FX Energy

[dan_s]

Rumors are swirling that FXEN has tested Kutno and will announce results soon. Keep in mind that this is a wildcat well, so it is a very high risk / high potential well.

[par_putt]

FX Energy Updates Kutno-2, Frankowo-1 and Komorze-3 Operations 09/17 07:55 AM

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SALT LAKE CITY, Sept. 17, 2012 /PRNewswire/ -- FX Energy, Inc. (FXEN:$7.846,0$-0.074,0-0.93%) today provided the following update on the status of the Company's operations in Poland.

Frankowo-1 Well
9 5/8ths casing has been set and cemented into the top of the Zechstein formation at a depth of 1525 meters. After waiting on the cement to set up, drilling will continue. The well is located on the Company's 100% owned Block 246 concession.

Kutno-2 Well
Drilling and coring operations are ongoing.The Kutno-2 well is being drilled together with the Polish Oil and Gas Company (PGNiG). PGNiG will earn a 50% interest in the Kutno concession in connection with its participation in the Kutno-2 well.

Komorze-3 Well
Production testing operations at the Komorze-3K well are continuing. Komorze-3 is a satellite structure located less than 3 kilometers from the Company's 2011 Lisewo-1 Rotliegend gas discovery. PGNiG is the operator of the well and holds 51% interest; the Company holds 49% interest.

When additional information is available on these and other operations, further updates will be made.

About FX Energy (FXEN:$7.846,0$-0.074,0-0.93%)
FX Energy (FXEN:$7.846,0$-0.074,0-0.93%) is an independent oil and gas exploration and production company with production in the US and Poland. The Company's main exploration and production activity is focused on Poland's Permian Basin where the gas-bearing Rotliegend sandstone is a direct analog to the Southern Gas Basin offshore England. The Company trades on the NASDAQ Global Select Market under the symbol FXEN. Website www.fxenergy.com.

[dan_s]

FXEN has a ton of upside if Kutno-2 is a successful well that confirms the structure being tested contains gas. However, FXEN has a lot more going for it than Kutno. If this wildcat well is a dry hole, my advice is to buy the dip that follows.

[wilmawatts]

Comments from yesterday's IPAA conference presentation by FXEN. Very positive developments:

http://lnkd.in/FPS3pu

[wilmawatts]

FXEN stock is moving up today on the comments and presentation, which is good.

This company has a very attractive risk/reward profile, the upside is quite impressive. Current reserves and production support the current stock price, you pay nothing for exploration potential.

Dan calls FXEN 'the milion dollar lottery ticket with no downside'

[wilmawatts]

Expect very good news very soon on several of the wells that are currently being tested by FXEN.

The outlook here is outstanding for capital appreciation.

[dan_s]

Keep in mind that FXEN is almost a pure play on what they have going in Poland. The eastern European gas market is much stronger than the U.S. gas market. Very high reward potential on this one if Kutno-2 is a successful test.

Kutno-2 is testing the largest structure in eastern Europe. If it is full of gas it could be the most significant event for Poland in a long time. Poland still imports a lot of gas from Russia.

FXEN is not a one trick pony. It is drilling several potential "Game Changers" this year.

If Kutno-2 is successful, I am expecting them to monitize their interest since the capital costs to develop the reserves are probably beyond them. However, that is just speculation on my part.

[wilmawatts]

More equipment and workers showed up at the site today.

A discussion at a linkedin investment group of what is going on gives a pretty good overview:

http://lnkd.in/FPS3pu

Production has really grown pretty impressively - and will continue to grow regardless of Kutno-2 results - a table with data is at the bottom of the link above.

[wilmawatts]

Company many drill Kuntos-2 500 m deeper according to reports that they modified their permit.

No flare seen on the webcams. Lots of activity at site.

Not positive, but not a dry hole either, at this point.

[dan_s]

2,500 meters is a LOT DEEPER and a lot more expensive. Plus, I doubt the rig they have can handle that depth.

[setliff]

i read that as 500 meters re kutnos-2. will that chg your comment, dan?

[wilmawatts]

Sorry Dan, the message was that they have a permit to drill 500 M deeper - not any more.

