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UPDATE: Falcon Oil & Gas Says Gazprom's Hungary Drilling Gets Underway

--Adds more detail and background--

News the drilling has begun on the Kutvolgy-1 well in Hungary marks the start of an exciting period of activity for newly listedAIM explorer Falcon Oil & Gas (LON:FOG) (CVE:FO).

Kutvolgy-1 is being drilled to a depth of 3,000 metres to test a 'shallow' gas play, called the Algyo formation, in Hungary's Mako Trough. And it is testing one of eight prospects which together have been estimated to host 568bn cubic feet of gas.

A number of wells have previously been drilled in the play and they have encountered gas, although none have been drilled in optimal wells, Falcon said.

The Kutvolgy-1 exploration well is the first of three to be funded by venture partner Naftna Industrija Srbije, a partly owned subsidiary of Gazprom.

The initial programme is expected to take 40 days. It is anticipated that an appraisal testing program will follow.

"We are pleased to confirm that the drilling of the first of a three well program with NIS in Hungary has commenced," chief executive Philip O'Quigley said.

"We are fortunate to have a strong partner in NIS funding this drilling campaign. I look forward to sharing the result of the drilling campaign with the market in due course."

This is the first work program to get underway since Falcon, which is also listed in Canada, joined the AIM market raising £16.9mln (US$25mln) in March.

The Dublin headquartered oil firm, which is backed by former Cove Energy chief John Craven, has quickly built a strong since its shares began trading on this side of the Atlantic and the Hungarian program is likely to be followed closely.

Gazprom is, however, just one of Falcon's venture partners. It also has projects with Chevron and Hess in South Africa and Australia respectively.

In a recent note, City broker Cantor Fitzgerald said that through these ventures Falcon's 'busy period of activity' will run to 2015.

Highlighting the upcoming share price catalysts, which include the Hungarian program, Cantor analyst Sam Wahab said the newly listed shares currently undervalue the material potential of Falcon's asset base.

Beyond Gazprom's work in Hungary, the analyst says a carried five well program in Australia is likely to get the green light in June, and that will be another catalyst for the AIM quoted shares.

According to Wahab, the Australian assets represent the bulk of his sum-of-the-parts valuation for Falcon, whereas the Hungarian project is the second most valuable currently.

He says Australia is worth 13p per share to Falcon, while Hungary and South Africa is valued at 6p and 2p per share, respectively. The analyst rates the stock as a 'buy' with a 22 pence price target.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.