Half Yearly Report

18 August 2010

Falkland Oil and Gas Limited

("FOGL" or "the Company")

FOGL, the oil and gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, announces the Interim Results for the six months ended 30 June 2010.

Highlights

·; The Toroa exploration well was drilled during June 2010 and was completed on 12 July 2010

·; The well reached a total depth of 2,476 metres, but did not encounter any reservoired hydrocarbons and was plugged and abandoned

·; Cash balance of $80.4 million as at period end (2009: $19.3m)

Richard Liddell, Chairman of FOGL, said:

"The first half of 2010 has been a period of great progress for the Company, in which we drilled the first well on our licence area. Although the Toroa well did not encounter hydrocarbons, the results have helped to reduce some of the key risks on the other plays in our licences.

"We look forward to continuing exploration in the deepwater area of licences, once a suitable rig has been secured"

Enquiries:

Chairman's Statement

During the first half of 2010 the Ocean Guardian drilling rig was contracted and drilled the Toroa prospect, our first exploration well on the licence area.

Toroa Well

We announced on 12 July 2010, that the Toroa F61/5-1 exploration well had been drilled to a total depth of 2,476 metres and full logging operations had been completed. The well did not encounter any reservoired hydrocarbons and was plugged and abandoned. The well was completed within budget and without incident.

Further detailed evaluation of all the data gained from the well is now being carried out and an update on the results will be provided once all the analytical work has been completed.

Deepwater Rig

In line with our licence commitments, we are actively seeking a suitable rig for exploration drilling activities in the deeper water areas of our licences. There are a limited number of such rigs available and despite a recent softening of the rig market, there is still considerable competition for the type of high specification rig required, which may extend our drilling programme into 2011.

Financials

FOGL started the period with $93.5 million in cash, of which $11.3 million was expensed in the exploration programme and $1.2 million used to cover administration costs. At the end of the period the cash balance was $80.4 million of which $11.7 million is held as 7.8 million Sterling. The loss before tax for the six month period was $2.1 million (2009: £3 million).

Outlook

Exploration drilling will resume in the deepwater area of our licences as soon as a suitable rig is secured.

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2010

All amounts included above relate to continuing operations.

Condensed Consolidated Statement of Financial Position

at 30 June 2010

Condensed Consolidated Statement of Cash flows

for the six months ended 30 June 2010

Condensed Consolidated Statement of changes in equity (unaudited)

Notes forming part of the interim report

for the six months ended 30 June 2010

1. Accounting policies

The consolidated unaudited interim financial information set out in this report is based on the consolidated financial statements of Falkland Oil and Gas Limited ("FOGL") and its subsidiary company (together referred to as the 'Group'). The condensed consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2009, which have been prepared in accordance with IFRSs. The accounts of the Group for the 6 months ended 30 June 2010 were approved and authorised for issue by the Board on 17th August 2010. These accounts have been prepared in accordance with the accounting policies that are expected to be applied in the Report and Accounts of FOGL for the year ending 31 December 2010 and are consistent with International Financial Reporting Standards adopted for use in the European Union.

Basis of preparation

The accounts have been consolidated in order to incorporate FOGL Finance Limited, a wholly owned subsidiary.

The financial information for the six months ended 30 June 2010 and 30 June 2009 is unreviewed and unaudited and does not constitute the Group's statutory financial statements for those periods. The comparative financial information for the full year ended 31 December 2009 has, however, been derived from the statutory financial statement for that period. The statutory accounts for the year ended the 31 December 2009 have been filed with the registrar of Companies. The auditors' report on those accounts was unqualified.

The financial statements are presented in United States Dollars and all values are rounded to the nearest thousand dollars ($'000) except when otherwise indicated.

The Group has certain contractual agreements with other participants to engage in joint activities that do not create an entity carrying on a trade or business of its own. The Group includes its share of assets, liabilities and cash flows in joint arrangements, measured in accordance with the terms of each arrangement.

2. (Loss) per share

The basic loss per share is calculated on a loss of $ 2,162,318 (2009: interim loss of $3,065,712) and on 146,252,066 (2009: 92,692,402) ordinary shares, being the weighted average number of ordinary shares in issue during the period. There is no difference between diluted loss per share and the basic loss per share as the Group reported a loss for the period.

3. Interim Statement

Copies of this Interim report for the six months ended 30 June 2010 will be available from the UK office 32-34 Wigmore Street, London, W1U 2RR, and on the company's website www.fogl.com.