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The Chronicle Herald on TPLM

May 22nd, 2008 · No Comments

We just copied this from a message board, since you need a subscription (we just checked, alas), we cannot vouch for it’s authenticity, but we think it’s unlikely, considering the content, that someone has doctered the article. Here it is.

Shares in Triangle Petroleum Corp. were up 52 per cent Monday on the U.S. markets after the firm reported a positive independent assessment for its shale gas development in Hants County.

The Calgary company made a significant shale gas discovery late last year after drilling two deep wells on the Horton Bluff shale in the Windsor block in Kennetcook, about 70 kilometres north of Halifax.

Petroleum consultants Ryder Scott Co. of Calgary completed an assessment on the resource potential of the property and found the shale gas play to potentially contain 69 trillion cubic feet of gas.

“The identification of 69 TCF (trillion cubic feet) of resource potential . . . is a major step in our development of the Horton Bluff shale resource in Nova Scotia,” the company said in a release Monday. “This is an extraordinarily large accumulation of natural gas in close proximity to a premium market.”

On Tuesday, shares were settling back down and trading around $1.55, but on Monday when the report was first released, Triangle shares shot up 61 cents, closing at $1.77. The 52-week high was $2.25 and the low for the past year was 72 cents.

Howard Anderson, Triangle’s vice-president of engineering, said the independent assessment shows there’s an “awful lot of gas” in the ground but it is still too early to predict how much of it can be recovered.

Triangle provided all the available data to Ryder Scott using the company’s extensive database of log and core samples from the wells drilled last year, the release said.

“We’re being a little cautious about recovery, as getting gas out of shale is difficult,” Mr. Anderson said in a telephone interview Tuesday from Calgary.

He said the company had similar calculations on the gas potential but wanted a third party to look at the data and “give it the right credibility.”

Ken Chernin of Acadian Securities described the resource assessment as “huge” but said there is still “a lot of uncertainty” around this interesting play by the junior exploration company.

“Even if the flow rates of gas are fantastic, there is still the problem of recovering the gas out of the shale, and shales have about a 10 to 15 per cent recovery rate,” the Halifax analyst said.

Mr. Chernin said if Triangle were able to recover 10 per cent — or almost seven trillion cubic feet of gas — of its resource potential, it would still be twice the size of reserves at the Sable offshore natural gas project, which originally had recoverable reserves of three trillion cubic feet, said Mr. Chernin.

The challenge is to release the gas from the shale rock, which is as impermeable as concrete, according to Schlumberger Oilfield Services.

Mr. Anderson said Triangle remains cautiously optimistic and recognizes there is still a lot of work to do on the site to turn it into a commercial discovery.

Even though it is a large amount of gas, it will be a challenge to get it out of the shale and people should not expect a recovery rate found in conventional gas plays, such as the Sable project.”

Commercial production of shale gas has not yet been achieved in Canada but interest is growing among junior energy companies, he said. High gas prices, new technologies and the Kennetcook site’s close proximity to the Sable gas pipeline make it an attractive project.

In the U.S., there has been shale gas production and Triangle hopes to “piggyback” on some of the successes south of the border, said Mr. Anderson.

We have proven there is gas there. Now we must prove it is commercial,” he said, adding the company is in negotiations with one firm as its partner for the project and hopes to make an announcement later this month.

The company plans to spend $30 million to $33 million this year and in early 2009 drilling six wells to firm up the play, Mr. Anderson said.

We have highlighted a few crucial sentences, you have to bear in mind that:

  1. The gas does not officially count as reserves (yet)
  2. It is not certain that it is a commercial quantity, they do not know whether, and if yes, how much of the gas is deliverable
  3. We have no idea at what cost gas can be produced.

Having said so, 69Tcf, or even 10% of that, really is a VERY LARGE AMOUNT. Funny enough, 6.9Tcf is exactly the estimate of deliverable gas Wayne Andrews uses in his valuation for InterOil. He arrives at a company value of $2B…

We hope we can fill in more of the blanks in the coming days. A good place to start is it’s year end report, they list all their properties in considerable detail.

$2.25, as being the previous high for the past year, might give a resting point for a while.

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