And sources have said that they might not drill that deep if they find the gas they are looking for, just wanted that permission.

Bottom line is if Kutnos-2 is non-commercial (and I don't think it will be) the 3D seismic at Lisewo SE may indicate another Ratlin size field (discovered by PGNiG in 1985 and still going strong). The seismic is just starting to be evalated apparently.

Lisewo SE could add $10 per share to the PV10 proved reserves - FXEN is not a one pony show!

[wilmawatts]

I might add they are shooting 3D seismic at the site today, to better define something they are looking for I expect

Will take a few days to shoot and process I expect, then a few days to pow-wow with the tech guys and PGNiG. Then decide on a course of action.

[wilmawatts]

The 3D seismic data might give them an idea of how much deeper they need to drill to get through the Rotliegend.

Remember the Rotliegend is a very thick Permian age formation that sometimes has different zones that are productive - due to the deposition sometimes the permeabilty between the different levels of Rotliegend is reduced - meaning a well might have to be completed in the lower Rotliegend, mid-Rotliegend, and upper Rotliegend since the gas does not migrate.

Also keep in mind two things:

1. It is a lot easier to make a commercial gas well when gas is selling at $12 a mcf like it is in Poland, versus the $2.80 mcf we are seeing here in the US. The spreadsheet using Polish priced gas looks a lot sweeter

2. The fracing technology, if they need to frac, is light years ahead of where it was at even a decade ago. The size of the pumps, the proppants (synthetic versus sand), and science have come a long long way. So if the formation is tight it still might make commercial sense to develop it.

[wilmawatts]

Here is the latest on FXEN as of today:

1. Apparently they are shooting 3D seismic at the Kutnos site today, to better define something they are looking for structurally about three miles under the surface. The 3D seismic data might give them an idea of how much deeper they need to drill to get through the Rotliegend. At this stage you want to penetrate all the potential zones, but you don't want to continue drilling mindlessly without a target (a deeper target may not exist, or it might be too deep to go after).

Remember the Rotliegend is a very thick Permian age formation that sometimes has different zones that are productive - due to the deposition sometimes the permeabilty between the different levels of Rotliegend is reduced - meaning a well might have to be completed in the lower Rotliegend, mid-Rotliegend, and upper Rotliegend since the gas does not migrate up and down in the formation.

2. We have been told that the company applied to amend their permit to drill 500 m deeper, but might not drill the entire 500 m if they find the gas they are looking for at a shallower depth.

3. We were told the town mayor quoted in a Polish newspaper has no clue if the well is good or not - apparently he indicated it was a good gas well in the article.

4. Also keep in mind two things:

A. It is a lot easier to make a commercial gas well when gas is selling at $12 a mcf like it is in Poland, versus the $2.80 mcf we are seeing here in the US. The spreadsheet using Polish priced gas looks a lot sweeter

B. The fracing technology, if they need to frac, is light years ahead of where it was at even a decade ago. The size of the pumps, the proppants (synthetic versus sand), and science have come a long long way. So if the formation is tight it still might make commercial sense to develop it.

5. The 5 analysts who cover the stock have it at a consensus 'buy' rating and have a $9.52 twelve month price target on the shares (they are at $7.70 today). No value has been given to the share price for Kuntos-2 (maybe rightfully so) apparently

6. The 3D seismic on the Lisewo SE field could indicate a field as large as the PGNiG Ratlin field (discovered in 1985 and still going strong). If we have 'closure' - and we will know soon - additional developmental wells to the Lisewo-1 couild add $10 per share to the PV10 NAV at FXEN. This company is no one pony show.


Stay tuned, carry on, and keep calm.

[setliff]

joe, i really appreciate your in depth updates. i am sure others do too.

jim

[mingya]

The well is Kutno-2. It is 500 Meters more - from 6,500 to 7,000 meters. Maybe the current rig can handle that. Also they had mentioned the most difficult part of the drilling was done and so perhaps the cost will not go too high.

Hard to tell what this means, there was some kind of truck that looked like seismic on the field recently. Somebody is on property near the well and has spotters watching the action which only further adds to the speculation.

