Falcon Oil & Gas Reports on Hungary Ops

Falcon Oil & Gas Ltd.

Falcon Oil & Gas Ltd. provided an update on two of the wells that Falcon is drilling as part of its oil and gas exploration activities in Hungary.

Mako-7 Well

The Crosco 801 rig is currently drilling the Mako-7 well to test a deep portion of the Mako Trough. The Mako-7 drill site is located approximately 6 kilometers north of the recently drilled Mako-6 location and 1 kilometer from the Hod-1 well, drilled 35 years ago by MOL. As of November 26, 2006, the Mako-7 reached a measured depth of 5,479 meters within the lower portion of the lower Endrod formation. Correlations with the Mako-6 and Hod-1 indicate, in the opinion of Falcon, that the Mako-7 wellbore is nearing the Basal Conglomerate zone. Based on electrical logs run in the well and the cuttings analyzed during drilling, Falcon is of the opinion that thicknesses, mud log shows, and general porosity levels within the Szolnok and Endrod formations of the Mako-7 well are similar to those encountered in the Mako-6 well.

As drilling continues at the Mako-7 with a mud weight of 17 pounds per gallon (ppg), Falcon expects to encounter additional gas-filled conglomerate layers interfingering with clays and marls similar to what was successfully logged as the Basal Conglomerate formation in the Mako-6 well. Strong seismic reflectors associated with this zone can be mapped over 500km(2) covering much of the central part of the Mako Trough. Below the Basal Conglomerate, Falcon plans on testing the underlying Syn-rift Conglomerate. The Mako-7 well is expected to reach total depth of approximately 6,000 meters in late December.

Magyarcsanad-1 Well

The Crosco 403 rig is presently drilling the Magyarcsanad-1 well located approximately 18 kilometers southeast of the Mako-6 well. The original primary objectives for the Magyarcsanad-1 well were to confirm the southeastern extension of the overpressured gas cell and to demonstrate the presence of gas charged reservoirs. Falcon encountered the Endrod formation at about 4,019 meters, and experienced a significant gas influx into the wellbore from the formation at 4,057 meters, with a mud weight of 12.16 ppg. The well started to flow back to surface. To prevent the continued influx of gas into the wellbore, the mud weight was raised to 16.91 ppg and drilling was able to continue. At 4,242 meters, total mud losses occurred and the mud weight was cut back to +/- 16.41 ppg. Losses continued to 4,257 meters and the mud weight was lowered to +/- 15.58 ppg. Losses were stabilized at this mud weight and drilling continued to a measured depth of 4,272 meters. At this depth, wellbore conditions caused the bottom part of the drill string to twist off. Efforts to retrieve the roughly 45 meters of drill pipe were hampered by the continuing loss of drilling mud into the overlying zones.

Consequently, on November 25, 2006, Falcon made the decision to run 5 1/2 by 5-inch production casing in the Magyarcsanad-1 well. Falcon based this decision on the following four points: First, extension of the Basin Centred Gas Accumulation to this southeastern corner of the Mako License was confirmed with the well encountering abnormally high pressures as evidenced by the increase of the mud weights and influx of gas. Second, there is more than 200 meters of gas-charged and likely fractured Endrod formation for testing consideration. This is sufficient volume for Falcon to evaluate the quality of the Endrod formation. Third, correlations with the Mako-2 (10 kilometers to the west-southwest) and 2D seismic data suggest that at a depth of 4,272 meters the Magyarcsanad-1 well was within +/- 250 meters of basement. Finally, rig safety was a strong component in the casing decision, since the high-pressure formation is without protection below a contingency liner, which was set at 3,863 meters.

Based on the results obtained from the Magyarcsanad-1 well, Falcon has met the two original primary objectives for this well, namely, to confirm the southeastern extension of the overpressured gas cell and to demonstrate the presence of gas charged reservoirs.

Falcon Oil & Gas Ltd. is a British Columbia corporation that is in the business of oil and gas exploration and production. It has operations in Hungary through its wholly-owned subsidiary TXM Oil and Gas Exploration, and in Romania through its wholly-owned subsidiary JVX Energy Corporation.