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Aus den BB, eine Zusammenfassung des Conference Call: I just spent three hours doing a full transcript. Hope it helps. 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. Ian McQueen I think you will probably give an update on the Basal Conglomerate in the Mako6 well, can you comment on that please and the other question is how would the H2S affect your ability to produce from the six existing wells. MB: First of all, we are going to make an announcement at the appropriate time on Mako6 so I am not able to comment on that. On the second part of your question. What happens here in terms of testing procedure is that these are test wells not production wells, but because we have the H2S, we need to have tubing and packers in order to be able to test the different zones. If we didn’t have to use tubing and packers we could test up through casing and everything would be much much quicker. We also are going to have to whenever we test a particular frac job, because we want to understand what the productivity and the concentrations of the gas concentrations whether it be methane, CO2, H2S condensate or oil or water or whatever, we have got to test each individual zone to be able to determine what its productive rates are. And in any particular section the important thing is for example in the Basal Conglomerate when you finish this in the Basal Conglomerate, you would pull the plugs out of whatever you plugged off to produce at all, or whatever portion you want to produce. And the answer is when all the different frac jobs are done, you are going to run a permanent H2S resistant tubing and packer in the hole to be able to produce it and to put online. Lyle: That is exactly correct. That’s what we will be doing. We will be using tubing and packers. This is not going to be necessary in our view for the Mako4 well because we are going to be running a long string of H2S resistant casing in that well, as soon as we locate it, * so we don’t have that problem and the completion process can go quicker. Once the testing stage is finished in these different wells and we understand what each individual zone will contribute we are able at that point to do multiple frac jobs and stages for example like they do up at Pinedale all at one time and not test each individual sequence. So that is going to be real big advantage in the future when we go to exploitation phase. But right now we need to know what we have got. All of our strategic partners are going to want to have the same type of testing programme that I have just described to you so they understand whenever we ramp up the operation to go into the exploitation phase what size drilling rigs we are going to need, what depths we are going to be drilling to and what we are going to be completing in. This is a process that unfortunately takes time and unfortunately will take more time in these 6 wells because of the fact that we have these minor amounts of H2S Paul Ballantyne with Paul Greatbatch here at Genesis Q. The first potential partner you mentioned in the list you gave was a service company. Are there any constraints on the progress of your activities through access to contractors or services? Are you now deprioritising the Szolnok formation and if so could you give us a sense of what the thinking behind that? Have there been any issues in the conversion of exploration licences to production licences? MB: Taking last question, no in terms of any issues, we now have the pl in hand. There are reporting requirements and things we have to do in terms of to the government. We have the production licence well in hand. In terms of the service providers we have used Halliburton and Schlumberger and one of the real important things is that on our last frac job on the Mako10 [!?] we had 23000 horse power on location and I think that’s more horsepower than has ever been at least in Hungary and if not Europe and one of the things that we found and I think this is important is that we had no problem fraccing these wells. We can frac these wells. We are not concerned about that risk factor. Also at this time we don’t have any issues with access to the service providers. When I was Chairman of Ultra Petroleum we made those service company deals with Halliburton and Integrated Solutions and I’m very confident that at the particular time when we absolutely demonstrate the potential of a lot of different frac jobs and these service companies feel comfortable, I really feel comfortable that some kind of arrangements can be made with some of these service companies at the appropriate time. This may be early days. Frankly at this point I would put them on lower part of the list in terms of making a deal now. I mean I don’t want to discourage anyone from talking to us. On curve of who is going to be the most interested, I think its going to be these gas marketers and these upstream majors and large independents. And certainly the majors and the upstream independents feel comfortable with where are with the 50 frac jobs we have got to do in terms of going forward with this. * John Tunburry Q. When can we expect firm announcement on flow rates and what is worst case for announcement? MB: As I mentioned the next frac job we are going to do is the Magy1 and those two frac jobs to