The Gazette
Thursday, May 22, 2008

Exploration activity for natural gas in Quebec’s St. Lawrence Lowlands is moving to the front burner, pushed by partners Questerre Energy Corp. and Talisman Energy Canada, who announced a $100-million pilot program yesterday to assess the potential of unconventional gas in the area.

The program, set to begin this summer and be completed in 2009, represents the largest exploration play in a region now being worked by up to a dozen junior companies, Jason D’Silva, Questerre’s vice-president of finance, said yesterday.

”The majority of exploration in the Quebec Lowlands will be done on our acreage,” D’Silva said in an interview from Calgary, where the company is based.

Stock prices surged yesterday for Questerre and Junex Inc., an unrelated Quebec-based junior that is also active in the area and which announced yesterday the settlement of a dispute over an exploration agreement.

Questerre’s key partner in its Lowlands venture is Talisman, which said earlier this week that it will sell up to $2 billion in assets to boost spending this year by $500 million to evaluate the unconventional natural gas potential of its North American holdings. Other partners are Forest Oil Corp. and Gastem Inc.

Unconventional sources of such natural gas as shale gas have become more economically viable because of higher energy prices and the advent of new technologies, including horizontal drilling techniques.

Questerre, which is listed in Oslo, Norway and Toronto, has about 4,400 square kilometres of land holdings in the Utica shale region between Montreal and Quebec City.

The program announced yesterday augments previous drilling and will see Questerre budget between $25 million and $30 million, of which $3 million to $5 million is expected to be spent in 2008 and the balance in 2009, the company said.

“Based on work to date, we believe the rock properties are very promising for unconventional gas in the lowlands,” Michael Binnion, Questerre president and CEO, said in a statement.

Junex said yesterday that it has signed a letter of intent that should lead to an out-of-court settlement over a dispute regarding its Nicolet property in the the St. Lawrence Lowlands basin.

“We are pleased that this settlement will allow us to clarify our rights concerning a permit located in the heart of the recent developments that occurred in the Utica Shale. We believe that this agreement will allow us to define the potential of this permit and to create value for our shareholders,” Jean-Yves Lavoie, Junex president, said in a statement.

In 2006, the company announced that a lawsuit against it had been launched by Fairlady Energy Inc. in connection with the Nicolet property.

Forest Oil is one of Junex’s exploration partners.

In trading in Toronto yesterday, Junex gained 92 cents to close at $4.22, and Questerre gained 75 cents to close at $4.70.
© The Gazette (Montreal) 2008