Two Falkland Islands oil exploration firms have announced a £57m deal just hours after Argentina elected a leader with a milder attitude towards the territorial dispute with Britain over the islands.

If the deal goes ahead, it will bring together two companies that have suffered some of the most precipitous declines in stock market value in recent years.



Rockhopper Exploration said it had agreed an all-share takeover of Falklands Oil & Gas (FOGL) that values the target company at £57m.

The combined firm would own the largest oil exploration licence in the offshore area north of the Falklands, where an expected oil bonanza has so far failed to materialise.

The Falklands were once seen as the next frontier for major oil discoveries, but excitement has fizzled out as well after well came up dry or not commercially viable.

The disappointment prompted shares in Rockhopper to slump 93% from a peak of £5.10 in September 2010 to just 35p.

FOGL has plunged even further, down from £2.43 in July 2010 to less than 10p on Monday, a slide of 96%.

Rockhopper was worth more than £1.3bn at its peak but has since declined to a little more than £100m, while FOGL’s stock market value has fallen from £350m to £50m.

Rockhopper’s chairman, Pierre Jungels, said that by coming together, the two firms had a better chance of making a commercial success out of their presence in the rough south Atlantic waters.

He said the deal would “add further momentum to the ongoing work to progress the development of discovered resources in the area towards commerciality”.

The takeover was announced within 24 hours of businessman Mauricio Macri being elected as president in Argentina.

Mauricio Macri. Photograph: Karlo Reyes/Demotix/Corbis

Outgoing president Cristina Fernández de Kirchner was a bitter and vocal critic of the UK claim over the Falklands.

Her administration threatened earlier this year to prosecute British firms seeking to extract oil in the disputed area.

But Macri has taken a more conciliatory tone, and his victory has been seen as a positive for foreign firms struggling with Argentina’s difficult business climate.

Sources close to the deal said it was “not unhelpful” that Kirchner was leaving but added that the takeover was triggered more by FOGL’s lack of success with its Humpback well.

Success would have sent FOGL’s share price soaring and the disappointing result allowed the two firms – which are already partners in a number of wells – to proceed with a tie-up.

Premier Oil owns 60% of Rockhopper’s licences in the Sea Lion area, an arrangement that adds complexity for firms looking at a potential “farm-in”, where a company takes part in exploration and shares costs with the licence holder.

Rockhopper and FOGL hope that by tidying up ownership of licences in the north Falklands, they can better attract farm-in partners to develop Sea Lion and other prospects.

They said the enlarged group would have “significantly more strategic influence over the pace and direction of oil and gas development in the North Falkland Basin than they would have as two stand-alone entities”.

The takeover values FOGL at £57m, an 11% premium to its Monday closing price. Rockhopper investors will own 65% of the combined company.