December 6, 2010 / 2:17 PM / 8 years ago

UPDATE 2-Corridor wells disappoint, sending stock tumbling

* Shares fall as much as 50 pct in heavy trading

* No gas recovered at Frederick Brook’s Well B-41

* Negligible gas recovered at Well G-59

* Company says preliminary responses “unexpected, perplexing”

* Analysts said shale play still has plenty of potential (Recasts, adds analyst comments and updates share price)

By Arnika Thakur

BANGALORE, Dec 6 (Reuters) - Corridor Resources Inc (CDH.TO) said on Monday a negligible amount of gas was recovered after plugs were drilled in two wells at a shale gas project in the Canadian province of New Brunswick, sending its shares down as much as 50 percent.

“The preliminary responses of these wells are both unexpected and perplexing,” the junior petroleum and natural gas company said in a statement.

Early results from the wells in the Frederick Brook shale play in the Elgin region of the province were expected to be much better, said Ken Lin, an analyst with Mackie Research Capital in Calgary.

The first well the company drilled there, G-41, had strong flow rates that peaked at about 11.7 million standard cubic feet a day (mmscf/d), he said.

“Clearly this is going to delay the program a bit. If they had wells that came on as expected, they could drill more but now ... they will have to go back to step one and figure out what’s wrong before proceeding with the drilling program,” Lin told Reuters.

Well B-41 has recovered 1,728 cubic meters of frac fluid and no gas, while Well G-59 has recovered 805 cubic meters of frac fluid and negligible gas, the company said.

Despite the disappointing results, Frederick Brook is a very early-stage shale play, and it still has plenty of potential, Lin said. “We still see really long-term potential there - they have a massive land position and it does take time for these shale plays to scale up,” he said.

Apache Canada API.N, a joint venture partner with Corridor, had completed the drilling of the two horizontal wells earlier in the year, and strong gas shows were encountered in the horizontal sections.

Corridor said frac water recovery rates have declined at both wells, and steps are being taken to recover additional amounts, which could encourage the flow of gas.

“If Apache can recover more of the frac fluid and get gas production started, the final results could be much more impressive than this early data,” analyst Greg Chornoboy of Jennings Capital wrote in a note to clients.

Shares of Halifax, Nova Scotia-based Corridor, which have gained 76 percent in the past year, were down about 45 percent at C$4.29 on Monday on the Toronto Stock Exchange. They touched a low of C$4.94 earlier in the session. The stock was the third most heavily traded on the TSX. (Reporting by Arnika Thakur in Bangalore; Editing by Frank McGurty)

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