Faroe Petroleum Cross-Assigns 2 UK Central North Sea Licenses

Faroe Petroleum has announced the cross-assignment of two UK Central North Sea licenses. This cross-assignment adds a new and potentially significant prospect to Faroe Petroleum's substantial portfolio.

UKCS Licenses P.1459 (Block 13/24d) and P.1404 (Block 13/25a) Blocks 13/24d and 13/25a located in the Central North Sea east of the Blake Field, contain the shallow (1,200ft) 'Fat Cat' Lower Cretaceous prospect which was partially tested by the 13/24a-2A well drilled by Amoco in 1981.

By means of cross assignment, the parties to License P.1459 (Block 13/24d) and License P.1404 (Block 13/25a formerly West Halibut) have equalized their interests in each license.

The new equities in each license are:

Company Equity

• Petro-Canada UK Limited (Operator) 45.0%
• Elixir Petroleum (UK) Limited 12.5%
• Faroe Petroleum (U.K.) Limited* 25.0%
• Granby Enterprises Limited 12.5%
• Reach Exploration (UK) Limited 5.0%

* before potential exercise of option by First Oil

License P.1404 has been converted to a traditional license and the UK's BERR (Business and Enterprise Regulatory Reform) has agreed to vary the terms of License P.1459 so the time periods of the two licenses match and any well drilled on the Fat Cat prospect (which lies within P.1459 and P.1404) will count towards the continuation of P.1459 into its Second Term, even if such a well is drilled on P.1404.

A combined work program, including the acquisition of high resolution, high density 2D seismic data (completed in 2007), and the drilling of a contingent appraisal well (prior to December 2009) has been agreed with BERR. Interpretation of these data, in addition to the completion of various technical studies will determine the technical and commercial viability of drilling a well to test the prospect.

While Faroe currently holds a 25% interest in these licences, First Oil has an option to acquire half of Faroe's interest (12.5%) in UKCS Licenses P.1459 (Block 13/24d) and P.1404 (Block 13/25a) in connection with the farm-in agreement on the Wissey gas field interest, acquired from First Oil by Faroe (Wissey, in which Faroe
holds 18.75% equity interest, is scheduled to come on stream later in August).

Chief Executive of Faroe Petroleum, Graham Stewart, commented, "This is an exciting prospect, which is large and has been de-risked by a well drilled previously on the same structure, which, despite encountering hydrocarbons, was not tested at the time. Its location is attractive with a choice of accessible infrastructure for a
possible development route, and the license benefits from a strong and experienced operator, Petro Canada, who has had considerable success already in the Moray Firth area, in which the prospect is situated.

"The new seismic survey over the prospect has already been acquired, and we therefore look forward to completing the interpretation and reaching an early decision on the feasibility of drilling the prospect by the end of 2009, to become part of our ongoing drilling program, which includes several near term wells to be drilled in
2008, on East Breagh, West Breagh, Marsvin, South East Tor and Hyme."