Interim Results

16 September 2014

Falkland Oil and Gas Limited

("FOGL" or "the Company")

Interim Results for the six months ended 30 June 2014

FOGL, the oil and gas exploration company focused on its extensive licence areas to the North, South and East of the Falkland Islands, announces its Interim Results for the six months ended 30 June 2014.

Highlights

· Progress towards next drilling campaign scheduled to start in Q1 2015

- Major 3D seismic acquisition programme completed in February 2014 and interpretation continues

- Eirik Raude deep-water rig contracted for the 2015 drilling campaign

- Five well drilling programme targeting over 1.3 billion barrels of gross prospective resources

- Interest of at least 40% in each licence ensures shareholders will have substantial equity exposure to these resources in the case of success

- FOGL is the largest licence holder of the six oil companies operating in the Falkland Islands with a net interest of over 40,000 km2

· Strong Financial Position

- Cash Balance of $109 million at period end

- Funded to undertake 2015 drilling programme

Richard Liddell, Chairman of FOGL, said:

"The first half of 2014 has been an active period for the Company with the completion of a the 3D seismic survey and the contracting of the Eirik Raude deep-water rig for a multi-well drilling programme commencing in Q1 2015. FOGL will be the only company drilling in both the northern and southern basins, and will have the largest overall equity participation.

"With our substantial partners and our strong financial position, we are well placed to capitalise on the opportunities that have been identified across our licences offshore the Falkland Islands. We have made excellent progress in preparing for the drilling campaign which could transform the Company."

Enquiries:

Chairman's Report

The first half of 2014 was marked by two major achievements, with the completion of a large 3D seismic programme and the contracting of a deep-water rig. In the South Falkland Basin multiple prospects have been identified from the 3D seismic data and with our partners Noble Energy Falklands Limited ("Noble Energy") and Edison International Spa("Edison"), we are continuing to evaluate the seismic data in order to finalise well locations for the 2015 drilling campaign. In the North Falkland Basin three drilling locations have been agreed with our Premier and Rockhopper Joint Venture.

Completion of the 12,000 km2 3D seismic survey

In February 2014, we announced that the PGS M/V Ramform Titan had completed a 12,000 km2 3D seismic survey over the Cretaceous Hersilia Fan complex within the Northern Area Licences. This completed the extensive 12,000 km2 3D seismic programme which the Company and its partners undertook after the 2012 drilling campaign. Specifically, the final part of this survey was designed to target a number of prospects and leads in the northern area of the South Falkland basin, including Hersilia, West Hersilia and Challenger.

Deep water rig contracted

On 3 June 2014, Premier Oil plc ("Premier") signed a contract with Ocean Rig for a dynamically positioned, harsh environment, semi-submersible drilling rig, the Eirik Raude. Simultaneously, a rig and cost share agreement was concluded with Noble Energy who will operate two wells in the South Falkland Basin where FOGL retains a 52.5% equity position. The remaining four wells in the North Falkland Basin will be operated by Premier and FOGL will participate in three of these wells with a fully carried position in two of them. FOGL's equity position in the North Falkland Basin programme is a substantial 40%.

In addition, a number of option slots that will facilitate additional drilling have been incorporated into the drilling contract. There are eight options which can be exercised prior to the rig being mobilised and up to eight further options that can be exercised during the drilling campaign. The total firm drilling programme is anticipated to last 240 days excluding mobilisation.

South and East Falkland Basin Licences

A full re-evaluation of the basin has now been conducted by the Noble Energy, which incorporates all existing well results, the 2D seismic and the new 3D datasets which are focused over the most prospective parts of the basin. The key conclusion of this work is that although gas was found in the Loligo and Scotia wells, the main hydrocarbon phase in the Diomedea area is expected to be oil. Detailed geophysical analysis has been performed on the new 3D seismic data with the objective of targeting oil rather than gas accumulations.

We are particularly encouraged by the prospectivity within the Diomedea Fan Complex. We have identified numerous prospects and leads and have in the last few months focussed our analysis on the five most attractive prospects, which comprise:

· Humpback: 510 mmbbls*

· Finback: 232 mmbbls*

· Caperea: 225 mmbbls*

· Stingray 266 mmbbls*

· Minke 240 mmbbls*

In the Cretaceous Fault Block area to the South, two prospects have been identified:

· Scharnhorst North: 188 mmbbls*

· Nurnburg: Evaluation ongoing

In the Hersilia Fan Complex three prospects, Hersilia, West Hersilia and Challenger, have been identified using the 3D fast-track data only. Work on these prospects is ongoing, but the final processed seismic data will be required to complete our assessment and this is expected later in 2014. Work on Loligo will also be undertaken once the final processed data is available.

