U.S. OIL and GAS plc's (Ticker: USOP) core activities are in the USA, with ongoing exploration activity in Nevada where the company holds a large lease acreage.

17 May, 2013 - U.S. Oil & Gas Plc - Company Statement

U.S. Oil & Gas Plc.
("U.S. Oil" or the "Company")
Company Statement

U.S. Oil & Gas Plc (GXG London: USOP, OTC New York: USOPY), the oil and gas exploration company with exploration assets in Nevada, reports that its interim results to 31 March 2013 will be published shortly and that it has funding for another drill.

The Company is responding directly to claims and allegations recently made on the internet, in the form of a Q & A (Questions and Answers) to the Chairman, Brian McDonnell, which can be found below.

The Company expects shortly to receive an updated Competent Person's Report (CPR) on its Hot Creek Valley asset and intends to invite all shareholders to a presentation on the results of the CPR and offer an opportunity to have questions answered. This Q & A is not intended to substitute for the CPR presentation.

The Company has chosen to release this Q & A in RNS form, rather than simply publishing it on the website, to ensure that it reaches all investors.

Statement by Chairman Brian McDonnell

Dear Investor,

As Chairman and CEO of U.S. Oil & Gas, I would like to answer at least some of the questions raised since the last RNS news release. We have assembled the following list of questions from numerous sources, including bulletin boards and emails. We have tried to represent the questions as close to their original form as possible, even where they seem at times provocative. I hope that in this Q & A we can satisfy at least some of the concerns you have raised.

We have arranged the questions into categories regarding "Technical", "Trust", "Competence", "Communications" and "The next stage".

Yours sincerely,

Brian McDonnell

(Chairman & CEO)

Technical

Q: What was the rationale for choosing the Eblana #1 drill location. It's been suggested that it was not the location where the data sets came together but was chosen to prove the IPDS technology, which would be a conflict of interest.
A: The Eblana 1 location was where the datasets most closely agreed. No particular dataset was given undue weight.

Q: Was the IPDS technology misleading or did it fulfil expectations? Does the lack of commercial flow mean IPDS was a mistake and a waste of money?
A: IPDS was a valuable part of the overall survey picture. We didn't depend on it exclusively, but it was enormously useful. Our discovery proves that. We found the oil where others have repeatedly failed. The dry well risk ratio in Nevada is reported as 15:1.

Q: What was the rationale behind returning to the workover again and again.
A: We described in the 8 May 2013 results RNS what we were doing. The first part of the programme was to cement the well, perforate the potential payzones and briefly test each zone. The second part of the programme was designed to identify the producer zones and large fractures. The intention with the last testing programme was to extend the
perforated intervals in two of those zones to increase and stabilize flow with the aim of obtaining flow from above the oil/water contact.

This part of the programme was also designed to confirm the continuity of oil flow and to generate the maximum amount of data ahead of the finalising of a Competent Person's Report (CPR). That data was an absolute requirement if the CPR was to have as full a view as possible of the asset.

Q: It is said you had problems with the drill from the start. Is that true? Did you do DST testing and if not, why not?
A: In Nevada, drilling is notoriously difficult from a well stability point of view. In our case, we also had multiple zones, which gave us the equivalent of 20 wells in one. As regards a DST, that could cost up to $1million for each zone, and we had 42 zones. In addition, formations in Nevada can be too unstable for open hole. A lot of risks would have been associated with a DST. We therefore decided not to go down that route.

Q: There seem to be discrepancies between the data released by Nevada Division of Minerals (NDOM) and what the company has been saying. Can you explain that?
A: The information from the Company has been accurate and reliable. The NDOM insists that it never implied the Company was lying or misleading NDOM.

Q: Did we drill deep enough with EB1 (8550ft)?
A: Drilling Eblana 1 deeper was not a risk we were willing to take given the geological uncertainties. We know much more now.

Q: Which survey technique was most useful in hindsight?
A: They all have to be taken together. No single technique can be allowed to dominate decision making.

Q: How many technicians have worked on the data interpretation over the three workovers?
A: Five professionals (excluding Company staff) worked on the data interpretation.

