Falcon, PetroHunter Seal Deal on Beetaloo Basin Property in Australia

Falcon Oil & Gas Ltd. has closed the transaction to acquire its previously announced 50% working interest in PetroHunter Energy Corporation's 7 million acre prospect in Northern Territory, Australia (the "Beetaloo Basin").

As consideration for the Beetaloo Basin transaction Falcon issued PetroHunter US $20 million of Falcon securities convertible into common shares of Falcon stock on a one for one basis, in addition to the US $5 million paid by Falcon to PetroHunter on August 25, 2008. The conversion of the convertible securities will result in the issuance of a maximum of 28,888,888 shares of Falcon at a minimum deemed value of $0.72 per share.

Falcon has loaned PetroHunter US $5 million. The temporary bridge loan must be repaid within 120 days and bears interest at a rate of 10% per annum. PetroHunter will not receive the proceeds of the loan directly; rather, the loan proceeds will be advanced directly to certain creditors of PetroHunter who are due payment for services or other obligations directly related to the Beetaloo Basin and Buckskin Mesa properties. The loan is secured by a first mortgage in favour of Falcon on five wellbores owned by PetroHunter and by a pledge of US $7.5 million worth of the convertible securities issued to PetroHunter in connection with the Beetaloo Basin transaction.

Under the terms of the loan, Falcon also negotiated an amendment to the Beetaloo Basin purchase agreement and an amendment to the escrow agreement associated with the Initial Buckskin Mesa transaction. The amendment to the Beetaloo Basin purchase agreement reduces the maximum amount due to PetroHunter from US $7 million to US $3.5 million in the event that Falcon's share price at the time of receipt for a (final) prospectus with respect to the convertible securities is issued is less than $0.63 per share. The amendment to the Initial Buckskin Mesa escrow agreement provides that the final decision on the initial testing program for the five initial Buckskin Mesa wells requires mutual agreement between senior management of Falcon and PetroHunter.

Falcon and PetroHunter continue to work diligently to satisfy or waive or all conditions to the acquisition by Falcon of a 25% working interest in five wells located within PetroHunter's 20,000 acre Buckskin Mesa project located in the Piceance Basin, Colorado and an option to acquire a 50% working interest in the entire Buckskin Mesa property.


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