No final decision has been made on which prospects will be selected for drilling and it is likely that a number of alternate locations will be developed, so that the selection of the second well is guided by the results of the first well. Currently, it is anticipated that the first well will be drilled on the Humpback prospect, within the Diomedea Fan Complex.

North Falkland Basin Licences

In the North Falkland Basin, FOGL will participate in three exploration wells, all with Premier as operator. Well locations have been agreed for each of the following prospects:

· Zebedee: 160 mmbbls (F1 & F2 reservoirs)*

121 mmbbls (F3 reservoirs)*

· Jayne East: 85 mmbbls*

· Isobel Deep: 240 mmbbls*

The drilling programme is expected to commence in Q1 2015. The first well is expected to be Zebedee, followed by Isobel Deep. In the event of a discovery at Isobel, an appraisal well may be drilled later in the campaign and so an early test of the Isobel/Elaine fan complex is logical. The rig will then move to the South Falkland basin before returning to the North Falkland Basin when the Chatham and Jayne East wells will be drilled. Any appraisal drilling or new programme wells resulting from the exercise of drilling options by any other Falkland licence holders will follow the last well in the firm campaign.

Discussions with the Falkland Islands Government, Premier and Rockhopper with regards to the potential unitisation of the Sea Lion Field took place during the reporting period and further meetings will take place during the second half of 2014.

Financials

The loss before tax for the six months was $1.3 million (2013: $0.9 million), with interest earned in the period of $0.7 million (2013: $1.2 million). Foreign exchange gains of $0.2 million (2013: losses of $0.4 million) were incurred, principally resulting from Sterling bank balances held to costs incurred in the UK.

At 30 June 2014 the Company had cash and bank balances of $108.7 million which is sufficient to fund the current proposals approved by the licence holders. FOGL is carried on the Jayne East and Isobel deep wells by Premier/Rockhopper. The Noble Farm-out agreement, covering the South and East Falkland Basin, provides a partial carry over the next two wells in this area.

Outlook

Since the end of the period we and our partners are continuing to process and analyse the latest 3D seismic data in order to high grade drilling locations ahead of the rig's planned arrival in Q1 2015.

The Board of FOGL views the future with confidence as we look forward to 2015.

* Mid case gross prospective resources based on FOGL management estimates

Falkland Oil and Gas Limited

Consolidated Condensed Statement of Comprehensive Income

For the six months ended 30 June 2014

All amounts included above relate to continuing operations.

Falkland Oil and Gas Limited

Consolidated Condensed Statement of Financial Position

At 30 June 2014

Falkland Oil and Gas Limited

Consolidated Condensed Statement of Cash Flows

For the six months ended 30 June 2014

Falkland Oil and Gas Limited

Consolidated Condensed Statement of Changes in Equity (unaudited)

For the six months ended 30 June 2014

Falkland Oil and Gas Limited

Notes forming part of the Interim Results

For the six months ended 30 June 2014

1. Accounting policies

The consolidated condensed unaudited interim financial information set out in this report is based on the financial statements of Falkland Oil and Gas Limited ("FOGL"). The condensed financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2013, which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The financial statements of the group for the 6 months ended 30 June 2014 were approved and authorised for issue by the Board on 15 September 2014. These financial statements have been prepared in accordance with the accounting policies that are expected to be applied in the Report and Accounts of the group for the year ending 31 December 2014 and are consistent with International Financial Reporting Standards adopted for use in the European Union.

The Directors are in the process of assessing the impact of the new standards, amendments to existing standards and interpretations in order to determine their impact on the Group. Based on the Directors assessment so far, the effect of the changes is considered likely to affect disclosure only.

Basis of preparation

The financial information for the six months ended 30 June 2014 and 30 June 2013 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 2013 has been derived from the statutory financial statements for that period. The statutory accounts for the year ended the 31 December 2013 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 Company 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 loss per share is calculated on the reported loss for the period of $1,295,000 (2013: interim loss of $941,000, year end 31 December 2013: loss of $4,005,000). The weighted number of shares and the weighted average number of diluted shares is set out below. There is no difference between diluted loss per share and the basic loss per share for the periods ended 30 June 2014 and 30 June 2013 as the group reported a loss for these periods. There is also no significant difference between the basic and diluted earnings per share for the year ended 31 December 2013.

3. Intangible assets

4. Cash and cash equivalents

5. Interim Statement

Copies of this Interim report for the six months ended 30 June 2014 will be available from FOGL's UK office Floor 8, 101 Wigmore Street, London, W1U 1QU, and on the company's website www.fogl.com.