Two U.S.-based exploration and production companies have started exploration activities in New Brunswick, Canada, hoping that this under-explored province in Eastern Canada contains unconventional resources similar to those in the United States.

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Southwestern Energy (NYSE: SWN) was the latest American company to enter New Brunswick. The company won a tender for exploration rights on two blocks totaling about 2.5 million acres. Southwestern Energy has committed to spending $46.8 million over the next three years to explore in New Brunswick. This will be the first activity for the company outside of the U.S.

Apache Corp. (NYSE: APA) announced in late 2009 that it entered a farm-out and option agreement with Corridor Resources (TSX: CDH), a small cap Canadian exploration and production company. The agreement covers acreage in Southern New Brunswick and commits Apache to spend $25 million over the next 18 months to conduct exploration activities there. These funds will earn Apache a 50% working interest in the units it drills and an option on future development.

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Current Activity

There is very little current production from New Brunswick. Corridor Resources discovered natural gas at the McCully field in 2000. Potash Corp. of Saskatchewan (NYSE: POT) is also involved in the field, and it uses some of the current production to supply one of its nearby potash mills.

Another producing area is the Stoney Creek Field, which was discovered in 1909 and produces small amounts of natural gas and oil. Contact Exploration (TSX: CEX), a small cap Canadian exploration and production company, has 5,500 acres under net lease in the Stoney Creek Field. The company recently commenced workovers of existing wells, the drilling of a new vertical well and initiated production from this field.

Maritimes Basin

New Brunswick and many other onshore and offshore areas of Eastern Canada are located in the Maritimes Basin, a Paleozoic Basin deposited more than 300 million years ago.

The industry will be exploring the potential of many different formations in this basin, with the goal of finding shale gas and other unconventional resources, and is hoping to repeat the same success it had in the continental U.S.

One prospective area is the Frederick Brook Shale, which may contain commercial amounts of shale gas. Another prospective area is the Hiram Brook formation, an oil-bearing formation located just above the Frederick Brook Shale.

Unconventional Formations Are Hot Plays


Shale and other unconventional formations have become the hottest plays in North America over the last few years, with even the mighty Exxon Mobil (NYSE: XOM) buying XTO Energy (NYSE: XTO) to get control of its valuable shale acreage inventory. (While acquisitions can be hostile, these varied mergers are always friendly. To learn more, see The Wonderful World Of Mergers.)

The Next Great Shale Play?

Large U.S.-based independent exploration and production companies have begun initial exploration activities in New Brunswick, a province in Canada, which historically has been under-explored by the industry. This investment may be an attempt to find the next great shale play in North America.

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