McCully Gas Plant Installation Completed
Halifax, Nova Scotia, March 28, 2003: Corridor Resources Inc. (CDH - TSX-V) announced today that the choke plant, the main component of the gas plant, has arrived on location at the McCully Field near Sussex, New Brunswick. Following hook-up, the plant will process gas to be delivered by pipeline already installed from the McCully A-67 (#1) and P-66 (#2) wells to Potash Corporation of Saskatchewan's (PCS) potash mill located two kilometres from the wells. An independent report by a Calgary engineering firm has assigned recoverable natural gas reserves of 11 billion cubic feet to these two wells. PCS intends to commission the plant in early April and will be the operator of the plant. Commencement of gas production to the mill is expected in April.
The planned natural gas production rate to meet expected mill demand is 2.3 million cubic feet per day. Corridor's 50% share of the gas production will be priced month to month based on the equivalent cost of #2 fuel oil. Corridor has protected its McCully gas price from falling below approximately $7.00 Canadian per mcf by hedging the NYMEX crude oil price at $22 US per barrel through to the end of February, 2004. This price protection has been achieved without losing the benefit of higher gas revenues if oil prices are greater than $22 US per barrel.
A total of seven wells have been drilled to date in the McCully field, all of which encountered natural gas in the Albert Formation. Corridor operated the first four wells in partnership with PCS. The McCully P-56 (#3) and C-75 (#4) wells are currently shut in awaiting market opportunities. An independent geological report assigned a potential of 500 billion cubic feet of gas-in-place to the area including and surrounding these first four wells. A further three McCully wells (D-48, H-28 and J-65) were drilled and operated by another operator which subsequently opted not to continue with the project. The wells were drilled and completed with water based fluids, with the results indicating these wells were damaged during these operations. As reported in a press release dated November 27, 2002, subsequent testing by Corridor of two of these wells has demonstrated a reduction of gas flow impairment as a function of time. An independent engineering report confirms that both of these wells would have been capable of significantly greater natural gas flow rates had they been drilled without incurring formation damage. These wells are currently shut in awaiting market opportunities. Additional information regarding these wells is available on Corridor's web site http://www.corridor.ca/.
The gas devoted to the PCS Potash mill from the first two wells represents only a small fraction of the natural gas reserves and production potential of the McCully Field. Corridor is in discussions with several prospective farmin partners to undertake the next stage of drilling and development of the field, with a view to connecting the field by pipeline to the main Maritimes & Northeast trunk line passing approximately 45 kilometres to the north of McCully. Timing for the resumption of drilling at McCully will depend upon the outcome of these discussions.
On other activities, the initial processing and interpretation of new seismic acquired last December across the Old Harry prospect in the Gulf of St. Lawrence has now been completed. The data confirms the attractiveness of the prospect. Corridor has continued to receive expressions of interest from companies interested in participating in drilling Old Harry and expects to conclude a farmin agreement with a major operating company following agreement by the Quebec and federal governments permitting exploration drilling to proceed in this area.
On Prince Edward Island, Corridor is in discussions with prospective partners regarding a farmin on the Green Gables prospect located approximately 30 kilometres northwest of Charlottetown. The prospect has two wells drilled previously on the structure and is indicated to contain several hundred billion cubic feet of natural gas in place. The intention is to drill a third well on the structure this year using air as the drilling fluid to minimize formation damage incurred by water-based drilling fluids in the earlier wells.
Offshore western Cape Breton, Corridor has received conditional approval from the Canada-Nova Scotia Offshore Petroleum Board to complete an application to undertake seismic on its exploration licence EL 2368. The approval is pending the results of a study regarding the impact of seismic on snow crab and is conditional on meeting a number of stipulations prescribed by the Board, including a seasonal limit of November through February for undertaking the work.
Corridor is a junior oil and gas exploration company, headquartered in Halifax, Nova Scotia, with interests onshore in New Brunswick, Prince Edward Island and Quebec, and offshore in the Gulf of St. Lawrence.
This press release contains certain forward looking statements relating to, but not limited to, Corridor's operations, anticipated financial performance, business prospects and strategies, including expectations relating to production levels; capital expenditure programs; the quantity of natural gas reserves; projections of market prices; projections of costs; supply and demand for natural gas; expectations regarding the ability to raise capital and to continually add to reserves through exploration and development; and treatment under governmental regulatory regimes. These statements are based on current expectations that involve numerous assumptions regarding factors and risks that could cause actual results to vary materially, including, without limitation to, the following factors: risks associated with oil and gas exploration, financial risks, substantial capital requirements, bank financing, government regulation, environmental, prices, markets and marketing, dependence on key personnel, dependence on Potash Corporation of Saskatchewan, Inc., availability of drilling equipment and access, risks may not be insurable, management of growth, expiration of licenses and leases, reserves estimates, seasonality, competition, conflicts of interest, Kyoto Protocol, issuance of debt, title to properties and hedging. There is no representation by Corridor that actual results achieved will be the same in whole or in part as those set out in the forward looking information. Furthermore, the forward looking statements contained in this press release are made as of the date hereof, and Corridor undertakes no obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward looking statements, whether as a result of new information, future events or otherwise.
