Junex inc.

Creating Value while Minimizing Risks

Business Model

Oil and gas exploration in Québec faced many setbacks in the last decades prior to the creation of Junex. Several companies, such as the public corporation SOQUIP, abandoned our geological basins after having invested millions of dollars without having made any significant discovery. In this context of a immaturely explored sedimentary basins, Junex resolutely decided to bet on science, personnel training and long-term work in order to add value to our shareholders’ assets. Thus, in the last decade, the company’s exploration strategy was applied in five different stages:

Stage 1: Securing Acreage

The first step of a wining exploration strategy is to initially ensure that the company acquires and holds exploration rights on a vast land of holdings whose value will be increased in case of a discovery. Since its creation, Junex has had the occasion to accumulate rights on 4 million acres, of which 3 million are in Québec’s main geological basins. At the time of the company’s registration in stock exchange in 2001, oil and gas activities were practically non-existent in Québec and oil and gas companies had practically no interest in the province, which enabled Junex to quickly build a vast landspread of exploration licences.

Thus, Junex has occupied since 2001 the land made free by different companies who had experienced exploration setbacks on our territory.

Stage 2: Build a Credible Geological Model

As Junex was raising the necessary funds for exploration with the financial markets, the company was also pursuing basic exploration work enabling to develop credible geological models. Less expensive than drilling, this exploration work nonetheless required an investment of a few million dollars in order to sample the rocks on field; analyse the mineral properties of the source-rock, acquire seismic surveys, identify the presence of hydrothermal dolomite reservoirs, work with expert groups such as the Geological Survey of Canada or the INRS. This stage represents scientific work crucial to the success of exploration.

Stage 3: Invest to Demonstrate the Value of Properties and Model

After having conceptualised geological models on the basis of exploration work performed in the first few years, Junex invested many million dollars between 2003 and 2007 in order to drill 15 wells in the St-Lawrence Lowlands and on the Gaspé peninsula. Even if these wells did not lead to substantial discoveries of hydrocarbons, they validated our geological models and demonstrated without a doubt the presence of oil and gas in Québec.

These results also enabled us to place Québec’s potential in their North American geological context by demonstrating the analogies between our projects and the discoveries made in similar basins, such as in the Appalachian Basin in the United States. It was during this period that Junex started investigating the Utica Shale’s gas potential amongst other things.

Stage 4: Sign Exploration Partnerships

The objective of these partnerships is to generate investments on our properties and in certain cases, take advantage of partners’ expertise in the oil and gas industry. Today, Junex is involved in two partnerships with the American company Forest Oil Corporation (Canadian assets since transferred to Lone Pine Resources Inc.) for the exploration and development of Utica Shales. Moreover, it was Junex’s first partnership with Forest Oil Corp. that led to the discovery of the great potential of Utica Shales in April 2008.

Mr. Bernard Lemaire, a well-known Quebec businessman, is the Company’s partner in the Galt project.

Stage 5: Maximize the Value of Significant Discoveries

Every exploration program’s ultimate objective is the discovery of an oil or gas deposit. This is what happened in 2008 when Forest Oil demonstrated that the Utica Shales could be fractured and free natural gas at the Junex Becancour no. 8 well. Junex then proceeded to raise capital of more than $22 million, enabling it to carry out its specific evaluation program of several properties it holds in the Saint Lawrence Lowlands. This work enabled Netherland, Sewell & Associates, Inc ("NSAI"), an independant Texas oil consultation firm, to establish its best estimate of original gas in place on Junex’s licences at 34.3 trillion cubic feet (Tcf) and its best estimate of Junex’s net share of potentially recoverable natural gas on its licences at 3.5 trillion cubic feet (TCF).

The company is presently focused on the development of the Galt oil discovery where an exploration programme composed of four horizontal wells is underway. An application for a Production Lease was also filed for the development of this project.

 



2 joint ventures with Lone Pine Resources Junex listed on stock exchange in 2001 Capex totalling $65 M on our land