Falcon Oil & Gas Provides 1H 2014 Interim Results
Falcon Oil & Gas Ltd. (the Company or the Group) announced Friday that it has filed its results for the 3 and 6 months ended June 30.
The following should be read in conjunction with the complete Interim Financial Statements and the accompanying Management’s Discussion and Analysis for the 3 and 6 months period ended June 30 filed with the TSXV. These filings are available at www.sedar.com and www.falconoilandgas.com.
- Completion of the transformational Farm-Out Agreement and Joint Operating Agreements of the Beetaloo permits, Northern Territory, Australia
- Positive developments toward the processing of shale gas exploration rights in South Africa – expected awarding of exploration right in 2014
- Total depth of the second well in Hungary, fully carried by Naftna Industrija Srbije JSC (NIS) reached and contract with NIS extended
- Continued focus on strict cost management and efficient operation of the portfolio
- The Group incurred a loss of $2.4 million in the 6 months ended June 30, decreasing from a loss of $6.6 million in the 6 months ended June 30
- Strong financial position, debt free with cash and cash equivalents of $5.5 million (Dec. 31, 2013: $8.4 million). Subsequently, on closing of Beetaloo Farm-out, Falcon received $18.7 million (AUD 20 million) cash from the Farminees in August
Philip O’Quigley, CEO of Falcon commented:
“2014 has been a busy year thus far for the Group with the execution and completion of the Agreements with Origin and Sasol of our Beetaloo permits in the Northern Territory, Australia. Together with the $18.7 million (AUD 20 million) cash received, the deal is worth up to approximately $187 million (AUD 200 million) to Falcon. I look forward to updating the market and making further announcements on the Group’s progress throughout the remainder of the year.”
Farm-out of Beetaloo permits, Northern Territory, Australia
On Aug. 21, Falcon completed its Farm-Out Agreement and Joint Operating Agreement with Origin and Sasol each farming into 35 percent of Falcon’s exploration permits in the Beetaloo Basin, Australia. The main transaction details are:
- Falcon retains a 30 percent interest in the Permits
- Falcon has received $18.7 million (AUD 20 million) cash from the Farminees
- Origin is appointed as Operator
- Farminees to carry Falcon in a 9 well exploration and appraisal program over the next 4 years, detailed as follows:
- 3 vertical exploration/stratigraphic wells and core studies
- 1 hydraulic fracture stimulated vertical exploration well and core study
- 1 hydraulic fracture stimulated horizontal exploration well, commercial study and 3C resource assessment; and
- 4 hydraulic fracture stimulated horizontal exploration/appraisal wells, micro-seismic and 90 day production tests
- Drilling/testing specifically targeted to take the project towards commerciality
- Farminees will pay for the full cost of completing the first 5 wells estimated at $59.8 million (AUD 64 million), and will fund any cost overruns. This drilling program will commence by mid 2015
- Farminees to pay up to the full cost of the next four horizontally fracture stimulated wells, 90 day production tests and micro seismic with a capped expenditure up to $94.4 million (AUD 101 million), any cost overrun funded by each Party in proportion to their working interest
- Farminees may reduce or surrender their interests back to Falcon only after:
- the drilling of the first 5 wells or
- the drilling and testing of the next 2 horizontally fracture stimulated wells
Overriding Royalty Agreements
In addition at completion of Falcon’s Beetaloo Farm-out, Falcon paid Malcolm John Gerrard, Territory Oil & Gas LLC and Tom Dugan Family Partnership LLC (TOG Group) $5 million to acquire 5 percent; and CR Innovations AG (CRIAG) $999,000 to acquire 3 percent of their respective Overriding Royalties over Falcon’s Exploration Permits in the Beetaloo Basin. The Overriding Royalty is now at 4 percent. Falcon and the Farminees have the option to reduce this Royalty further to 1 percent by the exercise of two 5 year call options. The call options will be funded by Falcon and each of the Farminees in proportion to their interest in the permits.
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