Mr. John Craven reports

FALCON OIL & GAS LTD.-COMPLETION OF AUSTRALIAN BEETALOO BASIN FARM-OUT AND COMMENCEMENT OF NINE WELL EXPLORATION AND APPRAISAL PROGRAM

Falcon Oil & Gas Ltd.'s 98-per-cent subsidiary, Falcon Oil & Gas Australia Ltd., further to the company's press release of May 2, 2014, has completed its farm-out agreement and joint operating agreement with Origin Energy Resources Ltd., a subsidiary of Origin Energy Ltd., and Sasol Petroleum Australia Ltd., a subsidiary of Sasol Ltd., each farming into 35 per cent of Falcon's exploration permits in the Beetaloo basin, Australia.

Key transaction details are:

• Falcon retains a 30-per-cent interest in the permits.
• Falcon has received $20-million (Australian) in cash from the farminees.
• Origin is appointed as operator with immediate effect.
• Farminees to carry Falcon in a nine-well exploration and appraisal program over the next four years, detailed as follows:
  • Three vertical exploration/stratigraphic wells and core studies;
  • One hydraulic fracture stimulated vertical exploration well and core study;
  • One hydraulic fracture stimulated horizontal exploration well, commercial study and 3C resource assessment;
  • Four hydraulic fracture stimulated horizontal exploration/appraisal wells, microseismic and 90-day production tests.
• Drilling and testing are specifically targeted to take the project toward commerciality.
• Farminees will pay for the full cost of completing the first five wells estimated at $64-million (Australian), and will finance any cost overruns. This drilling program will commence by mid-2015.
• Farminees to pay up to the full cost of the next four horizontally fracture stimulated wells, 90-day production tests and microseismic with a capped expenditure up to $101-million (Australian), any cost overrun financed by each party in proportion to its working interest.
• As part of the agreements to reduce the overriding royalties from what was originally 12 per cent to 1 per cent, farminees will pay their pro rata share ($14-million (U.S.) (approximately $15-million (Australian))) of the two five-year call options entered into by Falcon as part of agreements announced on Nov. 1, 2013, with CR Innovations AG and Dec. 17, 2013, with the TOG Group, should the farminees and Falcon decide to exercise the call options.
• Farminees may reduce or surrender their interests back to Falcon only after the drilling of the first five wells or the drilling and testing of the next two horizontally fracture stimulated wells.

Philip O'Quigley, chief executive officer of Falcon, commented: "I am delighted to announce we have completed the agreements with Origin and Sasol for our transformational farm-out of our Beetaloo acreage. Together with $20-million (Australian) cash upfront, the deal is worth up to approximately $200-million (Australian) to Falcon. We look forward to the immediate commencement of the nine-well exploration and appraisal program."

We seek Safe Harbor.