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MGM posts big Canol numbers Small northern explorer also involved in discussions to sell all of outstanding shares to Paramount Resources, which holds 13.9% Gary Park For Petroleum News
MGM Energy, the little explorer than has operated far above its punching weight in Canada’s North since being formed seven years ago, is on the verge of returning to its corporate roots just as it adds to growing evidence of a huge shale oil resource in the Northwest Territories Canol play.
The company said Feb. 27 that its search for a partner to help fund a program in the Canol has led back to Paramount Resources, which gave birth to MGM in 2007 to participate in drilling for natural gas in the Mackenzie Delta and Mackenzie Valley at a time when the Mackenzie Gas Project was still moving towards corporate approval.
Unable to attract a partner, MGM said it had held “high level discussions with management” at Paramount, which has retained 13.9 percent of MGM shares.
MGM said that during the talks Paramount has investigated making a proposal to acquire all of the issued and outstanding shares of MGM, but indicated an offer would only be at or below MGM’s current trading price.
“In addition, Paramount has indicated ... it is supportive of MGM searching for other strategic alternatives,” which could continue beyond any formal offer from Paramount.
Cash through mid-2015 MGM said it has sufficient cash to cover its expected costs through at least mid-2015.
The company provided a substantial lift to its asset position, which includes stakes in gas resources in the Mackenzie Delta area, by lifting the veil on results from exploration in the Canol, which stretches about 150 miles from tip-to-tip and is estimated by the Northwest Territories government to hold 3 billion barrels of recoverable oil.
The major players in the area are MGM in partnership with Shell Canada, plus Husky Energy, ConocoPhillips and Imperial Oil.
As a result of drilling, coring, logging, fracturing and testing its East MacKay I-78 well drilled last year, along with gathering additional well data and completing further geological and geophysical work, MGM has updated an assessment of shale oil-initially-in-place, OIIP.
The calculations were completed internally by qualified reserves evaluators and set a mean estimate for gross reserves in place on Exploration License 466 at 1 billion barrels (625 million barrels net to MGM).
On three other Exploration Licenses — 474, 475 and 487 — the total undiscovered OIIP is listed at 11.1 billion barrels gross, or 4.8 billion barrels net to MGM.
Recoverable not determined MGM said it is “not possible at this time to determine an estimate of what portion of the OIIP is recoverable and what portion is unrecoverable as additional drilling, seismic and development engineering is required to determine an anticipated recovery factor.”
It said a portion of the OIIP may become recoverable if commercial circumstances change and technological advances.
Interest in the Canol play is being prodded by planned exploration programs, plus word that Calgary-based Discovery Air International is operating a new service between Calgary and Norman Wells, NWT, with three flights a week, and a travel time of 2.5 hours compared with 7.5 hours on major carriers.
Discovery President Trevor Wever said Norman Wells was selected based on “customer feedback and design” after the airline weighed a number of markets.
Discovery is a subsidiary of Air Tindi, which operates out of Yellowknife, NWT, with a fleet of more than 20 fixed-wing aircraft.
The NWT government has also been pressing the Canadian government to cover up to 75 percent of an infrastructure plan to upgrade roads, bridges and ports in the NWT, looking for ways to ease the cost burdens on the exploration companies who estimate the exploration phase in the NWT is five to seven times greater than costs in northern Alberta or northeastern British Columbia.
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