Falcon Plunges After Exxon Recommends Abandoning Well (Update2)

By Sonja Franklin

Oct. 8 (Bloomberg) -- Falcon Oil & Gas Ltd. fell as much as 55 percent after the Canadian oil and natural-gas company said Exxon Mobil Corp. recommended ceasing operations at the Foldeak- 1 well site in Hungary.

Falcon shares fell 19 cents, or 50 percent, to 19 cents as of 1:47 p.m. on the TSX Venture Exchange. Earlier, they traded as low as 17 cents. Some 11.2 million shares changed hands, more than 16 times this year’s daily average of 663,019.

Falcon and partners Exxon Mobil, based in Irving, Texas, and Hungary’s Mol Nyrt. are “discussing next steps” in the production and development project located in the Mako Trough, the company said in a statement today.

Operator Exxon Mobil drilled the well in the Szolnok Formation at 4,358 meters (14,300 feet) and 4,200 meters and hit what may be a natural water deposit, Falcon spokesman Stephen Schultz said in an interview today. Falcon recommends test drilling again at a lesser depth, he said.

“We are disappointed in test results to date,” Falcon Chief Executive Officer Marc A. Bruner said in the statement. “The tests to date do not represent a complete evaluation of the hydrocarbon potential of the Szolnok Formation or the Mako Trough overall. We believe that it may be prudent to complete additional testing in the Foldeak-1 well.”

In 2007, Falcon was awarded a production license covering 245,775 acres in the Mako Trough in south central Hungary, the company said on its Web site. In April of 2008, Falcon entered into the joint venture with Exxon Mobil and Mol on an area covering 75 percent of the license for further commercial evaluation and development of the resource, Falcon said.

Exxon Mobil in Talks

Exxon Mobil “is currently evaluating the results of the two fracs at the Foldeak-1 well in the Mako Trough,” Patrick McGinn, a spokesman for the company, said in an e-mail today. “We are in active discussions with our joint-venture partners” about the next steps.

Exxon Mobil rose 28 cents to $69.95 as of 1:51 p.m. in New York Stock Exchange composite trading. Mol fell 1 percent to 14,940 forint in Budapest.

To contact the reporter on this story: Sonja Franklin in Calgary at sfranklin6@bloomberg.net