FX Energy's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Mar.13.14 | About: FX Energy, (FXEN)

FX Energy, Inc (NASDAQ:FXEN)

Q4 2013 Earnings Conference Call

March 13, 2014 16:30 ET

Executives

Clay Newton – VP, Finance & Chief Accounting Officer

David Pierce – CEO

Analysts

Joseph Reagor - Roth Capital Partners

Dan Mittag - Oppenheimer & Co

Joel Musante - Euro Pacific Capital

John Bair - Ascend Wealth Advisor

Operator

Good afternoon ladies and gentlemen and welcome to the FX Energy Incorporated Fourth Quarter and year-end 2013 financial and operating expenses results conference call. (Operator Instructions). And now I will turn the conference over to Clay Newton, Vice President of Finance. Please go ahead Mr. Newton.

Clay Newton

Thank you, Vickie. Thank you all for joining us today. I am Clay Newton, VP of Finance here at FX Energy. Welcome to our 2013 earnings call. This call will follow the usual format. I’ll talk about just a few key financial items. A substantial detail is available in our earnings release and our 10-Q that were filed earlier today and can be found on our website. After that, David Pierce, our CEO will talk about CapEx for this year and provide some operational updates. We will also have a Q&A at the end of David’s remarks.

I’d like to remind investors that during today’s call, we will be making statements that are forward-looking and consequently are subject to risks and uncertainties. Examples of these statements include those regarding exploration, drilling, developments, or other operations that may be subject to the successful completion of technical work, environmental, legal or partner approvals, equipment availability, or other things that are or may be beyond our control.

You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements. Such factors include the risks set forth in our Form 10-K and in our other filings with the SEC. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances.

I’ve divided my remarks today into three sections. First, I’ll talk about the numbers, production and revenues and non-cash charges. Second, I’ll spend a few minutes talking about our liquidity and capital resources. Lastly, I will review the reserve numbers from our year-end reserve reports.

Let’s start with production; during 2013 we produced a total of 4.4 billion cubic feet equivalent down from 4.8 billion in 2012. The 2013 figure represents an average daily production rate of approximately 12.2 million cubic feet equivalent per day compared to 13.1 cubic feet equivalent per day in 2012, a 7% decrease.

As we discussed on our last call production declines at our two oldest wells in Poland, our Zaniemysl well which was discovered 2004 and our Roszkow well discovered in 2005 accounted for most of the reduction. Production declines at those two wells have been mostly offset by the recent addition of the Lisewo-1 that began production in December of last year and Kormoze-3K started production just this month. Net to our interest the two new wells are producing about 3 million cubic feet equivalent per day. This brings our currently daily production to about 14.0 million cubic feet equivalent per day which is slightly higher than where we started 2013. Primarily as a result of decline in Zaniemysl and Roszkow, oil and gas production for the fourth quarter of 2013 was down from the fourth quarter of the year ago.

2013, Q4 production was just under 1 billion cubic feet equivalent, an average of about 10.8 million cubic feet equivalent a day while 2012 Q4 production was just under 1.3 billion cubic feet equivalent or 13.8 million cubic feet per day. In addition to the production additions at Lisewo-1, Kormoze-3K we plan to begin production from Lisewo-2 later this year and Szymanowice-1 early next year. Gas from both wells will be processed at the existing Lisewo gas production facility. Our oil and gas revenues were $33.3 million down 3% from last year, total revenues of 34.5 million were 6% lower than our 2012 total.

During 2013 as denominated in U.S. dollars the average price we received for production in Poland was $7.11 per mcf compared to $6.81 per mcf in 2012, an increase of 4%. The Polish gas tariff was actually 3.3% lower for both the fourth quarter and the full year of 2013 compared to 2012. However the U.S. dollar equivalent price for both periods was higher than the tariff change due to the strengthening of the Polish zloty against the U.S. dollar during 2013.

In early 2014 the Polish gas tariff was increased 3.1% by the public utility regulator and the increase became effective for us on February 1 of this year. However remember that our reported U.S. dollar denominator gas prices will continue to be effective by currency movements in addition to tariff changes. Even with the recent surge in U.S. natural gas prices we continue to enjoy significantly higher gas prices at much lower operating cost in Poland than our peers in the U.S.

Their higher margins translate directly into higher exploration and development spending in Poland.

