Jun 28th, 2007, 16:59
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FALCON ANNOUNCES SEARCH FOR STRATEGIC PARTNERS
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FALCON ANNOUNCES SEARCH FOR STRATEGIC PARTNERS Falcon Oil & Gas Ltd. has retained BMO Capital Markets as its exclusive financial adviser to help identify potential strategic partners. Falcon will focus on companies which can add value to the company's oil and gas project in Hungary by contributing to the technical understanding of the assets, accelerating development, securing services required for commercial production of oil and gas, and/or granting access to high-value end markets. Falcon president, chairman and chief executive officer Marc A. Bruner stated: "Today's announcement is part of the company's long-term plan and commitment to prepare for large-scale drilling and development on our 245,000-acre production licence, and reflects our focus on laying the foundation to move beyond exploration to production. Falcon's short-term goals and strategy have not changed. We will determine the most appropriate course of action as we continue to evaluate our results in the field over the next several weeks and months, as we work to take appropriate steps to address the commercial development phase." |
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Jun 29th, 2007, 23:07
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只看该作者 #780 |
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［转] Transcript/Conference Call - 故事继续演义
Notes on Conference Call 28 June 2007 Present: Mark Bruner, Lyle Nelson, John Gustavson, Peter Duda, Rod Wallace Peter Duda apologised for not returning calls yesterday – will endeavour to get back to investors who rang yesterday but did not have their calls returned. MB: Thank you for joining the call to discuss the announcement yesterday that it has asked BMO Capital markets to be its exclusive financial adviser to identify strategic partners. We organised today's call to address certain misconceptions that we understand may have arisen from yesterdays announcement. We want to make sure that everyone understands rationale behind the announcement that we are seeking strategic partners. Comments on context for yesterdays announcement and then take questions. We made the announcement because we have been approached by potential strategic partners to discuss possible cooperation for the next phase of Falcon's operation and wanted to inform the market that we have started the official process to identify the right strategic partners. We believe important to inform the market of this process and these discussions. Falcon began working with BMO to put together a data room to present the assets and opportunities. We have received the 245,000 acre Production Licence which was a critical step and culmination of years of hard work and dedication from our team of experts. The licence gave Falcon long term production rights and reinforces need for large scale drilling plan. It also gave Falcon a more tangible opportunity to present to potential strategic partners who would contribute to the development of Falcon's long term operations. In fact, prior to yesterday some potential partners already approached us on unsolicited basis which we believe is a testament to strength and potential viability of our operations. Now is right time to put in place formal process for identifying the best possible strategic partners to help move forward long term. We brought BMO in to assist us in executing a formal and competitive process. Discussions have begun and we will continue according to this process. We believe this is the right approach to achieve which is not only favourable to what we could achieve in the market but also best value for shareholders. With all that said let me provide some clarification about these potential strategic partners. The types of partners would provide various types support to operation over the long term would be for example oil service companies that might want to secure long term alliance with Falcon related to development on Production Licence or major upstream oil and gas companies with large field development capabilities. Or companies with expertise in gas transportation, gas processing and/ or infrastructure. Or companies with access to end market s for gas consumption or power companies. Our search may result in more than one partner each of which brings different value to Falcon in its long term development. We believe this information that all investors would want to know and we are following our obligation to disclose to investors. Next like to communicate that the assets, Falcon understands better than any of the other players out there and it has taken time and dedication to gain that understanding and to put that information together in an executable plan. Now we are in a position to show the information to potential partners who would help Falcon in its ongoing testing and completion phase and assist the company in moving beyond exploration and into its production phase. This testing programme has taken longer than anyone likes or anticipated but very pleased with the current status. The future appraisal of the current wells requires more than 50 new frac stimulations in 5 wells in the Mako trough. 