Ontex releases Houghton gas reserve estimate
2003-06-20 17:37 ET - News Release
Mr. Gary Conn of Ontex reports
ONTEX RESOURCES LIMITED: PIFHER AND ECHO ENERGY RECEIVE ESTIMATIONS ON GAS RESERVES
Pifher Resources and Echo Energy Inc., a private corporation, have each reported on the gas reserve estimations in respect of lands in Southwestern Ontario subject to gas leases held respectively by them. The reserve estimations were prepared by Robert B. Hutt, BSc, Pifher and Echo's consulting geologist, and reviewed by Jim McIntosh Petroleum Engineering Ltd., Pifher and Echo's consulting engineer.
According to the Pifher reserve estimation the estimated proven in-place gas reserves on Pifher's leased acreage in Houghton township in Norfolk county, Ontario, are 7.95 billion cubic feet and the estimated probable in-place reserves are 19.37 billion cubic feet, for a total estimated in-place gas reserve of 27.32 billion cubic feet, as detailed below.
Additionally, by letter from Echo Energy Inc. addressed to its shareholders dated June 19, 2003, Ontex has received a summary of a reserve estimation of gas reserves on lands subject to gas leases held by Echo in Bayham township, Elgin county, Ontario. According to the Echo reserve estimation, the proven in-place gas reserves of Echo's leased acreage in Bayham township are estimated at 28.85 billion cubic feet while probable in-place reserves have been estimated at 53.87 billion cubic feet for a total of 82.72 billion cubic feet of in-place gas, as further detailed below.
The Pifher reserve estimation states that:
(i) Pifher has completed drilling of 15 wells on its leases, all of which are indicated gas producers, many of which have received fracture treatments with encouraging results, a few are planned to be produced without fracture treatment at present;
(ii) proven reserves for the drilled 2,587 acres average 2.99 million cubic feet per acre and total 7.95 billion cubic feet;
(iii) probable reserves for the remaining undrilled 7,611 acres average 2.54 million cubic feet per acre and total 19.37 billion cubic feet; and
(iv) total proven and probable gas reserves for Pifher's leased acreage in Houghton township are 27.32 billion cubic feet.
The Echo reserve estimation states that:
(v) Echo Energy has completed drilling of 33 wells on its leases, all of which are indicated gas producers, most have received fracture treatments with encouraging results, a few are planned to be produced without fracture treatment at present and two have had only preliminary results;
(vi) proven reserves for the drilled 9,146 acres average 2.93 million cubic feet per acre and total 28.85 billion cubic feet;
(vii) probable reserves for the remaining undrilled 19,300 acres average 2.79 million cubic feet per acre and total 53.87 billion cubic feet; and
(viii) total proven and probable gas reserves for Echo's leased acreage in Bayham township are 82.72 billion cubic feet.
Pifher owns 1.73 million common shares of Echo representing approximately 20.6 per cent of the outstanding shares of Echo. Ontex owns approximately 18.8 per cent of the outstanding shares of Pifher and approximately 10.3 per cent of the outstanding shares of Echo. Pifher and Echo entered into a letter of intent in February, 2003, pursuant to which the parties propose to merge, subject to conditions which include obtaining required regulatory and shareholder approvals and receiving formal valuations. If the merger is completed, the combined entity would have a gas reserve estimation in excess of 110 billion cubic feet.
All leases held by Echo and Pifher are subject to royalties in favour of the landowners as percentages of the net revenue from all gas and associated hydrocarbons produced from each well drilled on the lands under lease.
In addition to royalties to the landowners, Ontex holds a gross overriding royalty on gas leases comprising 2,006 acres, which leases were purchased by Echo from Southern Ontario Natural Gas Limited in August, 2000. Echo has since drilled eight wells on this acreage. The royalty entitlement, which Ontex purchased from Southern in January, 2002, is 5 per cent of the production on the lands subject to the leases, increasing to 10 per cent on the earlier of the date at which Echo has recovered all capital costs relating to the drilling on and development of the land affected by the said leases and Aug. 23, 2005.
On a separate matter, Pifher reported that it had received a letter dated June 19, 2003, from Echo Power Generation Inc. advising that EPG has entered into a memorandum of understanding with Ontario Power Generation. Under the MOU, EPG and OPG will work together to do an assessment of the wind resource on lands located on the north shore of Lake Erie in Elgin county, which EPG has secured by licence and easement option agreements in Bayham and Houghton townships. The first phase of the agreement is to erect an anemometer on a site selected by OPG. During the next phase the companies will work co-operatively to conduct wind measurements and then develop a feasibility study on the lands referenced in the MOU. Pifher and Echo Energy each owns a 25-per-cent equity interest in EPG. |
