High Potential Oil & Gas Exploration and Production in Poland

Prep: June 27, 2005; Print: April 18, 2023

This report contains forward-looking statements. Forward-looking statements are not guarantees of future drilling or other exploration or development results, the actual presence or recoverability of estimated reserves, the ability to establish reserves equal to the potential of exploration targets, production amounts or revenues, the availability of required additional funding, construction costs or schedules or similar matters. Forward-looking statements are subject to risks and uncertainties outside FX Energy's control. Actual events or results may differ materially from the forward-looking statements. For a discussion of additional contingencies and uncertainties to which information respecting future events is subject, see FX Energy's 2004 annual report on Form 10-K and other SEC reports. As used herein “bcf” means billion cubic feet and “tcf” means trillion cubic feet of gas standardized for calorific content and liquids.

IPAA Oil and Gas Investment SymposiumLondon – July 7, 2005

2

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

BALTIC SEARUSSIA

CZECH REP.

UKRAINE

LITHUANIA

SLOVAKIA

50 KM50 MILES

BORNHOLM(DENMARK)

SWEDEN

GE

RM

AN

Y

GE

RM

AN

Y

Oil FieldGas Field

LEGEND

Polish Oil and Gas CompanyFX Energy

FX-Fences III

FX-Fences I

FX-Fences II

FX and POGC concessions - 2005

FX-Block255/Wilga

Two million acres in productive areas

FX business model fits Poland’s needs

• Poland wanted western exploration, offered wildcat land and data to FX

• FX brought more than $100 million to Poland, including farmouts with RWE-DEA, Apache, Homestake, CalEnergy

• over time, FX built a relationship of trust with Poland

The prize for FX’s persistence: a big share in POGC’s Permian acreage – largely unexplored Rotliegend sands

• by the mid-1980’s POGC had discovered 5 Tcf in Rotliegend sands without modern geophysics

• POGC moved to other horizons with easier geophysics, leaving Rotliegend untouched for 20 years (while SNS grew to 40 Tcf)

• FX has drawn on 20 years of technical progress in the Southern North Sea – geophysics that apply directly to Polish Rotliegend

FX Energy

• 1980’s: U.S. Rocky Mountain producer/driller/explorer

• business model: farmout to industry partners

• 1994: FX’s geophysicist suggests Poland

3

FX Polish asset: Rotliegend acreage20% of Poland’s Prime Permian Acreage: 2600 square miles

FX Landholdings

million acres km2 FX netgross net gross interest

Fences I: 0.22 0.11 891 49%

0.05 0.01 183 24.5%

Fences II: 0.67 0.33 2,715 49%

Fences III: 0.77 0.77 3,122 100%

Wilga/255: 0.22 0.19 912 82%

1.93 1.41 7,823

Fences II

Fences III

Rusocin discovery (2005)

Ujazd 100 bcf

Paproc 350++ bcf

Fences IRadlin 525 bcf

Sroda discovery (2005)

130 km

Zaniemysl discovery (2004)

4

SNS Basin 40 Tcf 5 Tcf

Groningen100 Tcf

FX Interests

UK

Poland’s Rotliegend basin was underdeveloped for 40 yearscompared to Southern North Sea analog

A fairway of aeolian Rotliegend sandstone reservoirs, with structural and stratigraphic traps, and gas sourced by Carboniferous coals and sealed by Zechstein evaporites, extends across the North European Basin

Producing Rotliegend gas fields in Poland are direct analogs to those found in the UK Southern North Sea (“SNS”) and onshore in Holland

FX’s 1.7 million gross acres in Poland’s Permian basin are comparable to about 20% of the productive area in the 40 Tcf SNS, or about 8 Tcf potential

Comparable land in the US would be valued at more than $200/acre, or about $300 million for FX’s 1.4 million net acres in Poland

5

Radlin Field

Zaniemysl

Rusocin

Sroda

Discoveries confirm expectations

FX’s last three wells all successful – all based on best geophysical methods

• 2005: FX Sroda discovery has reserves and production potential comparable to POGC’s 525 Bcf Radlin gas field

• 2005: FX Rusocin discovery confirms “pinch-out” stratigraphic trap model based on 350+ Bcf Paproc gas field

Production increases along with reserves

• four commercial wells drilled and tested

• significant production and revenue coming onstream

Sroda and Rusocin discoveries confirm areas of significant reserve potential

• Sroda area should yield several Radlin sized fields – potential 1+ Tcf

• Rusocin could lead to multiple fields along “pinch-out” trend – potential 1+ Tcf

Other prospects will emerge as geophysical work continues

• east half of Fences I/II

• Fences III and Wilga

• other opportunities with POGC

6

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

T

BALTIC SEA RUSSIA

CZECH REP.

