Operations Update

25 October 2012

Falkland Oil and Gas Limited

("FOGL" or "the Company")

Operations Update

FOGL, the oil and gas exploration company focused on its extensive licence areas to the South and East of the Falkland Islands, is pleased to announce the completion of the farm-out agreement with Noble Energy Falklands Limited ("Noble"), an affiliate of Noble Energy, Inc. and the signing of agreements with Petroleum Geo-Services (PGS) for the acquisition and processing of two new 3D seismic surveys. The Company is also providing an update on the Scotia well.

Noble farmout completed

Further to FOGL's announcement on 6 August 2012, the farmout to Noble has now been formally approved by the Falkland Islands Government. Therefore the agreement has now been completed and this represents a significant milestone for FOGL.

Two 3D seismic surveys commissioned

Two separate agreements have been entered into with PGS to acquire and process 3D seismic data over the joint venture's licences. The first survey will be located within the northern area licences and will cover a minimum area of 4,000 square kilometres. PGS will use the survey vessel M/V Ramform Sterling and the survey is expected to commence in late November 2012. This survey will be operated by Noble.

The second survey will utilise the survey vessel M/V Ramform Challenger within the southern area licences and will cover1,000 square kilometres. This survey is expected to commence in the first quarter of 2013 and will be operated by FOGL.

These surveys will require the consent of the Falkland Islands Government and the granting of an exploration licence to PGS to undertake this work. The precise locations of both 3D surveys are currently being finalised and a further update will be provided once the acquisition programme has commenced.

As a result of committing to these 3D seismic surveys the Falkland Islands Government has agreed in principle to extend Phase 2 of the northern area licences by two years to 15 December 2018 and the southern area licences by one year to 3 December 2016.

Scotia well update

Drilling of the Scotia well had been proceeding to plan and was ahead of schedule by approximately three days. A routine test on the blow-out preventer (BOP) revealed an equipment malfunction. The BOP has now been brought to surface in order to replace the failed component. In the light of problems encountered by a previous operator, FOGL had commissioned an extensive and independent examination of the BOP prior to the commencement of drilling. The recent malfunction is related to a part that had been used without problems during the drilling of the Loligo well and had been successfully tested earlier on the Scotia well.

The rig will be on a zero day rate whilst the repairs are being undertaken, although other costs will continue to be incurred and we will provide an update of costs after the well has been completed. We expect the repair work to take approximately 2 weeks to complete and as a result, there is likely to be a commensurate delay in reaching the total depth of the Scotia well.  

- Ends -

Enquiries:

Falkland Oil and Gas

 +44 (0) 207 563 1260

 Tim Bushell, Chief Executive

 Oriel (Nominated Advisor and Joint Broker)

 +44 (0) 207 710 7600

 David Arch / Gareth Price / Ashton Clanfield

 Jefferies Hoare Govett (Joint Broker)

 +44 (0) 207 029 8000

 Alex Grant / Chris Zeal / Graham Hertrich

 FTI Consulting

 +44 (0) 207 831 3113

 Ben Brewerton / Ed Westropp

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 26 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.