http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00006234

GENERAL DEVELOPMENT OF THE BUSINESS OF FALCON

Development of the Business During 2011

On April 11, 2011, Falcon issued 87,050,000 units (the “2011 PP Units”) at $0.16 (CDN$0.15) per 2011 PP Unit by way of a non-brokered private placement for aggregate gross proceeds of CDN$13,058,000. Each 2011 PP Unit consisted of one common share in the capital of Falcon (a “Common Share”) and three-quarters of one Common Share purchase warrant (each, a “2011 PP Warrant”), each whole 2011 PP Warrant being exercisable into one Common Share for a period of 36 months from the date of its issuance at an exercise price of $0.19 (CDN$0.18) per Common Share. A finders’ fee of $149,000 is due to a non-related entity.

On April 28, 2011, Falcon Australia entered into an Evaluation and Participation Agreement (the “E&P Agreement”) with Hess Australia (Beetaloo) Pty Ltd. (“Hess”). By the terms of the E&P Agreement, Hess will pay $17.5 million to Falcon Australia as a participation fee for the exclusive right to conduct operations for the exploration, drilling, development and production of hydrocarbons from three of the four Permits, and excluding an area comprising 100,000 acres surrounding the Shenandoah-1 well (the

“Area of Interest”). In addition, Hess will pay Falcon $2.5 million as consideration for warrants to acquire 10,000,000 common shares in the capital of Falcon at an exercise price of CDN$0.19 per share expiring 42 months from the date of issuance.

Hess shall acquire seismic data, at is sole cost of at least $40.0 million, over the Area of Interest within 18 months of the execution of the E&P Agreement. After acquiring the seismic data, Hess shall have the right to acquire a 62.5% working interest in the Area of Interest. If Hess acquires the working interest, they commit to drill and evaluate five exploration wells at their sole cost, one of which must be a horizontal well. All costs to plug and abandon the five exploration wells will also be borne solely by Hess. The drilling and evaluation of the five exploration wells must meet the minimum work

requirements of a work program. Costs to drill wells after the five exploration wells will be borne 62.5% by Hess and 37.5% by Falcon Australia.

By December 31, 2011, Falcon Australia must test and complete the Shenandoah-1 well at their sole cost, and in accordance with the Work Program. After testing and completion, Falcon Australia must provide Hess copies of the data obtained from such activities, and Hess must pay Falcon Australia $2.0 million for the data.

The Company will pay a “success fee” to two advisors in the aggregate amount of 5% for services provided in conjunction with the E&P Agreement with Hess. The success fee is based on the cash or cash-equivalent value of any net amount received directly or indirectly by the Company, including the participation fee, cost of seismic data commitment and cost of drilling commitment. The transaction as a whole is subject to receipt of all governmental and regulatory consents, including the TSX Venture Exchange.