New Brunswick

Shale Gas Exploration and Potential Development

Corridor is in the early stages of assessing the commercial potential for shale gas development in the Sussex and Elgin sub-basins. Several McCully wells, including F-58 and E-67b, along with the South Branch G-36 and Green Road G-41 wells have been drilled to varying depths within the Frederick Brook shale to evaluate its potential as a future source of shale gas production. A significant amount of technical information has been gathered for the shale sections penetrated to date in these wells, and is broadly summarized as follows:

Parameters	Frederick Brook Shale
Depth to Frederick Brook Gross Thickness Reservoir Pressure Pressure Gradient Temperature Total Porosity Gas-Filled Porosity Water Saturation Pressure Decay Permeability Main Kerogen Types Maturity Total Organic Carbon Headspace Gas Analysis - C1 Initial Free Gas-in-Place (E-67B Well)	2,000-4,000 m    (6,000-12,500 ft) 1,000 m  (3600 ft) 20,000-40,000 kPa   (3,000-6,000 psi) 10.2-12.4 kPa/m (0.45-0.55 psi/ft) 25-80 0C   80-170 (0F) 1.5-7.5 (%) 0.5-6.0 (%) 0.5-72 (%) 65-311 (nD) Type I, II, III 1.0-2.9 (Ro %) 0.6-2.2 (wt%) 480-116,000 (ppm) Up to 17.9E9 SCM (625 bcf/section)

A small nine tonne frac completed in a dolomitic shale section of the Frederick Brook formation in the McCully F-58 well continues to produce natural gas into the McCully gas gathering system at a steady rate of approximately 150,000 cubic feet per day since March, 2008. This is a very promising early indication of shale gas potential that may be developable with the application of large scale multiple fracture treatments over an extended wellbore length.

In November 2008, Corridor drilled a vertical well at the Green Road G-41 location designed to evaluate the shale gas potential of the Frederick Brook formation on the eastern flank of the Elgin sub-basin. The well encountered 17 meters of indicated net hydrocarbon pay in Hiram Brook sands between the depths of 1380 to 1615 meters. There are no plans to complete or flow test these intervals until the evaluation of the frac stimulation and flow testing operations planned for the deeper Frederick Brook formation are completed in the future. Approximately 785 meters of the Frederick Brook formation were penetrated in the well prior to reaching total depth of 2422 meters. A massive, friable, predominantly siltstone interval within the Frederick Brook formation was penetrated between the depths of 1753 and 1906 meters containing several thin (11 net meters) beds of permeable sandstone. Strong shows of natural gas were detected while drilling through the siltstone, requiring the mud weight to be increased to contain formation pressures more than 20 percent higher than a normal hydrostatic gradient. Fracture stimulation treatments planned for this and other prospective intervals in 2009/2010 are aimed at determining the natural gas production potential of this promising well.

Calgary based consultants GLJ have estimated a 59.1 trillion cubic feet (tcf) (net to Corridor) gas-in-place resource in the Frederick Brook formation in the Sussex and Elgin sub-basins. If only 10 percent of these resources are commercially recoverable, it provides a significant target for these shale gas exploration, appraisal and completion operations. Corridor has a 100% working interest in two exploration leases covering 118,146 gross acres in the Elgin sub-basin. The scale of the effort to appraise and develop these resources will be great, and one option for Corridor is to engage an experienced oil industry partner to participate in the financing and development of these resources. Confidentiality and Area of Exclusion Agreements have been signed with a number of potential industry partners who are proceeding to review and evaluate the information that Corridor has provided from wells drilled to date into the Frederick Brook shale. Corridor anticipates that it will have a partner in place to participate in this opportunity as natural gas markets recover from the current over-supply situation.

Map showing the distribution of the Frederick Brook shales over Corridor lands.

