DAVY VIEW

Australia acreage looks increasingly attractive

Following the $80m spend on seismic acquisition by Hess, its former partner, work on the Australian Beetaloo play has identified both unconventional oil and gas shales. The shale oil play is identified in the northern part of the basin while a number of conventional structures have been identified throughout the basin. The addition of shale with oil potential as well as conventional targets is important in that the most recent trend in the US has been to focus on plays that have a liquid content, thus providing an extra buffer against periods of low gas prices. In the context of farming out its near 100% interest in Beetaloo, the additional targets should generate an extra level of interest. The company is talking to several parties with respect to this farm-in.

Hungary to test before end-November; South Africa pending regulatory issue of exploration permit

It is now expected that the 50% joint venture with NIS will test the Kutvolgy-1 well before the end of November. Eight zones will be targeted with a conventional testing programme following which a call will be made to proceed to fraccing operations on the tested sands.

In South Africa, Falcon is involved in a cooperation agreement with Chevron covering a large acreage in the Karoo basin. The next step will be to convert the acreage formal technical cooperation permit to an exploration licence. This is a regulatory process which is not in Falcon's hands although recent official comment has provided some encouragement.

Our group valuation is 17.4p per share and the stock carries an ‘Outperform’ rating.