Junior shale gas players are preparing for a new round of growth and consolidation

as the once experimental production technique goes mainstream.

StealthVentures Ltd. is the latest in a slate of unconventional gas playersthat wants recognition for its undervalued potential, according to thecompany's chief financial officer.

Mark Roth says Stealth has onecritical advantage over other companies that have identified new shaledeposits in Quebec and British Columbia: "We are a producing shale gasoperation," he said.

In March, the company touted what isdescribed as the first commercial shale gas development in Alberta atWildmere, where it's producing a little more than one million cubicfeet per day.

Stealth plans to drill 100 additional wells thisyear to bring production past seven million cubic feet per day thisyear, rising to 18 billion cubic feet per day by 2011.

"Up until eight months ago we were a blue sky, pure exploration play," Roth continued. "That's really turned the corner."

Thetiming couldn't be better. Interest in shale gas exploded in recentweeks after Denver-based Forest Oil said the St. Lawrence Lowlands ofQuebec could hold trillions of cubic feet of natural gas resources.

Thenews sent shares of its local partner, Calgary-based Questerre Energy,soaring. The Calgary junior, which began the month of April tradingaround 34 cents, closed Monday at $4.29 on the Toronto Stock Exchange.

But the excitement hasn't been limited to Eastern Canada.

Lastweek, British Columbia took in a record $440 million from the sale ofoil and gas rights partly spurred by the Horn River region of theprovince where big companies such as Nexen and EnCana, along withAmerican independents Apache Corp. and EOG Resources, have been toutingbig shale discoveries.

A Wood Mackenzie report said the areacould hold as much as 50 trillion cubic feet of gas resources, morethan Canada's entire proven reserves.

Last week Talisman CEO JohnManzoni said the company is committing almost half a billion dollars toits unconventional gas plays across North America.

"It's a potentially exciting new source of growth," he told an investor's conference in New York.

ButDerek Krivak, Stealth's chief operating officer, said the suddenpopularity of shale is an "overnight success years in the making." Manysmaller companies have been touting the potential of shale gas foralmost a decade, he added.

"Back in 1999 and 2000 when I firstgot into it, I'd say half of the offices we went into kicked us out andsaid 'good luck with the science project, it'll never come to fruition.'

"Ithink the early time players like the EOGs, Nexens, Apaches and EnCanashave been looking at long-term strategic placements, so it's kind ofinteresting to see juniors looking at resource- type plays. Typically,that's something for the big guys."

Steve Calderwood, an analystwith Raymond James in Calgary, said there are still a lot of caveatsregarding shale gas development, especially for smaller juniors.

"Thefirst thing people need to realize is that only one to two per cent ofthat resource is recoverable. Many of these projects are far afoot interms of when they'll get developed," he cautioned.

"You need higher gas prices, but the resource base is huge."

Calderwoodagreed many smaller players will be swallowed up before they even getto the production stage, creating a new class of takeover targets.

"Thecompanies that are going to sink capital and infrastructure into theseplays are going to be bigger companies. So it makes perfect sense thatthey would be looking for acquisitions."

Stealth's shares felltwo cents on the Venture Exchange Monday, to close at 71 cents. Theshares have traded as high as $1.41 and as low as 47 cents in the past52 weeks.

spolczer@theherald.canwest.com