A few words as always about non-cash charges, our financial results continue to be impacted by non-cash charges. In 2013, we recorded foreign exchange gains of about $5 million compared to foreign exchange gains of about 16.3 million in 2012. Please remember that almost all of these foreign exchange gains are related to the dollar denominated intercompany debt between FX, Inc and FX Poland and other dollar denominated debt at the FX Poland level.

This will continue to vary overtime as the exchange rate between the U.S. dollar and the Polish zloty changes. However they have no impact on our revenues, cash flows or ability to execute on a capital budget.

Concerning our liquidity and capital resources our cash provided by operating activities of $2.3 million increased by about $3.5 million from last year to this year. Most of the improvement was due to changes in our working capital items. In our third quarter call, we estimated that our total capital spending for 2013 would be between 45 million and 50 million, our actual total capital spending in 2013 totaled 49.9 million which is about 36% more than we spent in 2012 and easily our highest capital investment program ever. At the end of 2013 we had approximately $11 million in cash and $20 million availability under our credit facility both of which will be available to use in addition to the cash we expect to generate for our capital program in 2014.

As David will explain in more detail we’re well positioned to pursue another active exploration and development program during the coming year. I will wrap up with a few final comments in our year-end 2013 reserve figures. Earlier today we reported proved or P90 oil and gas reserves at year-end 2013 of about 45 billion cubic feet equivalent. Our reserves declined by approximately 2.9 billion cubic feet equivalent from the prior year. Excluding production our reserves represent a 4% increase from our 2012 year-end reserves. The increase is due primarily to new reserves at Szymanowice of about 4 bcf which were offset by net negative revisions of about 2.4 bcf and our outer properties including 0.5 bcf in Montana.

The pretax PV10 value of our P90 reserves is a $159 million. Our after tax were smart value is about a 152 million down just 4% from 2012 values. We have filed summary reserve reports for both Poland and the U.S. as exhibits [ph] to our 10-K today but we will be posting the full reports on our website shortly so I would refer you to those reports for the full details.

With that background I will now turn the call over to David for some operational updates.

David Pierce

Thank you Clay. Good afternoon, I’m David Pierce. Thanks for participating. I’m pleased that now we can see an ongoing increase in momentum over the last few years in Poland. We drilled three wells there in 2012; five wells in 2013 and we expect to start 6 to 8 more wells this year. Just since our last earnings call we have started up a new production facility, got production started at two new wells and drilled two more commercially successful wells. We’re drilling more wells and have a bigger backlog of better prospects to drill than ever before.

Putting us into dollar terms we increased our CapEx with 37 million in 2012 to 50 million last year and we expect to make CapEx commitments this year of approximately 55 million. We will continue to allocate the majority of our resources to our core Fences concession.

We have a good track record, 73% success rate of drilling commercial wells. We have production infrastructure in place and we have our biggest ever inventory of undrilled 3-D defined prospects. Our number one priority is to increase our reserves production and revenue in the Fences.

Our second priority is to find a significant new exploration play in our 100% own concessions in Poland. This year we plan to follow-up on encouraging results of earlier exploration work in two of our concessions. We’re drilling one well now and we had budgeted up to three more wells depending on drilling and seismic results. Overall this is the best position we’ve ever occupied. Production and revenues are on a positive track this year, we have the resources to drill more wells than ever before. We have more and better targets in our lower risk core concession and we’ve the possibility of exploration success in our 100% owned concessions. We could have a very good 2014.

Let me provide a little bit more detail about our plans for this year. Most of the company’s production comes from just seven wells in our core Fences concession. Three months ago we drilled two more commercial wells there which should begin producing in the third quarter 2014 and the first quarter 2015 respectively. In addition the Zaniemysl well that we shut-in last year is scheduled to be side tracked and could be producing again before the end of this year. So upto three more wells could start producing over the next 12 months or so.

We also plan to drill four new wells in the Fences concession this year. Two of these new wells will be in the Lisewo area. The Lisewo area has about a dozen 3-D defined structures on two parallel North West, South East trends. We have already drilled four successful wells in this area two of which recently started production. Another new well to be drilled this year will be about 10 kilometers to the North West of Lisewo in an area called Miloslaw. This Miloslaw area is a look alike to the Lisewo area in that it has nine 3-D defined structures on two parallel North West South East trends. This year’s Miloslaw well will be our first well in this new area. And finally our fourth new well this year is named Karmin. It's located down on the South East corner of the Fences concession, Karmin is not part of the group of structures but it is on trend with the highest rate producing wells that we have ever drilled in the Fences concession.

