Vancouver, British Columbia,
Canada – July 30th, 2008 - Canada Gas Corp.
(“Canada Gas” or the “Company”) (formerly Wyn Developments Inc.) would
like to update recent progress and clarify several inaccuracies regarding
the Company. Highlights of this update are summarized below and the
full update can be viewed on the Company’s website at www.canadagas.ca.
- Canada
Gas retains right to call for operations on Prophet River project.
- Sproule
Associates Ltd., oil and gas consultants of Calgary, Alberta have
been engaged to perform an independent exploration and development
review of the Prophet River project.
- A
Canada Gas internal review of well data and assets suggests presence
of Cretaceous Buckinhorse shale, Triassic Montney siltstone and
Devonian Ft.Simpson and Muskwa shales presence on the Company’s
lands, in addition to Triassic Halfway, Mississippian Shunda and
Devonian Slave Point prospects. Thom Bainbridge, B.App.Sc,
P.Geol, the Company’s consulting geologist suggests “there is
fundamentally no geological difference between the Ft.Simpson/Muskwa
Formation encountered on the Prophet River and Trutch lands and that
being explored and developed in the Horn River Basin. There is
also no fundamental geological difference in the Triassic Halfway
and Montney Formations been pursued by our neighbors and throughout
the Western Canadian Sedimentary Basin.”
- President
and CEO Dave McMillan comments on the Company and market conditions.
Since restructuring the Company in
mid June 2008, Canada Gas has continued to apply considerable efforts to
move forward on several fronts. The Company has always maintained
an open relationship with its project partners, while defending
shareholder interests and working to maximize shareholder value.
Management has also pursued initiatives it believes are equally in the
best interest of the Partners shareholders, given feedback received from
all participants of the Prophet River and Trutch projects.
To that end, the Company would
like to explain in greater detail the recent reserves issue of the
Prophet River project as they relate to the Company’s financial
statements. The Company follows the full cost method of accounting
for petroleum and natural gas interests whereby all costs of exploration
for and development of petroleum and natural gas reserves are
capitalized. Costs associated with unproven reserves are reviewed by
management to determine whether they have become impaired. If impairment
occurs, the carrying value of the related interest will be reduced to
reflect the estimated net realizable value.
The Company is of the opinion that
at this point in time insufficient data exists to determine the potential
reserves that might exist in this Mississippian Shunda zone, the
estimated drainage area that would be used for a single vertical well,
and the economics of this zone. The Company has subsequently revised its
January 31, 2008 reserves report to reflect this conclusion, and as a
result, eliminated its share of total annual proven and non-producing
reserve from 2,469 MMCF to nil. Based on the new information, the
Company completed an impairment test in order to assess the recoverable
value of the oil and gas interests which resulted in a total impairment
of $8,736,588 on all projects for the year ended January 31, 2008.
(Refer to the Company’s January 31, 2008 audited financial
statements and MDA for additional information on these financial
adjustments).
The Company continues to pursue
effective strategies for the exploration and development of the Prophet
River and Trutch projects. Canada Gas continues to approach its
Prophet River partners with proposals to move the Companies
forward. Management believes time is of the essence in this regard,
for the Company and its shareholders, and does not accept the status quo
of continuing delays. According to the Prophet River Participation
Agreement with Tenaka Drilling Consortium Ltd., Canada Gas retains the right
to call for operations on the project and appoint itself as Operator,
just as the other participants have that right under the agreement.
The Company’s objective is to resume exploration and development on the
property as soon as fiscally and logistically possible, with or without
the participation of the project’s partners.
To this end, Canada Gas has
engaged the technical expertise of Sproule Associates Ltd. (“Sproule”) a
well known, respected, and reliable Calgary, Alberta based oil and gas
consulting company to prepare an exploration and development review of
the Company’s assets, starting with Prophet River. Sproule is now
in possession of the d-60-E/94-G-15 well file, has uploaded the Prophet
River 3-D seismic data and their evaluation is underway. At the
request of the Company, Sproule will review the Prophet River lands for
the primary objectives of the Devonian Slave Point, Mississippian Shunda,
Triassic Halfway, and any prospective unconventional hydrocarbon bearing
formations through existing well data, including the
d-60-E well, 3-D seismic data and
any regional exploration and development data pertaining to these
resources. Given the recent success in the application of
multi-stage vertical fracturing solutions to various formations, the
Company believes an unconventional review of the data obtained from past
work is also warranted. The Company will be kept abreast of
Sproule’s findings as they occur, and upon conclusion of the review, will
be provided interpreted seismic based structure and amplitude maps
for up to 8 major seismic events, including the events for the formations
listed above and a letter report with their findings, conclusions and
recommendations for Prophet River. Sproule’s review will assist in
preparing a full production test on the d-60-E/94-G-15 well, a final
determination of an earning well location for the Prophet River ‘B’
lands, and plotting additional exploration and development targets and
locations, if warranted. Sproule anticipates this initial review
will be completed late August 2008.
