Mr. Philip O'Quigley reports

FALCON OIL & GAS LTD.-HUNGARY DRILLING UPDATE-CONTRACT WITH NIS EXTENDED

Falcon Oil & Gas Ltd.'s initial drilling operations on the Besa-D-1 well have reached total depth (TD) of 3,000 metres, having encountered gas shows.

Besa-D-1 is the second of a planned three-well program to evaluate the gas potential of the Algyo formation in the Mako trough licence. The well has now been cased to TD and is suspended pending further technical evaluation in order to determine an appropriate testing program later this year. No operational problems occurred during drilling.

In January, 2013, Falcon agreed a three-well drilling program with Naftna Industrija Srbije jsc (NIS) to target the Algyo play, whereby NIS made a cash payment of $1.5-million (U.S.) to Falcon in February, 2013, and agreed to drill three wells by July, 2014, at their cost. The July, 2014, date for completion of drilling and testing of the NIS three-well program has been extended to Dec. 31, 2014. This extension has been granted to allow NIS to:

• Complete the testing of Besa-D-1;
• Evaluate the hydrocarbon potential of the entire Mako trough, including the Deep Mako play;
• Fulfill the third well obligation of the NIS three-well drilling program.

Philip O'Quigley, chief executive officer of Falcon, commented:

"We are pleased to confirm that we have drilled, without any operational difficulties, the second of the three-well drilling program, with our partner NIS. The technical evaluation of the well results and the testing program will take place during the second half of 2014.

"In working together, Falcon and NIS have agreed to extend the completion date for the three-well program from July, 2014, to Dec. 31, 2014, in order to identify the appropriate location and geological target for the drilling of the third obligation well within our prospective acreage in the Mako trough."

This announcement has been reviewed by Dr. Gabor Bada, Falcon's head of technical operations. Dr. Bada obtained his geology degree at the Eotvos L. University in Budapest, Hungary, and his PhD at the Vrije Aniversiteit Amsterdam, the Netherlands. He is a member of AAPG, EAGE and SPE.

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