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MGM writes down Arctic assets
Northern Canadian explorer MGM Energy has joined the write-down of resources related to the troubled Mackenzie Gas Project by reducing the value of its Arctic assets by 70 percent while shifting its attention to the Central Mackenzie Valley.
The one active driller in the Mackenzie Delta region in recent years, MGM posted a net loss of C$153.3 million for the fourth quarter of 2011, due mainly to writing down its northern holdings to C$60 million from C$214 million.
It said the move reflects the significant decrease in forecasted long-term natural gas prices and the continued delay in restarting the Mackenzie Valley pipeline.
Company President Henry Sykes said MGM holds to its belief that its substantial natural gas assets in Canada’s North hold tremendous potential which will eventually be realized.
But, without offering any specifics, he said that given the current uncertain timing of the Mackenzie pipeline MGM is considering alternative means of commercializing the Mackenzie Delta assets.
Concentrating on Canol shale Sykes said in a statement that MGM is concentrating on advancing the regulatory process for the Canol shale rights it obtained last year.
MGM had working capital of C$10.7 million at the end of 2011, enough to fund current expenditure levels into 2013, but not sufficient to fund the cost of a Central Mackenzie Valley well next winter.
As a result, MGM said it is looking at various forms of financing, including farmouts, joint ventures, asset sales and/or equity issues, adding it anticipates considerable interest in its land position.
The company believes it will attract the necessary financing because of the current and pending activity in the Canol play, notably the large successful bids on adjacent parcels by Husky Energy, ConocoPhillips Canada, Shell Canada, Imperial Oil and ExxonMobil Canada, along with MGM and its partner 6362 NWT Ltd.
—Gary Park
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