2016-07-25 07:46 ET - News Release

Mr. Philip O'Quigley reports

FALCON OIL & GAS LTD.: UPDATE ON AMUNGEE NW-1H HORIZONTAL WELL AND SPUDDING OF BEETALOO W-1 VERTICAL WELL

Falcon Oil & Gas Ltd. has successfully re-entered and cased the Amungee NW-1H horizontal well, and has spudded the Beetaloo W-1 vertical well in the Beetaloo basin, Australia.

Amungee NW-1H

The Amungee NW-1H well was drilled to a total measured depth of 3,808 metres last November, including a 1,100 m horizontal section in the B shale interval of the Middle Velkerri formation. The horizontal section was successfully cased and cemented earlier this month, and preparations are now being finalized to conduct a multistage hydraulic stimulation. The hydraulic stimulation is expected to commence around mid-August, and will involve up to 10 stages and will take up to two weeks to complete. This will then be followed by an extended production testing program.

Beetaloo W-1

The Beetaloo W-1 well is the fourth of Falcon's fully carried five-well 2015 to 2016 drilling and evaluation program, the initial phase of a nine-well drilling and evaluation program:

• This well, targeting the unexplored southern Beetaloo basin for shale and hybrid shale-sand plays in the Velkerri and Kyalla formations, was spudded on July 22, 2016.
• The well is designed to test the presence, depth, thickness and physical reservoir properties of the organic rich mudstones of the Kyalla formation and the Middle Velkerri member.
• The well is located approximately 85 kilometres south of the first well drilled, Kalala S-1, within exploration permit 117, with drilling estimated to be to a total depth of 3,045 m.
• Rig 185, an ATS 400 originally commissioned for the drilling of Kalala S-1, Amungee NW-1 and Amungee NW-1H wells from Saxon Energy Services Australia Pty. Ltd, is being used.
• Drilling is estimated to take between 35 and 50 days.
• The drilling of the Beetaloo W-1 well will be operated by Origin Resources Ltd. (35 per cent) with partners Sasol Petroleum Australia Ltd. (35 per cent) and Falcon (30 per cent).

Philip O'Quigley, chief executive officer of Falcon, commented:

"The multistage hydraulic stimulation of the horizontal section of the Amungee NW-1H well, scheduled to be completed next month, could go a long way towards proving up the resource potential of the Beetaloo basin.

"The Beetaloo W-1 well represents another exciting phase of the exploration program given that it will be the first well to penetrate the Middle Velkerri member in the south of the basin.

"We look forward to updating the market on both of these key operations as information becomes available."

Background -- Australia

On May 2, 2014, Falcon announced it had entered into a farm-out agreement and joint operating agreement with Origin and Sasol, with each farming into 35 per cent of Falcon's exploration permits in the Beetaloo basin, Australia, through its 98-per-cent subsidiary, Falcon Oil & Gas Australia Ltd. The farmees will carry Falcon in a nine-well exploration and appraisal program from 2015 to 2018:

• Farmees will pay for the full cost of completing the first five wells estimated at $64-million (Australian) and will finance any cost overruns, with work expected to be completed between 2015 and 2016;
• Farmees to pay the full cost of the following two horizontally fracture stimulated wells, 90-day production tests and microseismic data collection with a capped expenditure of $53-million (Australian), any cost overrun financed by each party in proportion to its working interest. This work program is expected to be undertaken in 2017;
• Farmees to pay the full cost of the final two horizontally fracture stimulated wells and 90-day production tests capped at $48-million (Australian), any cost overrun financed by each party in proportion to its working interest. This work program is expected to be undertaken in 2018;
• Farmees may reduce or surrender their interests back to Falcon Australia only after:
  • The drilling of the first five wells;
  • The drilling and testing of the next two horizontally fracture stimulated wells.

This announcement has been reviewed by Dr. Gabor Bada, Falcon Oil & Gas's head of technical operations. Dr. Bada obtained his geology degree at the Eotvos L. University in Budapest, Hungary, and his PhD at the Vrije Aniversiteit Amsterdam, the Netherlands. He is a member of AAPG and EAGE.

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