Also at Prophet River, the Company
and its project partners had assigned a 3rd party independent
auditor to review the d-60-E/94-G-15 well operations, which was
approximately 100%+ over budget, equaling approximately $17 million
dollars. Such expenditures equally contributed to financial
challenges facing the Company in adequately testing the Mississippian
Shunda and Triassic Halfway targets. This audit has suggested the
Operator and subcontractors could be responsible for nearly CAD $2.2
million in miscoded and/or unauthorized expenditures. The Company
is in ongoing discussion with the d-60-E Operator to achieve a resolution
satisfactory to all parties.
At Trutch, the Company anticipates
a September meeting with Enerplus Resources Fund Ltd. regarding winter
development plans. (Enerplus recently acquired Focus Energy Trust
Ltd.) According to the Trutch Operating agreement, Enerplus must
call for a minimum of one, maximum three Halfway development wells, with
more subject to all parties’ approval. Recent regional
developments, discussed below, have the potential to positively impact
the performance of the producing Triassic Halfway Formation on the
property and the Company looks forward to discussing this potential with
Enerplus ahead of the 2008/2009 winter development program. The Company
is currently producing from four Triassic Halfway wells on the property.
Also at Trutch, the Company has
recently received an offer from Northern Hemisphere Developments Corp. to
purchase all of Canada Gas’ Trutch assets. Canada Gas has
respectfully declined the offer as it does not meet with the Company’s
strategic plans.
The Company is also pursuing the
novation of its earned assets. This procedure, although largely a
formality, will ensure the Company has a direct relationship with the
Trutch project Operator, Enerplus Resources Fund Ltd., and ensure the
Company receives its production revenues directly. For the record,
Canada Gas has been reconciling all Trutch production accounting on
behalf of Tenaka Drilling Consortium Ltd., Flying A Petroleum Ltd. and
Bighorn Petroleum Ltd. to date.
In addition, since early 2008,
several factors have influenced interest activity in the Western Canadian
Sedimentary Basin (WCSB), Northeastern British Columbia, Canada, which
lie within the Company’s assets. In addition to strong natural gas
pricing and adjustments to Alberta’s oil and gas royalty regime, the
announcement of results from the application of an unconventional
horizontal well multi-stage vertical fracturing technique has
substantially increased industry interest in the Triassic Montney
Siltstone and Devonian Muskwa Shale Formations. There is also
strong indication this technique may be effectively applied to other
traditionally conventional prospects. As previously mentioned, the
Company has equally engaged Sproule’s unconventional division for an
assessment of this potential. After an initial review of the well logs
for the abandoned Bougie Trutch b-62-D/94-G-15 Shell et al Slave Point
Exploratory well (Total Depth +3000m), the shallow Halfway wells at
Trutch, and the d-60-E/94-G-14 Slave Point Exploratory Well at Prophet
River (Total Depth +3000m), the Company has identified additional
prospects on those properties in addition to the Triassic Halfway,
Mississippian Shunda, and Devonian Slave Point targets, including the
Cretaceous Buckinghorse Shale, Triassic Montney and Debolt, Devonian
Muskwa and Ft. Simpson Formations. As discussed, the Company is
preparing a more comprehensive analysis of these prospects, many of which
appeared gas charged while drilling. The Slave Point Formation was
the primary target of the b-62-D and d-60-E wells, drilled in 2005 and
2006, respectively. Each encountered approximately 300 meters of
the Triassic Montney Formation and approximately 300 meters of the
Devonian Ft.Simpson/Muskwa Formations. Until these recent
announcements and subsequent industry interest in 2008, the Company had
not considered the unconventional prospectivity of its
assets. The d-62-B well was abandoned by the Operator.
The d-60-E well is currently shut-in. Both wells can be re-entered.
Many analyses on the prospects of
unconventional exploration and development in British Columbia have been
published by the British Columbia Ministry of Energy, Mines and Petroleum
Resources, Canadian Discovery Ltd., Tristone Capital Inc., Canaccord
Adams, RBC, BMO, and FirstEnergy Capital Corp., among others. It is
important to note these research reports have not involved any specific
analysis or reference to the Company’s assets. The Company continues
to build a file on the subject.
Several features emerge through
their research:
- The
application of multi-stage fracture stimulation of horizontal wells
continues to evolve, but robust rates of return have been
demonstrated in its application, in some cases exceeding 50%[1].
