I've been in direct correspondence with Philip over the proposed deal made with Sweetpea's shares in Falcon Oil and Gas Austrailia Limited (FOGA) via phone and emails.

The following is a FAQ document sent to me by Philip that more fully explains how the latest proposed agreement with Sweetpea may impact those who currently hold shares in FOGA and hold exercisable options (which I decided against) for the same:

Questions and Answers relating to the Proposed Acquisition of Sweetpea’s shares in
Falcon Oil & Gas Australia Limited

Please explain the deal that's been hammered out?
This is really all about consolidating our position in Australia. The total value of the deal is $22.5m of which we are paying $3m in cash and the balance by issuing 98m shares in FOGC with those shares locked up for 3 years (subject to 15% being released each year). The new shares to be issued will represent 10.8% of the enlarged equity of the company and for that we earn an additional 24.2% interest in FOGA.

Why is Sweetpea Petroleum (subsidiary of Petrohunter Energy) selling?
Sweetpea is selling because for many years they have been locked into an unlisted company with no liquidity in their shares. This deal provides them with some cash and tradable securities, subject to certain lock-up provisions. They will also benefit from any upside in FOGA which will be reflected in the share price of FOGC shares.

What does this mean for the other shareholders in FOGA?
We have about 140 other shareholders in FOGA representing 3.1% of the company. If the deal goes through, which is dependent on them voting in favour of it, we will offer them a similar deal to the one being done with Sweetpea.

But can’t you compulsorily acquire the remaining 3.1% for cash equivalent?
Yes we can under normal Australian company law rules once we own more than 90% of the company. However, the board of FOGC passed a Resolution waiving its rights to compulsorily acquire the remaining 3.1% for cash equivalent.

So what kind of deal can the remaining shareholders expect to get?
After closing the deal with Sweetpea, FOGC fully intends making an offer to the remaining shareholders to acquire their shares in FOGA in exchange for shares in FOGC. We will not be proposing to offer any cash as part of the consideration. Also, there will be no lock-up period on the FOGC shares acquired.

But what does that mean in terms of the $1 per share I paid in 2010?
The deal we have agreed with Sweetpea is equivalent to 45 cent per FOGA share when you take the cash and share component of the deal into consideration and take into account the fact that the deal was agreed when FOGC shares were trading at 20 cent.

What is the timing of making an offer to the other shareholders?
Once we have approval from ASIC we will be sending a Notice of Meeting to all shareholders to convene a meeting to vote on the proposed deal. We expect that this meeting will be convened no later than the 28th June 2013. If we get approval, we will immediately make an offer to the other shareholders that will remain open for 30 days.

The share price of FOGC has already increased to 22 cent, what happens if the share price continues to increase before you conclude the deal with the other shareholders?
We will be offering the other FOGA shareholders the share equivalent in FOGC shares as if they were at 20 cent. So, any movement up or down will not have any impact on the proposed offer. But do bear in mind that the offer will only be open for 30 days.

Do you need all other shareholders to agree to accept shares in FOGC?
Absolutely not. FOGC can agree deals on an individual basis with each shareholder in FOGA.

But what if I want to stay as a shareholder in FOGA?
Staying as a shareholder in FOGA will have no impact whatsoever to your current standing as a shareholder in FOGA.

Does FOGA have any intentions to float the company on the ASX?
No, at least not in the short term. Assuming Hess elect to drill 5 wells we will be fully carried until the end of 2015 so we will have limited capital requirements going forward, except for approx. $5m that needs to be invested in EP99. The ASX market is not very conducive to listing small E&P companies at the moment, so it is not something we are considering.

What happens if the proposed deal with Sweetpea is not approved?
If the proposed deal with Sweetpea is not approved then FOGA will have to consider how it intends repaying the debt of approx. $10m to FOGC due for repayment at the end of September as well as funding the Capex requirement on EP99. In all likelihood it will probably involve an equity raise by way of a rights issue.

What about my options in FOGA?
You have options expiring in either June or November 2013. These options are priced at $1.25 which based on the proposed deal with FOGA at 45 cent per share are “not in the money”. The company will not be renewing or extending the option agreement.

Who do I contact if I need more information on the deal with Sweetpea and the proposed deal with the other shareholders?
You can contact:
Philip O’Quigley
Chief Executive Officer ¦ FALCON OIL & GAS AUSTRALIA LTD.
5th Floor, Styne House, Upper Hatch Street, Dublin 2, Ireland
Office: +353 1 417 1900 ¦ Mobile: +353 87 814 7042
email: [email protected]