AGM announcement and operational update

Wednesday 8 June 2011

Falkland Oil and Gas Limited

("FOGL" or "the Company")

AGM announcement and operational update

FOGL, the oil and gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, provides the following operational update ahead of its AGM later today.

Rig contract

On 19 May 2011 FOGL announced that it had entered into an assignment agreement with Borders & Southern Petroleum plc. ("B&S") and Ocean Rig 1 Inc. to contract the Leiv Eiriksson for two firm drilling slots. The rig is currently expected to arrive in the Falkland Islands in the fourth quarter of 2011. FOGL will utilize the third and fourth slots in the combined B&S and FOGL programme and expects to commence drilling in the first quarter of 2012.

Operations and drilling management

FOGL has made significant progress in establishing a strong and experienced drilling team managed by Dave MacKay, who has been appointed drilling manager. Dave has over 29 years of international drilling experience and is a specialist in deepwater drilling having worked for the last 12 years for BHP Billiton. Dave also gained crucial Falklands operational experience as part of the drilling management team on the Toroa well in 2010. Mike Thomas has joined as Operations Manager. Mike has over 30 years oil industry experience with Clyde Petroleum, Paladin Resources and most recently was Chief Operating Officer for Dominion Petroleum Ltd. Mike will be responsible for geological aspects, geotechnical well planning and HSE management.

Northern licence area approvals

On 24 May 2011, the Executive Council of the Falkland Islands approved the withdrawal of BHP Billiton from the northern licence area and transfer of operatorship to FOGL. They also approved a six month extension of Phase 1 of the northern licence area from 15 December to 15 June 2012. This extension requires the final approval of the British Foreign and Commonwealth Office, which is expected shortly.

FOGL is required to make a mandatory relinquishment of 20% of the Northern Licence area at the end of 2011 as required under the existing licence terms. The second phase of the Northern licence area does not expire until 15 December 2015 and carries the obligation to drill a single exploration well.

FOGL has already entered Phase 2 of the Southern Licence area and no further relinquishment is required.

Seismic programme and site survey

The latest site survey programme has now been completed. A total of five site surveys were completed on the following prospects: Inflexible, Vinson, Scotia, Hero and Loligo.

The site survey on Loligo was the fourth site surveyed on this prospect following three previous site surveys conducted in 2009. Having a range of sites on Loligo will enable us to determine the location of the initial exploration well and also, in the event of encouraging results, potential appraisal drilling sites.

Separately, FOGL is planning to acquire some additional focussed 2D seismic over the Scotia and Hero prospects. This data will be used to fine tune the location of an exploration well on either of these two prospects.

Farmout

FOGL is currently in early stage discussions with several parties who have expressed an interest in participating in our exploration drilling programme. The Company does not however anticipate concluding any farmout agreement until later this year.

Tim Bushell, Chief Executive of FOGL, commented:

"Since becoming operator and 100% owner of our licences on 31 March, we have secured a suitable rig, put in place funding for a 2 well programme and have established an experienced drilling management team. We have also accelerated all the other required work streams in preparation for our drilling programme which is expected to commence in the first quarter of 2012."

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