President's Message
To the Shareholders
The third quarter of fiscal 2010 saw the conclusion of Sharon’s asset divestiture program including the sale of its Parkman property for $560,000. This sale placed the Company in an excellent financial condition, with working capital of $322,000, no debt, a highly liquid, substantial stock holding in a rapidly growing resource company and a planned oil exploration and development program.
Sharon will now focus on oil projects in Canada with up to three horizontal oil wells, at Lloydminster, being evaluated for this year.
Update Sale of US Operations
On September 30, 2009 Sharon sold its U.S. operations to Magnum Hunter Resources in exchange for approximately 2.3 million common shares of Magnum Hunter valued at USD $2.3 million on the date of the sale. These shares have appreciated substantially since the sale and are trading at a value of USD $6.8 million, at the time of writing this report.
The management of Sharon believes that the Magnum Hunter shares continue to have growth potential and therefore plan to hold the shares in the intermediate term to benefit from continued capital appreciation. Over the long term Sharon plans to prudently use the proceeds from the sales of these shares, to finance its Canadian exploration and development activities.
Parkman Sale
In October 2009, Sharon closed the sale of its Parkman, Saskatchewan, oil property which produced 6 Bopd net to Sharon during the first half of fiscal 2010. Net proceeds from the sale totaled USD $560,000 which were also added to Sharon’s working capital.
Canadian Exploration
During the past year, Sharon participated in the acquisition of a land base in east central Alberta and adjacent areas of west central Saskatchewan. Some prospects with light and heavy oil potential of particular note are:
Lloydminster, Alberta:
The Company owns a 20% working interest in 400 acres of land near an active developing oil play at Lloydminster. The adjacent section to the north of this new land is currently being developed and a well, 250 meters north of Sharon’s lease line, has been drilled and brought on production. This successful well to the north has reduced the risk of the lands and Sharon and its partners are now planning to drill at least one horizontal well on the property during this year. Most horizontal wells in this area have commenced production at rates of 50 to 100 Bopd.
Sharon also has a 20% interest in approximately 1,600 acres on three other blocks of land, with potential for Lloydminster oil accumulations.
Shaunovan, Saskatchewan Prospects:
Sharon has a 20% working interest in approximately 6,800 acres, located in the lower Shaunovan fairway of west central Saskatchewan. One well is planned on the property in 2010.
Birdbear, Saskatchewan Prospects:
Sharon currently holds a 14% interest in 1,600 acres of land located in west central Saskatchewan. One 480 acre block immediately offsets a Birdbear pool which is being actively developed. Sharon plans to participate in a seismic program on this acreage to assist in defining a drilling location.
Business Outlook
After the completion of the sale of the U.S. properties and the Parkman oil pool, Sharon has significantly increased its financial flexibility. Over the last few months oil prices have stabilized at relatively high levels and natural gas prices have recovered from the very low prices of the Fall of 2009. Sharon plans to prudently develop its oil prospects in Alberta and Saskatchewan from its strong financial base.
On behalf of the Board,
R.W. Lamond, Chairman of the Board
February 25, 2010