:

This combination is a compelling opportunity to consolidate the portfolios of FOGL and Desire, diversifying the risk profile for both companies’ shareholders and enabling the combined group to move forward with an active, long-term programme for growth in the Falkland Islands. Specifically, this transaction provides FOGL with access to Desire’s interests in the North Falkland Basin (including the Sea Lion area) which we believe are highly complementary to our existing exploration portfolio in the South.

The farm-out to Premier and Rockhopper, which will reduce the combined group’s working interests in PL004a and PL004c to 40 per cent., is a prudent piece of portfolio management and allows us to participate in a more extensive exploration programme due to the drilling carry we have agreed, while retaining control through operatorship until both wells have been drilled.

FOGL is in a strong financial position and these transactions will enhance the company’s opportunity set and offer new and exciting potential opportunities to deploy capital and create value for both companies’ shareholders.”

Stephen Phipps, Chairman of Desire, said:

“We have for a number of months been seeking additional investment into our North Falkland Basin licences and are pleased that this process has concluded with the combination with FOGL. Not only do Desire shareholders retain material interests in Desire’s highly prospective exploration acreage, but we also benefit from the farm-out with Premier and Rockhopper, exposure to FOGL’s upcoming programme in the South Falkland Basin, a strong balance sheet and expert partners. We are entering an extremely exciting period in the Falklands with shareholders in the combined group now having fully funded, material exposure to five wells across three basins, testing three different play types.”

October 03, 2013


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