Falkland Oil & Gas to Begin Multi-Well Drilling Program in 2007

John Armstrong, Falkland Oil & Gas chairman had the following comments at the company's annual general meeting: "FOGL has made considerable progress in the nine months since admission to AIM. We have more than doubled the size of our licence area and now have a vast acreage position of approximately 79,000 sq km which is equivalent to 312 North Sea style blocks. We have completed a 9,450 km 2D seismic survey. Following the relinquishment of 18 blocks earlier this month, FOGL continues to retain a high 90% average equity stake in its licence areas, arising from our holding of 77.5% of the 29,000 sq km licence area in joint venture with Hardman, and 100% of the 50,000 sq km licence area. A relinquishment of 98 blocks is due from the latter area in December 2007.

The results of the 2D seismic survey are encouraging, far exceeding our expectations identifying more than 130 leads. A number of different play types are indicated.

In the light of the seismic results, and to enable us to fund expanded exploration plans, we raised a further £10 million in May through a share placing. FOGL currently has £19.3 million in cash which we believe, on the basis of current estimates, will be sufficient to fund the Company's planned exploration activities through 2006.

With the expanded exploration plans and the Company's future strategy the exploration management and technical team has been strengthened. FOGL will be moving into a new office to accommodate this expanded team.

In June we commenced a further 8,000km 2D seismic survey to define the leads we have identified. We also have an option to extend this survey to 15,000 km. Some 1,600 km of this survey have already been recorded. As already announced, last month, we reached agreement with the Falkland Islands Government on a two year extension to the southern area licence. We are also planning a 2,000 sq km 3D seismic survey. We expect that this survey, together with the possible extra 2D seismic would take place in the next twelve to eighteen months.

At the same time as we progress the analysis and interpretation of seismic data, we are preparing for discussions with potential farminees. We have already received a number of approaches and intend to commence a formal program to attract new companies to join us in our Falkland Islands project in the second half of 2005.

Over the next 12 months we will continue to assess the data that we have obtained to date while carrying out further mapping and analysis. Our objective is to define about 20 drillable prospects with a view to developing a multi-well drilling program targeted to begin in 2007.

The progress that we have made since our IPO has been remarkable and the results that we have gained to date have exceeded our expectations. Our focus is on progressing the exploration program. We believe that our licences are in the right geological setting and have the potential to deliver further value to shareholders.