PERHAPS THE MOST IMPORTANT POST ON FALCON * Posted By: JR~EWING
ALL MATERIAL IS IN THE OPINION OF THE AUTHOR
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Posted by Jastulo
**************************** Hungarian Well Drilling Program ****************************
・ FO has two wells drilling: The Pusztaszer-1 well and the Mako-6 well.
・ The Mako-6 well is targeting the primary and deepest part (i.e., the “sweet spot”) of the Mako Trough and is being drilled to target depth of 6,000 m.
・ The Pusztaszer-1 well is 45 km away from the Mako-6 and was to test the outer extension of the zone and much shallower part of the Mako Trough.
No gas, or uneconomic concentrations of gas, would have been surprising and would not have been indicative of the prospects for the Mako-6 well.
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********************** Pusztaser-1 A Surprising Barn Burner !!!!! **********************
・ The well has reached a measured depth of 3,659 m.
・ Formation tops for three key horizons have been penetrated:
Algyo, Szolnok and Endrod.
・ The Endrod was penetrated at approximately 3,035 m.
Significant gas shows of up through C5 (methane, ethane, butane, pentane, propane) have been encountered at several intervals within the Endrod formation IN SPITE of drilling the interval with an overbalanced mud weight.
・ FO’s geologists believes that the gas shows may be associated with a transition pressure zone where pressure values are increasing from a normally pressure regime into an overpressured zone. Basin Centered Gas Accumulations (BCGA) are typically found in abnormally pressured systems.
The Key Excitement Was Gas Kicks (Further Discussion On “…overbalanced mud weight”)
・ The drill was using 10 lb. of mud pressure through to the Endrod formation, but once that formation was reached the gas pressures were so intense that it was becoming hard to contain.
・ Mud pressures were increased to 12 lb.; despite this gas kicks continue to break-through the mud. This is concrete evidence that gas is present and that it is highly overpressured.
・ Although this does not prove that the gas reservoir is economic (the well still needs to be test and fracked), it is an indicative sign that the reservoir likely contains a substantial amount of gas.
Implications Of This Early Result:
Again, the Pusztaszer-1 well is 45 km from the “main” target well (Mako-6), which is currently drilling (started about 3 weeks prior to the Pusztaszer-1 well). If the reservoir proves to be fully charged it will lend credence on the theory that the entire Mako Trough BCGA contains more than
100 tcf of gas in place.
FO controls land containing about three-quarters of the entire Mako Trough.
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Posted by Flowgo
My take on this is that the sedar document is a submission for an upcoming PP if Falcon requires extra cash. If it were a reference to the Macquarie Bank Limited Credit Facility, why would there be references to MGI Securities, Knight Capital, Dundee, and the other agents participating?
There is a reference in the document to a closing date of March *, 2006. Considering that Bruner and the executives of Falcon own a significant number of shares in the company, could we assume they are protecting everyone's interests including the common shareholders?
One thing that is jumping out of the further DD being presented by posters & Falcon, is the fact that the wildcat being drilled at Pusztaszer-1 is over 45 km from the primary target. If this basin proves out to be this large, the rewards to Falcon Shareholders are going to be unfathomable. Could the Mako Trough become the largest gas play on Continental Europe? The clear guidance on drilling progress being provided from the company is outstanding up to this point.
Let's dive into the potential reward from the Hungarian play:
1 TCG of Gas at $4.00US/mcf
1,000,000 (mmcf) = US $5,000
1,000,000,000 (bcf) = US $5,000,000
1,000,000,000,000 (tcf) = US $5,000,000,000
Subtract a 12% royalty to the Government of Hungary (US $600,000,000) also a 5% Overriding Royalty payable to Prospect Resources, Inc. (the original licensee) (US $300,000,000). Subtract one time fees of US $4,000,000 (Prospect) and US $3,000,000 (prospect) payable once the first three (3) wells have been completed.
In Summary:
US 5,000,000,000 (Five Billion) per 1 TCF of gas (gross)
- US 600,000,000 (Six Hundred Million Total ORR/ 1 tcf)
- US 300,000,000 (Three Hundred Million Total ORR/ 1 tcf)
- US 4,000,000 (Four Million Total Payment)
- US 3,000,000 (Three Million Total Payment)
- US 100,000,000 (Facilities/Transport/Ops Total CAPEX/OPEX)
Net US 3,993,000,000 per TCF.
FO at Production Estimated Shares Oustanding 400,000,000
US $3,993,000,000 / 400,000,000 outstanding = US $9.9825/share/1 tcf
$9.98 X 5.00 TCF probable = US $ 49.90/share
$9.98 X 17.50 TCF potential = US $174.65/share
From Falcon's Website:
HUNGARY: We have two licenses in south central Hungary that allow us to drill and develop oil and natural gas within an underground geologic formation called the Mako Trough. The consulting firm of Gustavson Associates, has assigned a potential resource of 796 million barrels of oil and 17.5 trillion cubic feet of gas to two key formations within the Mako Trough. We have signed drilling contracts to initiate a seven-well program on our Hungary properties beginning in the fall of 2005.
Add in the Romanian CBM potential and minor Canadian Properties and what is the ceiling for the S/P? I feel pretty darn satisfied that I purchased more shares at $1.48, and will be adding on any pullbacks.
I thought SE was a great play. FO is extremely attractive, and the past accomplishments of FO management have the financial world dancing! Keep up the excellent vision FO, and prove up those reserves for the world to see.
Who wants to be a multi millionaire? Buy FO.
FO Flow
DISCLAIMER POSTED SHORTLY AFTER BY FLOWGO:
[I wish to clarify that my original **rough** potential asset valuation calculations were done in a very informal, ballpark format.]
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Additional calculations to be considered into potential shareprice estimate
Posted by TheKnight
The calculations in due course will be a little more complicated..Inter alia variables to factor in will be operating costs(they could be very expensive),recovery rates and time horizons for the new fields...and a suitable discount rate for the projects(fortunately Hungary is already in the EEC and Roumania will soon be)...Tax and royalties will also need be factored in(but the Hungarians could well raise their tax/royalty rates when they appreciate what this discovery could well meanto them -you only have to look at the Brits and North Sea oil tax last year!)..aswell as reasonable assumptions re long term sustainable gas and oil prices....We hate to be party poopers on this Board but we it is not helpful either you all getting much too carried away...Even so we do not disagree with the view that if the news continues to be good over the next couple of months or so,these shares ought still to be a "four/five bagger" ATLEAST from these levels