Final Results

Tuesday 15th March 2011

Falkland Oil and Gas Limited

("FOGL" or "the Company")

 Announcement of the Final Results for the Twelve Months Ended 31 December 2010

FOGL, the oil and gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, announces Final Results for the year ended 31 December 2010.

Financial Highlights

·; Invested US$21.8 million (2009: US$12.9m) in the exploration programme, including US$19.7 million to drill Toroa exploration well

·; Loss before tax of US$3.7 million (2009: US$5.5 million)

·; Cash balances at 31 December 2010 of US$69.8 million

Operational Highlights

·; Toroa F61/5-1, the first exploration well to be drilled in the East Falklands Basin, was completed on budget and without incidents

o The well did not encounter reservoired hydrocarbons and was plugged and abandoned

o Data obtained provided encouragement on the presence of good quality reservoirs and source rocks within the East Falkland Basin and will inform future drilling plans

o Results have no adverse implications for FOGL's deep water prospects

·; Twelve month licence extension was awarded for the Northern Licence area

·; Negotiations are at an advanced stage to secure a suitable deep water rig

·; Site surveys commenced in February 2011 on a number of prospects, including two new prospects within the Mid-Cretaceous fan play

Richard Liddell, Chairman of FOGL, said:

"2010 was a landmark year for FOGL in which we drilled our first well, the first exploration well ever drilled on the East Falklands Basin. We were pleased that the well was drilled on budget and without incident.

"Our focus is now on securing a suitable deep water rig to enable us to drill the large prospects we have identified in the deep water areas of our licences. Rig contract negotiations are at an advanced stage and we will make a further announcement when appropriate.

"Meanwhile, we have commenced further work in order to broaden the range of potential targets for the deep water drilling programme."

Enquiries:

Copies of the Annual report will be available in May 2011.

Chairman's and Chief Executive's Statement

2010 was a landmark year for FOGL in which we drilled our first exploration well, the first ever drilled in the East Falklands Basin. We were pleased that the well was drilled on budget and without incident.

It was a significant achievement to have progressed the project from concept to drilling in just six years since FOGL was listed, and despite the failure of Toroa to find reservoired hydrocarbons, the well has provided encouragement on the presence of good quality reservoirs and source rocks, and given us valuable information to plan future wells.

Although Toroa was an attractive target for initial drilling, we believe the potential of our deep water prospects is greater and we therefore look forward with much anticipation to the commencement of the next drilling campaign. FOGL is at an advanced stage in contract negotiations for a suitable deep water rig for the Southern Licence area. BHP Billiton, as operator of the Northern Licences area, is also engaged in related negotiations to secure a rig slot to drill Loligo.

During the year, the terms of the Northern Licence area were successfully renegotiated with the Falkland Islands Government. The licences were extended by one year without any additional work commitments or acreage relinquishments being required. 

On the Southern Licence area, having fulfilled the Phase 1 work commitment with the drilling of Toroa, the second phase commenced on 3 December 2010. BHP Billiton elected not to enter the second phase of the license and has assigned its 51% of the Southern Licence area and operatorship to FOGL, taking FOGL's interest in these licences back to 100%. The Falkland Islands Government (FIG) has formally approved this assignment of interest and transfer of operatorship to FOGL.

In order to provide further drilling options across FOGL's acreage, we are currently undertaking a site survey programme. The vessel is undertaking surveys on a number of separate sites including Vinson, in the Tertiary channel play, and two new prospects (Scotia and Hero), within the mid Cretaceous fan play. Site surveys will also be acquired on Inflexible, a Springhill fault-block, and Undine, a prospect in the Tertiary fold-belt play. These latter two prospects are similar to those that Borders and Southern intends to drill and will provide the option for FOGL to drill either of them in the event that Borders and Southern has encouraging drilling results. In addition, the Company may elect to acquire up to 1,300 km of new 2D seismic data, using the same vessel. This data will enhance prospect definition and aid the selection of drilling locations.

Regaining a 100% working interest and operatorship of the Southern licence area has not only given us greater control over the pace of future development, but also the option to pursue another farm-out agreement for this asset.

Financials

FOGL started 2010 with US$93.5 million in cash. During the year we invested US$21.8 million in the exploration programme, (including US$19.7 million to drill Toroa), and a further US$2.6 million for administration costs. The Company ended the year with a cash balance of US$69.8 million and therefore the Company is fully funded for our share of the costs of the Northern licence area work commitment. The loss before tax for the 12 month period was $3.7 million (2009: $5.3 million). No dividend is proposed.

Falkland Oil and Gas Limited

Audited Consolidated Statement of Comprehensive Income

for the year ended 31 December 2010

The loss for the year arose from continuing operations.

Falkland Oil and Gas Limited

Audited Consolidated Statement of Financial Position

at 31 December 2010

Falkland Oil and Gas Limited

Audited Consolidated Statement of Cash Flows

for the year ended 31 December 2010

Falkland Oil and Gas Limited

Audited Consolidated Statement of Changes in Equity

for the year ended 31 December 2010

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2010 or 2009, but is derived from those accounts. Statutory accounts for 2010 will be available in May 2011. The auditors have reported on those accounts: their report was unqualified and did not draw attention to any matters by way of emphasis.