FOGL.L Regulatory News (FOGL)

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Thursday 19 May 2011

Falkland Oil and Gas Limited

("FOGL" or "the Company")

Rig Contract Confirmed

FOGL, the oil and gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, announces that it has signed an assignment agreement and associated documents (together the "Rig Contracts") with Borders & Southern Petroleum plc. ("B&S") and Ocean Rig 1 Inc. to contract the Leiv Eiriksson for two firm drilling slots. The rig is currently expected to arrive in the Falkland Islands in the fourth quarter of 2011. FOGL expects to access the rig for the third and fourth slots in the combined B&S and FOGL programme and to commence drilling in the first quarter of 2012.

As announced on 19 April 2011 the Company is currently funded for a deep well on Loligo, a prospect within the Tertiary Channel play which has estimated Pmean reserves of 4,700 mmbbls. The well will have an estimated duration of 50 days. Based on its latest cost estimates and assumptions, the Company also has sufficient funds for a second well on either Loligo (as an appraisal well), or on one of the other high ranked prospects such as Nimrod, Vinson or Inflexible.

As an alternative, FOGL is also considering options to drill the second well on one of the deeper Mid Cretaceous prospects such as Scotia (Pmean reserves of 1,060 mmbbls). Such a well would involve additional cost due to its greater total depth and the Company continues to explore options to provide additional financial flexibility around its drilling options. In particular, the Company would look to fund this additional cost principally via a farmout and it is currently in discussion with several parties who have expressed an interest in participating in our exploration drilling programme.

Further to the announcement on 19 April 2011 and, as a result of the signing of the Rig Contracts, the Placing and the RAB Arrangements have become unconditional other than in respect of admission to trading on AIM. Application has been made for admission to trading on AIM of 45,714,281 Placing Shares and 15,103,978 RAB Shares ("Admission"). Admission of the Placing Shares and the RAB Shares is expected to become effective in on around 24 May 2011, following which the Company will have 207,235,325 Ordinary Shares in issue.

Tim Bushell, Chief Executive of FOGL, commented:

"We are delighted to have secured the Leiv Eiriksson which, together with the successful completion of the Placing, positions us to drill two wells commencing in Q1 2012."

Enquiries:

The technical information included in this announcement has been reviewed, verified and compiled by the Company's geological staff, including a qualified person, Colin More BSc., MSc. (Exploration Director), who has over 25 years of experience in petroleum exploration, for the purpose of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in respect of AIM companies, which outline standards of disclosure for mineral projects. Mr More is a member of the Geological Society of London, the American Association of Petroleum Geologists and the Society of Exploration Geophysicists.

Oriel Securities, which is authorised and regulated in the United Kingdom by the Financial Services Authority (the "FSA"), is acting as Nominated Adviser broker and bookrunner to the Company for the purposes of the AIM Rules for Companies and the AIM Rules for Nominated Advisers in connection with the Placing and Admission and is not acting for, and will not be responsible to, any person other than the Company for providing the protections afforded to customers of Oriel Securities or for advising any other person on any transaction or arrangement referred to in this announcement.

No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Oriel Securities or by any of its affiliates or agents as to, or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

Defined words and terms used in this announcement shall have the same meaning as ascribed to them in the Company's announcement on 19 April 2011.

Notes to Editors

FOGL intends to utilise the Leiv Eiriksson to drill its first well on the Loligo complex. This is a prospect within the Tertiary Channel play which has estimated Pmean reserves of 4,700 mmbbls. The Loligo complex comprises multiple reservoir objectives which have previously been referred to as the Loligo prospect, together with a number of additional underlying reservoir targets. FOGL is planning to drill a well to approximately 4,000 metres below sea level which will be designed to penetrate five separate reservoir targets, lying between 3,000 and 4,000 metres below sea level. This includes, the T1 and T2 Loligo reservoirs, together with three deeper independent reservoir objectives named 'Trigg', 'Trigg Deep' and 'Three Bears'. The well is expected to spud in Q1 2012 and take approximately 50 days to drill.

FOGL has developed a range of options for the second well. The final choice will be dictated by the results of Loligo and also, the two wells Borders and Southern is planning to drill in late 2011 / early 2012. If Loligo proves successful, FOGL could drill an appraisal well on Loligo, or alternatively another prospect within the Tertiary Channel play such as Nimrod (Pmean reserves of 1,500mmbbls) or Vinson (Pmean reserves of 733 mmbbls). If the Loligo results are disappointing, the most likely drilling candidates are within the Mid Cretaceous fan play, with the Scotia prospect (Pmean reserves of 1,060 mmbbls) being FOGL's preferred option. FOGL has undertaken a considerable amount of technical work on the Mid Cretaceous Fan play over the last year, including the reprocessing of all its existing seismic data. This has resulted in a number of new prospects being identified, several of which have strong seismic amplitude and AVO support. The presence of a thick section of high quality sandstones within the Toroa well has also improved the Company's confidence with respect to the possible presence of a good quality reservoir within this play. The Mid Cretaceous play is currently being pursued elsewhere in the South Atlantic on both the African and South American margins, as a result of the success of this play offshore Ghana. Any well on the Scotia prospect would be drilled to a total depth of approximately 5,000 metres below sea level, in a water depth of c.1,800 metres.

Finally, in the event of success for Borders & Southern on its Darwin prospect, FOGL may consider drilling the second well on the nearby Inflexible prospect (Pmean reserves of 250 mmbbls).