FX Energy, Inc. declares the successful workover of the company's Grabowka-12 well. It is expected to begin production early next year at approximately 1.0 to 1.2 million cubic feet of gas per day. Two more wells in the field, Grabowka-6 and Grabowka-8, are scheduled for re-entry later this year. The Grabowka field is located in western Poland in the Company's Block 287.

Though FX owns a 100% working interest in and operates the field, this three-well re-entry venture is part of an unusual and creative venture with PL Energia, a gas distributor in Poland. PL Energia agreed to pay all re-entry and workover costs, all operating costs, and all processing and distribution costs. Thus, FX Energy incurs no capital or operating costs. In return for funding all of the costs, PL Energia gained the right to purchase production from these three wells at the reduced price of $60 per thousand cubic meters of methane, or about $1.00 per thousand cubic feet of raw gas. Grabowka field gas is approximately 61% methane. The combination of the purchaser provided financing and the lower than normal gas price effectively creates an economic outcome similar to a royalty interest for FX.

PL Energia operates a gas distribution business in Poland based on compressed natural gas (CNG) and liquefied natural gas (LNG). Gas from Grabowka will be converted to CNG for distribution, eliminating the need for a pipeline. Elimination of the pipeline reduces costs for PL Energia, and advances the initial production date for both companies.

Zibi Tatys, FX Energy's Country Manager in Poland, commented, "Grabowka was clearly an economic resource, but too small for FX Energy to divert drilling dollars that should go to high potential exploration. By joining with PL Energia we were able to exploit this resource profitably. We might see net revenue of about $1 million per year over the next several years from the Grabowka project, assuming the two remaining wells perform to expectations. We think this kind of creative approach to exploiting a non-traditional opportunity may have application elsewhere in Poland."

The Grabowka field was drilled by the Polish Oil and Gas Company (PGNIG) in 1983-85. The wells were production tested but never produced commercially. In 2003, FX Energy acquired the rights to the 213,000 acre block where the field is located. Subsequently, FX Energy entered into an agreement with PL Energia, S.A.

Tags: FX Energy