North American Natural Gas Markets Presentation to ICoTA

1. North American Natural Gas MarketsPresentation to ICoTA October 22nd, 2009 J. Cameron Bailey CFA President and Chief Executive Officer

2. What Happened? Canadian Well Completions 2007 19,144 2008 20,729 • 9,000 down 56% 2010 ? Acquire and Exploit

3. Canadian Energy Financing - Activity • Year to Date 2009 • $5.8 billion of New Equity • 83 transaction • Energy accounts for 26% of all equity deals completed in 2009 • Year to Date 2008 • $2.3 billion in 2008 • 64 transactions • Cash Flows = Activity Acquire and Exploit

4. Natural Gas Price Forecasting – When? • Supply • Old Supply – Decline Rates? • New Supply • Drilling Activity – Key Driver • Drilling Efficiencies • Production Additions • Demand • Base Demand • Weather Acquire and Exploit

5. Historical Decline Rates US Production Declining by 30 - 35% per annum

7. Truth No. 1 - Production Declines! 2009 US Production 57.0 bcf/d Decline 25% 14.2 bcf/d Decline 30% 17.1 bcf/d Decline 35% 19.9 bcf/d Acquire and Exploit

8. US Natural Gas Production – Well Completions Acquire and Exploit

9. US Production Observations 2007 Production 51.8 bcf/d • January 2007 Average 49.6 bcf/d • 2007 Exit Rate 53.7 bcf/d • Production Additions 4.1 bcf/d • Decline 30% 14.8 bcf/d • 2007 Production Added 18.9 bcf/d • Gas Wells Completed 35,605 • Production Adds per Well 530 mcf/d 2008 Production 54.9 bcf/d • January 2008 Average 53.5 bcf/d • 2008 Exit Rate 56.6 bcf/d • Production Additions 3.1 bcf/d • Decline 30% 16.4 bcf/d • 2008 Production Added 19.6 bcf/d • Gas Wells Completed 36,432 • Production Added per Well 537 mcf/d Acquire and Exploit

10. Truth No 2. - Drilling Replaces Production Declines Acquire and Exploit

11. US Natural Gas Directed Rig Count – Future Supply? Source: Baker Hughes

12. 700 Rigs Operating – Supply Acquire and Exploit

13. The Growing US Supply Deficit US Average Demand

14. US Natural Gas Production – Declining? USProduction Source: Bentek

15. US Production - Declining When? Source: Bentek Acquire and Exploit

16. Natural Gas - Investment Cycle Concept Land Acquisition Permits Rig Count – Baker Hughes Rig Count Completions Pipeline Construction & Tie-in Production – Daily Estimates Six Month Delay? Acquire and Exploit

17. Delayed Production Response – Natural Gas Drilling Activity in Texas New well permits are down 73% but there still remained a large inventory of wells to complete Well completions have dropped off which will be followed by production declines Source: Railroad Commission of Texas

18. Texas - Natural Gas Production - Declining Source: Railroad Commission of Texas

19. Canadian Gas Drilling Rig Count – Future Supply? Lowest levels witnessed in 10 years Acquire and Exploit Source: Baker Hughes

20. Canadian Gas Production - Declining Canadian gas production is declining leaving less for exports to the US Acquire and Exploit Source: NEB

21. Canadian Gas Export to the United States Source: Bentek

22. Production Forecast - Assumptions Acquire and Exploit

23. Production Forecast – 2008 to 2009

24. Production Decline Analysis – 700 Rigs Forecast Acquire and Exploit

25. Natural Gas Demand

26. Total US Natural Gas Demand – Recession? More affected by weather than recession Source: Bentek 2009

27. Recession and Demand? – Industrial Demand Industrial demand is off 1.3 bcf/d Y/Y but has recovered Acquire and Exploit Source: Bentek 2009

28. Recession and Demand? – Power Demand Power Demand continues to be strong. Acquire and Exploit Source: Bentek 2009

29. The Growing US Supply Deficit US Average Demand

30. Seasonal Affect on Demand – Forecasting? Acquire and Exploit

31. Natural Gas Inventories – Awash in Gas ? The difference between surplus and critically low inventories is 500 bcf = 8 days of consumption Acquire and Exploit Source: EIA

32. Forecast Gas Storage Levels – 700 Rigs Operating Average Gas Demand 3.8 TCF Storage Not enough gas production to fill storage in 2010 Acquire and Exploit

33. Forecast Gas Storage Levels – 700 Rigs Operating Mild Winter – Low Gas Demand - 2006 3.8 TCF Storage Acquire and Exploit

34. Forecast Gas Storage Levels – 700 Rigs Operating Cold Winter 2008 – Perfect Storm 3.8 TCF Storage Not enough gas production to fill storage in 2010 Acquire and Exploit

35. Change in Natural Gas Inventory – Supply/Demand Balance Acquire and Exploit Source: EIA

36. US Wellhead Prices vs US Natural Gas Rig Count Source: EIA Acquire and Exploit

37. Production Decline Analysis – Response from Drilling + 60 Rigs per month Return to Work Acquire and Exploit

38. Natural Gas Myths • New technology applied to Shales and Tight Sand plays have changed the game? • Fewer wells – more productivity – replacing declines? • Recession has destroyed Demand? • Demand is running at historical highs • Drilling efficiencies have improved? • Few rigs can drill more wells – only the best crews and equipment are currently working Acquire and Exploit

39. Drilling Rig Efficiency – Improving? Acquire and Exploit

40. Conclusions • The low pace of drilling activity cannot be sustained • Price response will anticipate supply shortages • Price response will create cash flow increase capital budgets Drilling Activity • Weather is the biggest factor to when supply shortages will emerge. Acquire and Exploit