UKRAINE

LITHUANIA

SLOVAKIA

50 KM50 MILES

BORNHOLM(DENMARK)

SWEDEN

GE

RM

AN

Y

GE

RM

AN

Y

KRAKOW

W O L O M IN

Refinery

Gas Pipeline

Oil Pipeline

POGC Concession

Outstanding fiscal regime

• no government back-in

• 2% royalty

• 19% net income tax

• tax and royalty rates have been reduced over time

Established E&P infrastructure

• World Bank loan upgraded rigs, seismic, etc.

• standard oilfield services available

• established pipeline infrastructure

Attractive E&P conditionsAccess to existing pipelines

Poland energy facts

• coal/lignite provide 97% of electricity

• gas is 10% of energy mix vs. 21% European average

• per capita energy use in Poland is 67% of western Europe

• Poland imports 2/3 of gas needs from Russia: 650 mmcf/day

• pent up industrial demand for gas unlinked to oil price

7

Radlin Field

Sroda discovery

Sroda area

Sroda area potential 1+ Tcf; FX holds 49%

?

Successful drilling with good geophysics

• 2005: FX Sroda 4 discovery opens the door to near term reserve potential comparable to POGC’s Radlin field (525 bcf)

• Sroda-5 well and possibly Sroda-6 or Winna Gora to drill in 2005; additional seismic also in 2005

• expect to firm up additional prospects to southeast, toward Radlin field

8

Sroda discovery analog: Radlin gas field (POGC)

Radlin Field depth map

• Top Rotliegendes 3078 meters

• 525 bcf cumulative recoverable reserves

• area=15km2; porosity=17-25%; perm=185mD; CH4=84.1%; N2=15.6%; He=0.14%; H2S=n/a; gas column=55 meters max; 32 meters avg.

• 16 mmcf/day avg. well deliverability

• 30-35 mmcf/day avg. daily field production from 33 wells (per POGC policy for security of supply)

9

40 to 400 bcf potential

Sroda-4: a key discovery

Fences II: Sroda Field Discovery• Sroda-4: 33 meter gas column at 3600m depth

• over 20% average porosity

• Sroda field potential: up to 400 bcf

• Discovery reduces risk in a series of similar structures on trend

• play concept based on Radlin (525 bcf)

• interests: FX 49%; POGC 51%

10

Proposed 3-D

Sroda

Sroda N.E.

Sroda area: initial objectives

Sroda/Sroda NE/Sroda SE/Winna Gora

• drill Sroda-5 and possibly another in 2005

• acquire new seismic on Sroda, Sroda NE, Sroda SE and Winna Gora

• drill Sroda NE; drill Sroda SE; drill Winna Gora; then appraisal wells on each; look for 1+ Tcf from the group

• start producing in 2007, even if full development of the fields takes longer

• expect to add structures similar to Sroda along trend to the southeast toward Radlin gas field

SRODA-NE

X Sroda well

SRODA

Sroda SE

11

1250mSroda

SW NE

Sroda NE

Dep

th.

mSroda-4 discovery well locationLine #T0440593 Pre Stack Depth Migration

Sroda-4

Rotliegend sandstone reservoir

12

RoszkowSroda N.E.

Mieczewo

Winna Gora

Radlin

Zaniemysl

Srem Komorze

248 Area 1

248 Area 2

248 Area 3

Grundy

Lubinia

KotlinWolsztyn High

Deep Basin

(source area)

SrodaSroda SE

X LugiPinch-out area

Rusocin

DrzonekDolsk

Donatowo

Stable Platform

Polwica

Significant potential – four different plays

?

