Issue of options to directors

23 December 2011

Faroe Petroleum plc

("Faroe Petroleum" or the "Company")

Issue of options to directors

On 22 December 2011 the Company granted the following share awards in the form of nil-cost options over ordinary shares of 10p each in the share capital of the Company ("Ordinary Shares") to the executive directors:

Exceptional Performance Incentive Plan

The Company's Remuneration Committee ("the Committee"), which is comprised wholly of non-executive directors, has made awards in the form of nil-cost options under the new Faroe Petroleum plc Exceptional Performance Incentive Plan ("EPIP") in respect of Ordinary Shares:

The Committee has introduced the EPIP as a long term incentive plan, which will deliver appropriate awards to senior management on the delivery of exceptional corporate performance. The EPIP is, to a large extent, a replacement for the existing traditional option plan. Prior to the implementation of EPIP, the Committee sought and gained the support of its major and institutional shareholders. Nevertheless in order to meet the Company's high standards of corporate governance, these awards are subject to the approval of the EPIP by shareholders of the Company at its next general meeting. Details of the EPIP will be circulated to shareholders as part of the notice of general meeting.

In accordance with the rules of the EPIP, the vesting of these share awards will be subject to the achievement of challenging performance conditions measured over the three year period from the date of grant:-

·; a stretching absolute total shareholder return ("TSR") target calculated on a compounded basis from the average of the closing share prices in the 30 day period prior to the date of award as set out in the table below :-

·; in addition no awards will vest unless the Remuneration Committee is satisfied that the underlying strategic performance of the Company is consistent with the absolute total return levels attained.

At the end of the three year performance period, a minimum of 50% of any shares which vest must be retained for a further two years. Providing that stretching performance conditions measured over a five year period from the date of grant of the initial award have been achieved, then the number of shares retained may be matched as set out in the table below:-

Throughout the design and implementation of the EPIP, the Committee has been advised by PricewaterhouseCoopers LLP.

Faroe Petroleum plc Co-Investment Plan

Graham Stewart, Iain Lanaghan and Helge Hammer, notified the Company yesterday that on 22 December 2011 they had acquired Ordinary Shares as shown in the table below ("Investment shares"), and the Remuneration Committee, which is comprised wholly of non-executive directors, has made the following Matching Share awards in the form of nil-cost options under the Faroe Petroleum plc Co-Investment Plan (the "CIP") at the same purchase price as the Investment Shares being £1.5655 per Ordinary Share ('Matching Shares'):

The CIP provides for the Remuneration Committee to allocate up to three Matching Shares, subject to the achievement of certain performance conditions, for every Investment Share that would have been purchased if the gross salary deferred had been invested in shares.

The release of these Matching Share awards, in full or in part, is subject to various stretching performance criteria and the continued employment and retention by the participant of the Investment Shares for three years from the date of grant.

Following these grants, Graham Stewart, Iain Lanaghan and Helge Hammer have total options over ordinary shares, exercisable at various prices up to 186.25 pence, under the Faroe Petroleum Option Scheme, the EPIP, the CIP and the Faroe Petroleum Share Incentive Plan as follows:

Graham Stewart also holds an option to acquire 84,547 ordinary shares under a Long Term Incentive Plan exercisable at the nominal price of 10 pence per share.

Tim Read Chairman of the Remuneration Committee commented

"The EPIP is an entirely new "longer-term" incentive plan with demanding market-driven performance targets. It represents a key change to the current remuneration structure for the executive directors and, equally importantly, for those more junior members of Faroe's management team, who are making important contributions to the creation of shareholder value."

"The proposed EPIP is designed to provide clarity in terms of the size of shareholding which an individual could build in the Company. |It represents a significantly longer performance and holding period than the market norm and is subject to a mixture of demanding comparative and absolute total shareholder return metrics. The executives will only benefit from the EPIP if significant returns to shareholders are generated and the business strategy is successfully implemented."

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