Junex holds 100% of an exploration permit block having a total area of nearly 200,000 acres in the Bécancour/Champlain region. The territory under permit covers the industrial park of Bécancour and its 550 MW cogeneration power station using natural gas. For this region, the main objectives consist in finding an accumulation of natural gas in the sedimentary layer of the Trenton/Black-River. This natural gas could be produced before the reservoir is converted as underground storage for natural gas. The secondary objective of our drillings in this region is the increase of natural brine production that Junex has already developed in Bécancour.

Actually, the continuation of exploration in this region is based on results coming from nearly twenty wells and more than 300 km of seismic data which enable us to better understand the geology of the sector. In 2005, the drilling of Bécancour #7 well, completed to 1,067 meters deep, was the second well indicating presence of an excellent quality reservoir in the formation of the Trenton/Black-River. This reservoir filled with natural brine encourages the search for the same kind of reservoir in a higher structural position, so to increase our chance of finding a reservoir filled with natural gas instead of natural brine.

Having this objective in mind, Junex drilled, in 2006, the Champlain #1 well which is located on the north shore of St. Lawrence River. This well is located 3 km from the industrial park of Bécancour and was installed on an anomaly identified during the seismic campaign in 2005. The drilling reached 750 meters in depth and it has met a high pressure zone associated with important show of natural gas at 655 and 662 meters in depth. The situation required the premature setting of a casing at 644 meters in depth and then the well was drilled as deep as 750 meters. The analysis of the cuttings linked to the 655 and 662 meters zones indicated the presence of primary and secondary porosity. According to the technical interpretation of the company, these data indicate that the natural gas met at high pressure between 655 and 662 meters could be linked, through a fractures network, to a deeper reservoir located in the lower layer of the Trenton/Black-River.

The interpretation of the given results from the drilling of Champlain #1 well corresponds to our geological model and we expect, at the beginning of 2007, to drill this well deeper to nearly 900 meters in order to evaluate the lower zone of the Trenton/Black-River.

The well Gentilly #1, drilled by Questerre Energy and Talisman, few kilometres from our permits and having very encouraging preliminary results, incites us to evaluate the potentials of some deeper structures which were already identified by seismic data. Targets similar to the one conducted with the drilling of Gentilly #1well should be the subject of additional seismic surveys during 2007.

In 2006, Talisman and Questerre Energy drilled Gentilly #1 well where first results were very encouraging with an initial production flow of 4.5 million cubic feet of natural gas a day, according to a press release issued by Questerre Energy. In 2007, Junex will continue its exploration works of the Trenton/Black-River zone along with the completion of Champlain #1 well and, probably with the carrying out of a seismic survey that will give a better definition of the deepest targets similar to the one of Gentilly #1 well.

Bécancour/Champlain Shale gas project

In July 2006, Junex signed an agreement with one of the most important independent natural gas producer in the United States for the development of the shales gas of Bécancour/Champlain. The letter of agreement particularly concerns the evaluation of the gas productive capacity of the sedimentary layer of the Utica Shales, on four blocks of permits covering 143,395 acres located between Quebec-City and Montreal, which are entirely held by Junex. Following this agreement, Junex’s American partner who drilled Bécancour #8 well, extracted two cores for a total of 34.15 meters long, in the Utica Shales. The cores were laboratory tested in order to better understand the physical and chemical properties of the sedimentary layer of the Utica Shales and to establish its productivity potential.

Following the results analysis of these cores, our partner holds an option to participate in an 8M$(US) pilot study in order to better estimate the productive capacity of the Utica Shales. In May 2007, our partner elected to exercise his option to go forward with a $8M pilot-project in order to test the productivity of the Utica Shale. To know more about this deal or about Junex Shale gas projects please see the "Partnerships" or "Shale gas" sections.