Falcon Oil & Gas Ltd., Denver, (TSX: FO) has completed full testing of the Shenandoah-1 well in the Beetaloo Basin, Australia, and gas was produced from three shale intervals tested.

Shenandoah-1 is a vertical well situated in the deepest part of the basin and natural gas was the expected hydrocarbon at the depths being tested.

The well is the first to be tested in these unconventional targets, consequently the objectives of the tests were to determine whether the shale intervals could be fracture-stimulated and whether they could produce hydrocarbons, and to confirm rock, pressure and fluid properties. The operation has succeeded in these objectives. The well will now be plugged and abandoned to the highest environmental standards.

Three of the five intervals that were tested flowed gas while still recovering significant amounts of frac fluid.

The most positive results came from the Middle Velkerri shales where there was no indication of formation water being produced. The sustained gas rates ranged between 50,000 and 100,000 standard cubic feet per day with gas gravities ranged from 0.64 to 0.7. The lower interval also yielded 43° API condensate.

Importantly, the well showed that that these rocks can be stimulated and are overpressured. Both Velkerri intervals will now be considered candidates for future testing, including horizontal drilling with multiple stimulation treatments to establish commerciality.

The Lower Kyalla shale also produced gas to the surface and will now be considered for further exploratory investigation.

The Upper Kyalla shale is oil-bearing in Shenandoah-1 but was not tested due to wellbore configuration.

Two separate intervals were perforated in the Moroak sandstones. These were not stimulated but rather were conventionally perforated to find out if the rocks were gas-bearing and to provide technical information. Little to no commercial hydrocarbons were present. The test did however provide valuable rock property information as the Moroak is a target of interest elsewhere in the Beetaloo Basin as a conventional play.

Shenandoah-1 is within the 100,000-acre area that is under the sole ownership of Falcon Oil & Gas Australia Ltd. and is not part of the acreage included in the joint venture with Hess Australia (Beetaloo) Pty. Ltd. Under the terms of that arrangement however, Hess will be provided copies of data obtained from the testing and completion, for which the company will receive $2 million.

Falcon chief executive officer Robert Macaulay says, "The Velkerri results support our belief in recoverable hydrocarbons in the deepest part of the Beetaloo Basin. They also prove that these particular shales can be fracture stimulated, which is a crucial first step in the exploration and appraisal process. The Moroak sandstones continue to be a target of interest and the information gained from testing will help with prospecting for these targets elsewhere in the basin. The Lower Kyalla result is likewise encouraging. We will be working through the data to understand it better before committing our plans to paper on the next steps."