Gulf of St Lawrence

The Magdalen Islands Property

In July of 2008, the Company acquired the 17,500 hectare exploration permit for the Magdalen Islands (Iles-de-la-Madeleine) located in the Quebec sector of the Magdalen Basin in the Gulf of St. Lawrence. The subsurface of the Magdalen Basin is dominated by salt diapirs, where deep sedimentary evaporite deposits have become mobile and intruded upwards in plumes to bisect the sedimentary rock strata, forming potential hydrocarbon traps. Gastem has completed a comprehensive review and integrated re-evaluation of the existing available geological and geophysical data in late 2008 and early 2009, including purchasing existing seismic data, processing and reinterpretation with Boyd Petrosearch of Calgary.

This comparative analysis highlighted the need for complementary geophysical data and therefore, an onshore/offshore gravity survey was initiated in 2009. A report was prepared by Excel Geophysics, which produced the extended area Bouguer gravity map. Completed in June 2009, this survey has helped refine the geophysical model and the geometry and structure of the salt diapirs underlying the Islands.

The primary drilling target was confirmed and delineated accordingly. All the gravity profiles demonstrate that the central salt diapir is asymmetric, with shallower slopes to the south. Compared with previous models, the geometry and structure of the diapir is now better defined and much simpler. The main exploration target remains the Cable Head formation which should be encountered at 2,300 meters or less. This central salt diapir presents a world class hydrocarbon opportunity.

Significantly, a study released by the Geological Survey of Canada entitled Petroleum Resource Assessment, Paleozoic Successions of the St. Lawrence Platform and Appalachians of Eastern Canada (Open File 6174) by D. Lavoie, N. Pinet, J. Dietrich, P. Hanigan, S. Castonguay, A.P. Hamblin and P. Giles, which reemphasizes that the Magdalen Basin, specifically the salt structure zone associated with the Upper Carboniferous area has a high TCF natural gas potential. The GSC resource assessment estimate for the Magdalen Basin is (P50) 21 TCF, indicates that the Basin is most prospective and will likely be an area for major exploration in the near future.