- Alberta
Clipper has also indicated gross Montney OGIP of 500 Bcf across
their 33 sections of Trutch lands and will be drilling Montney
horizontal wells H2/08.[2]
- Estimates
of the Triassic Montney OGIP in British Columbia varies from 8 to 60
Billion Cubic Feet per section.[3]
- Estimates
of the Devonian Muskwa Formation OGIP in British Columbia varies
from 2 to 28 Bcf per section over 30 meters thick.[4]
- Estimates
of the Devonian Ft. Simpson OGIP in British Columbia of 12 to 370
Bcf per section over 200 meters thick.[5]
As a result of this increased
interest, British Columbia has witnessed record crown land sales in 2008,
reaching prices as high as $33,500 per hectare, or $6.5 million dollars
per section for these prospective unconventional lands in the July 16th,
2008 BC landsale. Also notable, Royal Dutch Shell Ltd. announced a
$5.9 Billion takeover offer on July 14th, 2008, for Duvernay
Oil Corporation.
The Company has been paying close
attention to these developments as the interest in these Formations is
high and previously unconsidered by the company. The Company has
been reviewing all available regional data including all well data.
The Company offers the following prospective assessment:
In June, the Company’s adjoining
neighbor to the south of Trutch, Alberta Clipper Energy Inc. described
their prospective resource estimate on gross sections Montney OGIP as 500
Bcf. In addition, they described applying the horizontal well
multi-stage vertical fracturing technology to the Triassic Halfway
Formation. Canada Gas currently has seven wells which have encountered
the Halfway. Four of these wells are currently producing
(c-36-A/94-G-15, c-25-A/94-G-15, b-56-A/94-G-15 and a-38-A/94-G-15), one
well is shut-in (a-13-B/94-G-15), one well is suspended pending further
work (b-086-A/94-G-15), and the d-60-E/94-G-15 well, as previously
announced, has encountered 24 meters of prospective Triassic Halfway
Sandstone at Prophet River. The application of this enhanced
completion method suggested to potentially improve production performance
and recovery rates is certainly of interest to Canada Gas. In
addition, Clipper’s recent disclosure on the Montney is also
encouraging. As Canaccord Adams notes in their analysis entitled
“The Full Montney,” dated June 23, 2008, “Companies with larger
landholdings, existing infrastructure and production are competitively
better positioned to maximize returns than are newer entrants…Moreover,
companies that have already executed drilling programs on their acreage
(which Canada Gas has achieved) – even if the drilling is oriented to other
targets – would have a better understanding of the geological potential
than newer entrants.”
Thom Bainbridge, B.App.Sc, P.Geol,
the Company’s consulting petroleum geologist and qualified person in
accordance with national instrument 51-101 standards with nearly 40 years
experience in the Western Canadian Sedimentary Basin, remarks:
“These developments in the WCSB
with a specific focus on the Montney and Ft.Simpson/Muskwa Formations, in
addition to our neighbors’ interests in employing horizontal multi-stage
vertical fracturing techniques to the Triassic Halfway Formation bode
well for the potential of the Prophet River and Trutch projects.
While depth of burial remains a consideration, there is
fundamentally no geological difference between the Ft.Simpson/Muskwa
Formation encountered on the Prophet River and Trutch lands and that
being explored and developed in the Horn River Basin. There is also
no fundamental geological difference in the Triassic Halfway and Montney
Formations been pursued by our neighbors and throughout the Western
Canadian Sedimentary Basin. These situations bode well for the
Prophet River and Trutch-Bougie Areas as Prophet is a “Foothills”
anticline and syncline relationship while Bougie-Trutch in a horst and
graben environment and as such both areas should have enhanced
permeability due to associated fracturing of the reservoirs
identified.”
It is important to note that
although these Formations appear present on the Company’s lands, there
can be no conclusion that these Formations will contain economic
quantities of recoverable reserves. Further analysis will be completed
on these Formations and more information will be provided when
available. The Company is encouraged by the opportunity to add the
Buckinghorse, Montney, and Muskwa unconventional targets to the
conventional Devonian, Mississippian, Triassic targets on the Prophet
River and Trutch assets. Once the Prophet River project review is
complete, the Company has asked Sproule to assess similar characteristics
and opportunities at Trutch.
