Corridor Resources Inc.

Corridor Resources Inc.

January 24, 2008 08:00 ET

Corridor Announces $71 Million Capital Budget for 2008

HALIFAX, NOVA SCOTIA--(Marketwire - Jan. 24, 2008) - Corridor Resources Inc. (TSX:CDH) today announced its capital and operating budget for 2008 as approved by its Board of Directors. The Corporation plans a total capital expenditure of $70.9 million, primarily related to drilling and completing additional natural gas production wells in its McCully Field in southern New Brunswick. The budget plan is designed to increase natural gas production and revenues from the McCully Field while limiting expenditures to the cash currently available and net cash flow expected from projected 2008 production rates and natural gas sales revenues. Priorities for 2008 include:

(a) infill drilling, testing, completing and tying in a number of selective McCully development well locations in the Hiram Brook formation within the proven and probable area of the McCully Field,

(b) deepening the E-67 well using overbalanced drilling fluids to evaluate and test the deeper (dolomitic) section of the Frederick Brook shale and to attempt to reach and evaluate the even deeper Dawson Settlement sands,

(C) drilling and completing several additional Hiram Brook wells at locations east of the J-38 well, after the production wax problem is resolved in this well,

(d) drilling and evaluating at least one exploration well in a separate closure to the south and east of the McCully structure where Corridor's new 2-D seismic has indicated the presence of a potentially thick Hiram Brook section,

(e) evaluating the thermal maturity of several potential sites in the Elgin area in preparation for horizontally drilling, fracturing and testing the natural gas production potential of the Frederick Brook shale formation, timing to be determined,

(f) fracturing and producing gas from either the Green Gables #3 well (if it can be utilized) or the Green Gables #2 well which, if successful, could lead to more drilling and economic development of the Green Gables prospect.

2008 Capital Budget

Corridor's 2008 capital budget is designed to be affordable within the Corporation's projected fiscal capacity, including approximately $20 million of capital carried forward from Corridor's 2007 fiscal year plus approximately $50 million of expected net cash flow from McCully production during 2008. The base budget assumes that no additional funds will be utilized from other sources such as equity financings, increasing corporate debt or selling assets. The budget has been prepared based on several conservative assumptions regarding expected capital expenditures, production volumes and sales gas prices. Revenues from gas sales are based on a conservative average production forecast of 34 mmscf/day (25 mmscf/day net to Corridor), an average sales gas price of US$7.25/MMbtu at Henry Hub (NYMEX) and a US$ on par with Canadian $. The production forecast has been based on exponential decline curve projections. The US$7.25/MMbtu gas price is currently approximately $1.00 below the forward strip price for the remainder of 2008. Operating expenses are based on experience gained during the first six months of full field production.

The total 2008 base capital budget as set forth below is forecast to be $70.9 million net to Corridor's working interest. The budget projects that eight new McCully development wells and one exploration well will be drilled and cased by the end of September, 2008, at an estimated net cost to Corridor of $43 million (includes $5.5 M of net costs for well E-67 approved in 2007). Capital costs for drilling and completions do not reflect some of the cost reductions beginning to be achieved and apparent in drilling and well completion operations during recent months. The well completion budget is $18.8 million net to Corridor for fracturing and testing at McCully. Additional funds have been allocated to other activities, including $5.0 million for tying in new wells to the gathering system, $2.0 million for 3-D seismic over the east flank of the McCully structure and $2.1 million for gas plant maintenance and other corporate assets.

Budget Flexibility

Corridor has the flexibility to expand or reduce its drilling program if available funds exceed or fall short of its projections in the base budget. For example, expansion of the budget could see additional McCully development wells drilled in the fall if additional funds are available. Other contingent capital projects for 2008 (if funds are available) include $3.5 million to drill and frac a horizontal Frederick Brook shale well in the Elgin area, $2.5 million for participation in drilling and testing for oil on Anticosti Island this summer (in the event that Corridor is unable to farm out its interests on satisfactory terms), $1.5 million for stratigraphic core holes in the Sally's Brook area, $2.5 million for a site survey for a potential drilling location on the offshore Old Harry prospect and $1.0 million to undertake the next steps toward the development of a natural gas storage facility at Cassidy Lake in southern New Brunswick.

Other Activities

Corridor is continuing with operations regarding completion, testing and preparing to tie in the McCully I-67, D-66, P-76, D-67, F-58, E-38 and J-38 wells and will be providing an update on test results for these wells during the latter part of February. Corridor expects to complete the tie-in of these wells to the gathering system by the end of February.

Corridor is preparing to abandon the New Harmony exploration well on Prince Edward Island following the recent completion of testing operations. Formation salt water was recovered from the interval 3273 to 3280 meters during testing operations. This interval had been fractured during completion operations undertaken in late December, 2007. The well at New Harmony is part of a Corridor farm-in on PetroWorth Resources' Exploration Licence 03-02 announced on May 11th, 2007. At Green Gables #3, Corridor plans to attempt to re-enter and repair the damaged casing in the spring and, if successful, resume fracturing operations at that time. If fracturing operations cannot be completed at this well for mechanical reasons, Corridor will evaluate the Green Gables #2 well to perform fracturing and testing operations there.

Corridor Resources Inc. is a Halifax, Nova Scotia based company focused on exploring and developing natural gas resources in the McCully Field and surrounding areas of southern New Brunswick. The Company has completed construction of a field gathering system, a gas plant, and a pipeline lateral connecting the McCully Field to markets through the Maritimes & Northeast Pipeline (M&NP). The Company initiated natural gas production to M&NP on June 28, 2007 and has a continuous development drilling program underway to add reserves and production capacity as field development expands. Corridor also has a number of potentially high impact exploration projects planned in New Brunswick and elsewhere in eastern Canada.

Forward Looking Statements

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, 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.

Contact Information

  • Corridor Resources Inc.
    Norman W. Miller
    902-429-0209 (FAX)