FX Energy

FX Energy Inc. are an independent oil and gas company focused on exploration, development and production opportunities in the Republic of Poland in association with the Polish Oil and Gas Company, or POGC, and others. FX Energy concentrate on underexplored acreage in productive fairways or geologic trends where they believe there is an opportunity to find significant gas reserves with lower risk.

At year-end 2010, independent reserve engineers estimated our worldwide proved oil and gas reserves to be 40.0 billion cubic feet, or Bcf, of natural gas and 0.6 million barrels of oil, or a combined total of 43.8 billion cubic feet of natural gas equivalent, or Bcfe (converting oil to gas at a ratio of one barrel of oil to 6,000 cubic feet of natural gas).  Of this 43.8 Bcfe, 91% was in Poland and 9% was in the United States.  The engineers estimated the PV-10 Value of our proved reserves to be approximately $127.3 million.

At year-end 2010, independent reserve engineers estimated our worldwide proved plus probable, or P50, oil and gas reserves to be a combined total of 87.1 Bcfe.  The engineers estimated the PV-10 Value of our P50 reserves to be approximately $206.4 million.

Subsequent to year-end 2010, we had a significant exploration discovery, the Lisewo-1 well in Poland.  Independent engineers estimate the proved and P50 reserves for this well to be approximately 12.7 and 17.7 Bcf of gas, respectively, net to our interest.  The incremental PV-10 Value of these proved and P50 reserves is estimated to be $16.0 and $19.7 million, respectively.  This discovery, in combination with our 2010 year-end proved reserves, would equate to 56.5 Bcfe of proved reserves, with an estimated PV-10 Value of $143.3 million.  Our year-end P50 reserves would then equate to 104.8 Bcfe, with an estimated PV-10 Value of $226.1 million.
Our 2010 oil and gas production was 3.8 Bcfe (10.5 million cubic feet equivalent per day, or MMcfed), which was up 69% from 2009 production; 3.5 Bcfe (9.5 MMcfed) of our production was in Poland and 0.3 Bcfe (1.0 MMcfed) was in the United States.  All of our production in Poland consisted of natural gas, while all of our United States production consisted of crude oil.
We currently expect that our 2011 production will rise significantly from our 2010 production rates.  One of our wells in Poland started producing just a few days before the end of 2010, and we have two other wells in Poland scheduled to begin production during the second quarter of 2011.  We expect these three new wells, with anticipated aggregate initial production of approximately 14 million cubic feet per day, or MMcfd, of gas (6.9 MMcfd net to us), will add to our 2010 base levels of production of 9.5 MMcfd of gas.  Thus, even without the benefit of any production from a fourth well that is waiting on production facilities or from our recent Lisewo-1 well or other possible discoveries, we expect our 2011 production to significantly exceed our 2010 level.

Substantially all of our growth in reserves and production in recent years has come from our operations in Poland.  We expect this will continue, as most of our technical efforts and capital budget are devoted to these operations in Poland.  We believe that these operations represent the most favorable opportunities for success that are available to us.  With a view to future growth in reserves and production, we now hold 4.6 million gross acres (4.0 million net) in Poland and continually review additional acquisition opportunities. 

As of December 31, 2010, we had approximately 45 million shares of common stock outstanding, and our market capitalization was approximately $280 million.  Our shares are listed on the Nasdaq Global Market under the symbol "FXEN."  So far during 2011, our average daily trading volume has been approximately 500,000 shares.  Our total assets as of December 31, 2010, were $66.6 million, and our net debt (long-term debt less working capital) was $16.8 million.  Net debt per thousand cubic feet equivalent, or Mcfe, of proved reserves was $0.38 at year end, or $0.30 including the 12.7 Bcf of gas reserves associated with the subsequent Lisewo-1 discovery. 

Email scottduncan@fxenergy.com