CalEnergy Gas Acquires Stake in Polish Acreage

FX Energy has signed a farmout agreement with CalEnergy Gas, the upstream gas business unit of MidAmerican Energy Holdings Company. The agreement covers joint operations on FX Energy's Fences project area in western Poland.

The agreement gives CalEnergy the right to earn a 24.5% interest in the Fences project area by spending a total of $10.6 million including the cost to drill two wells plus certain cash payments to FX Energy. FX Energy's position will be reduced to 24.5% with the balance of 51% owned by the Polish Oil and Gas Company (POGC). Cash payments made during the term of the agreement will be used to meet FX Energy's outstanding obligations to POGC and for working capital. The agreement is subject to the consent of Rolls-Royce Power Ventures and certain other conditions that must be satisfied.

The earning requirements in the agreement are staged, with CalEnergy retaining the right to proceed or withdraw at designated points. The decision to drill a second well will not be made until after the results of the first well have been evaluated. In the event CalEnergy elects not to drill the second well, only the acreage around the initial prospect will be earned and CalEnergy will have no future obligations. However, if CalEnergy elects to drill a second well and pay the balance of cash required under the agreement, FX Energy will then have met all of its obligations in the Fences area and each partner will be required thereafter to pay its proportionate share of subsequent exploration costs.

FX Energy holds interests in three project areas in Poland:

The Fences project area covers approximately 265,000 acres in western Poland's Permian Basin. FX Energy currently holds a 49% interest in the Fences project area (subject to CalEnergy's right to earn 24.5%) and the Polish Oil and Gas Company (POGC) holds 51%.

The Pomerania project area covers approximately 2.2 million acres in western Poland's Permian Basin. FX Energy currently holds a 100% interest in the Pomerania project area except for one block of approximately 225,000 acres, where its interest is 74% and POGC holds 26%.

The Wilga project area covers approximately 250,000 acres in central Poland; FX Energy holds a 45% interest.