TransAmerican Energy has entered into a Letter of Intent to acquire a 100% interest in 10 Utica shale oil and gas properties comprising 136,000 acres located in Quebec.
In consideration therefor, the Company has agreed to pay the vendor a $25,000 non-refundable deposit, to be held in trust pending TransAmerican's completion of due diligence. Subject to the Company being satisfied with its due diligence investigation, it will acquire a 100% interest in the property by paying the vendor $225,000 cash (inclusive of the deposit).
The Company has further agreed to grant the vendor a 2% overriding royalty consistent with those generally applicable in the oil and gas extraction/production industry, payable on commencement of commercial production revenues from the property. The Company will also pay a cash finder's fee of $11,250 in connection with the acquisition on closing of the Acquisition.
The Quebec Utica Shale
Questerre Energy Corp. reported that it believes the entire Quebec Utica shale region could hold potentially up to 20 trillion cubic feet of gas (TCF) with initial production rates of up to 12 MMCF per day with the typical decline rates for tight gas reservoirs (Globe & Mail Report on Business article published February 23, 2010). From 2006 through 2009 24 wells, both vertical and horizontal, were drilled to test the Utica. Positive gas flow test results have been reported, although none of the wells had been put on production at the end of 2009. There is no certainty that similar results will be obtained on the Lacasse Property.
The Utica shale is a black calcareous shale from 150 to 700 feet thick, and between 3.5% to 5% by weight total organic carbon. The Utica shale play focuses on an area south of the St. Lawrence River between Montreal and Quebec City. Interest has grown in the region since Denver-based Forest Oil Corp. announced a significant discovery there after testing two vertical wells. Forest Oil reported that said its Quebec assets may hold as much as four trillion cubic feet of gas reserves, and that the Utica shale has similar rock properties to the Barnett shale in Texas. Quebec has been known to have natural gas reserves, but advanced horizontal drilling techniques and higher gas prices are only now making the play potentially economically viable.
Forest Oil, which has several junior partners in the region, has drilled both vertical and horizontal wells. Talisman Energy has drilled five vertical Utica wells, and began drilling two horizontal Utica wells in late 2009 with its partner Questerre Energy, which holds under lease more than 1 million gross acres of land in the region. Among Other companies in the play are Quebec-based Gastem and Calgary-based Canbriam Energy.
Apart from interesting exploration targets on the south western section of the aforementioned area, TransAmerican believes that the Lacasse Property is in a very favorable and strategic position with lands bordering the St-Lawrence Golf and River. Islands in these waters will enable the Company to test the suspected presence of massive gas pools underwater that could encompass these islands.
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