Exploration & Production | Quarterly / Earnings Reports | First Quarter (1Q) Update

Falcon Highlights Beetaloo Basin Farm Out Deal in 1Q

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Falcon Oil & Gas Ltd. has filed its results for the three months ended 31 March 2014.

Highlights:

• Transformational Farm-Out Agreementand Joint Operating Agreements of Beetaloo permits, Northern Territory, Australia to carry Falcon in a nine well exploration and appraisal program over five years with Origin Energy Resources Limited, a subsidiary of Origin Energy Limited and Sasol Petroleum Australia Limited, a subsidiary of Sasol Limited, "the Farminees".
  • Drilling to commence following completion of the Agreements.
  • Origin and Sasol to pay Falcon A$20 million cash on completion of the Agreements.
  • Origin and Sasol to each earn 35% interest in the Permits.
  • Falcon to retain a 30% interest in the Permits.
  • Origin to be the Operator.
  • Farminees will pay for the full cost of completing the first five wells estimated at A$64, million, and will fund any cost overruns. This work is expected to be completed within the first three years.
  • Farminees to pay the full cost of the following two horizontally fracture stimulated wells, 90 day production tests and micro seismic with a capped expenditure of A$53 million.
  • Farminees to pay the full cost of the final two horizontally fracture stimulated wells and 90 day production tests capped at A$48 million.
• Spudding of the second well in Hungary, fully carried by Naftna Industrija Srbije JSC ("NIS"),
• Continued focus on strict cost management and efficient operation of the portfolio.
• Strong financial position, debt free with cash and cash equivalents at US$6.9 million (31 December 2013: US$8.4 million).

Philip O'Quigley, CEO of Falcon commented: "2014 has been a busy year for Falcon with the execution of the Agreements with Origin and Sasol of our Beetaloo permits in the Northern Territory Australia. Together with the A$20 million, the deal is worth up to approximately A$200 million to Falcon. I can confidently state that this carry and work programme is a great deal for our shareholders. In addition, we have spudded the second well in Hungary with our partner NIS. I look forward to updating the market and making further announcements on the Group's progress in due course."

Australia

Farm-out of Beetaloo permits, Northern Territory, Australia

As announced on 2 May 2014, Falcon Australia has executed definitive agreements including a 9 well Farm-Out Agreement and Joint Operating Agreements with Origin and Sasol, to each farm into 35% of Falcon's Exploration Permits in the Beetaloo Basin, Australia. The Agreements are subject to conditions inter alia Government, statutory authority consents and relevant Stock Exchange approvals.

Hungary Drilling

Spudding of second well in Hungary

As announced on 16 May 2014, the second of three exploration wells "Besa-D-1", with our partner NIS to evaluate the gas potential of the Algyő Formation at a depth of approximately 3,000 meters in the Makó Trough, Hungary has been spudded. The well testing operations on the first well, Kútvölgy-1 are now completed. The testing indicated that well production did not meet commercial rates. Falcon, with our partner NIS, has discontinued testing Kútvölgy-1, the well is to be plugged and abandoned. Falcon and NIS are now focused on Besa-D-1.

Results for Operating Activities

Falcon incurred a loss of US$0.3 million in the three months ended 31 March 2014, decreasing from a loss of US$4.7 million in the three months ended 31 March 2013.

Falcon's cash and cash equivalent balance at 31 March 2014 was US$6.9 million (31 December 2013: US$8.4 million).