Finally we also have planned to acquire a little more 3D seismic in the Fences concession this year most of it to expand coverage around the Lisewo area. We’re shooting less seismic in the Fences than in past years because we have already built quite an inventory of 3D prospects. You can see a map in the latest investor presentation just posted to our website. At the moment we have 20 undrilled 3-D defined structural prospects in the Fences concession, mostly in the Lisewo and Miloslaw areas.

We think it makes sense now to allocate more funds to drilling. Our operating partner supported our request for more wells last year and again this year and we’re continuing to lobby for even more new wells. So far we have discovered a gross 190 bcf P50 in the 11 successful wells we have drilled in the Fences. We think there is potential for more than that on a risked basis just in the undrilled 3D prospects now in our inventory.

We will continue to make every effort to increase the patient drilling because there is a lot more potential in the Fences.

Outside the Fences concession we’re making progress in our effort to find and develop another base of production. The Edge concession and the Block 246 concession continued to show very good potential. In the Edge concession we hold 100% working interest in about three quarters of a million acres in North Poland. Last year we drilled a total of 3K wells tested gas with 55% hydrocarbon content and showed a good porosity and permeability in the lower Zechstein.

We also saw potential in the Devonian immediately below. With that encouragement we acquired 3D seismic and last month we started drilling the total of 4k well to appraise our discovery. We’re now drilling below 2000 meters. Once we get below about 2500 meters we will be quarrying, testing and logging three target zones within the next 1000 meters.

We’re really excited about this well with the well itself of course but mainly for what it might tell us about regional potential. Meanwhile we have just completed the acquisition of a 220 square kilometer of 3D seismic survey surrounding the Tuchola structure. Our hope based on all the 2D seismic is the new 3D well will show us other features nearby with characteristics similar to the Tuchola feature. A logical next step would be to drill one of those new features, if all that works out successfully it will be a major step forward toward confirming a significant new hydrocarbon play.

Although it may seem early days yet we’re investigating development possibilities. The quickest and cheapest is to install power generation or co-generation on site. Second approach would be to transport low methane gas to industrial users in the area which would require at least 20 kilometers of pipeline possibly much more and would have a limited customer base. Another possibility would be to build the denitrification plant and tie into the nearby high methane pipeline at a distance of approximately 15 kilometers.

The high methane approach would provide access to the broadest group of customers including downstream distribution companies who might provide infrastructure funding. Much depends on our assessment of the potential size of this play and we really can’t address that question until we have results from the Tuchola-4 well.

For the moment I can say we are very excited about the potential of the Edge concession. In the next several months we expect to see drilling in seismic results to help us begin estimating that potential. The Block 246 concession covers about a quarter of million acres. It's immediately South West of the Fences concession and we hold a 100% of the working interest and operate.

The most mature play is in the South East quadrant where we may have the same play as in our core Fences concession. Our 2012 exploratory well yielded positive downhole data for both hydrocarbons and reservoir quality in the Main Dolomite and the Rotliegend.

We followed up with new 3D seismic and now have a preliminary structural map covering about a 100 square kilometers. We expect to complete final mapping in a couple of months or so after some additional geophysical work. We also have a decision to make about fracing the Gorka Duchowna well in the North West quadrant of the block. This 2013 well was designed primarily to test the Carboniferous which is the source of our gas in the Fences concession as well as the gas in the Bronsko and Koscian gas fields about five kilometers to the North.

Drilling and fracing operations in Block 246 are on hold for the moment. We want to see the results of the Tuchola-4 well in the Edge concession and the mid-year budget revisions from our partner in the Fences concession. If there is an opportunity whereas to increase 2014 activity in either the Edge or the Fences we will re-direct funds currently budgeted for two wells in Block 246. If not there are still time for 2014 drilling and/or fracing in 246. Let me emphasize that we’re encouraged as ever about the potential of Block 246 particularly shallow, low cost drilling and proximity to infrastructure but the Fences and Edge concessions have higher priority.

To close let me review our plans in Poland. In the Fences concession two wells are expected to start producing in 3K, ‘14 and 1K, ’15 respectively. We could also see there is the Zaniemysl well resumed production before year-end if the side track scheduled for the second half of this year is successful. We have four new wells to drill in the Fences this year, two more in the Lisewo area, a first well in the Miloslaw area and the Karmin well in the South East of the concession.

