Presentation outline Company overview Natural gas market Shale gas St. Lawrence Lowlands, Quebec Near term outlook Investment summary Appendix
Commercializing the Quebec shale gas discovery First mover in Quebec with one million acre land position taken in 1998 17.99 Tcf (3 billion boe) recoverable resource discovery in the Quebec Utica shale on Questerre lands…
Asset overview St. Lawrence Lowlands, Quebec Giant Utica shale gas discovery being commercialized with partners Lorraine shale upside Northeast British Columbia Evaluating Besa River shale gas potential in Liard basin Acquired…
Operating and financial results Six Months Ended June 30 2010 2009 Cash Flow 0.7 million 1.8 million Production Crude Oil and Natural Gas Liquids (bbls/d) 299 (47%) 410 (42%) Natural Gas (mcf/d) 1,866 (53%) 3,102 (58%) Total (boe/d)…
Capitalization & liquidity Insiders 21,579,517 9% Free Float 212,255,961 91% Total 233,835,478 Options (Average exercise price 2.44) 20,143,753 Average 3 month daily trading volume 3,503,820 (OSE plus TSX) Research Coverage
Natural Gas Market
Natural gas market Utica shale gas development a match to the longterm price of gas Shale gas to replace rapidly declining conventional gas Overinvestment and Source: EnCana Corp March 2010 Investor Days recession have…
Natural gas market Gas at over 60% discount to oil on energy equivalent basis Competitive with coal for power generation Clean, abundant, reliable, cost effective and efficient supply of energy Source: Encana Corp.…
Shale Gas
How is shale different Gas is extracted from the rock, not drained from it Shale gas molecules move five meters in five years so the rock must be fractured underground by hydraulic fracturing The objective is to…
Environmental considerations Efficient use of water and highly diluted frac additives Less than one liter of water and one teaspoon of additives required daily to heat an average home in Quebec Frac additives account for less…
St. Lawrence Lowlands, Quebec
Outline Shale gas in Quebec High margin gas Well defined geological fairway Core land position in fairway Incredible Gas in Place Path to commercialization Progress on path Future plans
High margin gas Robust economics Crown royalties of 1012% Realized prices of NYMEX + 0.50 premium Minimal investment to connect to local market of 0.5 Bcf/d and larger regional markets Pipeline infrastructure in Lowlands…
Well defined geological fairway Utica structure map Potential for different play styles in structured and unstructured areas of play fairway
Core land position in fairway Acreage Interest Gross Net Questerre Talisman 25%+4.25% GORR 719,788 206,746 Yamaska Forest Oil/Gastem 20% 113,453 22,691 St. Jean Gastem 59% 181,255 107,003 Total Acres 1,014,496 336,440
Incredible gas in place Resource assessment of Utica completed by Netherland, Sewell & Associates Does not include 4 % percent overriding royalty nor Lorraine formation One trillion cubic feet (Tcf) of natural gas equals 167…
Phases of shale gas development Resource identification 1950 to 2007 Geological studies including core analysis to validate natural gas potential of Utica shale Rock properties investigation 2008 to 2010 Single frac pilot vertical…
Path to commercialization 600 500 Com m itte d Capital ( m illions) 400 300+ 300 200 75 to 200 100 0 to 75 50 to 100 0 IDENTIFY INVESTIGATE DEMONSTRATE ESTABLISH COMMENCE Resource Rock Properties Commercial…
Progress on path Validated multiTcf Utica shale resource with independent evaluation Successfully proved geo mechanical rock properties consistently across assessed acreage with vertical well program targeting middle Utica…
St. Edouard No. 1A St. Edouard horizontal well simply excellent initial result of 6mmcf/d QEC interpretation is long term production test matches Haynesville shale type curve Independent research indicates 10% rate of return…
Measuring up to a proven shale play Quebec shale compared to SWN Fayetville shale 7 6 Daily Gas Rate (mmcf/d) 5 4 3 2 1 0 Year 1 Year 2 Year 3 Year 4 an an an an an an an an…
Establishing commercial parameters Negotiating with partners for commercial demonstration project Final location for demonstration project will be based on test results from pilot horizontal well program including…
Expected timeline
Near term outlook Currently testing Gentilly No. 2 Five fracs in 700m horizontal targeting middle and lower Utica Completion and testing of Fortierville No. 1 and St. Gertrude No. 1 scheduled for this fall subject to equipment…
Investment summary Mega discovery in Utica shale Strong Extensive land position in Quebec with multiple opportunities portfolio New shale gas plays in Horn River and Liard basin Light oil development at Antler in Saskatchewan Large…
Management and Board Management Board Michael Binnion, President & Chief Executive Les Beddoes, Jr. Officer International explorationist Former VP Exploration, Bow Valley Energy Inc.; Victoria, John Brodylo, VP Exploration (Nexen)…
Appendix
What is shale Organic shale is typically a source rock that changes conventional reservoirs over geologic time Shale must be source, seal and reservoir Gas/oil is in pore spaces (free) and on surface of particles (adsorbed)…
Harnessing the learning curve Barnett Shale (Texas) Every shale play has its own 7,000 learning curve and requires F ir s t Y e a r A v g G a s R a te ( M C F P D ) 6,000 unique, innovative 5,000 solutions 4,000…
Extensive technical database Utica and Lorraine unstimulated DSTs Over 5,000 km of seismic data Over 275 wells drilled in basin with core, logs or production tests in Utica and Lorraine Bow Valley/Terrenex study Source:…
1. Farnham No 1 (2009) 6. StFrancois du Lac No 1 (2008) 12. Gentilly No 1 (2008) 18. StAugustin de Desmaures No 1 (2008) Operator: Canbriam Operator: Forest Oil Operator: Talisman Operator: Junex Spud Date: July 9, 2009 Spud Date:…
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