Stable Platform – structural traps• Sroda cluster may continue along trend to

southeast toward and beyond Radlin field• other leads and prospects already identified:

Mieczewo, Srem, Roszkow• east half of Fences I/II are still early stage

Deep basin

• gas has been discovered downdip from Grundy, but reservoir quality was poor

Pinch-out area – stratigraphic traps

• Rusocin pins the pinch-out play on the downdip side – Lugi, Drzonek and Dolsk will test updip

• Pinch-out play may reappear in the southeast of Fences I/II

Reef play

• Zechstein has been a successful play for POGC northwest of Fences I/II (BMB, Lubiatow) - both oil and gas

• Fences I/II show indications of reef play potential

Fences III, Wilga, other exploration opportunities

• exploration can increase in tandem with production and cash flow

Reef area

13

X drillsite Lugi

RusocinDrzonek

Dolsk

Possible gas/water contact

Possible pinch-out

Rusocin discovery confirms pinch-out play

Rusocin well data• Net pay: 8.5 meters

• Gas saturation: 50%

• Flow potential: 28 mmcfg/d

• Porosity: 21.5%

• Interests: FX 49%; POGC 51%

Lugi is 100 meters high to Rusocin

Rusocin to Lugi potential 1+ TCF

Lugi to drill in 2005; 9 km stepout

14

RUSOCIN-1 LUGI-A

Lugi Prospect Seismic Line T0021804

Lugi location is 100m high to Rusocin

15

FENCES I

FENCES III

FENCES II

BMB: est. 75 mmbo + 350 bcf (1993)

Lubiatow complex: est. 150 mmbo + 700bcf (2003)

POGC focus: Zechstein reefs(major successes at BMB and Lubiatow)

16

Fences I and 248 Palaeohighs – Ca2 build upsPseudo-palaeohigh map at base Zechstein – generated from Zsp-Tp2 TWT

Area of Ca2 >45m

Area 2 is located on a spur of increased Ca2 thickness into the deeper Zechstein sea

Edge of Ca2 build up

Deep Zechstein sea

Shallow Zechstein barrier build-up

NB Artefact generated by

Triassic grabens

17

Prospects and Leads Identified - to Date Fences I/II Gas Potential (Bcf)Estimated Upside Potential:

Structural Traps

Sroda 400

Sroda NE 500

Winna Gora 200

Sroda SE 500

Polwica 750

Srem/Mechlin 75

Roszkow 125

248 Area 1 500

248 Area 3 200

Other

Structural Total 3245

Estimated Upside Potential: Stratigraphic Traps

Dolsk 170

Drzonek 350

Rusocin East 500

Lugi 750

248 Area 2 (Rotl) 300

Other

Stratigraphic Total 2070

Estimated Upside Potential: Reefs

Donatowo

Area 2 (Ca2)

Other

Reef Total

• 5.3 tcf represents estimated unrisked maximum potential• covers only certain named leads and prospects identified to date• FX interest is 49%

Estimated Upside Potential: Deep Basin Traps

Grundy

Other

Deep Basin Total

Prospect/Lead Inventory is Building• Sroda and Rusocin increase success odds and begin to frame values on structural and stratigraphic plays• work continues to identify more prospects and leads for these two play-types• work on two other play types (deep basin and reef) now in early stages – prospects and leads to come• Fences III area: first pass seismic reprocessing just completed – prospects and leads to come

18

Reserves and Revenues: beginning

Gas pricing• German border gas price (1Q05) $5.25 per mmbtu• Polish border gas price (Russian gas) $5.00 per mmbtu• Polish TPA Transmission Fee $0.69 per mmbtu• Polish Industrial Customers $6.80 per mmbtu• FX wellhead price (few wells/fields): $3.00 per mmbtu• FX wellhead price (strong supplier): $4.00 per mmbtu

Cost to Realize Expected Values• drilling cost range: $4-5 mm• expected drilling success rate: 50%; (FX is 3 for 3 since using

modern technology; SNS rate is 53.4%)• cost of discovery, therefore, is two wells, or $8 – $10mm• expected field size: 40 bcf to 600 bcf ($40 mm to $600 mm

present value in the ground at $3/mmbtu wellhead)• ratio of discovery cost to discovery present value ranges from

