Falcon is a global energy company with projects in Hungary, Australia & South Africa

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Message: Bruner still In Charge

First for the good news - I got two muffins this time along with a fruit cup so my average price for Falcon shares has now dropped to almost zero :)

Maybe bad news maybe not, but yes Bruner is still in charge and appears to have the support of Avelar and Burlingame. Burlingame was present, but I don't believe Avelar had anyone at the meeting. Burlingame supported the motions for all the resolutions and nominated two of their own directors (Robert McCauley and a Mr. Paris I believe were the correct names they added) which keeps the total number of directors at 9.

Myself, Roberto and Certified8 were able to talk with Steve Schultz before the meeting and Marc was able to sit down with us for almost one hour after the meeting. We were able to discuss a number of the questions that we all have and I will try and get as much of it down here while it is still fresh. Maybe Roberto and Certified 8 can add their own comments or corrections when they have a chance.

The Exxon deal and Mako trough were discussed in detail and MAB still thinks that Exxon will move to the next stage, but they have until the third week in February to make that decision. There was some very interesting discussion from MAB and Steve Schultz about the Algyo formation and the over 30 new targets that seismic have indicated may be very worthwhile for conventional gas production. MAB thinks that Exxon is very interested in the opportunity of producing convention gas - while the tricks for drilling the deep gas are worked out. MAB noted that the conventional gas, which is above 2800 meters, is not part of the Joint Venture and that Exxon may have an added incentive to stay in the partnership with the conventional gas targets now being a worthwhile addition to the JV. MAB thinks that if Exxon does not exercise their rights to move to phase 2 with Falcon, then they will be leaving one big piece of the Hungarian partnership with MOL out of their control, which doesn't make allot of sense unless Exxon is going to move completely away from Hungary of which he has seen no indication.

In the meantime they are getting some small flows of oil and gas from the Magy and they think they can improve on those flows over time so that there won't be any question about the production license after 2012. There was talk about a possible horizontal addition to the Magy to increase the flows as an additional step in that process. MAB also mentioned the idea of dewatering the Foldeak 1 well if Exxon were to walk away as they know there are enormous potential gas flows there if they can dewater that well. MAB also talked about completing Mako 7 and here I am a little fuzzy on exactly what could be done, but he did say the well was cased and that no perforations had been done of that well as yet.

A very big key for myself going forward was all the discussions that then moved on to the Beetaloo. MAB felt that if the Beetaloo had of been the first big basin centered play that we could be at a $10 to $20 stock by now. He wasn't dismissing the Mako as he still believes the Mako will be successful and they are keeping up with moving the Mako forward, but the difficulties of depth, pressure and sour gas are not there in the Beetaloo and that there is allot of excitement in Australia about it. They are still moving forward with plans for a big financing in Australia as was outlined in their press releases already. MAB said he will be meeting with allot of different players in Australia over the next couple of months and not just investors or JV partners. He mentioned that the big aluminum manufacturer in that part of Australia is very interested in securing a steady supply of natural gas as they are currently using bunker fuel plus the aluminum company had already secured pipeline right of ways.

There was some discussion about how the Australian new corporate set-up would be financially beneficial for the existing Falcon shareholders as well, in that a management fee would be paid to Falcon offsetting allot of the current management expenses. MAB also mentioned that the new Australian set-up would require drill pipe that Falcon has almost $10 million dollars worth of that could be sold to the Australian company which would secure more operating funds for the Mako as well.

There was discussion and questions about the potential for oil in Australia and from my perspective one of the most promising opportunities going forward. There are two shale oil formations that are not that deep (I can't remember the exact names right now but maybe Soly could post that cross section from the Shenadoah well for me that would refresh my memory). Each of these two formations are shallower than the Bakken plays here in North America and are thicker than the Bakken. MAB said that they believe from their seismic and drilling to date that these areas could flow 300 to 400 barrels a day from the type of horizontal wells that are being drilled every day in the Bakken. Just so anyone who is not familiar with the Bakken knows, a good horizontal Bakken well only flows around 200 to 400 barrels a day, but they keep flowing for many many years with very small declines, so these kind of flows in Austalia would be excellent. I questioned MAB about a time frame to see some oil flowing from the Beetaloo and he indicated that we could even see it in 2010 if the financing for the Austalian company is completed soon enough (even if it wasn't until 2011, any real indication of significant Bakken type play in the Beetaloo would be great). I cannot recollect exactly how MAB expressed it, but I believe the seismic work to date indicated that these two Bakken style formations were very wide spread and pervasive as indicated by the Scott Ryder report?? The natural gas shale formation was below the oil shale I believe but was not nearly as deep as the Mako and rather than being a young geological formation with sour gas was a very very old formation without some of the Mako difficulties.

The last question that I was able get through was about the leases in Australia and it appears to be good news in that MAB said that have negotiated a five year extension already on half of the Beetaloo. I can't remember exactly how MAB expressed it but the remaining half was I believe on a year by year renewal or something like that, but MAB was not concerned about losing any of it as they were moving forward with their obligations on developing the resource.

All in all it appears like we are still in a bit of limbo as we wait for the Australian financing to move forward and wait for Exxon's decision. However, we now have Burlingame on side and I believe Avelar too - because MAB was still alive :)

Without the Beetaloo, I would be selling my remaining shares as I think the Mako will continue to be a tough nut for quite some time. The Beetaloo, if the financing can be done in the next 3 to 6 months, represents a much easier nut to crack and any Bakken style oil flows will get this stock moving higher very quickly, but there certainly is no rush as we won't know anything for what -- 60 to 90 Days of course.

Best regards, Paul

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