Naftna Industrija Srbije JSC, the Serbian oil and gas company owned 56% by JSC Gazprom Neft, will drill three exploratory wells in the shallow Algyo play in Hungary’s Mako trough on lands held by Falcon Oil & Gas Ltd., Toronto.
Falcon to be fully carried on the drilling and testing costs. The first well is to be spudded in the last quarter of 2012. NIS will earn 50% of the production revenues from shallow production if successful. Falcon will retain 100% interest in deeper zones in the Deep Mako trough.
A number of Falcon wells have been drilled through the Algyo, at 2,300-3,500 m, in recent years but none has tested the play concept because all of the wells targeted intervals as deep as 6,000 m. Multiple Algyo prospects have subsequently been identified through extensive AVO analysis. NIS will target the three top ranked prospects.
The transaction remains subject to a favorable ruling of the negotiated tax and accounting treatment by the Hungarian Ministry of Finance.
Falcon noted that a gas processing plant at giant Algyo oil and gas field 5-23 km away would benefit project economics and the timeline for monetizing any discovery in the Algyo play.