10 of these are in BC. A minimum of 12 for Endrod and a minimum of 28 in Szolnok this will require considerable resources and will take over a year to complete, Simultaneously move from exploration to production phase, such as putting in place the appropriate strategic partners. As moves forward, we will provide updates to our shareholders. Finally there are no changes to announce with regards to changes in the status of our operations and our financing remains stable. We have drilled 6 wells and delineated one of the largest gas fields ever discovered in Europe and received a long term production licence. We continue to evaluate our results that we have to date and are able to continue moving forward in the immediate future. Our short term objectives and strategy have not changed. Endrod formation has produced both oil and gas under a stimulated natural flow in Magy1. Total Endrod sequence will shortly be tested with 2 fracture stimulations over the entire Endrod interval of 300m behind casing – results will significantly influence the future teseting of strategy M4,6 and 7 and in short will help define our next steps and where they should be and where we should commit our resources. Because of the pressure 7 58ths casing has been laid in Mako 4 and waiting Magy1 results to determine depth to drill to and we are searching required casing for H2S so tubing and packer completion is not necessary. Regardless of if we drill only to the Szolnok which we estimate to be another 300 metres or deeper into the Endrod we will require this casing. The previously reported discoveries of H2S are entirely manageable and are not expected to affect operation. It is important to recognise that this is a significant project with potentially 1000s of wells and this will be a multibillion project and will last many years – we must be prepared to move forward from exploration to production. We do see a need to identify appropriate partners to assist the company in many important respects. Although there is a tendency by some to regard each piece of information as critical – we do not agree. Strategic partners will be interested not because of the results of any one fracture but because of potential opportunity of entire resource under our production licence. Questions Jamie Somerville Q: Give us idea potential timelines of testing and when you could conclude discussions with partners A: MB: We are going to be fraccing Magy1 in July and results of that in August. At that point assess and decide next move. That's what is driving us short term. I would like to explain why take this approach why not moving forward with other operations until we have the result of the test on the Magy1 well. Why so important to see the results from Magy1 before we proceed forward? JG: Its important to realise when I started this whole programme in 1997/8 I saw the Mako trough as being the kitchen so to speak the source rock forr all the oil and gas fields around the Mako trough and in ensuing years thanks to Falcon and MB activities in actuality we also determined that there was a giant BCGA. First the BCGA was confirmed. Now recently it was announced in press release in Endrod natural fracturing in the Endrod had provided unstimulated flow of both oil and gas. To me fulfilment of dream indeed in kitchen where oil and gas generated. I can tell you this and it is subject to further QCing? (13.11 minutes) that over the last couple of days the scientists have gone through all the wells and HOD1 and Mako1 drilled by MOL and it is very significant that in all of these wells we are now able to see and we think we see correlation across the area in the Endrod in the form of oil shows in some of the other wells in the form of oil slicks on cuttings so we now think we see a basin wide, lets call it, “oil generating zone” in the Endrod. Assuming that this is correct and assuming that the type of brittleness that we saw in the Magy1 well which created natural fractures created by mother nature, this is very, very important event and clearly therefore the first test that MB talked about in the Magy1, the flow we saw so those fracs we put in in July may literally change the nature of the programme because everything would then be aimed at proving up more reserves in the Endrod. MB: I also wanted to mention that the previous [Scotia] report that we had in the Upper Endrod had no reserves associated with it. So it is very important to understand what is happening in the Magy1 because it will dictate next move we make in the field. Other question we are in the early stages in negotiating with strategic partners. We are in the process of having confidentiality agreements signed. Interestingly enough I absolutely have been contacted by other people since that press release yesterday. It is early days and early in the process. Certainly in my view to find the right partners we are looking at months to be able to do that. Beyond that I can tell you that we have some very interested people. Data room is ready and it took a long time to put together and we are ready to go there. Question: The other reason I am asking about timelines is your financial situation. Obviously, you raised a substantial amount money roughly a year ago, how the timeline for finding potential strategic partners ties into any requirement further financing for the company to continue appraising what you have found in Hungary? MB: I think the financial position was approximately $100m end of March. We have less than that now but adequate working capital to do what we need to do. It is important to always have adequate working capital. Depending what happens here, in terms of what we want to do money will be a factor in terms of how slow or fast we go. Now have substantial working capital to conduct our short term operations. MICHAEL from RAYMOND JAMES Q. Expected production of each of your projects? Early days – we have essentially 6 wells drilled and we are going to be selecting 5 out of the 6 to complete and this will take a substantial period of time and too early to answer until we have tested different zones and different layetrs. We have to start at the bottom and work our way up. I'd love to be able to answer but wont have the information. Can tell you we really didn't realise that we were going to have to do as many fracs jobs as it looks like we have to do. The good news is