(TSX:CDH): Corridor Resources Inc. (“Corridor”) announced today
that it has completed its integrated geotechnical analysis of the
Old Harry prospect comprised of data from a controlled source
electromagnetic survey (“CSEM”) and reprocessed two dimensional
(“2D”) seismic. Old Harry is a large (43,000 acre) undrilled
structure with four-way closure located in approximately 470 metres
of water in the Gulf of St. Lawrence, straddling the border of
Newfoundland and Quebec.
Corridor purchased a licensed copy of a CSEM
survey that was conducted in late 2017 over the Newfoundland side
of the Old Harry structure. The analysis of the CSEM data proved to
be more complicated than anticipated. This led Corridor to take the
additional steps to utilize modern techniques to reprocess 762 km
of its proprietary 2D seismic over the Old Harry structure
(originally acquired in 1998 and 2002) and undertake an integrated
geotechnical review with the aid of several senior consultants.
This comprehensive review revealed more
complexity in the Old Harry prospect than previous analysis had
suggested and resulted in three key findings. First, we have
determined that the geology and geochemical/petrological analysis
of the Old Harry structure is more complicated than previously
understood. This has led us to believe the play could be more gas
prone than oil prone and the overall hydrocarbon accumulation could
be less than originally estimated. Secondly, we have
concluded that, in order to more adequately de-risk the prospect, a
three-dimensional (“3D”) seismic survey should be conducted over
the entire structure before drilling an exploration well.
Third, despite renewed efforts, we have been unable to date to
attract a joint venture partner for the prospect, the reasons for
which are described later in this press release. As a result
of the foregoing, Corridor has determined there is no longer a
viable path to drilling an exploration well on the prospect before
the current exploration licence on the Newfoundland side expires in
January 2021. We reached this conclusion with the knowledge
that the timelines for regulatory approvals for offshore projects
are lengthy and are becoming increasingly challenging. As a
result, Corridor has decided it would not be prudent to continue
with additional capital spending on the Old Harry prospect and,
accordingly, is suspending all further technical work and
expenditures.
Concurrent with our decision to suspend work and
expenditures, Corridor intends to make a formal request to the
authorities in Newfoundland, Quebec and the Federal Government to:
1) grant us a new licence to extend Corridor’s land tenure on the
Newfoundland side; and 2) undertake the legislative and regulatory
steps necessary to clarify the status of Corridor’s exploration
licenses in Quebec. If Corridor is successful
in securing such regulatory relief, the additional time to its
land tenure and regulatory certainty would enhance Corridor’s
opportunity to solicit interest from prospective joint venture
partners. Given the complexity of the Old Harry prospect,
prospective joint venture partners will need more time to undertake
a thorough review of the technical work conducted by Corridor to
date and, if deemed necessary, conduct a 3D seismic program over
the structure. If we successfully secure the regulatory relief that
we will be seeking, Corridor would concentrate its efforts on
attracting a joint venture partner to the Old Harry prospect.
We would not anticipate committing any material capital
expenditures in any future process to secure a partner.
On the Newfoundland side of the prospect,
Corridor was granted a licence in 2008. In 2011, Corridor
registered an environmental assessment under the Canadian
Environmental Assessment Act, SC1992, c37 (the “EA”) for the
purposes of drilling a single exploration well on the Old Harry
prospect. Due to lengthy delays in processing our EA
application and uncertainty with First Nation consultation,
Corridor was granted a new exploration licence with a latest expiry
date of January 2021. That new tenure has been legally
challenged by a group led by environmental activists and a First
Nation group, which matter is still before the courts.
Corridor holds two oil and natural gas
prospecting licences on the Quebec side of Old Harry. These
prospecting licences were suspended by the Quebec government
effective March 29, 1999 while the Quebec Minister of Natural
Resources undertook, with his federal counterpart, discussions “to
reach an administrative agreement dealing with oil and natural gas
exploration and development in the Gulf of St. Lawrence.” This
agreement was ultimately reached on March 24, 2011 with the signing
of the “Accord between the Government of Canada and the Government
of Quebec for the shared management of petroleum resources in the
Gulf of St. Lawrence”. Notwithstanding that this Accord was
struck over seven years ago, neither the Government of Quebec nor
the Government of Canada has undertaken the steps necessary to pass
legislation to enact regulations to govern Corridor’s land tenure
in Quebec. Furthermore, Corridor has been precluded from
undertaking any operational activities, namely additional seismic
and CSEM, over the Quebec side, which covers approximately two
thirds of the Old Harry structure. The uncertainty regarding
the Quebec land tenure further complicates the prospect,
particularly if it is a natural gas accumulation, as economics of
the project would most likely require full field development of the
entire structure.
