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Falcon Oil & Gas Ltd. Enters Into Production

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MnM_Hero   Friday, 04/11/08 05:32:08 PM
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Falcon Oil & Gas Ltd. Enters Into Production and Development Agreement With ExxonMobil on Falcon's Project in Hungary
Thursday April 10, 9:45 pm ET


DENVER, April 10 /CNW/ -- Falcon Oil & Gas Ltd. (TSXV: FO, "Falcon") announced today that it and its wholly owned subsidiary, TXM Exploration and Production LLC, have entered into a Production and Development Agreement with Exxon Mobil Corporation affiliate Esso Exploration International Limited (ExxonMobil) under which Falcon and ExxonMobil will become joint owners in a specified portion (the "Contract Area") of Falcon's long-term production license (the "Production License") in the Mako Trough, Hungary. ExxonMobil will operate the Contract Area.

(Photo: http://www.newscom.com/cgi-bin/prnh/20080410/NYTH137 )

The Contract Area consists of approximately 184,300 acres, or 75% of Falcon's 246,000-acre Production License. The Contract Area will be owned jointly, with Falcon owning a 33% undivided working interest and ExxonMobil owning a 67% undivided working interest. The Agreement is effective today.
Falcon's Chairman and CEO, Marc A. Bruner, stated, "This agreement is a milestone in Falcon's history and is the culmination of Falcon's extensive efforts, announced on June 27, 2007, to find a strategic partner to support and enhance Falcon's exploration and development efforts on Falcon's long-term Production License. We are very pleased that we were able to reach agreement with ExxonMobil, a company which brings to the table all the financial, technical and operating expertise necessary to pursue the completions, testing and evaluation of this resource, and then to maximize value if we are able to commercialize this opportunity."

The Agreement provides for an initial consideration of US$25 million to Falcon and for ExxonMobil to spend US$50 million to conduct an Initial Work Program to test one or more of Falcon's existing wellbores or drill one or more new wells for such tests. Field operations under the Initial Work Program are scheduled to commence this year. After the Initial Work Program is completed and if ExxonMobil elects to proceed to the next phase (the "Appraisal Work Program"), it will pay Falcon an additional US$50 million and will expend US$100 million on the Appraisal Work Program. If ExxonMobil elects not to proceed beyond the Initial Work Program, it will relinquish and reassign to Falcon all of ExxonMobil's interest in the Contract Area. After the Appraisal Work Program is completed, ExxonMobil will pay Falcon an additional US$75 million if it elects to proceed to the next phase (the "Development Program") or it will reassign its interest to Falcon, subject to the terms of the Agreement.

Falcon will incur no development costs within the Contract Area for ExxonMobil's commitments during the Initial Work Program or the Appraisal Work Program. Beginning with the Development Program, Falcon and ExxonMobil would each receive revenues and be responsible for its proportionate share of expenses within the Contract Area (that is, 33% Falcon and 67% ExxonMobil), under a joint operating agreement.

ExxonMobil has the right to assign half its interest to MOL, a publicly traded Hungarian oil and gas company.

In addition to Falcon's 33% undivided ownership in the ExxonMobil-operated Contract Area, Falcon will remain sole owner and operator of 391,445 acres outside the Contract Area boundaries, as well as shallow rights covering 184,336 acres within the Contract Area, as follows:


-- Falcon Lands: Falcon retains 100% ownership in the remaining 25%
(61,445 acres) of the Production License that is not part of the
Contract Area.

-- Exploration Licenses: Falcon retains 100% ownership in 330,000 acres
which are outside the boundaries of the Production License, under the
original Mako Exploration License and original Tisza Exploration
License. Falcon also retains 100% ownership in the portions of the
Exploration Licenses which are above 2,800 meters within the boundaries
of the Production License. The 330,000-acre area outside the
Production License, and the shallower depths are not part of the
Production License.

The Contract Area, Falcon Lands, and Exploration Licenses are shown on the attached map.
Regarding Falcon's retained acreage, Mr. Bruner stated, "We see significant upside potential within the large portion of the Mako Trough where Falcon still owns 100%, and we intend to continue to evaluate and pursue opportunities simultaneously with ExxonMobil's operations."

BMO Capital Markets has acted as exclusive financial advisor to Falcon with respect to the Transaction.


Falcon to Host Investor Conference Call

Falcon will host an investor conference call beginning at 9:00 a.m. (Eastern Time), Friday, April 11, 2008. The conference call will be available live via telephone. To participate in the conference call within the U.S. and Canada, dial (866) 688-0039. To participate in the conference internationally, dial +1 (706) 679-3130. The conference code is 43449303. The conference call will also be broadcast live on the Internet and may be accessed at www.falconoilandgas.com.
The conference call will be available for replay via telephone beginning approximately two hours following the conclusion of the live call. To listen to a replay of the conference within the U.S. and Canada, dial (800) 642-1687 or internationally +1 (706) 645-9291. The replay code is 43449303.


About Falcon Oil & Gas Ltd.



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