Petrolia has become the owner of all of Hydro-Quebec's interests in the oil and gas exploration permits located on Anticosti Island. In Quebec, Anticosti Island is the place where the best reservoir characteristics have been discovered, both in terms of thickness of porous zones and of production capacity.
In return for an overriding royalty on petroleum production, Petrolia becomes the owner of Hydro-Quebec's interests over 35 exploration permits on Anticosti, comprising 1,576,794 acres (6,381 km2). In signing this agreement the Company replaces Hydro-Quebec and thereby becomes the partner of Corridor Resources (CDH TSX) in the exploration of these permits.
With this new acquisition the Company will hold in interest in 21% of all of the exploration permits issued in Quebec (3,689,009 acres). In addition to being the operator for most of these permits, Petrolia also holds a right of refusal over another 8% of the lands under permit (1,454,289 acres).
This new acquisition is strongly justified by a geologic setting that is favourable for the discovery of oil and gas, and also by the shallow depth of the petroleum targets (less than 1,500 m). Unlike the St. Lawrence Lowlands, which only exhibit a potential for the discovery of gas, the data indicate that the northern half of the Island is promising for the discovery of oil.
In fact, during the Lower Paleozoic, Anticosti Island was the easternmost segment of an old shoreline that now forms the leading edge of the Appalachians all the way to Texas. A number of world-class hydrocarbon fields have been discovered in this geologic setting, including several in hydrothermal-type reservoirs. The recent discoveries of natural gas in New York State, and one in Quebec in the St. Lawrence Lowlands, confirm the significance of this exploration environment, which extends eastward into the Anticosti Basin. The discovery of petroleum in western Newfoundland, on the Port-au-Port peninsula, unequivocally demonstrates the promise of this geologic setting in the Anticosti Basin. Only a few wells have recently been drilled on Anticosti Island to confirm this new exploration approach. These wells have demonstrated the presence of hydrothermal-type reservoirs, some of which have exceptional characteristics.
More than 850 km of modern seismic surveys and 17 wells have already been executed on the Island. Modern seismic surveying on the Island began in 1996-1997 when Corridor Resources acquired 88 km of profiles. In 1998 and 1999 Shell-Encal acquired 432 km of seismic profiles and drilled five holes. This drilling was aimed at the hydrothermal-dolomite reservoir in the Trenton-Black River and Romaine Formations. The last seismic-acquisition campaign dates back to 2003, when Hydro-Quebec Oil & Gas acquired 375 km of seismic profiling. In 2005 Hydro-Quebec and Corridor Resources drilled three holes, two of which were repetitions of holes drilled by Shell-Encal. The oldest wells were drilled on poorly-defined targets: only eight wells have been sited on the basis of modern seismic data, and several of these have revealed signs of hydrocarbons.
This time the Company has a strong advantage, since a joint operating agreement (JOA) is already in place and will enable exploration to begin as soon as convenient. With its current partners, Petrolia has the financial and technical resources to move ahead with its exploration work as quickly as it wishes. The Company intends to begin by interpreting and reprocessing some of the old seismic data in order to identify the next targets for drilling.
Petrolia is the operator on the Island for 23 exploration permits where it holds a 50% net interest. It also holds a 50% net interest in six permits where Corridor Resources is the operator. In addition, the Company has a further 25% net share in six other permits operated by Corridor Resources.
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