Shell Canada Energy has taken a farmout from MGM Energy Corp., Calgary, to earn an interest in MGM’s 466B exploration license in the Central Mackenzie Valley of Canada’s Northwest Territories by funding the drilling of one or two wells in the Devonian Canol shale oil play.
Shell has the option to terminate the farmout if MGM doesn’t receive timely regulatory approval to drill the first well but will earn 75% interest in EL466B and become operator if it drills and completes both wells.
Shell will earn 37.5% interest after drilling a vertical well, which could be drilled as early as the winters of 2012-13 or 2013-14. The second well would be a horizontal penetration.
MGM would operate both wells. Shell and MGM have agreed to a drilling and completion program for both wells, including coring and a multistage frac.
MGM has applied for a land use permit and water license with the Sahtu Land and Water Board to drill a vertical well on EL466B and expects to receive a final decision in the near future.
Chief landholders in the play include Husky Oil Operations Ltd., ConocoPhillips Canada Resources Corp., MGM, Shell Canada Resources Ltd., and Imperial Oil Resources Ventures Ltd. (OGJ Online, Nov. 4, 2011). MGM noted that Husky Energy was first with activity in the play, having shot 220 sq km of 3D seismic and drilled and cased two vertical wells in the 2011-12 winter.