Corridor Updates Activities at McCully Field

Corridor Resources reports that testing operations have now been completed at the McCully G-67 and C-67 well locations. The rig will now be positioned to directionally drill the McCully E-67 well to intercept the Hiram Brook reservoir at a location several hundred meters west of the C-67 and G-67 wells.

The McCully G-67 well has been drilled to a total measured depth of 2560 meters, and has encountered the Hiram Brook "A" sand in a fault zone. As a result, the well penetrated only eight net meters of reservoir in the "A" sand before entering into the underlying Fredericks Brook (shale) formation. The well also encountered eight meters of net pay in the "B" sand as well as a stray sand in the "B" shale that has flowed small volumes of oil into the wellbore. Corridor is evaluating two options for completing this well. The first option is to case the open hole section of the well in preparation for a frac stimulation treatment. The second option is to sidetrack the well to encounter a full section of the "A" sand in the upthrown side of the fault at a location approximately 100 meters south of the initial wellbore and case the open hole section. Corridor expects to make a decision regarding these options following completion of drilling operations at the E-67 well.

C-67 Test Results and Plans

The McCully C-67 well has been re-tested following suspension of drilling operations at the G-67 well. Corridor previously announced that the well had flowed at an initial rate of 2 million cubic feet per day for a six-hour initial flow period, followed by a second flow period at a reduced rate. APA Petroleum Engineering subsequently analyzed the results of the test and concluded that the initial higher rate showed indications of turbulent flow which negatively impacts production rates. APA believes that this problem can be overcome with a successful frac stimulation treatment. Following the initial tests, approximately 22 barrels of methanol were injected into the well to facilitate the removal of condensed water observed in the annular zone surrounding the wellbore. A series of tests have been undertaken to attempt to incrementally remove the water/methanol mixture from the reservoirs. These tests have involved shutting in the well to achieve a pressure build-up followed by a blow-down of the well to remove liquids and a subsequent flow test. A cumulative 4.5 cubic meters (29 barrels) of liquids (methanol and water) have so far been recovered from the well, and the flow performance has improved with each cycle. At latest report, the well flowed gas at a sustained rate of 820,000 cubic feet per day at a sustained flowing tubing head pressure of 9,000 kpa (1,300 psi). Continued cycling of the well will, Corridor believes, eventually restore the well to its full undamaged (but unstimulated) productive potential, which could approach or even exceed the 2 million cubic feet per day initially recorded. However, the time to achieve such a result may be several weeks or even months. Therefore, following completion of drilling operations at the E-67 well, Corridor plans to case the open hole section of the C-67 well in preparation for a multi-zone frac stimulation treatment in September.

G-67 Test Results and Plans

Initial efforts to cycle the G-67 well in a manner similar to C-67 have met with only partial success, partly due to the loss of pay section in the fault zone and indications that the well is continuing to show small volumes of liquids (oil) accumulating in the open-hole part of the wellbore. The well flowed at a sustained rate of 220,000 cubic feet per day at a sustained wellhead pressure of 1820 kpa (260 psi). The test results indicate that significant near wellbore formation damage was incurred during drilling operations. Fluid clean-up operations at this well would be expected to take an extended period of time and are impeded by the fact that the well slowly continues to make fluid. Corridor plans to case the open hole section of the well in preparation for a multi-zone frac operation in the fall.

McCully Frac Stimulation Program

APA Petroleum Engineering has strongly recommended to Corridor that existing and future wells at McCully should be subjected to a carefully planned frac stimulation treatments in order to achieve their full production potential. For example, the "A" sand in the C-67 well exhibits reservoir parameters and "blocky" thickness that make it an exceptionally attractive candidate for a frac treatment. Corridor envisages that most McCully wells should be subjected to comprehensive frac treatments in order to realize the full economic potential of the field. APA has projected that, following successful frac treatments, these wells will produce at rates 3 to 6 times the undamaged and unfraced rate. Accordingly, Corridor is commencing immediately to engage a team of experts to design a multi-well frac stimulation program that will include the completion of the McCully G-67 and C-67 wells in addition to the stimulation of several other gas-bearing wells in the field that are currently shut in awaiting a connection to market. Selection of the appropriate frac equipment and completion fluids will be critical to the success of the planned program. Corridor plans to mobilize a frac team and equipment to commence frac treatment operations at McCully in September. By that time, it is anticipated that two new wells will have have been drilled and cased in preparation for the planned frac campaign. Corridor expects the resultant production capacity will be sufficient to justify a pipeline connection to Maritimes & Northeast, and that gas could be flowing to the pipeline by the end of 2006 or early 2007.

The McCully field, located near Sussex in south central New Brunswick, is estimated to contain in excess of one trillion cubic feet of gas-in-place in the Hiram Brook formation. Two wells have been on production for two years supplying natural gas at an average rate of two million cubic feet per day to a limited local market. The G-67 well is the tenth well to be drilled in the McCully field and is part of the build-up of reserves and production capacity to supply significant volumes of natural gas to markets in New Brunswick and New England. Corridor intends to connect the McCully field by a 30 mile pipeline to the Maritimes & Northeast pipeline system. The C-67, G-67 and planned E-67 wells are located within an area that was independently appraised by APA in December, 2004, and that represents less than 20% of the total field area. The APA reserves report assigned proven gas-in-place of 217 billion cubic feet (bcf) and proven and probable recoverable reserves of 119 bcf (79 bcf net to Corridor's interest) to the area assessed.

To date, none of the existing McCully wells have been drilled to a depth sufficient to penetrate and evaluate the underlying Dawson Settlement formation expected to be present across the McCully field area. It has been estimated that this deeper horizon may contain volumes of natural gas significantly greater than the overlying Hiram Brook formation currently being evaluated. To date, wells are being drilled into the Hiram Brook formation, consistent with our focus to establish production for the pipeline connection to Maritimes & Northeast. Corridor intends that a future vertically drilled well will test the deeper Dawson Settlement formation at an estimated additional (incremental) cost of $2.5 million.