​Overview

35 Year Production Licence

Falcon began operations in Hungary in 2005 and it is the most developed asset in its portfolio. Falcon’s subsidiary, TXM, holds the 35-year Makó Production Licence covering an area of approximately 245,775 acres (approximately 1,000 km2) located in the Makó Trough, part of the greater Pannonian Basin of central Europe. The Makó Licence is located approximately ten kilometres from the MOL Group owned and operated Algyö field, which has produced approximately 2.5 Tcf and 220 Mmbo to date. The Makó Licence area is transected by existing gas pipelines, including a 12 kilometre gas pipeline built by Falcon in 2007, which together offer access to local and international markets.

2013 Competent Persons Report (CPR)

RPS Energy in a report dated January 2013 estimates that eight prospects in the Algyö Play contain gross unrisked recoverable prospective gas resources of 568 Bcf (P50).  Contingent resources for the Makó Production Licence, estimated for the Deep Makó Trough, include 35.3 Tcf of gas and 76.7 mmb of oil (P50).

Activity

NIS Agreement – Shallow Algyö Play (2300 – 3500 Metres)

In January 2013, Falcon agreed a three-well drilling exploration programme with NIS, owned 56 per cent by the Gazprom Group, to target the Algyö Play. NIS have made a cash payment of US$1.5 million to Falcon and agreed to drill three exploration wells by July 2014. NIS will earn 50 per cent of net production from the first three wells, and has the option to participate in any future drilling on terms to be negotiated, after paying Falcon US$2.75 million. Falcon is to be fully carried on the drilling and testing of the three exploration wells. Drilling preparations are already underway. NIS has informed the Company that it expects the first well to spud by the end of Q2 2013.

Deep Makó Trough 

Between 2005 and 2007, Falcon acquired 1,100 km2 of 3D seismic data and executed a six-well drilling programme on the Deep Makó Trough. Each of the six wells encountered thick sequences of hydrocarbon bearing rocks, and tests flowed hydrocarbons from each tested horizon. Early exploration efforts focused on proving hydrocarbon potential and delineation of the basin in order to secure the Makó Production Licence. Falcon may seek to partner with an industry player to re-enter and develop the Deep Makó Trough play.

Falcon conducted small vertical stimulations on all but two wells (Mako-4 and Mako-7). Each of the zones tested flowed hydrocarbons to surface. These were exploration wells and no horizontal wells have been drilled at this stage.