Hi GGGAL: 

 In response to your questions.  Thank you for being so engaged with this.  It helps me figure all this out.  I have one interpetation and am glad to have it challenged.

1. You indicate that IFR holds 6,000 acres on the play - if you look at slide 7 on MGM's latest presentation it looks to me that only a small sliver of EL-466B is in the shale basin. MGM's EL-474 does not look prospective to me furthermore it is located on the east side of the Mackenzie River. 

Response: I don’t follow your logic on Block 474 that the Canol is not prospective east of the Mackenzie.  There is not a lot there, but remember the scale of the map.  A sliver can be many km long. The Canol subcrops east of river and appears to be in the oil window from the vitrinate reflection and Tmax.  There is pretty good well control in that block.  There is not a lot of acreage there but at 9,140 acres (I worked in hectares and converted to acres hence the undue accuracy) it is still bigger than IFR net acreage in Summit.

Here are my numbers for MGM net acreage prospective for Canol after the farm-out to Shell.   We can debate the exact numbers, but they are an order of magnitude bigger than IFR. 

 

 

WI

Operator

Net acres

EL 466

67.5%

MGM

12,000

EL 474

50%

MGM

  9,140

EL 475

50%

MGM

42,300

EL 486

25%

Shell

21,150

 

 

Total

84,590

         

  These are P50 numbers meaning that they are 50% likely to be exceeded.   Of course the P90 number are smaller and the P10 numbers are bigger.  There is quite a spread between P10 and P90 showing the level of uncertainty.

2. TOC does not create porosity??

Response: TOC has been shown to be related anc correlated to interconnected porosity development in shales.  Further interconnected porosity is directly related to permeability.  This is how it works, the kerogen is waxy and fills up portions of the rock matrix.  When it is converted to oil or gas this become hydrocarbon filled porosity.  There are a number of petro physical studies documenting this.  This is perhaps my favourite  http://www.ingrainrocks.com/files/386/

Another source to google is Jarvie who has slides explaining how it works.

3. In my opinion the most prospective acreage MGM holds is the license they acquired with Shell at the last land sale (Shell 75% MGM 25% furtherest north license) this acreage is further away from the pipeline than IFR's acreage which also means much higher tie-in costs. 

Response: I agree that El 486 is very prospective, but I think EL 475 is as good.  I am basing this on the isopach maps and the maturity of the kerogen.   The thickest part of the Canol lies in 475 and 486.  I am not convinced that these blocks will be farther away from the Enbridge transfer point.  Enbridge is going to have to run a pipeline across the river at some point and this will be where all the companies tie in.   Most likely place the transfer point will across the river from Norman wells because that is where the existing pumping station is.  So Conoco, Husky and EL 466 and 474 will go north h and EL 475 and El 486 will go south along a main gather system spine.  This spine will probably follow the all-weather road.  The outline of that road is becoming pretty clear if you look at the Conoco maps.  They are building their road to tie into the proposed Husky road.  These big boys are ways ahead of the game and are playing for keeps.  

4. MGM is not in control of its future on the most prospective exploration license, Shell is.

Response : MGM is the operator on all but EL 486.  The only way they can get the boot is Shell applies to the Federal government and tries to convince them that they are incompetent.  Husky operates for IFR  Given that MGM is the most experience northern operator that doesn't seem likely.  More likely that Shell will want control and buy MGM out.  Check out Duvernay which was another Clay company.

5. MGM have stated that with the rights offering that it has sufficient capital to fund current capital expenditures until 2014 does MGM have access to cash needed to play in the frontier after 2014?

Response: Clay has stated publically that he is willing to fund this company indefinitely.    Clay has $3 billion in his bank account and his been good for his word for as long as the company has been going.  I don’t think IFR has a deep pocket principal investors.

6. Slides 7 & 8 of MGM latest presentation indicates that approx. 10 - 15 sections (6,400 to 9,600 acres) within EL466B are prospective, not that much larger than the +/- 6,000 acres you calculate IFR owns.  

Response:  I think your calculations are a little off.  It looks like a sliver because of the scale.  The sliver is 6 km wide tapering to zero at the top and 22 km long.   

7. I agree that Stewart is a dry gas discovery --- trust me on this, the area will require as many reserves possible to share in the cost to construct facilities and pipelines in the region.

Response: Dry gas is worth $3.50/mcf.  It is quite possible that Stewart will get tied in, but will it make money at that price?   Wet gas and oil has always been worth a lot more.  I really hope that gas becomes more valuable as MGM has 800 bcf net in reserves.  Also the oil window has about 272 Tcf gas in place with 140 bbl/ MMcf liquids.  My money is still on the oil for the big money.