Q: What use is a discovery if you can't get it to flow.
A: This was an exploration well the main purpose of which was to collect data to help prove the resource and target well drilling. We had hopes we could get a commercial flow from it, and the data made that hope more than reasonable.
It didn?t work out that way, as the data suggests the well is a little distance from the zones. But this well is what will give us our CPR statement of oil volumes in place etc.

Q: Why did you have to go back so many times to the workover and still not get a flow? Surely there's something wrong with your methods or your experts?
A: As far as our experts are concerned, they found the oil in an explorer's graveyard. We believe that counts as a resounding success.

Collecting data for periods much longer than our testing from a well showing oil is not at all unusual. We needed to understand how each zone was behaving. We needed to be sure our perforations were in the best places. We're talking about 1100 ft of possible pay here. It's a huge distance.

We found the best zones, we consistently flowed oil and we confirmed our discovery. If we had not persisted in order to get all that data and the oil, we would not have been able to say the field was a confirmed discovery. So yes, we could have moved on to Eblana 2, but the Company would not have the confirmed discovery of a new field, and the coming CPR would be much less comprehensive.

Q: How can you have 1100ft potential payzone and still not flow? Why did that come down to 150ft and two zones? What happened to the rest. Was reporting 1100 ft just hype? You said this well "may prove commercial". Why hasn't it? What went wrong?
A: The 1100 ft was what the data during the drill told us in terms of C readings, and we reported that in terms of potential zones. The reported 150ft is confirmed, not potential.

We certainly detected hydrocarbons in a large number of zones; the logs confirm that. Some zones in testing have oil that is presently mobile, some not mobile. We believe, as we have explained, that we were in fact a short distance from the structures themselves. A small distance can make the difference between high and low water cut. The size of the zones and flow properties are not necessarily related.

In terms of the 1100 ft reported, we believe we had a large number of "echoes" from zones that were oil bearing and from which the oil has migrated, possibly after the Nevada bomb tests caused local earth tremors. A few decades passing would still leave the oil signatures, but the oil would have migrated to other zones.

Q: What happened to the promising upper zones? Why didn't you test them first?
A: Conventionally, you test from bottom up. We had issues with the upper parts of the bore that had to be dealt with, so we moved on to equally promising zones. These decision have to be taken. It's a judgement call. We did not have unlimited time. One of the shallow zones certainly has potential.

Q: Why was Reilly Paige hired for the first workover, rather than a bigger name company?
A: Reilly Paige have drilled numerous wells in Nevada. It would have been irresponsible not to have tried out a company with local knowledge. The same went for the drill geologist who designed the well.

Q: Why the emphasis on a new CPR?
A: Because we told investors we were going to try to move the asset up the value chain in terms of the PMRS classification system, ultimately towards proved reserves. This report is an important stage along the way. An independent CPR is also the best way of countering the disinformation constantly being circulated about the Company's integrity and competence.

Trust

Q: Have members of the board, directly or as beneficial owners, been selling and/or buying shares?
A: No.

Q: Does US Oil have any connections with Chainman Oil (owners of neighbouring leases in Hot Creek Valley) or any other lease holders in Hot Creek Valley?
A: No.

Q: Has the company been investigated by the FSA (now FCA)?
A: The FSA does not comment on whether or not a company is under investigation. However, companies under formal investigation are notified of such investigations. The company has never received any such notification.

Financial

Q: Are we still funded for a further drill?
A: Yes, we have sufficient funding for another drill. We were highly cost efficient in the drill and the testing.

Q: Have you been approached by any would-be buyers?
A: We will make announcements on any such approaches according to the exchange rules when they apply. That is the normal procedure for a listed company.

Q: If you do have to raise cash, will you offer the shares to all shareholders rather than just a few select investors?
A: Should the Company be required to raise additional funds, we will consider all available options.

Q: Would you consider talking to a major oilie now about developing the field in conjunction with them?
A: We are open to all kinds of ways forward, and we'll take a view on those as they come.

Q: Why didn't you raise some more funds at £4?
A: At that point, the Board did not believe it was necessary or in shareholders' interests to raise more funds and dilute further.

Q: Why did we waste so much time and money on ADRs?
A: It was not a waste and they were not a large cost. ADRs are infrastructure for the development of the Company that need to be in place for when you require them. It's no good waiting until then to set them up.