frac 300m is going to happen in July. That’s what we expect. We expect to have the results in August. Its important to understand that we have 50 frac jobs to do. That’s going to take some time, also we have modelled these 50 intervals that have good chance of being economical. I think the probability of a large number of those frac jobs failing is small in my opinion. One other thing to mention. You have to start at the bottom and work your way up when you are completing these wells. We drilled Mako4 in order to do the Szolnok and what has happened is that we hit the overpressure quite early and based on our interpretation of the 3D seismic, we feel we have at least another 300-400m to get through Szolnok. We had to set the 7 5’8 casing. One of the things that has happened to us is that we’ve got this oil discovery in Magy1 and we want to see what it does before we decide whether to stop at that 300-400m or do we want to drill deeper down into the Endrod. So unfortunately that has put the Szolnok programme back because what you can’t do, although I guess you could, is go to one of the deeper wells, Mako6 or Mako7, and skip 15 frac jobs and then jump up into the Szolnok but with as much money as we have spent and with what appears to be a very large discovery, I don’t think make a lot of sense to do that. The unfortunate thing you know at this point, is that we may need some patience to see what happens in Szolnok. We have some Szolnok possibilities on some of the edge wells that we are evaluating now to maybe look at those. Q: We have been waiting for flow rates for some time and looking at the expectation that we have some flow rates in July. We will have frac July and the results in August. Q: At least August? My hope sooner. Some of my Engineers told me not to give absolute dates. My hope is that it would be sooner rather than later, lets see how it goes. Darron Preston Q: I am slightly mystified as to the current status on Mako6. I know that we are still cleaning up the frac fluid but suddenly it seems to have gone completely off the radar as it were and I am surprised we are not going to have an earlier cleanup. Perhaps you can explain why it seems to have gone a little bit more on the backburner? MB: Its not on the backburner, it is something we are working on every day. Let just me give you a little history on the Mako6 if I might. When we fraced the Mako6 we had to be ready for the H2S you recall the delays after we had some H2S shows on the S1 well. We had to be ready for this. We had some significant gas flows almost immediately with about 20% of our load back and we had some H2S entry into the borehole and we immediately had to kill the well. So the situation is in order to get ready to flow the well with the tubing and the packer, we shut that well in for over 5 weeks. So when we brought it back on, we were experiencing some plugging and one of the things we mentioned in the press release is that we have some obstructions and some plugging, that we are dealing with. That’s where we are right now, it something we are trying to resolve, and until we make a press release I am not really prepared to comment any further than that. Q. Do we have some sort of time as to when the press release will be issued regarding the situation at M6? MB: As soon as we have it resolved in terms of what we are doing, we will give you the press release. Jim Gerald Q. Can you get JG to comment on the thickness and extent of the oil in the Endrod that he and his team have mapped? JG: I cannot give you the exact thickness. The Hungarian scientists did their best in mapping it. We are now looking at it. But we are talking of the order of hundreds of metres. It varies a little bit across the basin but it is very formidable. That’s my best estimate. That’s a forward looking statement and all that. It is literally in last two days that I had the talk with the scientist so it requires more look. To me the original prospect generated here10 years into this, this is really exactly what I was looking for originally. Now, in my opinion, we know where the giant Algyo field got its oil from and so on. But I am not prepared to give you numbers because they are not my numbers and I need to have the details. But I am sure Marc with your permission that I may say that it is something that that is worthy of a press release in the very near future. (background laughter) Q. We have had two significant delays from H2S so far with S1 and Mako6. Have you nailed down the source of the H2S in the basement yet? JG: This is in contrast, it is not the type of H2S you find for example around the Caspian where Chevron is finding several percent in its gas. This is due to minor inclusions of pyrite iron sulphide in the rocks in the deeper part down in the Triassic dolomites that form the basement and it is from that that the H2S is generated. Again I am here relating Hungarian scientists that I talk with frequently and I will say that this is a question that we have no doubt that this is indeed the case so therefore we do not expect any surprises it is common in many and most wells and consequently Falcon also has to be prepared to deal with it as you heard Marc say. It is vexing and irritating and it has been delaying but it is something that can be handled and MOL’s processing equipment