MGM Energy Corp. has entered into an agreement with KOGAS Canada Ltd. (a wholly owned subsidiary of Korea Gas Corporation) for the sale of 20% of Umiak SDL 131 for $30 million. The sale price will be paid $20 million on closing and $10 million upon the decision to construct the Mackenzie Valley Pipeline or any other project to commercialize production from SDL 131. The sale is subject to normal closing conditions, including Korea Gas Corporation board approval and any necessary regulatory approvals. The board of directors of MGM Energy has approved the transaction. The transaction is expected to close by February 2011 and is subject to a right of first refusal.

MGM Energy's net mean contingent plus prospective resource estimate for its 60% interest in Umiak SDL 131 is 328 bcf. The sale of 20% of SDL 131 represents a sale of mean contingent plus prospective resources of 109 bcf, representing approximately 12% of MGM Energy's current net mean contingent plus prospective resource base of 887 bcf. Based on currently expected activity levels, proceeds from the sale will be sufficient to fund MGM Energy's capital and operating expenditures through into 2012.

MGM Energy also announced that, subject to receiving necessary regulatory approvals, it will be proceeding with the drilling of an oil prospect in the Great Bear River area. The well is expected to spud early February 2011 with a total projected cost of approximately $8.0 million gross, or $4.0 million net to MGM Energy.

Lastly, the National Energy Board of Canada has communicated that it will issue its Reasons for Decision respecting the Mackenzie Gas Project on Thursday 16 December 2010 at 2:30 Mountain Standard Time.

'MGM Energy is very excited to have KOGAS Canada as a partner in Umiak SDL 131 and we look forward to a long relationship. This transaction is an expression of confidence in the value of natural gas resources in Northern Canada, the quality of the Umiak SDL and the prospects for the Mackenzie Valley Pipeline' said Henry Sykes, President of MGM Energy. 'We also look forward to drilling the Great Bear River well. Although the well is high risk, the potential is great and any oil discovered can be transported on the existing Norman Wells pipeline'

Tags: KOGAS Canada Ltd, MGM Energy