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Is Newfoundland home to Canadas next big oil find?

CALGARY - A long, narrow stretch of shale rock that runs along western Newfoundlands coastline might be home to North Americas next big oil find.

So believes the junior oil explorer thats snapped up virtually all of the land in the Green Point shale.

But Shoal Point Energy Ltd. (SHP-CNSX) hasnt quite figured out how to economically draw the crude - some 23 billion barrels of it in place, according to one estimate - from the uneven, broken-up rock.

"Its a bit of a wild frontier still," said George Langdon, the companys Newfoundland-raised CEO, who has long been fascinated by rocks on the Rock.

"Theres a lot of oil in place. We havent proven the viability of it yet. But just the sheer number of what could be in place there makes it, to me, one of the significant resources in North America, right up there with the big ones."

As in other shale formations throughout North America, tapping the Green Point will require hydraulic fracturing, or fracking, to unlock the resource. The controversial practice involves injecting a mixture of water, sand and chemicals underground in order to crack the rock.

Fracking has unleashed huge supplies of natural gas and oil from shales across the continent, but it also brings with it concerns over the safety of groundwater supplies near drilling sites.

Each shale region is different, so what works in the Pennsylvania Marcellus or the North Dakota Bakken might have to be tweaked to adapt to the Green Points geologic quirks.

Indeed, its hard to draw a direct comparison between the Green Point and other North American shales. For starters, it appears to be several times thicker and the rock has been jostled around by moving tectonic plates.

"The shale is really broken up quite a bit and when a shale is broken like that, it can be very difficult to drill," said Larry Boyd, director of geoscience at AJM Deloitte, the Calgary consulting firm that Shoal Point hired to evaluate its Green Point potential.

Its difficult, he said, "just to get a hole that will stay together and wont catch your tools and things like that."

"Were really kind of pioneering something really brand new here."

The Green Point also extends into the offshore. So far, the wells have been drilled from land. In the future, it may be possible to tap the shale from platforms or barges in the shallow waters of Port au Port Bay.

Shoal Points activity so far has been at the south edge of the formation, which stretches north along the coast well past Gros Morne National Park.

The Toronto-based company, a small outfit with less than a dozen employees, is far and away the biggest landowner in the Green Point, having amassed more than 280,000 hectares across three blocks of land.

Shoal Point been going it alone and has drilled two wells so far. The first one was actually directed at a deeper oil target and happened upon the oil-soaked shale in the process.

The second was drilled last year into the Green Point shale itself, but successfully testing it has been slow-going. Shoal Point hopes that will happen next year, after which it aims to apply to the Canada Newfoundland and Labrador Offshore Petroleum Board for whats known as a significant discovery licence.

Shoal Point acknowledges it will take a player with much deeper pockets and technical expertise to fully develop its land and has been actively looking for a joint-venture partner to help.

Langdon - who travels frequently between Newfoundland, the financial centre of Toronto and the energy centre of Calgary - was recently out West to meet with possible partners and set up a data room for them to pore over company information.

"We think this play is big enough, has potential resources enough to attract the largest oil companies in the world," said Langdon, a geologist by trade.

"If this play was sitting in Texas or sitting in the western basin, thered probably be people all over it, but that will happen in time. I think its potentially a fantastic resource. It could be even of strategic importance -I think its potentially that big."

In some regards, Green Point has an edge over other shale zones. For one, its believed to contain high-quality light, sweet crude that sells at a premium price.

There is also a deepwater port at Stephenville, not far from Shoal Points operations, from which the oil could be loaded onto tankers and shipped to any number of lucrative Atlantic markets.

By contrast, Alberta oilsands crude and other landlocked North American sources have been fetching discounted prices due to a dearth of pipelines to coastal waters.

Newfoundland is also no stranger to energy development, with oil currently flowing from the Hibernia, White Rose and Terra Nova developments off the islands eastern shore.

The area where Shoal Point would be drilling is sparsely populated and without much farmland. So as Langdon sees it, fracking is likely to stir less opposition than in areas like Pennsylvania, New York State or the Quebec lowlands.

The region has long suffered from high unemployment. In fact, scores of Newfoundlanders currently travel to western oilfields for work.

"We would like to see that maybe reversed a little bit," said Langdon.

"If something like this becomes viable, weve got decades and decades of potential employment and production."

Though Boyd describes Green Point as a "world class resource," he said "were a long way off to really see that it will work."

"But it is kind of exciting. A lot of successful plays start out this way with really a lot of unknowns and youve got to go out and drill and keep on drilling until you figure out how it works."

Source: FinancialPost.com

� Shoal Point Energy

65 Queen Street West
Suite 501
Toronto, Ontario
M5H 2M5

Contact Information

as of 4:00pm EST Sept 12, 2012

Recent Press Releases
From Shoal Point Energy:

Shoal Point Announces Plans to Drill and Stimulate a Sidetrack on Well 3K-39 and Plans for 2 Additional Wells in 2013

Toronto, ON: Shoal Point Energy Ltd. announces that it is proceeding with plans to drill a sidetrack from well Shoal Point 3K-39, commencing at a depth of approximately 500 metres, on its EL 1070 property in western Newfoundland. Designated 3K39Y, the sidetrack is planned to reach a true vertical depth of 1500 metres, and is projected to bottom in the Green Point shale formation, approximately 800 metres south of the 3K39 bottomhole location. The large-diameter sidetrack well will be deviated at a significantly lower angle than previous wells, in order to minimize drilling, logging and testing concerns in the fractured shales, which were challenges encountered previously in the 3K39 borehole.  [...]

Shoal Point Files Preliminary Prospectus

Toronto, ON: Shoal Point Energy Ltd. announces that it has filed and obtained receipt on July 5th, 2012 for a preliminary prospectus (the "Preliminary Prospectus") in connection with a proposed best efforts offering of units and flow-through shares (the "Offering"). Each unit consists of one common share of Shoal Point and one-half of a share purchase warrant. Each whole warrant will entitle the holder to acquire one additional common share of Shoal Point for a period of 18 months from the date of issuance of the warrant at an exercise price to be determined. Shoal Point has granted the agent, Kingsdale Capital Markets Inc. (the "Agent"), an over-allotment option to purchase such number of additional units or flow-through shares that is equal to 15% of the number of units or flow-through shares, or a combination thereof, sold under the Offering, exercisable by the Agent in whole or in part for a period of 30 days from closing of the maximum offering.  [...]

    

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