that we have over 50 to do, it will take some time but we are very excited about those possibilities. Q. Can you estimate a reserve size? We have actually put out a 51-101 report over a year ago that Scotia prepared and this is a resource evaluation since there is not any production. This is based on volumetric calculations, electrical logs, pores and other mud logs and that kind of thing. We have got ideas or some other people have given their ideas as to what they think we have. What we are excited about now is that something that was not even mentioned in the previous report is going to be a pretty big deal now. Q. How much cash are you burning per month? We are not drilling any wells right now. We do not have a drilling operation going on. And limited completion programme. Burn rates are not high right now. Working capital is in good shape. Depending what happens let the resource or the wells we complete tell us how fast or how slow we need to go to evaluate it and properly decide what the next course of action is. We're in good shape. Q. You had $100m end of March. What have you got now? MB. I can't answer that question because we haven't filed any financial statements yet. It is the policy of the company to maintain proper working capital and we have that. We don't have any issues in the short term. Of course to go and get very aggressive out here, you know, this would be difficult to go spend a lot of money to go do that. We feel that based on the information that we are going to be picking up here in the near future we can decide how fast or how slow we want to go. Q. Have you thought about the different types of financing you could do? One of the purposes of what are trying to do now is to find a strategic partner and one of the nice things, I mean, we think we have identified quite a big resource here with 50 frac jobs to do. Any sort of partner that we bring in is going to have to come in not just with expertise but with money. We actually believe we will get better value with that strategic partner than if we went to the market to raise money. Q. Any issues with the sourness of the gas? Yes there is an issue. It is not an insurmountable issue. This is important for everyone to understand. We have a fraction of 1% in some of the deeper sections of our wells and what that requires is, that requires us because of that concentration it requires us to use tubing and packers to test each of our zones. In the future whenever we drill wells, we will have the necessary lead time to order the proper casing and it takes a lot of lead time to get this casing. We will run the right casing in the hole where we won't have the issue. In Mako4 not going to deepen that well until we have the right casing so we don't have to do a tubing and packer completion. This is not the first time people have run into H2S and had to use tubing and packers to test with. One of the issues is that it is true that this takes more time to do and it is also more expensive. But it is not a problem in terms of production in the wells that we currently have and it certainly wont be problem in the new wells that we drill. Its just going to be more time and it is going to be more expensive. Q. Jan von Holsbeg Can you give us a sense of the extensive nature of oil containing zone, how big is it? MB: This question about the thickness of Endrod in Mako6, Mako7, Mako4 and Magy1 I think it would be appropriate that he understands how thick it is. One interesting things you should know too is that it is a marl. It is about 40% limestone 20% dolomite and has some sand in it. Its pretty uniform through the section. Rob (Falcon engineer): The Mako6 has 685m and the Mako7 has 570m. Getting towards the centre of the basin, it will thicken up in the centre of the trough, of the Mako trough, so maybe getting up to almost a kilometre of section. And then obviously then off to the margins such as in the Magy1 where we actually have more like 300m or so. It is up to 600-700m in the middle of the basin and what we are doing is trying to ascertain how much of that is fractured marl. It varies through the sequence in what you would take that as being your net pay is fractured marl but the Magy1 well it will give us a very good indication of how much of that 700m is actually fractured pay. MB: I'd like to mention will be putting out a press release to summarise some of these things. Rob: A forward programme explaining why the 50 fracs are needed and where they'll be will be coming out quite shortly. Q. Gordon Nichols I wanted to ask about the Macquarie credit line Where are you with that. This area you are working in - are there any other companies working on borders MB: The deal we have with Macquarie is, we are still chatting with them, but it was estimating that we need to be producing for certain period of time to access the line of credit. With what's happened with as many different pay zones that we have got to frac, it is evident that it will take a substantial period of time because if you go into production it means you stop fraccing. So making a deal at this time with Macquarie is not on the cards until completion programme is finished The next question. The only other company that is on our borders is MOL. And they have some property to the west south and north of us. I don't know exactly what the percentages are but at least in the deeper parts of the Synrift and the Basal Conglomerate and the Lower Endrod, most of this deposit is on our property. We can say that with a lot of confidence because of the 3D seismic we have shot. When you get up into the Upper Endrod and Szolnok, they have a percentage of whatever is there in the upper sections. Even in upper section we have majority of what is prospective, at least that is our interpretation. |
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