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).
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 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 operations on Kútvölgy-1, the first joint well between NIS and Falcon, were completed in July 2013, the well having reached total depth (“TD”) of 3,305 metres. As anticipated, the top of the Algyő Formation was encountered at 2,985 metres, the well then penetrating an alternating sequence of sandstones, siltstones and shales over a gross interval of 320 metres to TD, with gas shows throughout. Two conventional cores were taken and extensive wireline logs were run. No operational problems or accidents occurred during drilling. In addition, it was announced that the Kútvölgy-1 well testing operations were completed. The testing indicated that the well experienced improved recovery from certain intervals however well production did not meet commercial rates. Falcon and NIS have discontinued testing Kútvölgy-1; the well is to be plugged and abandoned.
As announced on 16 May 2014, the second joint well “Besa-D-1” has been spudded. On 15 July 2014, Falcon further announced that initial drilling operations on the Besa-D-1 well have reached total depth (“TD”) of 3,000 metres having encountered gas shows. Besa-D-1 is the second of a planned three well programme to evaluate the gas potential of the Algyő Formation in the Makó Trough License.
As announced on 27 November 2014 The Group and its partner, NIS have mutually agreed to plug and abandon the second well, Besa-D-1, in the planned work programme. As per the contract with NIS, the Company was fully carried on all costs associated with the wells. Well testing operations on Besa-D-1 are now completed. The testing of two sand intervals, both part of the tight turbiditic sequence in the lower Algyő Formation at depths of 2,976 meters to 2,986 meters and 2,960.5 meters to 2,970 meters, indicated that well production did not meet commercial rates.
In January 2013, Falcon agreed a three-well drilling programme with Naftna industrija Srbije jsc (“NIS”) to target the Algyő Play, whereby NIS made a cash payment of US$1.5 million to Falcon in February 2013, and agreed to drill three wells by July 2014 at their cost. The July 2014 date for completion of drilling and testing of the NIS three well programme has been extended to 31 December 2014. This extension has been granted to allow NIS to:
• Complete the testing of Besa-D-1;
• Evaluate the hydrocarbon potential of the entire Makó Trough including the Deep Makó play; and
• Fulfill the third well obligation of the NIS three-well drilling programme.
In accordance with the agreement with NIS, the Group is fully carried on all costs associated with the three well drilling programme and is working with NIS in evaluating all options to derive shareholder value for the remainder of the programme.
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 will 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.
|Magyarcsanád-1||2007||4,272||250 bopd + 1,000 mcfpd|