MGM Energy Corp.

MGM Energy Corp.

December 15, 2010 13:38 ET

MGM Energy Corp. Announces Sale of 20% of Umiak SDL 131 for $30 Million to KOGAS Canada Ltd.

CALGARY, ALBERTA--(Marketwire - Dec. 15, 2010) -


MGM Energy Corp. ("MGM Energy" or the "Company") (TSX:MGX) announced today that it has entered into an agreement with KOGAS Canada Ltd. (a wholly owned subsidiary of Korea Gas Corporation) for the sale of 20% of Umiak SDL 131 for $30 million. The sale price will be paid $20 million on closing and $10 million upon the decision to construct the Mackenzie Valley Pipeline or any other project to commercialize production from SDL 131. The sale is subject to normal closing conditions, including Korea Gas Corporation board approval and any necessary regulatory approvals. The board of directors of MGM Energy has approved the transaction. The transaction is expected to close by February 2011 and is subject to a right of first refusal.

As disclosed in MGM Energy's 2009 Annual Information Form, MGM Energy's net mean contingent plus prospective resource estimate for its 60% interest in Umiak SDL 131 is 328 bcf. The sale of 20% of SDL 131 represents a sale of mean contingent plus prospective resources of 109 bcf, representing approximately 12% of MGM Energy's current net mean contingent plus prospective resource base of 887 bcf. Based on currently expected activity levels, proceeds from the sale will be sufficient to fund MGM Energy's capital and operating expenditures through into 2012.

MGM Energy also announced that, subject to receiving necessary regulatory approvals, it will be proceeding with the drilling of an oil prospect in the Great Bear River area. The well is expected to spud early February 2011 with a total projected cost of approximately $8.0 million gross, or $4.0 million net to MGM Energy.

Lastly, the National Energy Board of Canada has communicated that it will issue its Reasons for Decision respecting the Mackenzie Gas Project on Thursday 16 December 2010 at 2:30 Mountain Standard Time.

"MGM Energy is very excited to have KOGAS Canada as a partner in Umiak SDL 131 and we look forward to a long relationship. This transaction is an expression of confidence in the value of natural gas resources in Northern Canada, the quality of the Umiak SDL and the prospects for the Mackenzie Valley Pipeline" said Henry Sykes, President of MGM Energy. "We also look forward to drilling the Great Bear River well. Although the well is high risk, the potential is great and any oil discovered can be transported on the existing Norman Wells pipeline"

MGM Energy is a Calgary-based Canadian oil and gas exploration and development company with operations in Northern Canada. MGM Energy's common shares are listed on Toronto Stock Exchange under the symbol "MGX".

Certain statements or information included in this press release constitute forward-looking statements under applicable securities legislation. Forward-looking statements or information in this press release include but are not limited to business strategy and objectives, exploration and drilling plans and the timing thereof, as well as the anticipated timing for seeking regulatory approvals. Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. Although MGM Energy believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because MGM Energy can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by MGM Energy and described in the forward-looking statements or information. The forward-looking statements or information contained in this document are made as of the date hereof and MGM Energy undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Contingent and Prospective Resource Estimates: In this press release, MGM Energy has disclosed estimated volumes of "contingent resource" and "prospective resource". There is no certainty that it will be commercially viable to produce any portion of the contingent resources. The estimate has not been adjusted for risk based on the chance of development. The prospective resources are in undiscovered accumulations that have not been adjusted for risk based on the chance of discovery or the chance of development. There is no certainty that any portion of the prospective resources will be discovered or, if discovered, that it will be commercially viable to produce any portion of the resources. There is no certainty that a pipeline will be built to transport the hydrocarbons from these discoveries. The Company has provided an aggregation of the Company's mean contingent resources and prospective resources. It is statistically appropriate to sum resources at the mean estimate, whereas it provides an inaccurate estimate if the low, best, or high estimates of resources are summed. The aggregated estimate of resources (unrisked) include prospective resources that have not been adjusted for risk based on the chance of discovery or the chance of development and contingent resources that have not been adjusted for risk based on the chance of development. Additional information regarding the resource estimates, including definitions and risk factors, can be found in MGM Energy's 2009 Annual Information Form.

Contact Information

  • MGM Energy Corp.
    H. W. (Henry) Sykes
    (403) 781-7800
    (403) 781-7801 (FAX)
    MGM Energy Corp.
    Rick Miller
    Chief Financial Officer
    (403) 781-7800
    (403) 781-7801 (FAX)