SPI announces successful lower Montney Formation test!

Canadian Spirit Resources Inc. (SPI) announced today that they have successfully tested the lower Montney Shale Formation at their b-17-I/94-B-1 location. They have successfully perforated and stimulated that zone and the results have exceeded their expectations. They believe that “the lower portion of the Montney Formation is capable of adding to the total productivity of the Montney and other prospective formations.” This is significant because Talisman Energy (TLM) did not test the lower Montney at their b-15-I well and no determination was made by them on whether the lower Montney is economically viable. SPI's test demonstrates that the lower zone is productive and adds to the potential recoverable resource although flow rates were not released at this time (I'm guessing that flow rates were not released because they were flows from a vertical well in only the lower Montney zone and possibly could be misconstrued by the market if one were to compare them with other company's horizontal results from multiple zones).

SPI has reviewed the data from TLM’s b-15-I well located approximately one mile east as it is no longer in the confidentiality period and concluded that TLM has “very similar geological characteristics to that of CSRI’s well, adding significantly to the level of confidence that the upper Montney can be economically developed.” They have determined that the logs and cores are very similar to the Talisman data and are obviously, very comfortable with those zones. Talisman has stated that the initial test rates from their Farrell Creek Montney project have exceeded expectations and they are moving the portions of the project into commercial development in 2010.

SPI believes that they will achieve very successful flow rates from both the lower and upper portions of the Montney and the lower Doig Formation. In turn, they expect to move a portion of their Montney prospective resource into the 3P reserve category, possibly as early as the beginning of 2010. SPI also states that should the company achieve the required level of reserves as they expect, they “intend to graduate its listing to the Toronto Stock Exchange.” This is possibly a late 2010 event.

This can only be viewed as a highly successful test and news release! Anyone who has been following this company over the last several years can attest that the company has always been very conservative and understated in their news releases. The tone of this release as well as the remarks they made at the recent SEPAC presentation are in high contrast to their previous statements. They can easily be construed as much more enthusiastic and positive and one can almost see SPI beaming with excitement about their 2010 prospects.

Moving to the Toronto Stock Exchange will attract a different set of investors as well as broaden their prospective shareholder base and will positively impact the company. As SPI states, they believe that “2010 will be the year that visible progress is made toward achieving the Company’s mission of developing 1 tcf of natural gas in western Canada.” We can expect good things from SPI in 2010!