Calgary-based Triangle Petroleum Corp., which has focused its exploration efforts on a frontier natural gas shale basin in Nova Scotia, said Thursday it obtained a 10-year production lease in the region to continue drilling efforts.
In December Triangle received an approval in principal for the agreement from the Nova Scotia government to lease the Windsor Block, where drilling efforts are under way. Under terms of the new agreement, Triangle will lease 474,625 acres gross (270,000 net), an area that covers substantially all of the land it leased previously.
Triangle was given the leasing rights to both conventional gas and oil in the block, including prospective shale gas in both the Windsor and Horton plays. Last year Triangle's log analysis of two wells in the Windsor Basin yielded an estimated 89-109 Bcf of original gas in place per section from the Horton Bluff formation (see Daily GPI, Jan. 31, 2008).
"This lease, with its new 10-year tenure, eliminates a critical uncertainty in our ability to continue our efforts to identify signposts towards commercial production in the Windsor Block," said President Howard Anderson. "To date, Triangle and its partners have invested approximately C$32 million in seismic, drilling, completions and other technical work in the Windsor Block."
Triangle also continues to look for "one or more joint venture partners to join us in moving the project forward," said Anderson.
To retain its rights to the land block Triangle agreed to drill seven wells in the Windsor Block before April 15, 2014. These wells are to be distributed across the land block to fully evaluate both conventional and shale resources. Areas of the land block not drilled or adequately evaluated after the fifth year are subject to surrender, Triangle said.
Current gas and oil royalty rates are set at 10% in Nova Scotia. Tenure on some of the block may be eligible for renewal after the first 10 years, based on whether commercial production is established or whether drilling and evaluation criteria is satisfied, said Triangle.
In 2007 Canaccord Adams energy analyst Irene Haas said the gas shale plays in New Brunswick and Nova Scotia "could be ahead of the pack" in terms of new shale field potential in North America (see Daily GPI, Oct. 4, 2007). She wrote then that Triangle was the first mover in the Scotian shale play, after having "firsthand experience with the Barnett Shale and the Fayetteville Shale..." and its wells to date "hint" at a potentially gas-prone shale in the Kennetcook Basin.
In a conference call with investors earlier this month, Anderson admitted that Triangle still was trying to establish a commercially viable flow from its Windsor Basin prospects.
"We have not been able to demonstrate commercial-level gas flow rates from the three wells completed to date," Anderson said. "Our project continues to provide us with both positive results and unique challenges."
Since July 2008 the four-year-old company, which explores through subsidiary Elmsworth Energy Corp., has drilled three wells in the frontier region at a cost of around C$15 million (C$3.1 million net). Most of Triangle's exploration is focused on the Kennetcook area.
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