SOMBA K'E/YELLOWKNIFE - Despite a new study that finds the NWT is the worst place in Canada to do oil and gas business, plus continued delays to the Mackenzie Gas Project, the most active exploration company in the NWT is not showing any signs of slowing down.

Rig drilling at MGM Energy's third well project this past winter north of Inuvik. The company plans to drill three to four more wells in the same vicinity next winter. - photo courtesy of Gary Bunio

MGM Energy recently sold enough common shares to raise $80 million for its projects during the 2008-09 winter season. The company plans to use much of the money raised to fund the drilling of three, possibly four, wells north of Inuvik.

The budget is set at $70 million, down $25 million from last year's program - which also included some seismic work - when MGM found a mildly encouraging amount of oil at its third well in the Mackenzie Delta after encountering two dry wells earlier in the season.

"The dry holes definitely did not help," said Rick Miller, chief financial officer.

"If you looked at all the scenarios that could have happened, it was probably the two worst: no news on the pipeline, positive or negative, and the dry holes."

The delays to the Mackenzie Gas Project are making it more difficult to attract investors and have forced the company to take smaller gambles than before, he added, noting last year, the company managed to raise $100 million.

"Once there's positive news on the pipeline, that will increase our share price and it will be easier for us to raise money," he said.

MGM's share price currently sits at approximately 58 cents. This time last year, it was at least three dollars, according to Miller.

MGM's reduced spending comes in the wake of a study conducted among petroleum executives by the Fraser Institute, which ranked 88 jurisdictions worldwide in terms of having low barriers to oil and gas investment.

The NWT was deemed the worst among Canadian regions, ranking 13th worst out of all 81 worldwide jurisdictions.

In 2007, the study called the territory the 21st worst jurisdiction out of 54.

Survey respondents cited regulatory costs and aboriginal land claims as barriers to investment, as well as a lack of infrastructure.

"Ways need to be found to get a better cost of capital for the entrepreneurial oil and gas companies to keep working aggressively in this basin," one respondent said of the NWT.

"The NWT might be the worst place to participate in Canada, but only because of the Joint Review Panel and the continuing regulatory hangover of the Mackenzie Valley pipeline," said Gary Bunio, MGM's chief operating officer.

"There are high regulatory expectations no matter where you work in Canada."

Nellie Cournoyea, CEO of the Inuvialuit Regional Corp., agreed the pipeline accounts for a large part of the negative investment climate in the NWT.

"If you're going to invest, you want to invest where you have a fairly reasonable chance of getting the approval process concluded in an efficient manner. And when you don't ... it creates uncertainty."