Exploration & Production | Exploration & Appraisals | Key Wells | Drilling Program

Falcon Begins Beetaloo Drilling Campaign

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   |    Friday,May 29,2015

Falcon Oil & Gas Ltd. has announced that drilling operations have commenced on its initial three well fully funded drilling campaign in the Beetaloo Basin, in the Northern territory of Australia.

Highlights:

• Civil works on the first well, "Kalala S-1" are now under way with the spudding on target for the end of June 2015.
• Kalala S-1 is located within exploration permit 98, with access from the existing Carpentaria Highway and will be drilled to a total depth of approximately 2,800 meters.
• The well is targeting the Middle Velkerri formation to assess hydrocarbon saturation and reservoir quality.
• Kalala S-1 is to be operated by Origin Resources Limited (35%) with partners Sasol Petroleum Australia Limited (35%) and Falcon (30%).
• Kalala S-1 is the first of Falcon's fully carried, 2015 three well drilling and evaluation programme in the Beetaloo Basin, Northern Territory, Australia, operated by Origin. It is anticipated that the mobilisation of the rig to "Kalala S-1" well site will happen shortly with the spudding of this first exploration well on target for the end of June.

It is expected that Kalala S-1 will be drilled to a total depth of approximately 2,800 meters and that drilling will take approximately 35 to 50 days. Kalala S-1 is located within exploration permit 98, with access from the existing Carpentaria Highway.

Falcon is fully carried for all 2015 drilling and evaluation costs, retaining its 30% interest in the Beetaloo Basin with co-venture partners Origin and Sasol.

The principal objectives of the 2015 three well drilling programme are to:

• penetrate the Middle Velkerri formation to assess hydrocarbon saturation and reservoir quality;
• evaluate oil versus gas maturity and determine the most prospective areas and depth window;
• provide further information on the aerial distribution of the target Middle Velkerri formation; and
• collect data points for subsequent vertical/horizontal drilling, completion and production testing.
• Formation evaluation and reservoir characterisation will be carried out from these initial three wells through petrophysical interpretation, core analysis, geomechanical studies and stimulation design.

Philip O'Quigley, CEO of Falcon commented: "We are delighted to announce the commencement of drilling operations and the expected spudding of the first of our three well fully funded drilling campaign by the end of June 2015, in this highly attractive basin. We look forward to exploring the potential of the Beetaloo Basin in Australia with our partners and updating the market with further details in due course".

Background

On 2 May 2014, Falcon announced it had entered into a Farm-Out Agreement and Joint Operating Agreement with Origin and Sasol with each farming into 35% of the Falcon's exploration permits in the Beetaloo Basin, Australia through its 98% subsidiary, Falcon Oil & Gas Australia Ltd.

The Farminees will carry the Group in a nine well exploration and appraisal programme from 2015 to 2018.

• Farminees will pay for the full cost of completing the first five wells estimated at A$64 million, and will fund any cost overruns, with work expected to be completed between 2015 and 2016.
• Farminees to pay the full cost of the following two horizontally fracture stimulated wells, 90 day production tests and micro seismic data collection with a capped expenditure of A$53 million, any cost overrun funded by each party in proportion to their working interest. This work programme is expected to be undertaken in 2017.
• Farminees to pay the full cost of the final two horizontally fracture stimulated wells and 90 day production tests capped at A$48 million, any cost overrun funded by each party in proportion to their working interest. This work programme is expected to be undertaken in 2018.

Farminees may reduce or surrender their interests back to Falcon Australia only after:

• The drilling of the first five wells or
• The drilling and testing of the next two horizontally fracture stimulated wells.
• This announcement has been reviewed by Dr. Gábor Bada, Falcon Oil & Gas Ltd's Head of Technical Operations. Dr. Bada obtained his geology degree at the Eötvös L. University in Budapest, Hungary and his PhD at the Vrije Aniversiteit Amsterdam, the Netherlands. He is a member of AAPG and EAGE.