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PERSPECTIVES: GEORGE LANGDON // AMHERST WIND FARM POWERS UP

Eastern Canada’s Energy News

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Forent Energy looks west to help fund Alton Block

$4.95 August 2012 30.2

PERSPECTIVES
INDUSTRY INTERVIEW
BY SUZANNE RENT
In each issue, Earth Resources interviews a leader in Atlantic Canada’s energy industry. For this issue, we spoke with George Langdon, president of Shoal Point Energy, which is exploring the Green Point Shale in Western Newfoundland.

Q: WHAT ABOUT WESTERN NEWFOUNDLAND WAS ATTRACTIVE TO THE COMPANY? A: People on our team have been familiar with the favourable geology for quite some time, having been educated in the province. I got back involved in the early ’90s with small exploration companies when exploration was done by major oil companies for conventional targets. We became aware of the unconventional potential of the geology about four or five years ago when we drilled another well, and we realized it had similar potential to the big shale basins that are being developed in the U.S. It’s pretty much equivalent to the Utica (shale), it’s the same rocks, more or less. Q: IS THERE ANYTHING UNIQUE ABOUT THIS PLAY? A: The target Green Point Formation is very thick. Again lies within a unit, the Humber Arm Allochthon, where the original thickness of the sedimentary package was thickened several times by stacking, or what we call imbrication. We can see it in the onshore geology and offshore from seismic data in western Newfoundland. And when we drill our latest data shows us the great thickness of the Green Point. It’s probably related to this structural thickening. That’s something that I haven’t personally seen to this extent anywhere else in a shale or a resource play. I think this is making it very uniquely attractive to us. Great thickness gives you the possibility of very large volumes of oil in place. Q: IT’S AN OIL IN SHALE PLAY AS OPPOSED TO A GAS IN SHALE PLAY? A: Yes, our data indicated it contains mainly oil, with associated gas. The evolution in America has gone from gas-in-shale plays, which have become so voluminous they have driven down the price of gas in America, to liquids plays or oil plays, which are more valuable right now because the price of oil is relatively higher. Q: IS STIMULATION REQUIRED TO GET AT THE OIL? A: Yes, we ultimately think stimulation will be required, like all the other liquid plays, although we do see some natural permeability. There are similar plays, for example, in Western Canada that are analogs and which flow without stimulation, but if you stimulate them you potentially get a lot of oil out. We understand that stimulation will be allowed under the current regulations so we are planning our exploration program to include stimulation. Q: WHAT HAS BEEN THE COMMUNITY’S RESPONSE TO THE COMPANY’S PRESENCE IN WESTERN NEWFOUNDLAND? A: Nothing but positive so far. With regard to our next round of operations, due to start late this year, we haven’t done all of the advance preparation of community meetings and so on, but we plan to do all that. With regards to what we’ve done in the past—we’ve drilled two wells at Shoal Point—it’s been absolutely no problem at all. We’ve worked carefully within the community and I think the land surface impact has been minimal. We intend to be extremely open and diligent in telling people what we are doing and how we are conducting operations in an extremely positive manner.
Photo: Contributed

George Langdon, President, Shoal Point Energy Ltd.

Q: WHAT IS THE TIMELINE FOR THE PROJECT? A: Right now there are several key timelines for this year. One is to finish the testing program on the current well, the 3K39 well at Shoal Point. We are now applying for regulatory approval to frack some time later this year. We have two other new wells planned on our adjoining properties, which could start late this year or early in the spring after the harshest part of the winter is over. So, over the next nine to 12 months, we expect to complete the evaluation of one well and drill two new wells, and then the stimulation of all three wells. Q: NOW THERE ARE A NUMBER OF COMPANIES IN WESTERN NEWFOUNDLAND ALL LOOKING FOR OIL AND GAS. HOW DO YOU DIFFER FROM THOSE COMPANIES? A: I think we differ because for the last several years now we’ve focused entirely on the Green Point shale. We’ve made certain commercial arrangements, such as farm-ins and so on and in some cases taken only shallow rights. We focus entirely on the Green Point shale. At this point that separates us from the other companies. Q: TECHNICALLY IT’S AN OFFSHORE PLAY, BUT IT CAN BE ACCESSED FROM THE LAND. THAT MUST MAKE A DIFFERENCE IN TERMS OF COSTS AND RISK. A: I can’t say up to now that we’ve drilled any cheap wells. They are very expensive. That has to do with us being the first in this basin, the rocks are difficult to drill, the borehole tends to fall apart if [we] leave it open for a while. There are drilling issues like this that we are getting a handle on and these costs, we are confident, will come down rapidly as we continue to drill these wells. But yes, over time there should be tremendous cost savings from drilling from the shoreline because there is no difference than drilling under a lake or simply deviated boreholes. The rocks don’t know the difference. As long as we’re not drilling extremely difficult horizontal wells, which we don’t plan [on doing], the drilling should be cost contained and very, very safe from an environmental viewpoint.

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Green Point

Shoal Point 3K-39

EIA

Parson’s Pond

Shales Flowing Oil
Trout River

St. Pauls Sally’s Cove

Chimney Cove

Little Port

Shoal Point 3K-39

Possible Drilling Locations are Underlined
SHOAL POINT ENERGY LAND POSITION Properties can be drilled from the shore into the shallow water, Western Newfoundland.

Q: SHOAL POINT OWNS THE LARGEST PORTION OF LANDS IN WESTERN NEWFOUNDLAND NOW? A: Yes, I believe we do by sheer acreage. We’re up to about gross interest in 720,000 acres (291,374 hectares). Our net interest is over 90 per cent of that. I believe it’s the largest land holding.

Properties can be drilled from the shore into the shallow water, Western Newfoundland

are quite happy to run with what we have. Before you have your land package, you want to be ahead of the curve. But now that we have it, we’ve been really open in divulging all the information we have. I think the time has come to get the message out to shareholders on a large scale and to potential buyers and potential joint venture partners. You’re going to see us doing a lot more of that.

Q: IS THERE MORE RISK INVOLVED WHEN YOU TAKE ON BIGGER PROJECTS LIKE THAT? A: Apart from the geological risk, which we feel has been reduced by our recent work, the major risk is fiscal and lies in being able to properly fund your work projects through stock sales or joint ventures until commerciality is reached. But the large scope gives you a huge opportunity if someone comes along and wants to do business with you. Q: DO YOU FEEL YOU HAVE A COMPETITIVE LAND POSITION? A: We’ve tied up more than enough land for us to work with. There are other land options coming up that we may be interested in but we

Q: WHAT DO YOU THINK THE FUTURE IS FOR WESTERN NEWFOUNDLAND AND OIL AND GAS? A: I think if we can show proof of concept with our continued testing of the wells, and establish that oil could be produced commercially, the future looks very bright because of the sheer volume of the play, and the potential resources in place, and hence, potential reserves that might be recoverable. With further confirmation over the next year or so I believe we would be on the cusp of a major industry. E

EARTH-RESOURCES.CA • JULY/AUGUST 2012

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