MGM drafts Central Mackenzie plans

MGM Energy, one of the few active explorers in Canada’s North over recent years, expects to determine by Sept. 30, for parcels acquired last month in the Central Mackenzie Valley, whether it will start exploration in the 2011-12 winter.

It is also prepared to resume activity on its other Northwest Territories properties if there is sign of real progress on a Mackenzie Valley gas pipeline, but it does not expect to drill or conduct seismic work in the upcoming winter.

The Calgary-based junior and its 50-50 partner made a gross work commitment of C$5 million to secure three Central Mackenzie Valley exploration licenses totaling 628,000 acres. The same sale attracted work commitments of C$529 million for eight licenses in the same region.

MGM said its new lands, along with its existing Exploration License 454 are prospective for multiple Devonian-aged shale plays, which it believes are liquids rich at depths of about 2,500 feet to 8,200 feet, and Paleozoic structural plays.

They are all within about six miles to 19 miles of Enbridge’s existing oil pipeline infrastructure, connecting the Norman Wells field with northern Alberta.

MGM, which has no current production, reported a net loss in the second quarter of C$1.3 million compared with a loss of C$2.35 million in the same period last year, partly because of lower exploration and evaluation spending. Its net loss for the first half of 2011 was C$5.61 million, up $170,000 from a year ago.

The company said the time needed to complete a Mackenzie pipeline means it will generate losses for the “foreseeable future,” but it has enough financial backing to cover the next couple of years, including C$20 million paid by Kogas Canada for a 20 percent stake in the Umiak Significant Discovery License on the Mackenzie Delta, with another C$10 million due if and when there is approval for a commercial project.

—Gary Park