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MGM Energy Completes Ops at Canol Well

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MGM Energy Corp. announced early results from its East MacKay I-78 well drilled this winter to test the Canol shale formation on MGM Energy's EL 466B in the Central Mackenzie Valley.

The East MacKay I-78 well, a vertical well, spud January 27, 2013 and reached target depth of 6,565 feet (2,001 meters) Feb. 15. Following logging, casing and the running of the completion string, the drilling rig was released Feb. 25. Drilling operations proceeded without incident and all formations were present as expected. In particular, the primary target, the Canol shale, was found between 5,968 feet and 6,296 feet (1,819 meters and 1,919 meters), and the Bluefish formation, the secondary target, was found between 6,352 and 6,421 feet (1,936 meters and 1,957 meters). Cores were taken within the Canol and Bluefish formations, as well as the upper Hume formation, immediately below the Bluefish. A full suite of electric logs was run once drilling was completed.

Testing operations on the Bluefish formation began on March 2, 2013. One zone of the Bluefish formation was fractured, using a small 20 tonne frac energized with nitrogen. The frac was successful, with emplacement of the sand. After flowing back approximately 30 percent of the frac fluid, the well ceased flowing due to lack of formation pressure. Rather than undertaking operations to resume the flow, and given the seasonal constraints of operating in the Central Mackenzie Valley, the decision was made to discontinue testing of this secondary zone to ensure sufficient time to test the primary Canol target.

Testing operations on the Canol formation began March 4. The Canol formation was fracked in three stages, with one stage having two perforation zones. Each of these fracs was again small, ranging from 23 tonnes to 35 tonnes, using a total of 2,450 barrels of frac fluid. All fracs were successful and all were energized with nitrogen. Approximately 70 percent of the frac fluid was recovered in the first five days after fracking. During that time, the well continued to clean up. Over the four day period of March 10-14, the well returned approximately 140 barrels of fluid consisting of a mixture of frac fluid, and formation hydrocarbons, the latter consisting of light, sweet, crude oil and natural gas. Throughout this period, nitrogen was used to assist in lifting fluids from the well. Because of seasonal constraints on activity, well testing operations in the Canol formation were concluded March 15 and equipment has since been demobilized. In order to obtain pressure data, gauges have been left in the hole, and are expected to be retrieved in the summer/fall of 2013.

MGM Energy also drilled, sampled and monitored three water wells in the area immediately adjacent to the I-78 well. Samples of water were taken before, during and after the fracs. The results of this monitoring are ongoing and, along with water samples, are being shared with regulators and governments.

Well operations were conducted in a remote area and in harsh weather conditions. Notwithstanding this, MGM Energy reports that no material environmental or safety incidents occurred at any stage of the project.

"We are very excited with the early results of the well," said Henry Sykes, President of MGM Energy Corp. "The results are quite consistent with our expectations. While it isn't possible to establish ultimate flow rates with a vertical well and the small fracs undertaken, at this point we've identified the presence of hydrocarbons in the Canol shale underlying our lands. One or more horizontal wells will need to be drilled to establish the best method of completing these wells and the flow parameters and, ultimately, to determine a type curve for these wells. In the near term, a great deal of work and analysis remains to be done with respect to information obtained and cores taken during the project, and that work will take some months to complete. We look forward to providing periodic updates as material information becomes available. We also look forward to working with regulators and local communities to ensure that the benefits of responsible development of the Canol shale are well understood and quantified. And finally, we wish to gratefully acknowledge the support we received from the local communities throughout our operations."

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