NEWS :: Initial Development Study Program for ChebSparton Receives Notice From ExxonMobil of Initial Development Study Program for Chebucto Natural Gas Field
9/1/2009 9:01:11 AM - Market Wire
TORONTO, ONTARIO, Sep 1, 2009 (Marketwire via COMTEX News Network) --
Sparton Resources Inc. (TSX VENTURE:SRI) (the "Company") is pleased to announce that it has received a notice letter from ExxonMobil Canada Ltd. indicating that ExxonMobil is considering the development of a Significant Discovery License (SDL) in which the Company owns a 12.5 % working interest. SDL 2286, part of the Chebucto field, is located near the existing Sable Offshore Energy Project ("SOEP") facilities The SOEP natural gas project, is located in offshore Nova Scotia, and supplies natural gas into the northeast seaboard areas of the United States and Canada. Sparton has owned the Chebucto interest since 1997.
INITIAL PROGRAM AND COSTS
Prior to the development of Chebucto into a producing gas field, certain geological and engineering studies must be undertaken to confirm the resource size and production expectations, design the required facilities, and estimate the capital costs. As well, certain commercial and regulatory matters need to be resolved. It is estimated that Sparton's share of the initial costs will be between $200-300,000 over the next 12 month period. Following completion of this work a further cost of $250-500,000 is estimated to accrue to Sparton during the next 12 months for the final detailed engineering and project execution planning.
SCHEDULE
If the study work confirms the viability of development the earliest that first gas could be produced is in 2013.
THE CHEBUCTO GAS FIELD
The Chebucto gas field, discovered in 1984, covers two SDL's (2286 and 2276A) and based on the currently known geometry of the field Sparton's overall ownership share of the field's hydrocarbon accumulation after unitization is estimated at 6%. Chebucto is located approximately 16 km east of the North Triumph production platform.
VALUATION TO SPARTON
The Company has reported several valuations of its Chebucto interest. The initial evaluation, with an effective date of August 1, 2003, was prepared for the Company by APA Petroleum Engineering Inc. (APA), petroleum engineering consultants of Calgary Alberta. APA has extensive engineering and evaluation experience in the Canadian East Coast and on other projects world-wide. Subsequent updates were prepared by the same organization with the latest being May 11, 2005, (See Sparton news release dated September 4, 2003, Long Form Prospectus dated February 27, 2004, and news release dated June 2, 2005). All these documents are available on www.sedar.com. Based on a review of all available technical data APA reported that Sparton's estimated unitized 6% share of the Chebucto gas accumulation amounts to approximately 20 Bscf (billion standard cubic feet) in proven and probable categories. Using then current gas prices and a 10% discount rate with a 2010 production startup, and a 20 year production life APA, in 2005 calculated a net present value to Sparton before tax of approximately $27 million. This valuation will be updated to reflect current conditions and reported to shareholders when available.
DISCUSSION
The news of an initial planning program for possible production at Chebucto is a significant event in the potential development of Sparton's resource assets. Chebucto has historically been difficult to evaluate due to uncertainty in the time frame for development. With the current development planning proposed by the interest representative, Company management believes that Chebucto now has the potential to create significant value for its shareholders. Sparton looks forward to becoming a full participant in the development of the Chebucto natural gas field. New information and results of an updated valuation for Chebucto will be reported when available.
CORRECTION TO SPARTON NEWS RELEASE DATED JULY 20, 2009
In paragraph three, line two of this release under the heading of "Option Terms" the number $500,000 is incorrect and should be changed to $500,500.