Interim Results

23 August 2012

Falkland Oil and Gas Limited

("FOGL" or "the Company")

Interim Results for the six months ended 30 June 2012

FOGL, the oil and gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, announces its Interim Results for the six months ended 30 June 2012.

Highlights

·; Equity placing raised £48.5m (US$75m) before expenses in January 2012 to fund forward drilling programme

·; Farm-out to Edison International SpA confirmed 26 June 2012

·; Leiv Eriksson rig under contract to FOGL on 31 July 2012

·; Loligo well spudded on 3 August 2012

·; Second farm-out to Noble Energy announced on 6 August 2012

·; Cash balance of US$220.7 million at period end

Richard Liddell, Chairman of FOGL, said:

"The first half of 2012 was a very significant period in the development of our business, with an equity issue raising gross proceeds of £48.5m (US$71.8m) in January 2012 and subsequent farmouts to Edison International and Noble Energy. FOGL is in the enviable position of having a very strong balance sheet, leading industry partners and the potential to realise value across our large acreage position in the Falkland Islands.

"Following the period end, we have entered into a very exciting phase for the business and our partners, commencing with the spudding of our high impact Loligo exploration well. I look forward to providing updates on our operations as the year progresses."

Enquiries:

Chairman's Statement

The first six months of 2012 were a very active period for the business as we made the final preparations for our exploration drilling programme, which is now underway. The equity placing in January, and farm-outs to Edison International SpA and Noble Energy were key elements in this process as we sought to manage shareholder risk, whilst maintaining sufficient equity and control to benefit from the upside potential contained within the licence areas.

Financials

The loss before tax for the six months was US$0.2m (2011:US$3.6m), with interest earned in the period of US$1.6m.

On 13 January 2012, 112.7m new ordinary shares were placed to raise approximately £46.5m (US$71.8m) after expenses.

Funds totaling US$55.2m for the reimbursement of a proportion of historical exploration costs and the option fee were received on completion of the Edison farm-out agreement. FOGL also received final settlement of US$24.3m from BHP during the period.

Cash Balance

FOGL started the year with US$107.9m in cash, of which US$41.3m were expensed in the exploration programme and US$2.6m used to cover administration costs. At 30 June 2012 bank deposits were US$220.7 m of which 17% were held in Sterling.

On the basis that two wells are drilled within budget, it is estimated that the Company's cash balance post the 2012 exploration campaign will not be less than US$200m.

Farm-out transactions

During the period the Company successfully completed a farm-out process in order to maximize exploration of the Company's large acreage position and to mitigate shareholder risk. On 26 June 2012 we announced completion of a farm out agreement with Edison International S.p.A. followed on 6 August 2012 by the execution of a second farm-out to Noble Energy Falklands Limited, an affiliate of Noble Energy, Inc., a leading global exploration and production company.

Loligo well spud

The Loligo exploration well 42/07-01, was spudded on Friday 3 August 2012. The well is located approximately 200 km east of the Falkland Islands. FOGL is the operator of the well, holding a 75% interest, and its joint venture partner Edison International Spa holds the remaining 25% interest in licence PL028. It is the first of a two well exploration programme using the Leiv Eriksson semi submersible drilling rig.

The well is designed to test the Loligo Complex, which is a large Tertiary aged stratigraphic trap with multiple reservoir objectives. It is anticipated that the well operations will continue for around 60 days.

Outlook

The Board of FOGL looks to the future with confidence, having both the corporate partners and the financial and management resources to realise the value within FOGL's licences, offshore from the Falkland Islands. With two wells scheduled to be completed during the next reporting period, this is a key stage in the Company's development.

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2012

All amounts included above relate to continuing operations.

Condensed Consolidated Statement of Financial Position

at 30 June 2012

Condensed Consolidated Statement of Cash Flows

for the six months ended 30 June 2012

Condensed Consolidated Statement of Changes in Equity (unaudited)

Notes forming part of the interim report

for the six months ended 30 June 2012

1. Accounting policies

The condensed 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 2011, which were prepared in accordance with International Financial Reporting Standards. The financial statements of the Group for the 6 months ended 30 June 2012 were approved and authorised for issue by the Board on 24 August 2012. These financial statements 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 2011 and are consistent with International Financial Reporting Standards adopted for use in the European Union.

Basis of preparation

The accounts have been consolidated to include the financial statements of FOGL Finance Limited, a wholly owned subsidiary.

The financial information for the six months ended 30 June 2012 and 30 June 2011 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 2011 has been derived from the statutory financial statements for that period. The statutory accounts for the year ended the 31 December 2011 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 $160,898 (2011: interim loss of $3,536,134) and on 303,186,932 (2011: 158,448,718) 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. Restricted Cash

Restricted cash relates to cash deposited in Escrow or Letter of Credit (LOC) accounts, required for operational purchases. In the event the goods are not supplied, the funds will return to FOGL. At 30 June 2012, FOGL had approximately $31.4million in LOC accounts and $26.5million in Escrow accounts.

4. Interim Statement

Copies of this Interim report for the six months ended 30 June 2012 will be available from FOGL's UK office 32-34 Wigmore Street, London, W1U 2RR, and on the company's website www.fogl.com.