The Utica – An Emerging Canadian Shale Gas Play

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The best leverage for investors could lie with those junior oil and gas companies who have amassed large exploration permits in the St Lawrence Lowlands right in the heart of the Utica fairway.

Altai Resources Inc. ATI – TSX.v 100% owner of the Sorel-Trois Rivières natural gas property, 114,344 hectares (282,544 acres). Altai also retains a 15% gross royalty in the adjoining permit of 13,290 hectares (32,840 acres) held by Talisman Energy Canada.

Canadian Quantum Energy Corp. CQM – TSX.v has interests in four key permits comprising approximately 170,000 gross acres / 35,000 net acres in the heart of the identified Utica’s Fairway. CQM participated with its' partners, Talisman Energy and Questerre Energy, in the recent, very significant Gentilly discovery well and is participating in the drilling of the Gentilly #2HZ well. CQM also has 50% partnership and joint operations with Junex on the 54,600 acre Nicolet Permit, also in the heart of the Utica Fairway.

In November of 2009 the company obtained shareholder and regulatory approval to effect a 4 x 1 forward split of its shares which resulted in there now being 24,581,776 shares being issued and outstanding, 57% insider ownership.

Netherland, Sewell and Associates Inc., a world renowned Texas based engineering firm, are preparing an engineering report, due the end of January 2010, that will cover Canadian Quantum’s 50% interest in the Nicolet Permit. Netherland Sewell was previously commissioned to do an engineering report on Questerre’s Utica Shale properties.

Epsilon Energy Ltd. EPS – TSX Has an elective participating interest of up to 25% in a portion of Gastem, Inc.’s (TSXV: GMR) leasehold acreage in the St. Lawrence Lowlands (covering Utica shale and Trenton-Black River targets). EPS went non-consent on the first two exploratory wells drilled within the Yamaska project but has decided to participate in the next well.

Gastem Inc. GMR – TSX.v Holds exploration, storage permits and rights to 3,135 km² in the St. Lawrence Lowlands, the Gaspe Peninsula and the Magdalen Islands in Quebec as well as rights and interests in New York State and in Appalachia.

Junex Inc. JNX – TSX.v Holds rights for more than 6 million acres under exploration permits located in the Appalachian Basins in Quebec. These rights are shared out between the St-Lawrence Lowlands and Gaspésie areas and includes some licenses in which Junex only holds a royalty on the future production of hydrocarbons. Junex holds more than 1.1 million net acres in the Utica region.

Petrolympic Ltd. PCQ-TSX.v Holdings in the St. Lawrence Lowlands include a 30% interest in 673,021 acres (272,362 hectares). This is through a joint venture with Ressource & Energie Squatex Inc.

Questerre Energy Corp. QEC – TSX Over 1 million gross acres (0.34 million net) in the Utica/Lorraine shale gas play.

Conclusion


There is a lot of work being done today, in the Utica, to answer the question - are the all-in costs of drilling, completing and fracing horizontal wells going to be economic/will the upcoming results support further development of this play? If upcoming results indicate robust economics then ladies and gentlemen we just might have one of the largest resource plays in Canada happening in the most perfectly situated place for one to happen.

Quebec’s Utica shale gas play should be on investors radar screens for all the right reasons, is it on yours?

Richard (Rick) Mills
rick@aheadoftheherd.com
www.aheadoftheherd.com