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Falcon Oil & Gas boosted by significant Aussie shale gas milestone

“This declaration of discovery is a huge leap forward, so it is terribly exciting,” chief executive Philip O'Quigley said.
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Testing will continue for Amungee NW-1H for at least another 20 days.

There’s lots still to do, but today’s declaration that Amungee is officially a discovery marks a significant milestone for Falcon Oil & Gas Plc (LON:FOG, CVE:FO).

Amungee NW-1H, the well that is still being tested, is one element of an ongoing and successful exploration programme that’s being led by Australian major Origin Energy.

“Origin came on board couple of years ago and started drilling only last year, this project is just going from strength to strength,” Philip O’Quigley, Falcon chief executive, said in an interview with Proactive Investors.

“This declaration of discovery is a huge leap forward, so it is terribly exciting.”

“All in all, we’ve had five operations in the last eighteen months or so.”

“It has been a fantastic exploration programme to date, working with Origin, really a world class operator.”

At Amungee a flow testing programme is still in the early stages - 10 of at least 30 days have past since flows began - and the well continues to recover fluids from the fracking programme.

Nevertheless, the well has been producing rates of between 0.8 and 1.2 million standard cubic feet of gas per day and early analysis indicates a dry gas composition containing less than 4% carbon dioxide.

The shale discovery itself is said to have a thickness of 30 metres. Porosity was said to be between 4.0% and 7.5%; gas saturation is measured between 50% to 75%, and permeability between 50 and 500 nano-Darcy.

Falcon highlighted that work to determine the discovery’s size is ongoing.

“That’s a lot of desktop study to go on with the next coming months,” O’Quigley said. “Then, we’ll head into the next phase of the drilling programme.”

Exactly what those plans will look like is somewhat unclear presently due to the recent start of a moratorium on hydraulic fracture stimulation in the Northern Territory, following the election of a new Australian government in the summer.

In reference to the temporary moratorium, O’Quigley added: “that kind of puts a stall on us, if you like, to what would otherwise be an accelerated drilling programme on the back of these fantastic results.”

O’Quigley notes that a prior independent assessment of the often controversial extraction method – which was commissioned under the prior government, had previously made strong conclusions and recommendations in favour of the industry.

“In the report, he [Dr Allan Hawke] comes out with two rather strong statements and recommendations.

“One being that the environmental risks associated with hydraulic fracturing can be managed effectively, subject to the creation of a robust regulatory regime.

“And the other heavy statement he makes is that, having taken regard to the weight of all the expert opinion – and I think there was something like 260 submissions made - his enquiry finds that there is no justification whatsoever for the imposition of a moratorium on hydraulic fracturing in the northern territory.”

Australia’s new labour led government has now put the moratorium in place and is commissioning it’s a further independent enquiry.

Falcon and Origin won’t be sitting on their hands in the meantime, however, as there’s plenty of desk top work still to be done.

O’Quigley told Proactive Investors he looks forward to bringing more positive operational news in the coming months.

“This is a vast basin. We’ve got something in the order of 4.6mln acres, so you know, this is early stages but we’re taking huge positive steps with every step we make,” he added.

On Wednesday, Falcon shares gained around 6% to trade at 4.37p.

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