Caledonia Field: South Branch G-36 Oil Discovery

In the fall of 2008, Corridor drilled the South Branch G-36 well to explore for natural gas on a separate geological structure located approximately three kilometres south of the McCully Field. The well penetrated a thick sequence of interbedded sands and shales in the Hiram Brook formation before drilling nearly 500 meters into the underlying Frederick Brook shale. Wireline logs indicated a total of 80 net meters of hydrocarbon bearing sands within the Hiram Brook formation, but were inconclusive regarding whether or not the hydrocarbons encountered were gas or oil. Two sandstone intervals in the Hiram Brook formation were frac’ed and flow tested, with the first interval yielding only a small show of oil and the second interval resulting in a natural flow of light oil (45 degrees API) and no formation water at a measured rate of 59 barrels per day at the end of a 10 day flow test period. A longer term test utilizing a pump to reduce down-hole pressure and increase the rate of production was made to evaluate the economic potential of the well.  The production rate declined to 5 barrels a day and initial tests indicate that paraffin waxes were precipitating out of the oil during production.  A number of tests are underway to confirm the nature of these precipitates and the possible cause(s) of their precipitation.

The Frederick Brook shale had strong showings of natural gas during drilling operations, and wireline logs and core data indicated a high potential for shale gas development in this part of the basin. No attempt to complete the shale interval was made in this well.

The South Branch oil discovery was followed up later in the fall with a 37 square kilometer 3-D seismic survey surrounding the well to outline the possible extent of the oil potential in the area and to assist in locating follow-up appraisal wells. The new oil field has been called “Caledonia”, as the discovery resides at relatively shallow depths (1,500 meters) in sands flanking the Caledonia highlands. The discovery of oil opens up a new objective for Corridor as it is still in the very early stages of determining the longer term potential for discovering, developing and producing hydrocarbons from this highly prospective Carboniferous age basin.

Map showing top of the Fredericks Brook Shale for the McCully Field and adjacent areas in the Sussex/Elgin sub-basins.

Exploration drilling to date has barely scratched the surface regarding the ultimate potential for discovering oil and natural gas reserves in the Sussex/Elgin sub-basins. The map shown above is intended to illustrate the likelihood of a hydrocarbon discovery being predominantly either oil or natural gas when exploring the Sussex/Elgin sub-basins. It presents depth contours to the base of the Hiram Brook formation (or top of the Frederick Brook shale). Thermal maturity data and exploration results to date in this region suggest that for depths shallower than roughly 1500 meters most hydrocarbons present in the formation are likely to be in the form of oil. Hydrocarbons found between depth ranges from 1500 to 2000 meters are more likely to be transitional between oil, condensate and natural gas. Hydrocarbons encountered at depths greater than roughly 2000 meters are likely to be in the form of relatively liquid free natural gas. The greenish colored regions of the map represent areas where the sands of the Hiram Brook formation (if present) are found at depths generally less than 1500 to 2000 meters and where, if hydrocarbons are discovered, they are likely to be oil. The reddish/orange colored regions of the map represent areas where hydrocarbons discovered in either sands of the Hiram Brook formation or in shale and siltstones of the Frederick Brook formation are likely to be in the form of natural gas.

The above map indicates the entire southern rim of the Sussex sub-basin may be prospective for oil. Similarly, the southeastern and northeastern rims of the Elgin sub-basin are also indicated to be very prospective for oil. Many more exploration wells will need to be drilled over the next number of years to fully explore and assess the ultimate potential for oil in these areas. The sands of the McCully Field are generally found at depths between 2000 and 3000 meters and have been found to be gas bearing, but with minor amounts of condensate associated with the gas in the shallowest reservoirs in the field. For shales of the Frederick Brook formation to be potentially gas productive they need to contain predominantly natural gas and little or no oil. Generally the greater depth and thickness of the Frederick Brook shale suggest that it can be explored and potentially developed for shale gas over most of the map area.

Havelock Area

Corridor holds a 100% working interest in an exploration lease covering 44,354 acres located to the north of the McCully Field where Corridor is planning to drill a core hole this year on the Sally’s Brook Prospect to evaluate the strata in this sparsely explored part of the Cocagne basin.

 

Millstream Area

Corridor and Windsor Energy each hold a 50% working interest in three exploration licences located to the west of the McCully Field, covering an area of 106,740 gross acres (53,370 net acres). No exploration activities are planned for 2009 on these licences.