NIS Signs Deal with Falcon Oil & Gas for Hungary Project
Naftna Industrija Srbije, j.s.c. Novi Sad (NIS) and Falcon Oil & Gas Ltd. have signed a Letter of Intent for the acquisition by NIS of an interest in producing the Algyö Play within Falcon’s Makó production license in Hungary.
NIS is to acquire an interest from Falcon’s Hungary subsidiary TXM Oil & Gas Exploration Kft in Falcon’s 955 sq km Mako production license from a depth of 2,300 m down to the base of the Algyo formation. TXM will retain all rights deeper than the base of the Algyo formation such as the Szolnok and Endrod formations.
The Algyo formation is a prospective, pervasive, hydrocarbon-bearing sandstone found predominantly between 2,500 and 3,500 m below surface. A letter of intent calls for NIS to pay TXM $1.5 million upon signing a participation agreement.
Under the terms of the agreement NIS shall, at its sole expense drill, test and complete three wells in the agreement area. These wells, to be drilled and tested before 31 December 2012, shall be located so that each well tests an independent Algyö prospect.
After drilling the three wells, NIS has the right to acquire a 50% interest in production from the entire agreement area by paying TXM a further $2.75 million. If NIS does not fulfill its drilling obligations, TXM will retain 100% interest in the agreement area.
If the NIS earn-in is completed, NIS and TXM will share future exploration, appraisal, and development costs and production in the agreement area in accordance with their participating interests held under a joint operating agreement. TXM will be the operator under the participation and joint operating agreements.
TXM said NIS is an active player in Serbia and has a growing presence in the region, including exploration in the same type of targets addressed in the agreement, to which North American technology will be applied in Hungary. NIS said the joint project with TXM will bring NIS closer to achieving the strategic goal of hiking reserves to 50 million tons and production of oil and gas to 5 million tons of oil equivalent in 2020.
NIS noted that Serbia has a huge potential of shale gas exploration and that cooperation with Falcon in Hungary will allow it to learn and prepare its geologists and engineers for further deep exploration in Serbia.
Dr. György Szabó, CEO of TXM, said “These signatures represent a major latter-day milestone on the road of collaboration between the two neighboring countries’ petroleum industries, which goes back more than half century. Falcon-TXM is absolutely confident that the application of experiences gained through its projects in South-Eastern Hungary, along with the adaptation of proven North American technology and equipment, will be rewarded by success not only in the boundaries of its own mining plot but in the field of cooperation in Serbia as well.”
NIS, owned 51% by Russia’s Gazprom Neft, is one of the largest, vertically integrated oil and gas companies in Southeast Europe, dealing with exploration, production and refining of crude oil and natural gas, as well as with the sales of a broad range of petroleum products.
Recently, NIS announced the signing of agreement with East West Petroleum Corp. that will lead to the drilling of 12 well in onshore Romania.