FX Energy, PGNiG Delivered Setback by Kutno Disappointment

FX Energy, Inc. has announced that it will plug and abandon the Kutno-2 well. The decision was made after that after evaluation of drilling data.

Although gas shows and porosity of up to 6% were seen in the upper Rotliegend, the well flowed only salt water. The Rotliegend in the Kutno-2 well appears to be fluvial in origin, with abundant clays, dolomites and shales intermixed with sands.

Kutno-2 targeted a massive Rotliegend structure. The Company had commented earlier that Kutno-2 was a very high risk well.

David Pierce, Chief Executive Officer of the Company, said, "We knew from the outset that the big risks in this well were drilling risk, gas quality and reservoir quality. We overcame the first two risks, but not the third. We had hoped that Kutno might contain the classic dune sands that we continue to encounter in the Fences concession. That would have been a very big prize, but unfortunately the reservoir quality is too poor to make Kutno-2 commercial."

"While we are disappointed by the outcome of this well, it is a known and unavoidable risk of the exploration business. The key is to keep a balance between lower risk drilling and production development, such as in the Fences concession, and high potential exploration in our other concession acreage in Poland.”

FX Energy had estimated total costs for Kutno-2 at approximately $10 million. The Polish Oil and Gas Company (PGNiG) earned a 50 per cent interest in the concession area due to it carrying some of the cost of the drilling process on Kutno-2.