In the Edge concession we’re drilling the Tuchola-4 well and expect to see results in the second quarter. We have just finished acquisition of 220 kilometers of 3D seismic acquisition in the area around Tuchola and we anticipate preliminary mapping around mid-year. We have budgeted another Edge well and upto two wells in Block 246 but we will differ taking action on these until we see Tuchola-4 results and also whether there might be an opportunity to add more wells in the Fences concession yet this year.

We’re pleased to have so many opportunities in front of us this year and to have capital resources to support our increased momentum. We appreciate your patience and thank you for helping us get here. Operator we can take some questions now.

Question-and-Answer Session

Operator

We will take our first question from Joseph Reagor with Roth Capital Partners.

Joseph Reagor - Roth Capital Partners

Couple of questions for you, first one can you guys just over the general all-in capital budget and what percentage you expect to be expense to the exploration mine this year?

David Pierce

I suppose it depends on the outcome of drilling. I mean I don’t think we can really address that until we know how we do on our wells.

Joseph Reagor - Roth Capital Partners

Can you give an all-in capital budget I guess then for the wells you’ve planned and the exploration you guys have planned as far as seismic?

David Pierce

Probably about the same distribution as last year except we will be spending a little more drilling. Roughly speaking I think we’re looking at 35 million to 40 million on drilling and 10 million on seismic, seismic will be down a bit, infrastructure might be something like 5 million.

Joseph Reagor - Roth Capital Partners

On Zaniemysl, side tracked planned for the second half but was there any reserves in the updated reserve report that are attributed to that well?

Clay Newton

Yes there are net, I believe it's about 800 million cubic feet proved and about double that P50 reserves.

Joseph Reagor - Roth Capital Partners

And then one final thing, can you just remind us again on the timing of if you were to side track that on the second half and only successful, when could we expect production from that again?

David Pierce

Well we would expect to see production as soon as we cleared the side. We’re going to be producing through the same well ahead into the same pipeline. So there is no, I mean this isn't really a new well this is just a new bottom hole location. So it should start production essentially immediately.

Operator

We will go next to Dan Mittag with Oppenheimer & Co.

Dan Mittag - Oppenheimer & Co

I had a quick question on Lisewo-2 production, is it roughly similar to what you’ve experienced in the Fences?

David Pierce

We’re just completing testing of that well and should have results in a week or 10 days I expect.

Dan Mittag - Oppenheimer & Co

Would you announce that?

David Pierce

Not as a standalone but we will certainly mention that in the next news release that comes down the road.

Dan Mittag - Oppenheimer & Co

And then on the Tuchola-4 assuming nothing goes wrong we can expect some kind of result by say end of second quarter? Is that fair to assume or?

David Pierce

Yes if things go as we expect I think we will have all of our testing done and all of our data in by the end of the second quarter maybe earlier than that. Now we may have interim news out because we’re going to be looking at three separate zones and we may have something to say about 1 or more of them as we go down. In the fences we have typically put out some kind of announcement when we ran our first drill stem test but that’s a known quantity, a more predictable area. Tuchola-4 is a little less so we want to both get news out on a timely basis but at the same time we want to make sure that we’re not going off as talked.

So I would anticipate a number of interim releases but certainly everything done all done within the second quarter.

Dan Mittag - Oppenheimer & Co

I don’t want to speculate too much on Tuchola-4 but if assuming it were successful in the three zones you were looking at would that change your focus of drilling for the remainder of the year or is it pretty much set?

David Pierce

No I think we intentionally have built in some flexibility at this point. As I mentioned we’re going to give priority to any increase in drilling activity in the Fences that we have an opportunity for and we continue to work on that issue every day. But if we saw good success in the Tuchola-4 well I think we would want to get out there and drill one or more new structures as soon as it was prudent to do so and so by prudent to do so we have just finished acquisition of a big 3D seismic shoot. I don’t know how quickly we will be able to pull drill sites off that but we certainly want if we get a good Tuchola-4 result, if we see that leaving infrastructure aside that we have got a commercial discovery there then we will want to see if we have got some more reserves in the area and begin to estimate how big the potential is for this entire concession. So yes, I think that will certainly become our, it will be a big focus area for us but it will stay behind Fences. Fences is quick cash flow and little bit production, we have already got production facilities right where we’re drilling at least two of the wells and that will remain number one.

Dan Mittag - Oppenheimer & Co

On that note I noticed that there were some changes at the top of your partner’s roster, and has the new leadership over there been maybe recharged as to getting some more work done? Maybe a couple of wells that once in the Fences concession?

