Falcon Oil & Gas Ltd. Announces Completion of First Phase of Operations and Provides Operational and Financial Update



    BUDAPEST, Hungary, Aug. 29 /CNW/ -- Falcon Oil & Gas Ltd. (TSXV: FO)
("Falcon" or the "Company") today announced the completion of its first phase
of operations in the Mako Trough, and provided updates on the Company's
operational activities and financial position.  The Company also filed its
second quarter financial information and accompanying management discussion
and analysis (MD&A) with the Canadian Securities Administrators.
    Marc A. Bruner, Falcon President, Chairman and CEO, said, "I am pleased
to announce that Falcon has successfully completed the first phase of
exploration in the Mako Trough and has achieved several critical milestones in
the last 18 months. With six exploratory wells drilled to date, we believe we
have discovered a very significant basin centered gas resource. We have flowed
gas from both the Szolnok and Basal Conglomerate formations, proving the
presence of the basin centered gas accumulation which was confirmed when the
Hungarian Government awarded us a production license in May of this year.  In
addition to this, we have also flowed oil and gas on test from the Endrod
Formation, where we believe we have discovered a potential basin centered,
fracture oil play."
    Mr. Bruner continued, "We also recently completed the acquisition of over
1,100 square kilometers of 3D seismic data.  As we move forward to the next
project phase, we will be analyzing this seismic data along with all the other
data we have acquired in order to optimize our planning.  As announced
previously, we are also talking with other potential partners who have
expressed interest in participating in this very exciting project."
    
    Operational Update
    
    As part of the first phase of exploration, Falcon completed the following
activities over the last 18 months:
    
    -- Successfully drilled six exploratory wells including the deepest well
       in Hungary.
    -- Secured a production license from the Hungarian government covering all
       oil and gas in the identified basin centered gas accumulation (BCGA)
       resource under the exploration license.
    -- Acquired over 1,100 square kilometers of 3D seismic data.
    -- Conducted extensive testing and evaluation of the exploration wells, as
       outlined below.
    

    
    Delineation wells
    -- Testing of Pusztaszer-1 delineated the Northwestern extent of the Mako
       Trough, established the presence of mobile gas in the Szolnok, and
       confirmed the ability to frac at this depth.
    -- The Szekkutas-1 well established mobile gas in the Northeastern portion
       of the basin in the objective horizons of the Endrod and Szolnok.
    -- Magyarcsanad-1 tested the Southern end of the Mako Trough, and flowed
       gas and oil from natural fractures in the Endrod Formation.  As
       previously announced, as part of Falcon's overall testing program,
       Falcon executed two facture stimulations of the Magyarcsanad-1
       exploration well at the end of July 2007.  To date, results confirmed
       flowed gas and oil from fractures.  The well has yet to fully clean out
       fracture fluid, therefore the following are initial indications of flow
       rates only.
    
    The Pre-Fracture Treatment (natural flow) unstabilized flow through
perforations at 4,058-4,062 meters yielded an initial rate of 387 barrels of
oil per day (bopd) and declined to 63 bopd in 23 days.  The gas rates over the
same period were 665 thousand cubic feet per day (mcfg/d) and 137 mcfg/d
respectively.  Additional perforations were added at 4,135-4,137 and
3,909-3,910.5 meters and the well was then fracture treated in stages with a
total of 329,000 pounds of proppant and 9,200 bbls of fluid.  Falcon has
recovered 60% of the frac volume to date.  The Post Fracture Treatment
unstabilized flow yielded an initial rate of 91 bopd and declined to 35 bopd
in 19 days.  The gas rates over the same period were 400 mcfg/d and 85 mcfg/d,
respectively.
    The well is currently shut-in for bottom hole pressure evaluation and
analysis.  Falcon is also evaluating the recent in-flow production and
temperature logs.  Based on the test results to date, Falcon believes that the
oil is coming out of a natural fracture system, and the Company is examining
all potential future completion techniques to develop this fracture play, such
as the drilling of horizontal wells that might join up multiple fracture
zones.  The seismic data should help considerably in defining the fault and
fracture patterns in this resource, and these options will be examined as part
of the near term technical data review period.

