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Gas Price Increase To Drive FX Energy's Revenues Higher; New Production Facilities And Pipelines Should Do The Same; Drilling Operations To Accelerate

Stocks in this article: FXEN

SALT LAKE CITY, April 16, 2012 /PRNewswire/ --  FX Energy, Inc. (NASDAQ: FXEN) today announced that the Polish Energy Regulatory Agency has increased wholesale gas tariffs in Poland by 16.9% as of March 31, 2012. By virtue of its gas contracts with PGNiG, the Company's partner and operator of most of its producing wells in Poland, the price increase became effective for FX Energy on April 1, 2012. The new tariff is expected to remain in place through at least December 31, 2012. The benefits of the increase will apply to virtually all of the Company's gas production in Poland, representing approximately 91% of current Company-wide production on a gas equivalent basis, with the remainder being predominantly oil in the USA.

"Based on the current exchange rate, we are selling gas today at a weighted average price of $7.40 per thousand cubic feet at the wellhead in Poland, dramatically higher than today's sub- $2.00 Henry Hub spot price. In addition, almost all of our operating costs in Poland are fixed, so the higher revenues from this price increase will drop directly to our bottom line," said Clay Newton, VP of Finance for FX Energy.  "We will use the increased revenues to support our growing exploration, development and production projects in Poland, where currently there are two drilling rigs and two pipeline construction crews at work on our projects."

Facilities and Pipeline Construction

The Company reported that construction has started on the pipeline expansion downstream from the KSK production facility in the Fences concession in Poland. The KSK production facilities have been producing since last year, but the rate has been constrained by limited throughput at a river crossing. Crews have started work on a two kilometer twin line at the crossing that will double capacity and allow full production from the KSK facility. The Company anticipates the new line will become operational during or slightly before the third quarter 2012. Thereafter, production, net to the Company, is expected to increase to as much as 14 to 15 million cubic feet equivalent per day (MMCFE/D).

Separately, crews have started construction on a new production facility and pipeline that will serve the Winna Gora well in the Fences concession. Permitting along a short stretch of the pipeline remains ongoing, but crews are laying pipe along the remainder of the eight kilometer line. The Company anticipates first production in the third quarter of 2012. Production from the well could add up to 2 MMCFE/D to the Company's production volumes.

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