What Falcon Oil & Gas does
Beetaloo – Falcon Oil & Gas Ltd’s (LON:FOG) (CVE:FO) (OTCMKTS:FOLG) Australia now holds a 22.5% interest in 4.6mln gross acres in exploration permits EP76, EP98 and EP117 covering the most prospective core area of the Beetaloo Sub-basin.
The Beetaloo Sub-basin is located in the Northern Territory, 600 kilometres south of Darwin and close to infrastructure including a highway, a pipeline and a railway.
Some 6.6Tcf has been booked as a contingent gas resource before results from the upcoming drilling programme – which will see up to four wells drilled.
Thanks to a new farm-out deal Falcon is now carried for A$268mln of the costs, up from A$113mln.
Karoo Basin – Karoo covers an area of 7.5mln acres. Falcon submitted its application to the Petroleum Agency of South Africa in 2010.
Mako Trough – Falcon has been active in the Makó Trough since 2004 when it acquired the Makó and Tisza exploration licences
How it’s doing
In results for the three months to September 30, 2020, the company reported a loss of US$146,000 compared to a US$764,000 loss a year ago.
The company also reported a cash balance at the end of the period of US$11.5mln, while net finance income swung to a US$279,000 gain from a US$360,000 loss a year ago.
Falcon and partner Origin Energy will conduct further well operations in order to deliver a flow test for the Kyalla 117 N2-1H ST2 well at Beetaloo, the two companies said in November.
A fracking programme got underway in early October and since late October the well has undergone ‘flowback’ operations to recover the frack fluid.
Some gas shows have been observed, but, a measurable gas breakthrough has yet to occur, the group added.
Intervention operations – to re-enter the well and deploy nitrogen lift techniques to lower pressures – are now being planned. The company noted that such activities are not uncommon and similar measures were applied to the successful Amungee NW1H well.
In December, Falcon confirmed that this work would be carried out without delay. while the Australian government said it will back exploration in the Beetaloo sub-basin with up to A$50mln of funding.
What the boss says: Philip O’Quigley, chief executive
“The announcement by the Australian government highlights the strategic and economic importance of the Beetaloo sub-basin which it believes has the potential to be a world-class gas resource, transform the Northern Territory economy and generate 6,000 jobs by 2040.”
What analysts say
Falcon Oil & Gas Limited (LON:FOG) still has the opportunity to make a significant gas breakthrough at the Kyalla 117 N2-1H ST2 well, analysts said after the latest update.
There was some gas observed, but a measurable gas breakthrough had yet to occur Falcon said, while data indicated higher pressures in the horizontal section of the well than in the surrounding reservoir.
To lower the pressures in the well, Falcon and partner Origin Energy will re-enter the well with coiled tubing and apply nitrogen lift.
This is a technique that is used extensively across the oil and gas industry and was previously applied to the successful Amungee NW1-1H well tested by the two companies in 2016, said Cenkos, which has a 39p price target and buy recommendation.