BUDAPEST, Hungary, Feb. 12 /PRNewswire-FirstCall/ -- Falcon Oil
& Gas Ltd. (TSXV: FO), in response to the recent fluctuation in
the price of Falcon Oil & Gas Ltd.'s ("Falcon" or the
"Company") common shares and the increase in trading volume,
announced that while there have been no new material developments,
it has decided to provide the following interim summary and
operational update regarding its drilling program in Hungary. As a
result of the preliminary information which Falcon has gathered
over the last several weeks of testing, Falcon continues to be
highly optimistic about its Mako Trough project, and the commercial
viability of this 54.9 tcf Contingent Resource (estimated
recoverable portion)(1)(2). (The 54.9 tcf figure is based on a P50
probability, as described in the Scotia Report, dated September 15,
2006, previously filed on Sedar at http://www.sedar.com/.) These
interim results are summarized in the technical review below.
Falcon emphasizes that these results have so far confirmed all of
the expectations and estimates previously announced publicly, and
that it has achieved its original objectives first defined in 2005:
* Conduct a continuous drilling program on the Tisza and Mako
Licenses; * Identify the primary target zones for hydrocarbon
development; * Confirm and define the over-pressured gas cell of
the Mako Trough; * Shorten the lead time to first production from
the Mako Trough. Falcon further points out the following: 1. The
Delineation Wells: The Pusztaszer-1, Szekketas-1, and
Magyarcsanad-1 wells (the "Delineation Wells") are currently being
tested and evaluated. As described in detail in the Operational
Update below, we have encountered significant hydrocarbons in the
Delineation Wells. The primary purpose of the Delineation Wells was
for these wells to serve as a benchmark in identifying the
boundaries of the Basin Centered Gas Accumulation ("BCGA") and to
aid the Company in understanding the mechanics of the BCGA system
within the Mako Trough. 2. Established Existence of BCGA: The
original purpose of the Delineation Wells and the overall work
program to date -- to prove the existence of the BCGA -- has been
completely accomplished with the Hungarian government's formal
written acknowledgement and acceptance of the existence and large
extent of the BCGA, as issued by the government and announced by
the Company on December 21, 2006. This was the most important
milestone in the process of securing a long-term production
license. Falcon is extremely pleased with the status of its ongoing
efforts toward obtaining a long-term production license covering
all or most of the BCGA underlying the Company's licenses. When
issued, the production license will be valid for 35 years, with the
possibility of extending it for an additional 17.5 years. The
Hungarian Geological Survey's "Expert Opinion" (issued on December
21, 2006), states that Falcon's report "demonstrates a continuous
BCGA cell" and that it "recommends approval of the estimate of
unconventional gas ..." as calculated in the Scotia Report -- that
is, 54.9 tcf, including 42.2 tcf in the Szolnok formation (based on
a P50 probability). The Geological Survey further states in its
Expert Opinion that "the [Scotia Report] ... data can be
legitimately used toward a mining plot [long-term production
license] designation." 3. Deep Wells: Completion work has commenced
on the Mako-6 deep well but no zones have been perforated as of
this date. Falcon has drilled the Mako-7 in the center of the BCGA
and that well is preparing to log through casing. When the Mako-7
is completed, the 801 rig will be moved 18 kilometres to the
northwest where the Mako-8 well will continue with Falcon's deep
test strategy. 4. Szolnok Development Plan: The Szolnok formation
is currently estimated to contain approximately 77% of the total
54.9 tcf assigned in the Scotia Report (based on a P50
probability). Now that the Company has received the Hungarian
government's unequivocal recognition of the BCGA, the Company is
proceeding under an aggressive and comprehensive BCGA evaluation
plan initially targeting the Szolnok segment of the shallower BCGA
gas system. The Szolnok is the horizon in the Mako Trough most
analogous to the well- established BCGA projects in the U.S., such
as the Pinedale Anticline in Wyoming. The Szolnok program will
include multiple wells to be drilled to the base of the Szolnok
formation and completed in the Szolnok (and above, if warranted).