Since August 2007, the Company has
been under considerable sustained market pressure. This pressure
has been a function of both macro and micro factors, within and outside
of the Company’s control. The junior resource sector in general has
been depressed, and the Company is not alone in the selling pressure it
has experienced. Dave McMillan, President and CEO, comments on the
situation:
“We have drilled two deep wells
that were expensive and due to drilling complications were significantly
over budget. Further, the Operators advised these wells did not
successfully encounter the primary target formation. Regardless,
Management and I believe there is tremendous opportunity in these
lands. I have continued to support the Company by subscribing for
private placements at all levels both before and since the slide in the Company’s
share price. Management believes that the low market valuation of
Canada Gas is a consequence of significant selling pressure, and does not
accurately reflect the true potential of the Company’s assets and
strategic alternatives. We have described many promising and
dynamic elements in this news release. The Company does invite and
welcome positive and progressive contributions from all and will continue
to aggressively pursue opportunities of wealth creation for shareholders,
the marketplace and industry. The Company is actively seeking
promising alternatives to enhance shareholder value, including mergers,
acquisitions, partnerships and the addition of strong technical
management. Please be advised that this update is being presented
as a strategic guide for shareholders, and there is no guarantee that in
the course of business the suggested outcomes will occur as
described. The Company’s operations are fluid, and strategic
initiatives flexible. Please review the forward looking statements at
the bottom of this release if you are unfamiliar with the conditions
influencing public companies.”
For more information on Canada Gas
Corp., please visit www.canadagas.ca or contact the Company toll free at 1.888.685.5851.
On Behalf of the Board of
Directors,
Chad McMillan B.A. (Cmns)
Vice President, Corporate
Communications
(604) 685-5851 or Toll Free: (888)
685-5851
520 - 700 West Pender Street
~ABOUT THE COMPANY~
Canada Gas Corp. (tsx.v: CJC;
Frankfurt: YXE; otc:bb: CJCFF) is a participant in two natural gas
projects located in the prolific Western Canadian Sedimentary Basin,
northeastern British Columbia, Canada. The Prophet River and Trutch
projects feature varying PNG rights, new pool discoveries, and multiple
prospective target horizons and exploration and development
locations. The Company has approximately 20 million shares
outstanding and is currently in production.
The Company’s Corporate Structure
is now the following:
Issued and Outstanding:
approximately 20 million shares
Fully Diluted: approximately 28
million shares
Market capitalization:
approximately CAD $3 million
Daniel Kesonen, Chairman, Director
Dave McMillan, President &
CEO, Director
Marc Tran B.Comm, B.A., Director,
Chief Financial Officer
Chad McMillan, B.A., Director,
Vice President Corporate Communications
Canada Gas Corp’s current assets
are located in the Western Canadian Sedimentary Basin, northeastern
British Columbia, Canada.
The Canada Gas portfolio includes:
The Prophet
River Project
- A
33 1/3% gross working interest in the 11 square mile Prophet River A
lands. (All PNG from surface to
Sulphur Point).
- A
33 1/3% gross working interest in the 8 square mile Prophet River B
Lands. (All PNG from surface to
total depth drilled).
- A
33 1/3% gross working interest in 1 square mile. (All PNG from
the base of the Debolt to the basement).
- A
33 1/3% ownership of the Prophet River 3D seismic data.
- A
33 1/3% interest in the d-60-E/94-G-15 Prophet River Mississippian
new pool discovery well.
- A
9.5% to 15% gross working interest in 18 square miles. (All
PNG from the surface to the base of the Halfway Formation).
- A
30% gross working interest in approximately 7 square miles.
(All PNG bottom of Halfway to top of Slave Point).
- A
24% gross working interest in 13 square miles. (All PNG top of
Slave Point to basement).
- A
33 1/3% interest in one square mile. (All PNG surface to the
basement).
- A
9.5% to 15% gross working interest 6 Triassic Halfway Formation
wells: 4 Triassic Halfway wells in
production (a-38-A/94-G-15, b-56-A/94-G-15,
c-25-A/94-G-15, c-36-A/94-G-15), one well currently shut-in
(a-13-b/94-G-15), one suspended b-086-A/94-G-15, and one abandoned
(d-62-b/94-g-15).
- A
15% gross working interest in 14,217 meters of six inch gathering
pipeline from Enerplus Resources’ Tommy Lake field to the Trutch
Lands.
- Approximately
$17 million in Tax Pools.
[1] “The Full Montney,” Canaccord Adams, Equity Research, June 23,
2008.
[2] Corporate Presentation, Alberta Clipper, June 2008.
[3] “Shale Gas and Other Natural Gas Opportunties in British
Columbia, Canada,” British Columbia Ministry of Energy, Mines and
Petroleum Resources, Resource Development and Geoscience Branch, Oil and
Gas Division, 2007.
[4] “Shale Gas and Other Natural Gas Opportunties in British
Columbia, Canada,” British Columbia Ministry of Energy, Mines and
Petroleum Resources, Resource Development and Geoscience Branch, Oil and
Gas Division, 2007.
[5] “Shale Gas and Other Natural Gas Opportunties in British
Columbia, Canada,” British Columbia Ministry of Energy, Mines and
Petroleum Resources, Resource Development and Geoscience Branch, Oil and
Gas Division, 2007.
Chad McMillan B.A. (Cmns)
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