Falcon O&G Amends PDA with Exxon, MOL to Combine Mako Trough Interests

Falcon Oil & Gas has entered into an amendment to its April 10, 2008 Production and Development Agreement with Exxon Mobil Corporation affiliate ExxonMobil Hungary (Mako) Limited ("ExxonMobil") and MOL Hungarian Oil and Gas Plc. ("MOL").

Under the Amendment, the parties agreed to three principal matters: (1) the parties have agreed to use reasonable efforts to combine their respective exploration licenses and mining plots to form one unit consisting of all or part of the Mako Trough; (2) if ExxonMobil and MOL elect to proceed to the Appraisal Work Program, the parties agree to expand the area where wells may be located and apply a portion of the US $100 million Appraisal Work Program expenditures basin-wide in a combined work program, based on the optimum locations from a technical basin-wide appraisal standpoint; and (3) if ExxonMobil and MOL elect to proceed to the Development Work Program, the parties agree to apply 50% of the US $75 million payment due to Falcon to the same expanded basin-wide area in a combined work program.

Amendment to the PDA

Background to the PDA: As a result of the extensive technical data developed by Falcon, on May 22, 2007 the Hungarian Mining Authority granted to Falcon a production license, which covers a significant part of the Mako Trough. A substantial portion of the remaining adjacent area in the Mako Trough is covered by licences, which are held by MOL and currently operated by ExxonMobil. On April 10, 2008, Falcon announced the entering into of the PDA among Falcon, ExxonMobil and MOL, covering a part of the Production License (the "PDA Area"). ExxonMobil is the contract operator of both the MOL Area and the PDA Area.

The Amendment addresses three principal matters:

  • (1) Formation of Unit: Falcon, ExxonMobil and MOL all recognize the significant potential benefits, from an operating efficiency and technical analysis standpoint, of combining all or a portion of their jointly-owned interest into one unit. Therefore, they have agreed to commence technical discussions and use reasonable efforts to combine all or a portion of their respective interests in the Mako Trough. The Amendment provides that Falcon, ExxonMobil and MOL will pursue discussions toward that objective, beginning in the first calendar quarter of 2009.
  • (2) Application of Work Commitment Budget: Falcon, ExxonMobil, and MOL are continuing the Initial Work Program, Phase I of the PDA, on the PDA Area without any modifications. The Amendment does not affect any aspect of the ongoing Initial Work Program. If ExxonMobil and MOL elect to proceed to Phase II of the PDA, the Appraisal Work Program, there will be no change in the US $50 million which will be paid to Falcon at the time of such election.

Under the Amendment, a portion of the US $100 million expenditures which ExxonMobil and MOL will be committed to spend in Phase II for drilling wells and related expenditures, will now be applied on the basis of the optimum well locations from a technical appraisal standpoint. Specifically at least one well will be drilled on the PDA Area, with a minimum expenditure of US $25 million and a maximum of US $40 million. The balance of the US $100 million (the "Appraisal Program Balance") will be applied to wells either on the PDA Area or within the MOL Area. All seismic and technical data resulting from the Appraisal Work Program from both the PDA Area and the MOL Area will be shared among the parties.

The parties will analyze all such data, discuss well locations, the combined work program and related expenditures through the three companies' joint Operating Committee, however, the final decision on location of such wells shall be an ExxonMobil/MOL decision.

  • (3) Reallocation of Third Payment: The Amendment further provides that Falcon agrees to reallocate one-half of the US $75 million payment that is due to Falcon if ExxonMobil and MOL elect to proceed to the Development Work Program. Those funds (US $37.5 million) will now be applied in the same manner as the Appraisal Program Balance to the optimum locations and operations on a basin-wide technical basis, to be discussed by the companies' joint Operating Committee, however, the final decision on location of such wells shall be an ExxonMobil/MOL decision.

Marc A. Bruner, Chairman and CEO of Falcon, stated, "We are pleased to enter into the amended terms with ExxonMobil and MOL. The Mako Trough is potentially an enormous resource, and Falcon regards these modifications to the April agreement as a significant step forward in optimizing the ultimate development of Falcon's assets. All parties have a single common goal, and will greatly benefit from a combined work program."

Update on drilling program in the Mako Trough

Falcon is pleased to announce that the Foldeak 1 well is expected to spud in January 2009 with the purpose of testing the hydrocarbon potential of the Szolnok formation as part of the Initial Work Program in the PDA Area. This well is located approximately 1000 meters from the Mako 6 well.
 

Related Companies
Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE


Most Popular Articles


From the Career Center
Jobs that may interest you
Blow Out Prevention (BOP) Specialist
Expertise: Subsea Engineer|Subsea Engineering
Location: Houston, TX
 
United States Broussard: Senior Field Engineer - MWD/LWD
Expertise: Field Development
Location: Broussard, LA
 
Senior Well Engineer
Expertise: Drilling Engineering|Well Control
Location: United States
 
search for more jobs

Natural Gas : $3.64/MMBtu 0.27%
Brent Crude Oil : $53.93/BBL 1.83%
Light Crude Oil : $50.93/BBL 1.66%
Updated in last 24 hours