Q: You said at the last AGM that ADRs were imminent. Why did they take so much longer?
A: Firstly, when the share price fell in November 2012 the environment became cautious. People were naturally wanting to see what happened next. Secondly, we had people making untrue and highly damaging allegations about the Company to the institutions concerned and just about every other body they could think of. They meant to interfere with our
business, and they did.

Q: Have you any plans to list USOP on a bigger trading exchange? GXG may have served a purpose but surely it's time to move on?
A: Not at present. It costs a lot and it takes many months. What we need at the moment is stability so we can build the Company for the next stage.

Competence

Q: People say the well logs have been misinterpreted by the company. Isn't that incompetent?
A: Our logs have been interpreted for us by individuals with world-class expertise. Those currently commenting via the internet are welcome to come and debate with our experts at the forthcoming presentation.

Q: According to some investors posting on the internet, the company fails to comply with BLM and NDOM rules. Can you comment on that?
A: We are fully compliant with BLM and NDOM rules. An NDOM official even went on record on TV saying we were in full compliance. The Company has submitted literally hundreds of documents and reports to authorities. All issues are dealt with as they arise. Nobody should be in any doubt that the authorities wouldn't hesitate to shut down a drill if they
felt the Company was not compliant. That's their job.

It is worth pointing out that certain shareholders invited television coverage of this drill against the Company's wishes. State and Federal officials were suddenly under a spotlight and besieged daily by emails and phone calls from shareholders and others seeking operational information or making carefully calculated defamatory statements. This is not a helpful environment for our operations, unfair to the officials concerned and unfair to the Company.

Q: GXG Markets issued a reprimand about the timing of the announcement of the share option scheme announcement. Why can't this company get governance right?
A: The issue that led to that arose because of a complex situation for which we have apologised. GXG say the matter is closed, and we would like to leave it there. As far as governance goes, this Company is happy to stand by its
processes.

Q: When is this company going to have proper administration so that regulatory problems don't arise and shareholders are dealt with properly? Isn't it time to do things like other companies?
A: The Company is properly administered and managed. It communicates with shareholders in the appropriate and legally sound way via RNS, AGM, website and corporate presentations. However, I agree that now is the time to upscale our operations. You don't drill, case, complete and test a well as economically as we did by having a large organisation.
We have our discovery now, and this is the time to develop the Company. How we do that we are still working through.
It will involve beefing up management and expertise in all areas. All of the pathways involve a bigger, more administratively capable organisation. If we had extended ourselves before this, we may either have run out of cash or faced much larger share dilution than we have up to now.

Q: Why do you spend so much time on the drill site when you should be running the company?
A: The general attitude out there is that a small explorer is going to fail and go bust, so basically a supplier tries to extract every cent out of you they can. That's why you have to be on the spot. You can't leave those fights to the drilling manager, and you can't handle it across time zones. By being there, especially for the first drill and tests, we could use top class contractors and still bring in our operations well below the usual cost.

Q: Why can't we have an oil industry person as CEO?
A: Because this job is in large part about controlling spending, intelligent strategising and tough negotiating. I believe I do a good job on all of those things. As far as exploration goes, any CEO will act on the technical advice he receives. We have an extended team of seven people working on that side. We intend to develop the technical side of the board as part of the next phase for the Company. We are already embarked on that.

Communications

Q: Why are communications with shareholders in this Company so bad that shareholders have to go off and find information for themselves? Why wouldn't you give us actual flow rates? You said you got a consistent flow. Why didn't you release permeabilities?
A: Nobody has been deliberately trying to keep shareholders in the dark. A difficult balance has to be struck between frequent information and accuracy, and free flow of information and commercial confidentiality.

As regards the well test, we said that we would report when the testing was over. In fact we reported after each of the three segments of the testing. Why didn't we report permeabilities? Because with so many zones, including some fractures, we believe that it would meaningless. This well can't be compared to a well with two zones. It would have been potentially misleading to report fluid flow rates in the middle of a testing programme. Similarly for water cut; the cut can vary hour to hour depending on a host of factors and the methods being used to test.

I understand that everyone wants information, but under GXG Rules, the Company is obliged to release information that is factually accurate and accurate information takes time to assemble and validate. We released information only when it was accurate and have never had to backtrack on a result. The Net Pay Zone we reported is still the correct figure.
The number of confirmed producer zones is still as we said it was.

