The Colville Lake area in the central Mackenzie Valley, Northwest Territories has been the focus of natural gas exploration since the 1970s. A number of major discoveries have been made by others in the Colville Lake area during that time, with four Significant Discovery Licenses awarded to date. In addition, Paramount made two new discoveries (at Nogha and Maunoir) in the area. These discoveries, as part of the overall landholdings of Paramount in the region, were acquired by MGM Energy from Paramount in the Plan of Arrangement in January 2007. As with the Mackenzie Delta, there is no production of hydrocarbons from this area due to the absence of pipelines to transport the hydrocarbons to markets.
The Colville Lake properties cover approximately 600,000 hectares (approximately 385,000 hectares net) in the Mackenzie Valley, Northwest Territories. The Colville Lake properties are at:
- Nogha (Exploration License #426, Exploration License #430 and one concession agreement);
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Maunoir (Exploration License #399 and Exploration License #428);
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Turton (Exploration License #414);
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Kelly (Exploration Licenses #424 and #442); and
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Great Bear River (Exploration License #440).
The Nogha, Maunoir and Turton properties are held through a 50/50 joint venture with an industry partner, and the Kelly and Great Bear River properties are wholly owned.
Ten wells have been drilled to date on the Colville Lake lands (four at Nogha, four at Maunoir and two at Turton), eight of which have been cased and suspended and two of which have been abandoned. Approximately $82.2 million in net capital expenditures have been made to date by Paramount on these properties.
Several prospects and leads have been identified through 2D seismic in the Colville Lake area. Current mapping indicates good gas potential in the immediate area of the Nogha discovery as well as in the surrounding basal Cambrian Sandstone strata.
In 2007/08 the Corporation intends to shoot seismic in the Kelly and Nogha areas at an estimated cost of $15 million, defining drilling for the 2008/09 winter drilling season.
Discoveries have been made in the Colville Lake area by Paramount at Nogha and Maunoir. The Nogha C-49 and M-17 discovery wells were production tested at combined rates from the Mount Clark A and C zones of 5.1 and 3.5 Mmcf/d, respectively. The Maunoir C-34 discovery well was production tested at 235 bbls/d of oil.
Third party estimates filed with Canada’s National Energy Board in connection with hearings into an application for a natural gas pipeline through the Mackenzie Valley estimates potential undiscovered resources for the Colville Lake Cambrian sandstone, which covers approximately 5.3 million hectares in the Mackenzie Valley, of up to 8.6 Tcf of gas in place (high case). Undiscovered resources are those quantities of oil and gas estimated on a given date to be contained in accumulations yet to be discovered.
An evaluation of the potential resources of the Nogha property at Colville Lake, conducted by McDaniel & Associates Consultants Ltd., independent petroleum engineering consultants carrying on business in Calgary, Alberta estimates the potential contingent resources of the property to be approximately 136.2 Bcf (high case). The evaluation is as of December 31, 2006.
The table below summarizes the estimated volumes of contingent resources attributable to the Nogha property at Colville Lake, net to MGM Energy. The estimates presented are in accordance with the definitions and guidelines in Canadian Oil and Gas Evaluation Handbook and applicable securities regulations.
| Contingent Resources(1) (Bcf) |
| |
(Estimate)(2)
|
|
| Low |
Best |
High |
| 11.5 |
41.7 |
136.2 |
Notes:
1. Contingent resources are those quantities of gas estimated to be potentially recoverable from known accumulations but are classified as a resource rather than a reserve due to: lack of pipeline infrastructure, making the project uneconomic on a stand alone basis; potential regulatory issues with respect to the construction of the pipeline and facility infrastructure; lack of demonstrated intent to bring the volumes to market within a specific time frame; and insufficient drilling or technical data to be able to accurately estimate total pool productivity. Estimates are shown before the deduction of royalties.
2. A low estimate is a conservative estimate of the quantity that will actually be recovered from the accumulation; a best estimate is the best estimate of the quantity that will actually be recovered from the accumulation; and a high estimate is an optimistic estimate of the quantity that will actually be recovered from the accumulation.