1:4 up to 1:60

Sroda-5, Sroda NE, other wells• Each Sroda area well (Sroda-5, Sroda NE, etc.) should

add approx. $2 mm/yr for FX• $4 vs. $3 gas adds $0.7 mm/yr to FX cashflow for each

Sroda area well

4 Bcf

--

40 Bcf

--

40-400 Bcf

Est. fieldSize

3 mmcf/d

4 mmcf/d230 bbls/d

10 mmcf/d

3 mmcf/d

5 mmcf/d

Initial (est)Production Rate

4 Bcf

6 Bcf +250 mbo

26 Bcf

--

35 Bcf (est)

Initial ProvedReserves

--49%80%28 mmcf/d65 mD21.3%8m2730mRusocin-1

35 mD

3 zones

250 mD

8.8 mD

Perm

22 mmcf/d

16.7 mmcf/d510 bo/d

115 mmcf/d

22 mmcf/d

Open FlowRate

80%

100%

80%

80%

Methanecontent

49%

82.18%

24.5%

49%

FX %interest

2700

2350m

2850m

3600m

Depth

65m

37m

33m

Net Pay

22%

3 zones

22.8%

20-24%

Poro

2005

2006

2006

2007

Est. startproduction

Kleka-11

Wilga-2

Zaniemysl-3

Sroda-4

Well Name

4 Bcf

--

40 Bcf

--

40-400 Bcf

Est. fieldSize

3 mmcf/d

4 mmcf/d230 bbls/d

10 mmcf/d

3 mmcf/d

5 mmcf/d

Initial (est)Production Rate

4 Bcf

6 Bcf +250 mbo

26 Bcf

--

35 Bcf (est)

Initial ProvedReserves

--49%80%28 mmcf/d65 mD21.3%8m2730mRusocin-1

35 mD

3 zones

250 mD

8.8 mD

Perm

22 mmcf/d

16.7 mmcf/d510 bo/d

115 mmcf/d

22 mmcf/d

Open FlowRate

80%

100%

80%

80%

Methanecontent

49%

82.18%

24.5%

49%

FX %interest

2700

2350m

2850m

3600m

Depth

65m

37m

33m

Net Pay

22%

3 zones

22.8%

20-24%

Poro

2005

2006

2006

2007

Est. startproduction

Kleka-11

Wilga-2

Zaniemysl-3

Sroda-4

Well Name

FX Annualized revenues

FX working interest

Annual net revenue

Annual Operating Costs

Net daily revenues

Net after royalty

Gross daily revenues

Methane content

Price (per mcf or bbl)

Daily production (mcf)

Indicative Cash Flows

$143,762

49%

$293,392

$50,000

$941

98%

$960

80%

$ 2.00

600

Kleka-11

$2,042,026

25%

$8,334,800

$250,000

$23,520

98%

$24,000

80%

$ 3.00

10,000

Zaniemysl-3

$3,995,107

82%

$4,882,800

$125,000

$13,720

98%

$14,000

100%

$ 3.50

4,000

Wilga-2 gas

$2,590,290

82%

$3,165,840

$125,000

$9,016

98%

$9,200

100%

$ 40.00

230 bbls

Wilga-2 condensate

$2,331,322

49%

$4,757,800

$250,000

$13,720

98%

$14,000

80%

$ 3.50

5,000

Sroda-4

FX Annualized revenues

FX working interest

Annual net revenue

Annual Operating Costs

Net daily revenues

Net after royalty

Gross daily revenues

Methane content

Price (per mcf or bbl)

Daily production (mcf)

