Main points of MBAs storyMain points to know about the MBA story are:
1. MBA's main focus right now is on the Gordon Creek natural gas field, Carbon County, Utah, which they purchased 50% of in March of this year. Gordon Creek borders on the Conoco/Phillips Drunkards Wash leases, the huge natural gas field operated by Conoco/Phillips that is Utah’s largest coal bed methane gas field. Drunkard’s Wash has produced 500 BCF since discovery in 1992, and currently produces about 4BCF of gas per month. Average well life expectancy ranges from 15 to 30 years. Because of the success of the Drunkard’s Wash field, much is known about the geology in the area, and production includes both conventional gas and coal bed methane. The joint venture’s Operations Manager is Steven Prince, who began his career working for the original developer of Drunkard’s Wash, River Gas. He was instrumental in the acquisition of Gordon Creek by the joint venture because he felt its similar geological composition to Drunkard’s Wash would lead to similarly successful results.
2. The existing Gordon Creek Project provides cash flow from conventional natural gas sources. The property includes 4 producing wells, 4 shut in wells and room to drill at least 20 more wells on 160 acre spacing. Utah law permits 40 acre spacing if they choose to drill more.
3. The recently begun work over program has already substantially improved production. The plan was to rework the 4 producing wells, open up and rework the shut in wells, and then commence new drilling. Preliminary results released recently announced that production had doubled from 650mcf/day of production to 1.3mmcf/day, a significant improvement. As part of the workover program, previously unexplored CBM zones will be evaluated.
4. The property was the subject of a recent report by Sproule & Associates, which describes the area geology is a “blanket” formation that has led to success rates approaching 100%.
5. The big story at MBA is the opportunity to increase production and cash flow substantially through a comprehensive program to drill 35 more wells. MBA has identified 20 drill locations on the existing 5,000+ acres, and has firm plans in place to acquire an adjacent 5,000 acres on which 15 wells will be drilled. This will increase the BOE/day level from 75BOE/day only a week ago to a targeted 1,500 BOE/day
6. First class scaleable infrastructure is already in place. Buyer’s pipeline crosses the property - 10 kilometers of pipeline are already constructed throughout the Gordon Creek property along with a first class, scalable compressor plant. The Questar gas pipeline runs just north of Gordon Creek, permitting ready access to market. All the elements for success through immediate cash flow growth are in place - i.e. no pipeline builds, no environmentalists, no indigenous interests, etc.,
7. Easier access to drilling crews and a lower level of competition - Because they are drilling in the Southern (US) as opposed to Northern (Canadian) Rockies, MBA feels they have a competitive advantage over a number of other Canadian juniors when it comes to accessing drill crews and equipment.
8. Natural Gas is the energy fuel of the future for a number of reasons: a/ Environmental - Natural Gas is the purest, cleanest, most environmentally friendly source of hydrocarbon energy. There are no significant emissions from the production or usage of natural gas (e.g. no greenhouse gas, acid rain, solid waste). b/ Efficiency - Natural Gas technology, appliances and delivery systems are getting more prevalent and more efficient, which means more economical. c/ Reliability - 85% of gas used in the US is produced in the US (the other 15% from Canada). By contrast, the US relies on foreign sources for 60% of oil supply. With infrastructure in place, supply disruptions are rare. The Conclusion? Increasingly, Natural Gas is the Energy Fuel of the Future.
9. MBA has put together a cash flow valuation for this project, assuming moderate success rates and constant gas prices, which calls for a valuation of approximately $70 million. The current market cap is $7 million. The PDF of the spreadsheet may be found at https://mailer.clarkavenue.com/mba/mba_valuation.pdf
10. Management, and a few people close to MBA own a majority of the stock - 60%+ now and approaching 80% fully diluted. A good portion of the float is represented by 2000+ very small shareholders. What this means to MBA is that if they are successful, the stock will respond accordingly.
In addition to the Utah property, MBA has an interest in an oil land gas play in the Maritimes, Dover/Gautreau, in an area that is heating up. They share the same geology with Corridor Resources (“CDH”), which is next door in Stoney Creek, currently being drilled by Contact Exploration (“CEX”) and not far from the CBM play being drilling by CEX and Stealth Ventures (“SLV”).