The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Marketwire

Corridor Announces $100 Million Anticosti Joint Venture: The Government of Quebec and Maurel & Prom to Invest

Thursday, February 13, 2014

Corridor Announces $100 Million Anticosti Joint Venture: The Government of Quebec and Maurel & Prom to Invest

16:02 EST Thursday, February 13, 2014

HALIFAX, NOVA SCOTIA--(Marketwired - Feb. 13, 2014) - Corridor Resources Inc. (TSX:CDH): Corridor Resources Inc. ("Corridor") announced today that it has signed a letter of intent with the Government of Québec, through its affiliates Investissement Québec and Ressources Québec ("RQ"), Pétrolia Inc. ("Pétrolia") (TSXV-PEA) and Etablissements Maurel & Prom S.A. ("M&P") to create a joint venture that will appraise and potentially develop hydrocarbon resources on Anticosti Island, Québec.

Exploration Program

The letter of intent calls for the parties to conduct an exploration program of up to $100 million in two phases, Phase 1 of which is to consist of an initial program budgeted at $55 million and not to exceed $60 million. The Phase 1 program is planned to commence in 2014 and requires the drilling of 15-18 stratigraphic wells in year one followed by three wells with multiple fracture stimulations in year two. Following a favourable decision of the board of directors of the General Partner of the limited partnership to be formed in its review of the Phase 1 results, a Phase 2 program for the remaining $40 to $45 million will be undertaken to drill and fracture stimulate an additional number of wells and conduct certain feasibility studies.

Funding by RQ and M&P

The commercial terms of the joint venture require Corridor and Pétrolia to transfer to a newly formed Québec limited partnership ("Partnership") their respective Anticosti exploration licenses containing 891,906 acres and 639,037 acres, respectively, in exchange for Partnership interests of 29.30% (Corridor) and 20.70% (Pétrolia). Concurrently, RQ and M&P will commit to spend $100 million collectively through the two phase program in exchange for a 50% interest in the Partnership; with RQ committing $56.67 million to receive a 28.33% interest and M&P committing $43.33 million to receive a 21.67% interest. Additionally, Corridor will transfer (i) a 6.67% interest in the Partnership to RQ in exchange for a cash payment of $13.33 million; and (ii) a 0.97% interest in the Partnership to Pétrolia in exchange for a cash payment of $1.93 million. The resulting interests in the Partnership will be as follows:

Ressources Québec 35%
Corridor 21.67%
Pétrolia 21.67%
M&P 21.67%

M&P will have the right to exit from the Partnership after a minimum of $35 million has been expended by the Partnership in conducting a minimum of 15 stratigraphic wells and the drilling and fracture stimulation of one well. The exercise of M&P of this exit right would be based solely on a reasonable analysis and interpretation of the technical data and results of the Phase 1 program accomplished at that time. In such event, M&P would relinquish its entire interest in the Partnership for no consideration. If this were to occur, in completing Phase 1, RQ would fund up to $13.26 million of the remaining Phase 1 commitment and would then own 50% of the Partnership. Corridor and Pétrolia would each become obligated to pay up to $3.37 million and each would then own 25% of the Partnership.

Project Governance

The Partnership will be managed by a General Partner to be owned by the four joint venture participants. Each of the participants will be entitled to appoint one member to the Board of Directors of the General Partner, and a fifth and independent director shall be appointed with the unanimous consent of the Partners. Pursuant to a contract operating agreement, Pétrolia shall be appointed Contract Operator and M&P shall be designated as Assistant Technical Operator. Each of the participants shall have equal representation on the operating committee and technical services committee of the General Partner. The Partnership will be organized to take advantage of the combined expertise of all the Partners so that the programs are implemented in a safe, effective and environmentally responsible manner.

Significant Resource

The program is designed to further explore the Macasty Formation on Anticosti Island, which is the lateral equivalent of the Utica Formation in Eastern Ohio. In an independent resource assessment effective June 1, 2011, prepared by qualified reserves evaluator Sproule Associates Limited of Calgary ("Sproule") in accordance with National Instrument 51-101, Sproule determined, based on data available at the time, a best estimate of the total petroleum initially-in-place of the lands to be transferred to the Partnership by Corridor and Petrolia of 33.9 (19.8 net to Corridor) billion barrels of oil equivalent, all of which was classified as undiscovered resources. The Sproule resources report addressed only the undiscovered petroleum initially-in-place since insufficient information was available at such time to estimate the technically or economically recoverable amount of hydrocarbons within the study area.

Closing

The letter of intent is not legally binding on the parties. Closing of the transaction is expected to occur on or before March 31, 2014 but in no event later than April 30, 2014 and is subject to completion of legally binding definitive agreements and receipt of all necessary approvals.

Advisors

National Bank Financial have acted as exclusive financial advisors to Corridor in respect of this transaction, and legal advice is being provided by Bennett Jones, LLP and Davies Ward Phillips & Vineberg LLP.

"We are extremely pleased to be advancing this exciting evaluation program, as it has the potential to unlock a large resource base which could provide significant economic benefits to Québec and to Corridor and its partners," said Mr. Phillip Knoll, CEO, Corridor Resources Inc., who added, "We are happy to have both Ressources Québec and Maurel & Prom S.A. join with Pétrolia and Corridor in undertaking this appraisal program. The combined expertise of the participants will be utilized in a manner that ensures the use of industry best practices to move forward with an effective program designed to determine Anticosti's hydrocarbon development potential."

Corridor's partners include:

Ressources Québec

As a subsidiary of Investissement Québec, Ressources Québec is the gateway for companies seeking to invest in the mining and oil and gas industries. Ressources Québec supports resource companies at every stage of their projects, from exploration and development through to processing. It offers a full range of financial products, including investments in equity, debentures and various types of loans.

