Falcon Oil and Gas (FO.V)

[a1derfullife]

Falcon Oil and Gas Value

The company put out a press release today (9/25/06) saying that the Scotia Group had done another resource assessment of Falcon's property in Hungary, and come up with a 50% probability estimate of ~ 55 trillion cubic feet of natural gas. This is a resource, not a reserve, so if we assume this would translate into a reserve of 30 trillion cubic feet (TCF), produced linearly over a time frame of 20 years (ie, 1.5 TCF/year), starting in 2008, and also assume that Falcon will make $1.00/MCF after tax on this production, and use a discount rate of 10%, the net present value of this resource is ~$11.5 billion. Falcon currently has about 500 million shares, warrants, and options outstanding. If we assume that this number will increase to 750 million before the gas starts flowing in serious volume, the current value per share is $11.5 billion/0.75 billion, or ~ $15.50/share. The current share price is $2.70 (US), so the stock appears to be quite undervalued.

A1