With wells averaging 10,000 to 14,760 feet (3,000 to 4,500 meters)
in depth in the center of the Basin, the Company expects this
development plan to include drilling and completion costs averaging
approximately $10 million per well for the initial wells and $7
million for the full cycle development wells. This is the same
trend of cost reduction due to operational improvement and economy
of scale demonstrated in the established North American BCGA
developments. The Szolnok plan has already been initiated with the
drilling of the new Mako-4, which is currently at 3,300 feet (1,012
meters), as the first dedicated "shallow" well clearly inside the
hydrocarbon-generating area of the Mako Trough BCGA. This location
is within the axis of the Mako Trough, approximately five
kilometers southeast of the Mako-6 and 13 kilometers northwest of
the Magyarcsanad-1 well, both of which had significant gas in the
Szolnok as interpreted from electric and mud logs. Following the
Mako-4, Falcon is currently planning to drill three additional
Szolnok tests. These wells will be drilled to the northwest of the
Mako-4. The Foldeak-1 well will be located less than one kilometer
east of the Mako-6. The Szikancs-1 will be drilled six kilometers
northwest of Mako-6 and less than one kilometer east of the Mako-7.
Szikancs North-1 is projected to be drilled approximately four
kilometers northwest of the Mako-7. Falcon intends to drill, case
and complete these four wells with multiple fracture stimulation
treatments over as large an interval of the gross pay section as
possible, followed by flow-testing and tying into the existing
Falcon pipeline. These locations, in the vicinity of Falcon's
existing pipeline facilities, will allow for efficient use of the
Company's and third party infrastructure and related facilities
(gathering and pipelines, processing facilities, etc.). The wells
will be drilled with the Crosco 403 rig, which will continue to
focus exclusively on drilling wells in the Szolnok evaluation plan.
The development plan for 2008 will include significantly expanding
these development operations with multiple rigs. 5. Incidental H2S:
As referenced in the Operational Update below regarding the
Szekketas-1, the Company encountered traces of hydrogen sulfide
(H2S) in the Triassic formation that appeared to be present in or
migrating from the Endrod or Triassic formations. Falcon believes
that these traces do not indicate a broader presence of H2S in
other zones, nor do they represent a significant problem. This
opinion is based on the facts that the Company did not encounter
H2S in the Magyarcsanad-1 well, and that this is likely to be
limited to the Triassic formation, which is not present throughout
the Basin. Encountering H2S caused a delay in Falcon's ongoing
testing of the S-1, while Falcon awaited delivery of H2S monitoring
and safety equipment. The Company determined that all safety
precautions must be implemented immediately, and has done so,
without regard to delays. Testing has resumed and the Company is
carefully monitoring the situation. 6. Financial Strength to
Continue Existing Program: Falcon has no debt and over $110 million
in cash in its account, which Falcon presently believes is more
than sufficient for the exploration phase of its operations,
including the testing program and the Szolnok program, as described
above. In summary, Falcon is extremely pleased with its progress to
date and remains prepared to overcome any challenges it may face as
it continues operations in Hungary. OPERATIONAL UPDATE Executive
Summary Pusztaszer #1: A total of three fracs were performed in the
Pusztaszer #1, of which two were in the Basement Gneiss Breccia at
3825-3865 and 3745-3815 meters. Although no gas was recovered in
the first two fracs, the third frac recovered significant gas. The
third frac was a test of a limited sandstone interval in the
Szolnok formation at 3368-3378 meters. This resulted in a positive
test with gas recovered at the perimeter of the BCGA gas cell in
the over-pressured Szolnok formation. The well is currently shut-in
for pressure build-up, and the Company has not completed testing.
