Junex Signs Quebec Shale Gas Deal

Junex Inc. reported that it has entered into an agreement with a major U.S.-based independent gas producer regarding gas production capacity evaluation of certain Utica shale strata on four permit blocks (143,395 acres) located between Quebec City and Montreal and wholly owned by Junex.

The agreement provides that the partner may earn a working interest of 100% in the Becancour and Batiscan/Champlain permits, subject to a 5% gross overriding royalty interest, convertible to a 15% working interest in favor of Junex, and only in connection with Utica shale strata. This arrangement will allow Junex to maintain all rights under these permits with respect all strata above and below the Utica shale strata, including the overburden--the likes of which has produced such gas fields as Pointe-du-Lac and Trenton-Black-River, an abundant pool in New York State. In addition, all natural brine production and Becancour underground natural gas stockage projects remain under Junex's full control and unaffected by the deal, as these projects are located in strata that are deeper than the Utica shale strata.

The agreement provides for an option period during which the partner will proceed at its own cost with the coring and evaluation of Utica shale in the Becancour No.8 Well currently being drilled by Junex. Upon receipt of coring analysis by an accredited laboratory, the partner will have a period of 6 months to elect or exercise its option to spend a total of US$8 million in exploration efforts over an ensuing period of 18 months.

"This is an exciting time for Junex since we have concluded two deals this week with U.S.-based partners,” said Jean-Yves Lavoie, Junex’s president. “Today's agreement has been concluded with one of the largest independent gas producers in the United States, whose ability to develop unconventional natural gas projects is well-established. We are pleased to benefit from our partner's expertise in establishing our shale gas projects which are relatively unknown in Canada but are gaining popularity in the United States. This agreement, together with that announced earlier this week with AMQUE, U.L.C., could lead to minimum investments of US$20 million on our properties located between Quebec City and Montreal over the course of the next 3 years. We are very pleased with these two agreements which allow Junex to add value to its properties while retaining important rights with respect to very promising strata such as Trenton Black River or the overburden.”

Junex holds exploration rights on more than 4 million acres of land located in the Appalachian basin in the province of Québec. Recent major discoveries in the United States and Eastern Canada have stimulated exploration in Québec, which is located in a favorable geological setting for oil and gas discovery. Junex's strategy is to reduce exploration risks by entering into partnerships with other exploration companies. In parallel to its exploration efforts, Junex's goal is to achieve positive cash flows from its natural brine and drillings services operations. Junex also holds approximately a 12% interest in Petrolia and a 5.4% interest in Gastem.