Drilling Update

10 September 2012

Falkland Oil and Gas Limited

("FOGL")

Drilling update in response to speculation and price movement

FOGL, the oil and gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, is providing this update on drilling operations at the Loligo prospect following recent market speculation.

The well has been drilled to a depth of 3,900 metres and is expected to reach total depth ("TD") within the next 24 hours. Drilling operations are approximately five days behind schedule, principally as a result of having to run an additional string of casing in the top section of the well. No abnormal pressures have been encountered during the drilling of the well and all operations have been conducted without issue.

A further announcement will be made within the next seven days, once the well has reached TD and wireline logging operations have been completed.

Enquiries:

Falkland Oil and Gas

 +44 (0) 207 563 1260

 Tim Bushell, Chief Executive

 Oriel Securities (Nominated Advisor and Joint Broker)

 +44 (0) 207 710 7600

 David Arch / Gareth Price / Ashton Clanfield

 Jefferies Hoare Govett (Joint Broker)

 +44 (0) 207 029 8000

 Alex Grant / Chris Zeal / Graham Hertrich

 FTI Consulting

 +44 (0) 207 831 3113

 Ben Brewerton / Ed Westropp

The technical information included in this announcement has been reviewed, verified and compiled by the Company's geological staff, including a qualified person, Colin More BSc., MSc. (Exploration Director), who has over 26 years of experience in petroleum exploration, for the purpose of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in respect of AIM companies, which outline standards of disclosure for mineral projects. Mr. More is a member of the Geological Society of London, the American Association of Petroleum Geologists and the Society of Exploration Geophysicists.