Corridor Resources closing up shop (sort of) in New Brunswick

The oil and gas business is a risky game, and shareholders of Halifax-based Corridor Resources got another example of that last week when the company released its 2014 year end results and reserves.

Despite a statement from Corridor president and CEO Steve Moran insisting the company is “well positioned in 2015”, the news was not good.

In fact, the company announced it is drastically cutting back its capital spending program in 2015 compared to 2014, and it reduced the amount of proved and probable natural gas reserves at its producing McCully field near Sussex, New Brunswick to 66 billion cubic feet from the 98.3 bcf it said it had in 2013.

Considering the McCully field is the company’s main cash cow, its natural gas production continues to decline and the New Brunswick government imposed a moratorium on hydraulic fracturing in December of 2014 (and fracking is required to extract natural gas from the Frederick Brook shale that the McCully field is located in) prospects for Corridor look grim.

Anyone who has worked for Corridor in New Brunswick can’t be happy about these developments, either.

In 2014 the company spent $23.5 million – much of that occurring in New Brunswick. But Corridor says it has authorized a “minimum” capital expenditure of just $2.4 million for 2015 and says “management has not forecasted any capital spending in New Brunswick until 2017. “

Whoa. That Corridor won’t be spending much money in New Brunswick doesn’t mean hundreds are out of work as a result. But in a province that needs all the economic activity it can get, every little bit helps.

In fact, the current environment in New Brunswick has Moran looking for a new core area to operate in, and it doesn’t sound like it will be anywhere in Atlantic Canada.

Here is a quote from Moran, which appears in the second-last paragraph of the March 31 press release announcing Corridor’s 2014 year end results:

With the recent downturn in commodity prices, Corridor expects there may be numerous opportunities in 2015, particularly in Western Canada, as other industry participants seek to dispose of assets to remedy leveraged balance sheets. To that end, Corridor has established an office in Calgary, Alberta. Should Corridor successfully identify and transact on a new opportunity, the capital budget would be increased accordingly.

That doesn’t sound like a terribly bullish outlook on New Brunswick.

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