M&P, A worlwide presence, a diversified oil gas portfolio

As a mid-size oil & gas Company listed on the Paris market (in EUR), Maurel & Prom has proven experience as an oil operator with a presence in Africa and latin America. In 10 years, the Group has designed oil systems, drilled more than 100 exploration wells will a success rate of more than 46% and discovered major fields at minimum cost. Currently working in 12 countries on 4 continents, Maurel & Prom is extremely focused on exploration and maximisation of the value of its acreage. That is why the company's management is comprised exclusively of professionals with strong track records in the oil & gas industry.

Pétrolia

Pétrolia is a TSXV listed junior oil and gas exploration company which owns interests in oil and gas licenses covering 16,000 km² (4 million acres), which represents about 22% of the Québec territory under lease. The leases, the majority of which are located on the Gaspé Peninsula and Anticosti Island, are considered to be very promising and represent almost 71% of the territory under lease for which there is land-based oil potential in Québec. Pétrolia has 70,652,372 shares issued and outstanding.

Corridor is an Eastern Canadian junior resource company engaged in the exploration for and development and production of petroleum and natural gas onshore in New Brunswick and Québec and offshore in the Gulf of St. Lawrence. Corridor currently has natural gas production and reserves in the McCully Field near Sussex, New Brunswick and crude oil reserves in the Caledonia Field near Sussex, New Brunswick. In addition, Corridor has contingent resources and discovered resources in Elgin, New Brunswick and undiscovered resources on Anticosti Island, Québec where Corridor has ongoing exploration projects.

Forward Looking Statements

This press release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking information typically contains statements with words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. In particular, this press release contains forward-looking statements pertaining to: the terms of the joint venture, including the ownership and governance of the Partnership, the commitments to be made by each participant; the exploration program to be conducted by the joint venture; the objectives of the exploration program; the ability to enter into definitive agreements establishing the joint venture; timing of closing of the joint venture transaction; the characteristics of the Anticosti properties and associated resources; and business plans and strategies.

Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to Corridor and its shareholders.

Forward-looking statements are based on the terms of the letter of intent and Corridor's current beliefs as well as assumptions made by, and information currently available to, Corridor concerning business prospects, strategies, regulatory developments, government support, future commodity prices, future natural gas production levels, the ability to obtain equipment in a timely manner to carry out exploration and development activities, the ability to market products successfully and the ability to obtain financing on acceptable terms. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that forward-looking statements will not be achieved. These factors may be found under the heading "Risk Factors" in Corridor's Annual Information Form for the year ended December 31, 2012.

The forward-looking statements contained in this press release are made as of the date hereof and Corridor does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

Oil and Gas and Resources Disclosure

All calculations converting natural gas to crude oil equivalent have been made using a ratio of six mscf of natural gas to one barrel of crude equivalent. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of six mscf of natural gas to one barrel of crude oil equivalent is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

" total petroleum initially-in-place " or " PIIP " refers to that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It includes that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered. Total petroleum initially-in-place is equivalent to total resources.

" undiscovered petroleum initially-in-place " or " undiscovered resources " refers to those quantities of petroleum that are estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of undiscovered petroleum initially-in-place is referred to as prospective resources, the remainder as unrecoverable. Undiscovered resources carry discovery risk. There is no certainty that any portion of these resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. A recovery project cannot be defined for this volume of undiscovered petroleum initially-in-place at this time.

Resources do not constitute, and should not be confused with, reserves. Actual resources will vary from the resource estimates, and those variations could be material. There is no certainty that it will be economically viable to produce any portion of the resources.

The Sproule resources report was conducted in accordance with the COGE Handbook and National Instrument 51-101 and addressed only the undiscovered petroleum initially-in-place, since insufficient information was available at such time to estimate the technical or economically recoverable amount of resources within the study area. National Instrument 51-101 disclosure requires that the resource estimates must be classified according to COGE definitions and disclosed in the most specific category. Under these definitions, Sproule classified the total petroleum initially-in-place as undiscovered resources, based on the following: (i) a core of the Macasty shale from the Chaloupe well contained residual oil; (ii) the Macasty shale has not been flow tested from any well on Anticosti Island; (iii) the resources are inferred to exist based on the interpretation and mapping of limited pyrolysis, core, well log and seismic data; and (iv) this is an unconventional shale oil resource that will require a stimulated completion for evaluation and, until an appropriately researched project has been undertaken to identify and evaluate potentially recoverable volumes, it is premature to speculate whether the Macasty contains recoverable or unrecoverable resources. Subsequent to its report, Sproule reviewed the pertinent data collected between June 1, 2011 and December 31, 2012 and made no changes to the original resource estimates. In March 2013, Sproule indicated that the initial core results appeared to be consistent with the initial report.

For further information on Corridor's resources on Anticosti Island, see the Annual Information Form of Corridor for the year ended December 31, 2012.

FOR FURTHER INFORMATION PLEASE CONTACT:

Contact Information:
Phillip R. Knoll, President
Corridor Resources Inc.
(902) 429-4511
(902) 429-0209 (FAX)
www.corridor.ca

Products
  • Globe Unlimited

    Digital all access pass across devices. subscribe

  • The Globe and Mail Newspaper

    Newspaper delivered to your doorstep. subscribe

  • Globe2Go

    The digital replica of our newspaper. subscribe

  • Globe eBooks

    A collection of articles by the Globe. subscribe

See all Globe Products

Advertise with us

GlobeLink.ca

Your number one partner for reaching Canada's Influential Achievers. learn more

The Globe at your Workplace
Our Company
Customer Service
Globe Recognition
Mobile Apps
NEWS APP
INVESTING APP
Other Sections