Catch the tweets here....
https://twitter.com/Zackfoot

Photo of seismic truck
https://twitter.com/Zackfoot/status/251 ... to/1/large

I have noticed some investors have grumbled about the information roll-out not being very helpful for investors and also a lot of old time investors have been frustrated by FXEN keeping to time schedules and also the time from discovery to getting the gas sold on the market.

Anyways, we should know something in the next 3 months and hopefully about some other catalysts in their portfolio. Namely Tuchola, Frankowo and Plawce.

[wilmawatts]

A lot of the old time investors have an attitude. They really need to sell the stock and move on if they don't like the way things are being conducted.

To sit back and criticize continually when you see the production gains this company has shown and the prospects, all while operating in a country that has seen very little exploration (therefore does not have the regulatory structure for exploration well established) is inexcusable in my opinion. It is a sign of very poor decision making on their part as an investor.

Dan has a dozen GREAT companies to invest in here at EPG, so if you don't like the treatment at FXEN as a shareholder time to move on, there are other games where the personalities might fit better. That said, I am not an old timer (but have been in the stock well over a year), hold at a good gain at current price levels, like management and their presentations, like Dan think the share price will go higher based on existing production and discoveries without Kutno, and I am not selling (but I would if I was infected with the 'old timers' attitude). Some folks were born to complain, they can take their carping to the water cooler IMO.

FXEN is on the Sweet 16 for a reason. Shareholders will find out, if they don't know already, fairly soon.

[prince_jake_33]

Dan and Willmawatts, I am concerned that no gas is flowing from a well [KUTNO2] that is 20000 feet deep. I understand that the well is down into the producing sand. . A column of water that high would drive a column of light gas at around 6000 psi if the gas flow is not restricted. I know nearly nothing about this complicated operation.
I sold my FEXN stock yesterday but hold some of the oct 7.5 puts.
I would like to get back into FEXN with the oct 7.5 puts .
Dan, you said to buy FXEN after KUTNO 2 well is found to be dry, if that happens.
What do you think now?

[setliff]

fwiw, oct calls outnumber puts by >4/1. also, fwiw, there is little to no premium for holding oct nov or dec puts as insurance. the puts would cost as much as a downside unless i am looking at something wrong.

[wilmawatts]

You have to make your own call here on what to do if the Kutno is dry. The market is giving the stock little if any premium for Kutnos. If the well is dry the other assets and plays are very attractive. The current price is a great entry point, well below Dan's fair value based on only discovered and producing properties.

Then again, like I said, you have to make your own call as to when you would re-enter or not. For what it is worth.

[prince_jake_33]

Setliff I am selling oct 7.5 puts for about $1.00.If the stock is put to me I will have a cost basis of $ 6.5. I am not using puts for insurance, buy rather for investment.

[setliff]

prince--yeah i figured since you had sold equities. i looked into it since i still have several k shs.

jim

[wilmawatts]

From another board this morning - discussing the seismic truck on site at the Kutnos-2 well - this guy is usually pretty sharp:

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
The truck is a vibrator truck, which is used as the source for seismic data. The crew didn't just stop in for a beer. It is most likely that FX ran a Vertical Seismic Profile (VSP) or velocity survey in the wellbore after setting the liner through the Zechstein. A string of geophones (receivers) is lowered into the wellbore and the vibrator generates the signal. The geophones are moved up the wellbore at set depth intervals or at significant geological features such as formation tops and faults. This gives the operator a direct measurement of the rock velocities and is used to tie the well depths to the seismic data. If they ran a VSP, then the data can be processed to give them a seismic look ahead of the bit. Given the proposed TD, I think it is wise of them to get a good tie of well data to seismic.

I haven't been hanging around here much. Still long but not as long because I've learned to sell on jumps. My hunch is that they ran a velocity survey or VSP (see previous post) and figured out that they aren't as deep geologically as they thought because (surprise, surprise, surprise) the actual rock velocities are different than those used to make conversion from time to depth before drilling. No opinion as to whether this bodes good or ill for Kutno.

FYI, I'm not optimistic but love the fact that FX isn't paying for it.
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Company has always said this was a longshot, I guess we will find out.

[wilmawatts]

well back drilling today