Additional Szolnok and Algyo zones of interest remain to be
evaluated. Executive Summary Szekkutas #1: The Szekkutas #1 was
drilled as a gas cell Delineation Well on the eastern margin of the
BCGA. Two zones within the Basement Triassic consisted of naturally
fractured Dolomite. These intervals 3505-3495 meters and 3437-3447
meters, proved to contain minor gas. A thin, naturally fractured,
marl-rich Endrod section of the BCGA was then fracture treated
though perforations at 3386-3391 meters. During flow back and clean
up after frac, traces of hydrogen sulfide (H2S) were detected. The
production test was immediately halted until appropriate monitoring
and safety equipment could be mobilized to location. A revised
testing program was developed to minimize the impact of H2S on
personnel and equipment. It is believed that the H2S encountered on
this test is derived from Triassic Dolomites through natural
fractures that continue up into the Endrod. Commingling the gas
flow stream with other formations in this well and gas from other
wells will easily enable pipeline specifications to be met.
Completion Operations have now resumed and flow testing will
follow. Upon conclusion of the Endrod test, a further 550 meters
(1804 feet) of the shallower gas bearing Szolnok formation will be
tested and evaluated. ApexPE (well known as BCGA fracture treatment
specialists) has been contracted and will manage and direct the
overall fracture treatment strategy. Executive Summary Mako #6: The
Mako 6 was drilled to a depth of 5692 meters, where 5 1/2" casing
was set. Due to extreme bottom hole pressures (17,100 psi),
temperatures (238 degrees C), APA (well known high pressure/high
temperature experts) was contracted for the completion design
strategy. APA concluded that specialized equipment is required and
the Company is in the process of assembling this equipment. The
precautionary measures, completion equipment, materials, and
applied safety factors now implemented meet or exceed the Company's
key service providers' Health, Safety and Environment company
policies. This will now allow the contractors to provide the
services required to safely and successfully test the well.
Falcon's current schedule has operations commencing on or about the
end of February and fracture treating the lower most Synrift
section during March. ApexPE will be actively involved in the
design, management, and execution of the stimulation operations.
Executive Summary Magyarcsanad #1: While drilling this well, Falcon
encountered a gas influx which equated to a 4000 psi shut-in well
pressure. The high pressure gas influx originated in the Endrod
formation at 4,057 meters. Upon cementing the 5-1/2" casing the
Company encountered another high-pressure gas influx through a
channel in the cement allowing the migration of gas to surface. The
gas is currently being vented and flared in a controlled manner
with the liquid hydrocarbons being gathered and stored. Upon
measurement and testing, Falcon determined that the gas is of good
quality and the condensate is sweet. Rigless operations are
scheduled to commence within the next three weeks that will include
a circumferential survey of the cement quality. Falcon is currently
finalizing a workover and completion program for the well that will
include the termination of the migrating gas and condensate flow as
well as the testing of the Endrod and Szolnok formations. This well
provides an important delineation accepted by the Hungarian
Authorities to the southern most part of the Mako Trough BCGA cell.
Executive Summary Mako #7: The Mako-7 reached a TD on December 21,
2006. This well was drilled to a Hungarian record depth of 6,085
meters MD. Cement clean out and completion operations are presently
underway. When operations are complete, the 801 rig will be
mobilized to the Mako-8 location for a 5,700-meter well to test
synrift facies or Basement, whichever occurs first. Executive
Summary Mako #4: Rig 403 initiated drilling on January 30, 2007.
This well represents a dedicated shallow Szolnok test. The
projected total depth is 4,200 meters. As of this report Falcon has
drilled and set the 13-3/8" casing at a depth of 1,012 meters.
