Long term incentive plan & share option scheme

Friday 30th December 2011

Falkland Oil and Gas Limited

("FOGL" or "the Company")

FOGL LONG TERM INCENTIVE PLAN AND SHARE OPTION SCHEME AWARDS

FOGL, the oil & gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, announces the following arrangements in respect of awards to be made under its Long Term Incentive Plan and Share Option Plan incentive programmes for directors:-

THE FOGL LONG TERM INCENTIVE PLAN (LTIP):

The grants awarded under the FOGL LTIP have a three-year performance period and a ten-year term. Each year, at the discretion of the Remuneration Committee a new grant is awarded, and for 2011 new grants have been approved for executive directors as follows:

The Size of Grant: Grants are awarded under the LTIP as a combination of restricted shares (par value options) up to a maximum of 50% of annual salary, and options with a market value exercise price, up to a maximum of 100% of annual salary.

Restricted Share Vesting: Restricted shares will vest on the achievement of strategic objectives and operating milestones over a three-year performance period. Continued employment with FOGL is required for vesting.

Market Value Option Vesting: Options will vest according to absolute share price growth calculated over three years. Growth under 33% will not be rewarded. The total award will be calculated by reference to the total number of days on which this target 33% share price growth is exceeded during the three-year period, with a maximum award possible where the average growth reaches 73%. Continued employment with FOGL is required for vesting.

Exercise Period: Grants vested under either or both plans may be exercised up to ten years from the date of award.

Exercise Price: The exercise price for the market value options for the 2011 award is 70p, being a premium of 37% above the Company's share price of 51p, as at close on 29th December 2011.

Awards: In accordance with the scheme rules, grants have been awarded to Tim Bushell and Colin More today, 30th December 2011, as follows:-

Tim Bushell - 196,078 restricted shares have been awarded, calculated as 50% annual salary divided by the Company's share price as at close on 29th December 2011.

285,714 market value options have been awarded, calculated as 100% annual salary divided by the exercise price of 70p.

Colin More - 176,471 restricted shares have been awarded, calculated as 50% annual salary divided by the Company's share price as at close on 29th December 2011.

257,143 market value options have been awarded, calculated as 100% annual salary divided by the exercise price of 70p.

THE FOGL SHARE OPTION SCHEME:

Grants are awarded under the FOGL Share Option Scheme as market value options.

The previous options were awarded to executive directors in three tranches. As previously announced, the first tranche lapsed on 31 December 2010, and was replaced with a new one-off option grant so that the total market value (taken at the relevant dates of grant) of all the shares under option under the FOGL Share Option Scheme did not exceed four times salary. During 2011, in recognition of the increased level of activity in the Company, the board approved an increase to the salary multiple from four times to five times salary. Further tranches have lapsed or will lapse during 2011 and have been replaced by new one-off option grants as follows:

Awards of options will be made to non-executive directors at an exercise price of 70p.

Conditions: The conditions described above under the LTIP for the market value options, in relation to Vesting, Exercise Period and Exercise Price, apply also to market value options awarded under the Share Option Scheme.

Awards: In accordance with the scheme rules, the following grants have been awarded today, 30th December 2011:-

Tim Bushell - 620,000 market value options have been awarded, calculated as the value of the lapsed options of £234,000 plus one times salary, divided by the exercise price of 70p.

Colin More - 565,714 market value options have been awarded, calculated as the value of the lapsed options of £216,000 plus one times salary, divided by the exercise price of 70p.

Richard Liddell - 240,000 options have been awarded.

David Hudd - 120,000 options have been awarded.

Tim Jones - 120,000 options have been awarded.

- Ends -

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