The provincial government’s energy corporation will spend at least $20 million over the next year to drill exploration wells on three licenses near Parsons Pond. The wells must be drilled within the next 12 months or so or the licenses will revert to the Crown.
NALCOR Energy acquired a 67% interest in the venture for slightly more than CDN$500,000; that represents about 85% of the interest previously held by Calgary-based Leprechaun Resources. The remainder is split among a group of small private sector companies: Leprechaun Resources, Deer Lake Oil and Gas, InvestCan and Vulcan Minerals. The only changes in the interests held by each company appears to be with the Leprechaun portion.
Leprechaun tried to raise capital for the venture last year through a public share offering. Evidently that offering didn’t attract as much attention as expected. It appears that the provincial government’s energy corporation stepped in to salvage the project.
Vulcan and InvestCan are also partnered on a separate venture in the Bay St. George region. The drilling program on the Robinsons No. 1 is planned to finish this year at at depth of 3600 metres. Earlier this year, Vulcan drilled two wells in the shallow Flat Bay deposit, both of which showed oil.
In mid July 2009, the provincial environment department notified Leprechaun that its application for an access road at Parsons Pond would require an Environmental Preview Report.
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Devil in the details Update: From Moira Baird’s excellent Telegram story:
1. Expiry date on the existing licenses: February 1, 2010. That’s two tight a time frame to get three holes spudded and assessed.
2. Drilling as early as September: Using what rig? If NALCO doesn’t have one already lined up and on site, they will have to bring one in from as far away as Alberta or the Gulf Of Mexico. Good luck with that. The best prospect would be to use the rig Vulcasn currently is using on Robinsons No. 1. Availability late fall or early winter.
3. Friends in high places: NALCO’s Jim Keating on the possibility of getting an extension on the licenses: “I believe, if required, we'll be able to seek an extension for the licences to make sure that ... we optimize the best results for the people of the province and our partners.”
Can you say “unfair advantage”, boys and girls?
4. Which other companies: “[NALCO boss Ed] Martin said Nalcor has been assessing the west coast for the past two years and had also been approached by some of the exploration companies.”
Okay. Which ones and for what properties?
We know about Leprechaun, which has former cabinet minister Paul Shelley in key positions. How about Deer Lake Oil and Gas with former Peckford aide Cabot Martin at the helm?
Those would be the most likely choices and they might also explain why Leprechaun effectively got what looks more like a government bailout than a farm-in.
After all, if Leprechaun had the cash to do the drilling program, it wouldn’t have sold out to NALCO or anyone else. And if all Leprechaun had needed was an easy extension of the license to get the job done, they also wouldn’t have sold out such a large stake to NALCO.
Nope, license extensions are only easy if you’ve got connections and NALCO is connected all the way to the top.
5. Pull the other one: $14 million out of a total of $20 million? The drilling program was estimated to cost $26 million, not 14. Where’d the rest of the cost go?
