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Corridor Pursues New Partner for Frederick Brook Shale

The Canadian subsidiary of Apache Corp. has dropped out of a joint venture (JV) with Corridor Resources because it said poor results from two natural gas test wells in New Brunswick's emerging Frederick Brook Shale did not justify spending more.

Corridor, a junior producer based in Halifax, NS, was notified by Apache Canada Ltd. that it would not commit C$100 million required to further test and appraise the shale deposit in the Moncton Basin, which is in the southeastern part of New Brunswick.

The news Wednesday, a day of generally poor economic news, sent Corridor's stock down by more than 23% to close at C$3.18/share. On Thursday the stock regained some strength and was trading at about C$3.21 (up 0.94%) near the close of the Toronto Stock Exchange.

Under a farmout and option contract negotiated with Corridor in late 2009, Apache Canada agreed to spend up to C$25 million over 18 months to evaluate the commercial potential of gas in the Frederick Brook formation, as well as light oil potential at the Caledonia oil discovery (see Daily GPI, Dec. 8, 2009).

The appraisal was scheduled to be completed by Wednesday (June 1). Apache then had the option to drill more test wells and construct a gas pipeline to Corridor's gas plant at the McCully Field near Sussex, NB.

According to Corridor, two horizontal wells, Will DeMille G-59 and Green Road B-41, did not generate "sustained shale gas production." The G-59 well was reopened in May and flowed hydraulic fracture (frack) fluid "at low rates with minor gas shows over five days," Corridor said. "When the Will DeMille G-59 well was shut in after initial testing in early December 2010, it had recovered only 4% of the total frack fluid."

An Apache spokesman said the well results that Apache "was looking for, was hoping for, we certainly didn't get them..." He said "there's potential there," but horizontal drilling methods and hydraulic fracturing (fracking) to stimulate production didn't work.

However, Corridor said it is not giving up on the play and will pursue new JV partners. It also may return to drilling vertical wells in the shale using propane as a fracking stimulant, which resulted in higher initial tests in 2009.

"Based on a consensus among third-party expert consultants and Corridor technical staff, the most significant issues identified with the G-59 and B-41 well performance relate to the design of the horizontal wells in this high-stress environment and the fracture technique," the producer said. "Corridor believes that a different well design and frack program will lead to a commercial development of the Frederick Brook Shale."

Corridor has almost 820,000 net acres in the Moncton Basin and was one of the first movers in the emerging Horton Group-Frederick Shale gas play in New Brunswick (see Daily GPI, Oct. 4, 2007).

The producer plans to drill two vertical wells in the shale formation later this year "to confirm the well productivity required to proceed with a pilot phase. Based on the results of these appraisal wells, Corridor plans a staged approach to demonstrate commercial viability that would include a pilot phase with a capacity of 40 MMcf/d, targeting gas production in late 2013."

According to Corridor, the shale gas resource "is still in its early stage. The "best estimate of gross discovered resources is 67.3 Tcf as estimated by GLJ Petroleum Consultants Ltd. in the GLJ shale resources report, effective June 1, 2009."

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