Calgary-based Paramount Resources Ltd. plans to spin off its considerable Far North exploration assets in the Mackenzie River Valley as part of a long-range plan to finance growing exploration prospects there.

Paramount, which is 60% leveraged to natural gas, has been exploring for and developing oil and gas in the northern part of Canada for 27 years. It holds about 600,000 hectares (385,000 net) in the Mackenzie River Valley, where it focuses on its Colville Lake natural gas properties. To date, Paramount has spent about C$80 million on its Colville Lake properties.

Paramount has five core producing areas: Kaybob, Grande Prairie, Southern Alberta/Southeast Saskatchewan/Montana/North Dakota, Northwest Alberta and Northeast British Columbia/Northwest Territories.

Details of the proposed plan are not finalized, but the board of directors approved in principle a proposed spin off called “Newco,” a separately traded public company. Newco will consist of the company’s Mackenzie Delta and Colville Lake oil and gas interests, which are within its Northeast BC/Northwest Territories core area. Paramount’s average production in that region for 2006 is estimated at 3.10 boe/d. Its 2005 natural gas sales volumes there averaged 23.3 MMcf/d, a 44% increase over 2004 average sales volumes of 16.2 MMcf/d.

The spin off is expected to be completed by the end of the year, and it will be initially owned by Paramount and its shareholders.

The impetus for the spin off, said Paramount, came from a recent farm-in agreement with Chevron Canada Ltd. and BP Canada Energy Co. The agreement covers exploration in the Mackenzie Delta and parts of the Northwest Territories. Under the agreement, Paramount may earn a 50% stake in the properties by drilling 11 wells and shooting 3D seismic data over a four-year period on 412,500 hectares, an area about three-quarters the size of Prince Edward Island.

The farm-in agreement “provides an outstanding window of opportunity” for the Mackenzie Delta assets, and the spin off is an “appropriate financing structure” to take advantage of it,” Paramount said. The increased development also will make Paramount a major player if the proposed Mackenzie Valley natural gas pipeline is built.

“Paramount’s entering into the Mackenzie Delta farm-in agreement demonstrates confidence in, and will provide a positive contribution to, the proposed pipeline’s success,” it said. Newco, it said, will “pursue additional interests” in the Mackenzie Delta and Mackenzie Valley and “become a major producer into the proposed Mackenzie Valley pipeline.”

Newco will operate as a separate corporation from Paramount; however, Paramount said it would provide certain services until Newco is able to obtain its own personnel. Paramount’s current Chairman and CEO Clayton H. Riddell also will be Newco’s CEO. Other management personnel will be named later, Paramount said.

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