David Pierce

Well that’s certainly our hope. We have made the same observation as you did. We have been in contact about that, we’ve got discussions going about that very issue. Certainly that’s something that we want very much and I know that Poland and the rest of the EU is now asking the U.S. to send our gas over there by the way of LNG. I can’t see any reason why they wouldn’t want to encourage domestic production as well.

Dan Mittag - Oppenheimer & Co

Okay. Thank you for your response.

David Pierce

Yes we have high hopes there.

Operator

(Operator Instructions). We will now go next to Joel Musante with Euro Pacific Capital.

Joel Musante - Euro Pacific Capital

I just had a question; I guess it was kind of a follow-up on the last question but on status of well permits in the Fences area and what wells you might not have permits on yet and if you’re not able to get permit for whatever reason. Kind of what are your contingency plan going forward?

David Pierce

Well if you’re talking about drilling at operating committee we have agreed on the wells to be drilling this year and at that point it becomes an internal POGC matter until we get to the point where we see contract signed and ready to go and so I really don’t have much to say about that. If on the other hand you’re talking about the permitting that allows us to get a new discovery in the production we have been attached with that job and we’re on it right now, I can tell you.

If you notice the two wells that we drilled in December last year both are scheduled to come online in fairly short order, one of them in under a year and the other one just over. We’re already doing that permit work that is for the flow lines and production facilities and so on. We’re doing that right now for all four wells that were scheduled to be drilled this year. So we anticipate that once we do get them drilled that we’re going to be producing them in something around or just under a year each. That’s the best answer I can give you.

Joel Musante - Euro Pacific Capital

And on the permit to actually drill the well, I guess that would be your JV partners?

David Pierce

Yes the operator and that’s all in their domain and I really I mean I can tell what I hear from individual people there but frankly until I see contract signed its all speculation on my part. So I prefer to wait and will put out news as each well gets contracted and they begin site preparation work.

Joel Musante - Euro Pacific Capital

So what wells out of the ones that you mentioned have already been contracted?

David Pierce

None of them have been contracted yet.

Joel Musante - Euro Pacific Capital

Okay. All right.

David Pierce

The first though that I expect to see drill would be the Baraniec well in the Lisewo area and the Karmin well down in the South East. I know those are in the front of the line but we haven't seen signed drilling contracts yet on either of those.

Joel Musante - Euro Pacific Capital

Okay and what about the Zaniemysl side track?

David Pierce

I’m not aware of any permit issues there in particular. Again we’re working inside an existing well, on existing well site. It is schedule for the second half of this year and I’ve seen some of the individual steps that have been taken over the last two quarters in that direction. So I think that well is coming as planned in the second half.

Operator

We will take our last question from John Bair with Ascend Wealth Advisors.

John Bair - Ascend Wealth Advisors

My question regards to whole [ph] prospect and looking at your maps that you’ve had out on your recent presentations and so forth looks like you’ve a map North West, South East trending fault [ph] off the South East flank of the structure that dies out but if you go along straight another very prominent fault shows up. It appears to me that that South West or South East fault rather coming up the South East flank. The upturn side of that would be over in the Tuchola-3k. So my question is simply, since I don’t obviously have the advantages of seeing some seismic in here, how confident are you that those two faults aren’t actually connected one in the same and that being said it certainly wouldn’t condemn to hold four location but certainly would change the interpretation and I guess specifically do you have a size line that ties to the 3k in the Tuchola-4 location together so that you’re very confident that in fact there is no fault.

David Pierce

Let me prefaces this by saying that although Tuchola-4 is technically an appraisal well we’re in wild cat country generally. There is no commercial production up here, this is going to be a case of first impression and I will be remiss not to underlying all of the risks that are in front of us. That said this is the best quality 3D seismic we have ever shot, so yeah we have a direct line between any two points within the bend here.

John Bair - Ascend Wealth Advisors

So what I’m saying is specifically is there a line an East West line that ties your, along the line where your locations are spotted on your seismic line where you can clearly see that there is no fault separation between the two locations and again I want to stress from my vantage point even if there is it doesn’t necessarily condemn the idea it certainly would put a little higher risk as the two wells might not be in communication. So I’m just asking that.

David Pierce

Yes and the answer is that’s not how we map it. I can’t say that that’s not how it is, but that’s not how we map it. And I’m not entirely certain that even if we did map the fault through there that it wouldn’t be on the east side of Tuchola-3. In any event I mean there is still a lot that we don’t know about this and that’s one of the reasons we’re going to do what we have planned to do as much quarrying and testing as we can, as we move through this area. Tuchola-3 we didn’t see any pressure drop as we were testing the well. If there were a boundary on either side of that well, you would expect to see some kind of a pressure bump and we didn’t see that. So our best guess is that it has not affected there. You do see it playing out little bit in the contouring but that’s about it.

