Falcon Oil & Gas Ltd. announced that its Hungarian subsidiary TXM Oil and Gas Exploration LLC has executed the agreement in relation to a significant exploration program with Naftna Industrija Srbije Jsc (NIS). NIS to drill three exploration wells targeting the shallow 'Algyo Play' reservoir. Falcon to be fully carried on the drilling and testing estimated to cost a minimum of $20 million.

NIS to make an immediate cash payment of $1.5 million to Falcon. Drilling preparations are already underway. Falcon and NIS expect to commence drilling the first well by the end of March 2013.

Second and third wells likely to be completed by the end of third quarter of 2013. NIS to earn 50% of any net production revenues from the 3 wells.