and so on is available and can handle this at the surface from a treatment standpoint. * MB: I might add that over in Magy1, what we are producing in terms of what H2S is coming out of the gas would go into the pipeline and be taken in the plant at MOL. It is more of a casing problem at this point than a pipeline problem. Q. Do you have an engineering report planned to follow up Scotia report? We have a very good group of people at falcon. I want to let everyone know we are working with John and its very interesting before John sold this to Falcon, John had talked to a lot of these strategic investors himself and is familiar with a lot of the technical teams of a lot of these people and John has been working with us throughout this process. It is frankly my belief that JG understands better than anyone. He is going to be working in the data rooms with our team of people at Falcon and these strategic investors. So a lot of them already know he is going to be working with us. JG: If I could answer this even more directly. At present time we are trying our best to find parallels from other fields in the world. I am happy to say that there are indeed fields that produce from this type of marl as we are talking about in the Endrod so we try to make our models from that. We are then trying to come up with the most likely result we can get. We have been charged by Falcon to come up with what do these fracs cost and what might we expect and this will then give Falcon the management tools to go forward with this number of fracs. Of course, if indeed predictions come true then Falcon has wonderful problem to decide whether or not they should let such excellent wells continue to flow and provide cash flow. It is a tough decision to cut off a very very good flowing well to test another zones. That’s a wonderful problem to have. MB: A lot of people might want to know our thoughts on probability of finding a partner. Do you think we are going to have any trouble finding a partner? JG: I have to defer on one point. *I am not totally familiar with the Bank of Montreal you know detail things but assuming that the confidentiality agreement are the standard across the industry, I am absolutely, I have no doubt whatsoever this is a giant business opportunity for many types of companies you are talking about. And my own experience up to the point where you and I made the deal, up to that point I was talking with several major companies and I was talking with large electricity companies. The latter were actually just looking for who could operator and I JG, with just a small consulting company, could obviously not operate like you have been able to do. So such possible strategic deals should now be available to you particularly as the gas situation and the energy situation in Europe has sharpened. Jamie Somerville Q. Looking at chart of your share price the market valuation has been pretty volatile. In looking for strategic partners firstly I wanted to ask do you have any preference for retention of any interest, any operating interest. Secondly whether you can give any indication as to what you actually think a fair market valuation of this asset is at this point in time, regardless of upcoming coming test results. MB: I think that is a difficult question because we don’t have the test to put a value on it. It is my belief that with the Szolnok with the previous 51-101 that was done with Scotia and what we have discovered now that the value is considerably higher than certainly our market cap now and I feel very comfortable that a deal with a strategic partner - we have property big enough to make several deals with several strategic partners, it doesn’t need to be one. Any kind of deal is certainly going to require capital not only to finish what we have already started with the 6 wells* but to do additional drilling, infrastructure and that kind of thing. I just don’t think there’s much question with 50 fracs to do and once JG finishes modelling the potential of those 50 frac jobs, I am very comfortable that we are going to find some people to make a deal with. There are certainly some obvious things that you should be thinking about and who some of those people might be. In this part of the world this is the right place at the right time and the right deposit that could change the complexion of Europe if it works out in the way we hope and believe it will, so I don’t think there’s any question there’s are a lot of people who are going to be interested and there are already people that are interested, I’ll tell you. And we are talking now. Q. With regard to retaining operatorship or control? I am not going to rule out a strategic partner in terms of operations. I don’t rule that out. I am not saying we have to have that. I am saying its my belief that it is big enough that we could have several operators and we could operate different parts of it and we could still operate in there. I think there is flexibility and we have flexibility to cut many kinds of transactions that would be beneficial to shareholders. I am very confident on this that we going to do very well there.
aus der Diskussion:	FALCON - ALLE DATEN, ALLE FAKTEN
Autor (Datum des Eintrages):	Mokwey  (02.07.07 13:36:26)
Beitrag:	30 von 47 (ID:30447756)
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