John Bair - Ascend Wealth Advisors

How long did you test that 3k well?

David Pierce

Not very long, we realized immediately that we were going to have to drill another well because you may recall we didn’t get any full course through the Tuchola-3 well. We only got side well course. So once we knew we had to drill another well there we didn’t want to waste a lot of gas on something that didn’t seem to be terribly important and that would get answered in due course in a better way here in this Tuchola-4 well.

John Bair - Ascend Wealth Advisors

And if this Tuchola-4 is successful would you consider drilling the little bubble that you’ve got mapped there to the east of the 3k discovery?

David Pierce

Not at this time because one of the big issues up where, well the question is are there a lot more fields like we hope this one is. Our view is that gas fields are like cockroaches, there is never just a one. There is going to be more but it's much more important for us to demonstrate that than it is to drill the final well in this particular accumulation or even if it's a little separate one there. So what we’re going to focus on is to try to scope or to estimate the area potential that’s the first challenge when we have this new 3D seismic processed and interpreted we will be looking for drill sites on other structures that we think are similar and we will be wanting to drill one or more of those rather than try to do development drilling in existing discovery.

We will also want to be, I mean partly you want to know that just because you want to know what you’ve got partly you want to know that so that you can make good economic decisions about how you do go about developing this area. We can -- even if this is a very small accumulation we can put cogen [ph] plant right on site and make money from it. But you can do better if you’ve got more reserves by putting that gas in the high methane line and there is an in between case for just using the low methane as it is and taking it around the neighborhood.

Well just to make a good economic case we really have to have a better understanding of what else is out here.

John Bair - Ascend Wealth Advisors

Would you consider, so assuming the 4 is successful would you focus on trying to get those two wells online fairly quickly once you decide whether you are going to do the cogen or tie it into the high methane line and if so how long would you think the timeline is just roughly speaking?

David Pierce

I believe roughly speaking we can probably be producing power on site in under a year. So it's not going to take us forever to get this thing going. If we go either of the other paths then I think we’re looking at two years from the time we initiate work in that direction and I don’t have an answer. We may go in two directions or once. I mean conceivably we could set this field up for cogen plant and at the same time if we think we’ve got a lot more gas out there begin work on either a low methane pipeline approach or a high methane denitrification approach and they are not mutually exclusive. We could bid on paths [ph].

But although we’re investigating all those possibilities now because it feels like they are becoming fairly real. We can’t make any kind of final decision until at the very least we have the Tuchola-4 there, that’s going to be number one and that should not be long and coming. A couple of months little longer maybe and we should have it all.

John Bair - Ascend Wealth Advisors

Okay and how close with your next reasonable prospect being, I see (indiscernible) you’ve got a number of prospect outlines in 128, 108, would you be probably moving into one of those and testing one of those structures? One of those ideas?

David Pierce

If you look at the investor relation, the map on the right, the particular block where Tuchola is located you can see that this 3D seismic program covers the Tuchola area itself and then it runs North West and South East if we’re going to drill something it's going to be in that area where we have got 3D. All of the lease and prospects that you see on this map are based on older 2D seismic and we would not consider drilling on that seismic, that seismic is a guide for us as to where to go shoot 3D and some of these things are big enough that you certainly expect to see something there when you do shoot the 3D but we will be looking at where we have already got 3D for our next target.

John Bair - Ascend Wealth Advisors

So all those in the blue outlines are 2D seismic? Like 129, 150, 149?

David Pierce

Yes those blue outlines are in fact are the concession blocks that collectively form the Edge.

John Bair - Ascend Wealth Advisors

Okay.

David Pierce

And so the things that you see inside of them are all of them are 2D prospects but we want to put 3D on them and as I say we have just now finished the acquisition of this 3D seismic right across the top of the block where the Tuchola well is located.

John Bair - Ascend Wealth Advisors

Right to the North West?

David Pierce

Yes.

David Pierce

Well thank you, I appreciate it and thank you everybody for participating. We will talk to you in a couple of months.

Operator

That does conclude today’s conference. We thank you for your participation.

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FX Energy (FXEN): Q4 EPS of $0.07 beats by $0.10. Revenue of $7.6M (-35.5% Y/Y) misses by $0.9M.