Drilling operations are continuing as programmed. About Falcon Oil
& Gas Ltd. Falcon Oil & Gas Ltd. is a British Columbia
corporation which is in the business of oil and gas exploration and
production. It has operations in Hungary through its wholly-owned
subsidiary TXM Oil and Gas Exploration, LLC, and in Romania through
its wholly-owned subsidiary JVX Energy Corporation. Further
information about Falcon is available at
http://www.falconoilandgas.com/. Notes Regarding Contingent
Resource Estimate: (1) The resource estimate has been conducted
using the definitions specified by the Canadian Oil and Gas
Evaluation Handbook. The Mako Trough Resource falls under the
"Discovered Resources" classification. The values refer to the
probabilistically estimated recoverable fraction of "Contingent
Resources" within that classification. Contingent resources are
those quantities of oil and gas estimated on a given date to be
potentially recoverable from known accumulations but are not
currently economic. The economic nature of this resource has not
yet been assessed due to the early stage of data gathering for the
Mako Trough resource. The recoverable portion of this "Contingent
Resource" is contingent upon the demonstration of productive
capability of the various zones of interest through well testing
and longer term production testing which has not occurred as of the
effective date of the report. (2) Estimates are as at August 15,
2006, the effective date of the Scotia Report. Contacts: Falcon Oil
& Gas Ltd. Marc A. Bruner, President, Chairman & CEO
Michael K. Lam, Corporate Development North America (416) 303-8810
Alexander Hubbard-Ford, Corporate Development Europe +44 (0) 79
8448 1541 Canada - Brisco Capital Partners Corp. Graeme Dick (403)
313-9663 United Kingdom - 4C-Burvale Carina Corbett John
Carrick-Smith +44 (0) 20 7907 4761/0 Falcon's discovered resources
are not reserves. Only those quantities of oil and gas that are
anticipated to be economically recoverable from discovered
resources are classified as reserves. Until such time as Falcon's
discovered resources are proven to be reserves, there is a risk
that Falcon may not achieve ongoing operations from which it may
generate significant revenue. In the interests of providing Company
shareholders and potential investors with information regarding the
Company, including the Company's assessment of its and its
subsidiaries' future plans and operations, certain statements
included in this press release may constitute forward-looking
information or forward-looking statements (collectively,
"forward-looking statements"). All statements contained herein that
are not clearly historical in nature are forward-looking, and the
words "anticipate", "believe", "expect", "estimate" and similar
expressions are generally intended to identify forward-looking
statements. Similarly, forward-looking statements in this press
release include, but are not limited to anticipated developments of
the Company's drilling project in Hungary and the timing thereof,
the Company's drilling project in Romania and the timing thereof,
capital investment levels and the allocation thereof, pipeline
capacity, government royalty rates, reserve and resources
estimates, the level of expenditures for compliance with
environmental regulations, site restoration costs including
abandonment and reclamation costs, exploration plans, acquisition
and disposition plans including farmout plans, net cash flows,
geographic expansion and plans for seismic surveys. In addition,
please note that statements relating to "reserves" or "resources"
are deemed to be forward-looking statements, as they involve the
implied assessment, based on certain estimates and assumptions,
that the reserves and resources described can be profitably
produced in the future. Such statements represent the Company's
internal projections, estimates or beliefs concerning, among other
things, an outlook on the estimated amounts and timing of capital
expenditures, anticipated future debt levels and incentive fees or
revenues or other expectations, beliefs, plans, objectives,
assumptions, intentions or statements about future events or
performance. These statements are only predictions. Actual events
or results may differ materially. Although the Company believes
that the expectations reflected in the forward-looking statements
are reasonable, it cannot guarantee future results, levels of
activity, performance or achievement since such expectations are
inherently subject to significant business, economic, competitive,
political and social uncertainties and contingencies. Many factors
could cause the Company's actual results to differ materially from
those expressed or implied in any forward-looking statements made
by, or on behalf of, the Company and the foregoing list of
important factors is not exhaustive. These forward-looking
statements made as of the date hereof disclaim any intent or
obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or results or
otherwise. Company shareholders and potential investors should
carefully consider the information contained in the Company's
filings with Canadian securities administrators at
http://www.sedar.com/ before making investment decisions with
regard to the Company. The TSX Venture Exchange does not accept
responsibility for the adequacy or accuracy of this release.
DATASOURCE: Falcon Oil & Gas Ltd. CONTACT: Marc A. Bruner,
President, Chairman & CEO, or Michael K. Lam, Corporate
Development North America, +1-416-303-8810; or Alexander
Hubbard-Ford, Corporate Development Europe, +44-79-8448-1541, all
of Falcon Oil & Gas Ltd.; or Graeme Dick, Canada, Brisco
Capital Partners Corp., +1-403-313-9663, or Carina Corbett or John
Carrick-Smith, United Kingdom, 4C-Burvale, +44-20-7907-4761/0 Web
site: http://www.falconoilandgas.com/
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