Corridor has always expressed that it would not
proceed with exploration or development on the Old Harry prospect
unless it could attract a partner with the size, experience and
expertise to act as operator of the project. As previously
mentioned, we have recently approached numerous large oil companies
to solicit joint venture interest. To date, we have been
unsuccessful due to a number of factors, including:
- As a result of modern data
acquisition and processing techniques, most prospective partners
would now require a 3D seismic survey done over the entire Old
Harry structure before drilling an exploration well;
- Although not a unanimous view, many
prospective partners believe the Old Harry structure is more likely
to contain natural gas than oil. Given the recent abundance
of natural gas in North America brought about by the recent success
of shale plays, a natural gas accumulation is less attractive for
deep water exploration; and
- The lack of clarity regarding
Corridor’s Quebec land tenure creates an uncertain environment for
investment.
In its most recent marketing efforts, Corridor
has not received interest in the Old Harry prospect from many
international companies. In our view, this was due to a
higher cost environment related to uncompetitive taxes and an
increasingly cumbersome and unpredictable regulatory approval
process in Canada.
Going forward, in addition to seeking regulatory
relief for Old Harry, Corridor will focus its efforts to advance
its exploration and production operations in New Brunswick while
continuing to evaluate new opportunities to deploy its working
capital, which currently stands at approximately $58 million.
Corridor is a Canadian junior resource company
engaged in the exploration for and development and production of
petroleum and natural gas onshore in New Brunswick and offshore in
the Gulf of St. Lawrence. Corridor currently has natural gas
production and reserves in the McCully Field near Sussex, New
Brunswick. In addition, Corridor has a shale gas prospect in
New Brunswick and an offshore conventional hydrocarbon prospect in
the Gulf of St. Lawrence.
For further information: Contact: Steve
Moran, President and CEOCorridor Resources Inc.#301, 5475 Spring
Garden Road, Halifax, Nova Scotia B3J
3T2
Ph: (902) 429-4511 F: (902) 429-0209 Web: www.corridor.ca
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 characteristics of Corridor’s properties;
business plans and strategies; including seeking a new exploration
licence over the Old Harry structure in Newfoundland, seeking
regulatory clarity with respect to the Old Harry structure in
Quebec, and the evaluation of opportunities to deploy working
capital; exploration and development plans, including timing of
such plans; processing and interpretation of the CSEM data and the
2D seismic data base over the Old Harry structure; the benefits and
timing of such 2D reprocessing; Statements relating to "reserves"
are forward-looking statements, as they involve the implied
assessment, based on certain estimates and assumptions that the
reserves described exist in the quantities predicted or estimated
and can profitably be produced in the future.
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 the
Corporation and its shareholders. Forward-looking statements
are based on the Corporation's current beliefs as well as
assumptions made by, and information currently available to, the
Corporation concerning anticipated financial performance, business
prospects, strategies, regulatory developments, future natural gas
and oil commodity prices, exchange rates, future natural gas
production levels, the ability to obtain equipment in a timely
manner to carry out development activities, the ability to market
natural gas successfully to current and new customers, the impact
of increasing competition, the ability to obtain financing on
acceptable terms, the ability to add production and reserves
through development and exploration activities, and the terms of
agreements with third parties such as the Corporation's forward
sales contracts and hedging contracts. 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 include, but are not limited to, risks associated with oil
and gas exploration, development and production, operational risks,
development and operating costs, substantial capital requirements
and financing, volatility of natural gas and oil prices, government
regulation, environmental, hydraulic fracturing, third party risk,
dependence on key personnel, co-existence with mining operations,
availability of drilling equipment and access, variations in
exchange rates, expiration of licenses and leases, reserves and
resources estimates, trading of common shares, seasonality,
disclosure controls and procedures and internal controls over
financial reporting, competition, conflicts of interest, issuance
of debt, title to properties, hedging, information systems,
litigation and aboriginal land and rights claims. Further
information regarding these factors may be found under the heading
"Risk Factors" in the Corporation’s Annual Information Form for the
year ended December 31, 2017. Readers are cautioned that the
foregoing list of factors that may affect future results is not
exhaustive.
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.