Stetson has signed a Hydrocarbon Exploration and Production Contract (the "E&P Contract) with the Agencia Nacional de Hydrocarburos of Colombia (ANH) for LLA-11 (the "Block"). This Block in the Llanos Basin was successfully won by the Company during a bid round held on June 22, 2010, in Cartagena, Colombia (the "Bid"). The Company has granted a 90% interest in the Block to a wholly-owned subsidiary of Sagres Energy Inc. ("Sagres") in consideration for the Company retaining a 10% carried interest during the first exploration phase (the "Carried Interest"), which consists of a minimum expenditure of US $9.5MM over a 36 month period.

The Block has an area of 51,190 Ha (gross) and is located in the Llanos Basin of Colombia, a prolific basin in the foreland of the Colombian Andes (Figure 1). The Block is on trend with existing and new discoveries and is also close to the giant Cano Limon field. Currently, there is around 900 km of 2D seismic data over this Block. Existing 2D seismic has identified a significant lead over this block and it is possible that future seismic programs will add to the estimated prospectivity of the Block.

The Block carries an additional royalty of 1% payable to the Government of Colombia in addition to the basic royalty scheme established under Colombia Law, being 8% for up to 5,000 bopd of production and increasing to 25% for a 600,000 bopd field. All other terms of the contract are standard to the model Colombian E&P Contract. Sagres will have an option to acquire the Company's Carried Interest in the Block over the next twelve months at a mutually agreed price.

Stetson entered into a Letter of Intent with a private Ontario company ("Ontario Co."), to acquire a 90% interest in the Block in consideration for paying to Stetson a fee of US$50,000, taking responsibility for 100% of the costs of the first exploration phase, agreeing to reimburse Stetson for all expenses of the Bid and to allow Stetson to retain the Carried Interest (the "LOI"). Subsequent to the Bid, Ontario Co. was acquired by Sagres.

The transaction may be considered a Non-Arm's Length Transaction for the purposes of the TSX Venture Exchange as Stetson and Ontario Co. had a common officer, Ahmed Said, at the time the terms of the LOI were negotiated. Stetson and Sagres are arm's length parties. The Closing of the transaction remains subject to all requisite approvals, including without limitation, approval of the TSX Venture Exchange.

Ahmed Said, President and CEO, stated, "We are pleased with the results of successful award in Colombia. The Carried Interest provides our shareholders with exposure to Colombia without committing significant capital."

Tags: Stetson Oil & Gas Ltd.