Q: Why did you say we would make $1m a day from Eblana #1 at the last AGM when now we haven't flowed the well.
A: Please listen to the recordings that are circulating on the internet. It's clear that the statement was made in the context of a question about the funding of the second phase of development of the field, that is the phase after the first two to three wells. The meaning was that "limited production" from a field like this can be in fact quite large in terms of revenue, and so no statement could be made at this time about how phase 2 might be funded. The possibility of production did not refer to a single well, or even two or three wells. Production could be expected to grow rapidly through Phase 2 as wells were added. We still believe that scenario to be perfectly possible and still maintain that the method of funding phase 2 can't be known until production is on stream.

The actual quote from a recording is

(Recording @ 52.30)

Q: "...then you're going to go ahead with Phase 2, 6-9 months. Funding is going to be required.

BM: "What you're leaving out is that there is the possibility of actually going into limited production, and limited production can be at the rate of 1m to 2m dollars generation of revenues a day. So the issue of funding is dependent on so many factors. We just need to work through the programme."

I also said regarding Eblana #1, and it's on the recording, "It's better not to speculate on flow rates."

Unfortunately, I can't supply you with the recording because it doesn't belong to us, but I urge you to source it and listen to it for yourselves.

Q: What's happened to the 100 well MDP (Master Development Plan)? Was that just ramping?
A: We still intend to develop an MDP as this is necessary to move your discovery up the classification value chain.
The rules also say you have to submit an MDP to the authorities before you can drill more than a small number of wells. We believe that the potential size of the resource means that the field will support a large number of wells.

The next stage

Q: What is the status of the Eblana 2 APD and the next drill? Are we going to drill a spur? Why aren't we moving to drill Eblana 2 now? Are we surveying first? Clearly the company doesn?t know what to do now.
A: We believed that collecting and analysing data and using that information to inform decision-making is one of the Company's proven strengths. It would be easy to charge ahead and keep momentum going, but it would be wrong. The team has only just left the site. We need to get back to base and look at every angle in the data. At this stage we have
several options and we will consider all of them with the utmost diligence.

We have no intention of taking longer than absolutely necessary to plot the way forward, and we will map that out clearly when we have done the work.

THE DIRECTORS OF THE COMPANY ACCEPT RESPONSIBILITY FOR THE CONTENTS OF THIS ANNOUNCEMENT

Neither this announcement nor the information contained herein constitutes an offer or solicitation by U.S. Oil and Gas plc for the purchase or sale of any securities nor does it constitute a solicitation to any person in any jurisdiction where solicitation would be unlawful.

For further information contact:

Brian McDonnell, Chief Executive Officer +353 (0) 87 238 3419

Alexander David Securities Ltd / Corporate Finance Adviser
Fiona Kinghorn/David Scott +44 (0) 20 7448 9800

Lionsgate Communications
Jonathan Charles +44 (0)779 189 2509
jcharles@lionsgatecomms.com

GXG Markets
Simon Kiero-Watson +44 (0) 20 7653 1935
skw@gxgmarkets.co.uk

Alex Benger +44 (0) 20 7653 1935
ahb@gxgmarkets.co.uk

ADR Broker Desk, Deutsche Bank
United Kingdom
Simon Davies and Richard Willis
Tel: +44 (0) 20 7547-6500
Fax: +44 (0) 20 7547-9995
E-mail: adr@db.com

USA
Jay Berman
Tel: +1 212 250-9100
Fax: +1 732 544-6346
E-mail: adr@db.com

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About U.S. Oil & Gas

U.S. Oil & Gas plc is a GXG quoted (Ticker: USOP) oil and gas exploration company with a strategy to identify and acquire oil and gas assets in the early phase of the upstream life-cycle and mature them. The Company's main asset is in Nye County, Nevada where it holds the entire share capital of US-based company Major Oil International LLC ("Major Oil"). Major Oil has acquired rights to exploration and development acreage in Hot Creek Valley, Nye County, adjacent to the oil and gas rich Railroad Valley area of Nevada, both of which are part of the Sevier Thrust of central Nevada and western Utah, USA.

U.S. Oil & Gas PLC.

For further information please refer to our website at: www.usoil.us