    
    Other exploratory wells
    -- Mako-7 was drilled as a second deep basin test.  Petrophysical and
       mudlog analysis indicated the presence of hydrocarbons in a 2.5 km
       column in the Szolnok, Endrod and Basal Conglomerate Formations.
    -- Mako-4 was drilled to the Szolnok formation and is suspended pending
       completion of the current geologic review.
    -- The Mako-6 was the first deep test in the Basin, reaching a total depth
       of 5,692 meters.  A test of the Synrift was attempted which proved
       tight.  An interval at the base of the Basal Conglomerate was tested
       with initial rates of up to 700 mcfg/d, with associated hydrogen
       sulfide of 400 parts per million (ppm), and diminishing.  The test was
       aborted when a suspected down-hole failure occurred.  Material
       extracted from plugged tubing was identified as part of a barite plug
       that had been placed below the test interval.  Following a planned
       evaluation program, the Mako-6 could be re-entered for possible testing
       in the Upper Basal Conglomerate, Endrod and Szolnok formations.  The
       Company has not established a time table for additional work to be
       performed in the well bore.
    
    The focus of Falcon's current activity will be to analyze the results
gathered to date alongside information from the 3D seismic program as part of
a technical and operational review period in order to plan and implement the
final project phase of resource development.  The Company believes that this
is the prudent and best approach in order to determine which wells to
complete, and how to best complete the wells.
    Because Falcon is not drilling during this phase, the non-active
personnel and machinery are being released, as is prudent to manage costs.
    In line with the requirements of the Hungarian government, Falcon plans
to submit the development plan to the Hungarian government by the end of 2007.
    
    Financial Update
    
    As of June 30, 2007, Falcon reported approximately $53 million in cash
and cash equivalents.
    
    Strategic Partner Update
    
    Falcon continues its search to identify a strategic partner or partners
who could add value to the Company's oil and gas project in Hungary by
contributing to the technical understanding of the assets, accelerating
development, securing services required for commercial production of oil and
gas, and/or granting access to high-value end markets.  Discussions are taking
place, and confidentiality agreements have been established with prospective
partners.  The type of partnerships currently under consideration are farm-in
joint ventures that explicitly prohibit acquisitions of Falcon stock.  The
Company is committed to informing investors when a strategic partner has been
identified.
    
    Independent Scotia Group Report
    
    Also released by Falcon yesterday is a copy of a review completed by the
Scotia Group, an independent, third party consultant to Falcon.  The document
provides a review of Falcon's operations and accomplishments.
    
    Conference Call Update
    
    The Company will host its quarterly investor conference call on
Wednesday, August 29, 2007 at 8:30 a.m. (ET) to provide updates on the
Company's financials, operations, well status and strategic partner
discussions.
    The conference call will be available live via telephone. To participate
in the conference call within the U.S. and Canada, dial (866) 688-0039. To
participate in the conference internationally, dial (706) 679-3130. The
conference call will also be broadcast live on the Internet and may be
accessed at www.falconoilandgas.com. The web cast will be archived on the
Company's website.
    The conference call will be available for replay via telephone beginning
at 12:00 p.m. (ET) on Wednesday, August 29, 2007, until Wednesday, September
12, 2007, at 11:59 p.m. (ET). To listen to a replay of the conference within
the U.S. and Canada, dial (800) 642-1687 or internationally (706) 645-9291.
The replay code is 13162665.

    
    Contacts:
    Weber Shandwick Worldwide
    Peter Duda /JJ Rissi
    +1 (212) 445-8213 / +1 (212) 445-8224
    
    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 are made as of the date hereof disclaims 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 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.




For further information:

For further information: Peter Duda, +1-212-445-8213, or JJ Rissi, 
+1-212-445-8224, both of Weber Shandwick Worldwide, for Falcon Oil & Gas Ltd.
Web Site: http://www.falconoilandgas.com

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Falcon Oil & Gas Ltd.

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