UPDATE - Falcon Oil & Gas looks forward to start of Beetaloo shale drilling

--ADDS BROKER COMMENT--

Falcon Oil & Gas (LON:FOG) told investors that the start-up of a three-well drill programme in Australia’s Beetaloo shale basin is on track for mid-2015.

Tendering and contracting for the rig and key services are currently underway, and drilling locations have been identified.

The wells are designed to penetrate both oil and gas sections within the Beetaloo’s Middle Velkerri shale.

Falcon has a 30% stake in the project in which it is partnered by Australian firm Origin and Sasol.

Philip O’Quigley, Falcon’s chief executive, said: “Our initial three well, fully funded exploration drilling campaign in the Beetaloo basin, Australia is on track to commence shortly and we are working closely with our partners Origin and Sasol to complete preparations ahead of drilling this highly attractive basin."

O’Quigley also highlighted that there continue to be encouraging signs from the South African authorities in regards to shale exploration.

Falcon is staked as an early mover in the nascent sector, having previously secured rights to a significant footprint of prospective acreage in the country’s Karoo basin.

The South African Department of Mineral Resources is expected to begin issuing licences this year, O’Quigley said. And it is understood that Falcon’s application is currently being processed.

In this morning’s first quarter results statement, for the three months to March 31, the pre-revenue exploration companyreported a $237,000 loss. It ended the period in what it called a strong financial position, with US$11.5mln of cash and no debt.

Falcon said it maintains a focus on strict cost management and efficient operations.

Brendan Long, analyst at Charles Stanley, said today’s results statement was as expected and he repeated a ‘buy’ recommendation, with a 19.7p price target.

Long highlights also that the 19.7p does not give any value to the potential in South Africa, but, that will be revisited ‘as appropriate’ over the course of this year.

Cantor Fitzgerald analyst Sam Wahab, meanwhile, also has a ‘buy’ recommendation and has a 21p price target.

“Despite the challenging market conditions, we believe Falcon is well positioned with a number of near-term share price drivers,” Wahab said in a note.