Indicative Cash Flows

$143,762

49%

$293,392

$50,000

$941

98%

$960

80%

$ 2.00

600

Kleka-11

$2,042,026

25%

$8,334,800

$250,000

$23,520

98%

$24,000

80%

$ 3.00

10,000

Zaniemysl-3

$3,995,107

82%

$4,882,800

$125,000

$13,720

98%

$14,000

100%

$ 3.50

4,000

Wilga-2 gas

$2,590,290

82%

$3,165,840

$125,000

$9,016

98%

$9,200

100%

$ 40.00

230 bbls

Wilga-2 condensate

$2,331,322

49%

$4,757,800

$250,000

$13,720

98%

$14,000

80%

$ 3.50

5,000

Sroda-4

19

Company ProfileShare and Balance Sheet Information

Basic Shares Outstanding 34.6 million

Options/Warrants Outstanding 7.2 million

Fully Diluted shares 41.8 million

cash from exercise + $33 million

Market Capitalization $340 million

Volume 270,000 shs/day

Management Ownership 8.4%

Institutional Ownership 31%

NASDAQ National Market: “FXEN”

Options traded on CBOE and AMEX under “FXEN”

Member Russell 3000 Index

Balance Sheet Data ($mm) 12/31/04 03/31/05

(Audited) (Unaudited)

Current Assets $37.8 $34.4

Property, net 14.8 14.5

Other 0.4 0.4

Total Assets $53.0 $49.3

Current liabilities $4.0 $1.3

Long term liabilities 0.4 0.4

Stockholders equity 48.6 47.6

Total $53.0 $49.3

Share Information 6/27/05 (Estimated)

20

Critical Elements Gathered – Gaining Momentum

Underlying everything, FX has critical land asset with large hydrocarbon potential• SNS analog argues for several Tcf of undiscovered gas in Fences I/II/III• Sroda discovery increases success outlook for Sroda and nearby structures with 1+ Tcf potential• Rusocin discovery confirms presence of pinch-out play type with 1+ Tcf potential• leads and prospects identified in other plays and areas• drilling cost, expected success rate, expected values yield excellent reserves growth

Technical capability• Hardman and team bring successful experience and latest technology from Southern Gas Basin• Tatys and staff in FX’s Warsaw Production Office have the right credentials and experience to produce

gas in partnership with POGC

Funds in hand to drive a substantial drilling and development program• over $30 million cash to focus on lowest risk areas (Sroda now, pinch-out after Lugi)• reserves and production will support project funding or other industry specific funding methods

Three discoveries; two exploration models confirmed; production starts in 2006• Zaniemysl: scheduled to begin production mid-2006• Wilga: plan to start production mid-2006• Sroda: expect production in 2007 with several wells• cash flow should exceed G&A rate in about twelve months

21

Why consider an investment in FXEN now?

FXEN common stock down substantially from a peak of $16.70 in Feb’05; two significant wells about to begin drilling; average daily trading volume 300,000 shares

Production revenues to commence in 2006: first three wells expected to generate revenue of up to $8 million annually – more than G&A

Warsaw production office opened June 2005 headed by Z. Tatys, former VP of POGC and Head of E&P

Sroda-4 discovery (May’05) sets up a cluster of nearby structural traps; gross potential 1+ Tcf of gas; Sroda-5 and possibly Sroda-6 to drill in 2005

Lugi well could establish a major pinch-out stratigraphic play extending southeast from the recent Rusocin discovery (Jan’05); gross potential 1+ Tcf of gas

Strong technical team building an inventory of prospects and leads with estimated unrisked maximum gross potential over 5 Tcf of gas identified to date (net 2.6 Tcf; risked net 1.3 Tcf @ $1/mcf in the ground represents a present value several times the current market capitalization of $350 million

Strong balance sheet: $34 million in cash; no debt

Excellent record of exploration success: three discoveries in a row!

22

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04

Stock Performance

Closing Price

0

500

1,000

1,500

2,000

Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04

DAILY VOLUME (000) At June 27, 2005, 90-day average daily volume was 270,000 shares per day

Announcement dates of Industry Agreements and Drilling ResultsOrneta4/97

Gladysze9/97

PoniatowaCzernic

2/99

SiedliskaWitkow

8/99

Wilga 410/00

Annopol2/01

Tuchola1/01

Chojnice5/01

Wilga 2

1/00

Wilga 3

6/00 Kleka6/00

CalEnergy8/02

Apache4/97

RWE-DEA5/96

Zaniemysl 31/04

Rusocin1/05

Sroda-44/05