Mail Stop 3-9 April 28, 2005
Mr. H.S. (Scobey) Hartley
Chief Executive Officer
JMG Exploration, Inc.
500-4th Avenue S.W., Suite 2600
Calgary, Alberta, Canada T2P 2V6
Re: JMG Exploration, Inc.
Registration statement on Form SB-2
Amendment No. 1 filed April 8, 2005
File no. 333-120082
Dear Mr. Hartley:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Prospectus Summary, page 2
General
1. Describe, if material, actual costs you are obligated to pay
JED
Oil, Inc. as part of your technical services agreement, that are
over
and above the cost of performing actual services. Examples would
be
management fees or other fees for each well drilled over and above
the actual costs to drill the well and management fees in addition
to
the cost to actually operate wells once they have gone on
production,
and any other similar fees.
Risk Factors, page 4
2. Consider adding a new risk factor that states that you
currently
have no proved oil and gas reserves and disclose the ramifications
on
your company if you do not discover any oil and gas reserves in
the
future.
Management`s Discussion and Analysis or Plan of Operation, page 14
Financial Operation Overview, page 15
3. You have disclosed the year-end price of natural gas in
$/gigajoule. The petroleum industry commonly uses prices for
natural
gas expressed as $/Mcf or $/MMBtu and which investors are used to
seeing. We suggest you revise your document to disclose the price
of
natural gas in either of these terms for clarity purposes. If you
disclose natural gas prices as a function of Btu`s, also provide a
conversion factor for average Btu values per Mcf of natural gas.
Contractual Obligations and Commitments, pages 19-20
4. Please revise your contractual obligation disclosure to include
a
discussion of the Exploration and Development agreement discussed
on
page F-15 of the notes to the financial statements.
Business, page 21
Exploratory Projects, page 23
5. We note your statement that you intend to concentrate your
efforts
on oil and natural gas projects that carry a relatively high risk
of
failure but offer significantly high rewards. However, reconcile
this with the fact that two of your farm-in projects appear to be
located in relatively mature fields that have been developed for a
number of years and, therefore, probably would not offer
significantly higher rewards or consider removing the statement.
Use of seismic and other data in site selection, page 23
6. Consider balancing your disclosure with the fact that the use
of
seismic data and other technologies and the study of producing
fields
in the same area will not enable you to know conclusively prior to
drilling and testing whether oil or natural gas will be present
or,
if present, it will be in sufficient quantities to recover
drilling
and completion costs or to be economically viable.
Selection of prospects, page 23
7. We note a November 16, 2004 press release by Fellows Energy Ltd
stating that it had signed a joint venture agreement with Denver-
based JMG Exploration Inc. to drill its Weston County in Wyoming
and
Gordon Creek in Utah projects. The release also said the under the
agreement, JMG will receive a 50 percent interest in exchange for
incurring $2 million in exploration and drilling expenditures on
the
two projects by November 7, 2005. In addition, JMG advanced $1.5
million to Fellows in the form of a short-term loan. As this
appears
to be material information you should include it in your
prospectus.
Oil and Natural Gas Properties Under Development, page 23
Hooligan Draw, page 23
8. You reference the Timber Draw 1-AH well located one-half mile
from
your prospect well and you note that it flowed 16,000 barrels of
oil.
Disclose the current status of the well and if the well is still
producing and if so at what rate. If the well produced a
cumulative
amount of 16,000 barrels of oil disclose that this is not an
economic
amount of oil as it would not pay for the current costs to drill a
well to that depth.
9. Update the status of the Hooligan Draw well that you paid
$1,250,000 to JED to drill. Did the estimated cost of $1,500,000
to
drill the well include any management or operator fee to JED? If
so,
this amount should be disclosed.
Fiddler Creek, page 24
10. Disclose the current producing rate from the Fiddler Creek
field
and how many wells are on production.
Cutbank - Montana, page 27
11. Disclose the current producing rate from the Cutbank field and
how many wells are on production.
Underwriting, page 44
12. Please expand the discussion to provide additional information
concerning the timing of the offer to JED stockholders, when it
will
terminate, and the general offer commence. In addition, please
clarify the extent to which the disclosure will be updated to
reflect
the extent to which JED stockholders purchased shares in this
offering.
Notes to Financial Statements
7. Related Party Transactions, page F-14
13. It appears that your discussion of unpaid related party
payables
does not agree to the balance sheet. As such, please revise your
disclosure to ensure that all material related party transactions
are
discussed.
Exhibits
14. We note your response to comment 80 and reissue the comment.
Please file the revised legal opinion as an exhibit.
* * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
You may contact Tabatha Akins, Staff Accountant at (202)
824-
5547 or Lisa Vanjoske, Assistant Chief Accountant at (202) 942-
1972
if you have questions regarding comments on the financial
statements
and related matters. Please contact Song P. Brandon, Staff
Attorney
at (202) 942-2831, John Krug, Senior Attorney at (202) 942-2979,
or
me at (202) 942-1840 with any other questions.
Sincerely,
Jeffrey P. Riedler
Assistant Director
cc: Gary A. Agron, Esq.
Law Office of Gary A. Agron
5445 DTC Parkway, Suite 520
Englewood, Colorado 80111
Jeffrey M. Knetsch, Esq.
Brownstein Hyatt & Farber, P.C.
410 17th Street, 22nd Floor
Denver, CO 80202
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