AECO Gas $Cdn/GJ. Select 2011 Year-to-Date Summary Statistics

(1)

Date

Disclaimer The information and data contained herein has been obtained or prepared from sources which ARC believes to be reliable but has not been independently verified. ARC makes no representations or warranties as to the accuracy or completeness of such information and data nor the conclusions derived therefrom. This document has been published on the basis that ARC shall not be responsible for, and ARC hereby expressly disclaims any responsibility for, any financial or other losses or damages of any nature whatsoever arising from or otherwise relating to any use of this document.

Sources Bloomberg, CAODC, Baker Hughes, EIA, NOAA, CPC, IEA, Natural Resources Canada, Canadian Gas Association, ARC Financial Research

Chart Watch

January 3, 2012

1

DJIA ended 2011 with a slight recovery for the week

4

ARC Oil Sands Index gained 5.7%

12

Canadian heavy spreads continued to narrow

28

Long-dated gas futures ended 2011 at $4.37/MMbtu

36

US dry gas production down in December

WTI Crude

$US/B

Edmonton Light

$Cdn/B

Henry Hub Gas

$US/MMBtu

AECO Gas

$Cdn/GJ

AECO Basis

$US/MMBtu

Currency

$US/$Cdn

Peter Tertzakian, Chief Energy Economist Tel (403) 292-0809

[email protected]

Kara Jakeman, Manager, Energy Research Tel (403) 292-0720

[email protected]

98.83  96.12  2.98  2.50  0.39  0.9811 

Wendy Liu, Senior Energy Analyst Tel (403) 292-0391 [email protected]

Commentary

Energy Charts commentary will return next week.

Indicator 31-Dec-10 30-Dec-11 2011 YTD

High

2011 YTD Low

2011 YTD Average

Gain % (Loss)

Dow Jones Industrial Average 11,578 12,218 12,811 10,655 11,958 + 5.5%

Nasdaq 2,653 2,605 2,874 2,336 2,677 - 1.8%

S&P/TSX Composite 13,443 11,995 14,271 11,178 12,961 - 10.8%

Canadian Dollar 1.0017 0.9795 1.0601 0.9483 1.0115 - 2.2%

S&P/TSX E&P Index 3,457 2,756 3,820 2,326 3,158 - 20.3%

S&P/TSX O/G Equip and Services 2,073 1,859 2,340 1,542 2,036 - 10.3%

ARC Cdn O&G Grow h Equity Index 68,206 56,998 75,706 46,345 65,602 - 16.4%

ARC Oil Sands Equity Index 24,354 21,305 28,544 17,815 23,688 - 12.5%

Philadelphia O/G Service Index 245 216 298 182 251 - 11.9%

WTI Spot ($US/B) 91.38 98.83 113.93 75.67 95.05 + 8.2%

WTI 24-Month ($US/B) 93.53 94.39 109.88 81.08 96.84 + 0.9%

Brent Spot ($US/B) 94.30 107.58 126.74 92.98 111.06 + 14.1%

Edmonton Light Spot ($C/B) 85.45 96.12 117.97 74.53 95.51 + 12.5%

Western Cdn Select ($C/B) 70.97 84.05 93.10 57.90 77.78 + 18.4%

Natural Gas HH Spot ($US/MMBtu) 4.23 2.98 4.92 2.83 4.00 - 29.6%

Natural Gas HH 25-36 Month Avg. 5.35 4.37 5.61 4.37 5.16 - 18.3%

Natural Gas AECO Spot ($C/GJ) 3.74 2.50 4.15 2.46 3.45 - 33.2%

AECO Differential ($US/MMBtu) 0.28 0.40 0.74 -0.22 0.32 + 44.3%

Natural Gas NBP ($US/MMBtu) 9.70 8.31 10.89 8.11 9.35 - 14.3%

Select 2011 Year-to-Date Summary Statistics

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July 3, 2006

20,000 30,000 40,000 50,000 60,000 70,000 80,000

Jan-10 May-10 Sep-10 Dec-10 Apr-11 Aug-11 Dec-11

$0.76

$0.80

$0.84

$0.88

$0.92

$0.96

$1.00

$1.04

$1.08

Jan-10 May-10 Sep-10 Dec-10 Apr-11 Aug-11 Dec-11

$US/Cdn

100 140 180 220 260 300 340

250 650 1,050 1,450 1,850 2,250 2,650

Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11

S&P/TSX Oil & Gas Equipment & Service S&P/TSX Oil & Gas Drilling

Philadelphia Oil & Gas Service

S&P/TSX Phil.

1,500 2,000 2,500 3,000 3,500 4,000

6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000

Jan-10 Jul-10 Jan-11 Jul-11

S&P/TSX 300 Composite Index

S&P/TSX E& P Index

TSX Composite TSX E&P

Performance of Oil and Gas Equities

Daily Index Values; Rolling 24-Month History

Market Indicators

Broad Equity Markets

Broad market indices are one of many vital signs measuring the health of the economy. Energy demand is a function of economic health.

1 2

3 4

5 6

Performance of Canadian oil & gas equities are compared against the broader market.

The ARC Oil Sands Index measures the performance of six oil sand producers.

The ARC CDN Oil & Gas Growth Index measures the performance of over 100 oil and gas producers that are not included in larger exchange indices.

The performance of Canadian oil and gas service equities (left scale) are plotted in tandem with the corresponding US company index (right scale).

Much of Canada’s oil and gas production is exported. As such, the value of the Canadian dollar has significant impact on corporate revenues.

ARC Oil Sands Producers Equity Index

Philadelphia Oil & Gas Service Equity Index

ARC Canadian Oil & Gas Growth Equity Index

Canadian Currency Exchange

Daily Close Values; Rolling 24-Month History

The S&P Comp.

also recovered the last week of 2011.

The threat of Greece defaulting is

center stage. 1,000

1,500 2,000 2,500 3,000

6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000

Jan-10 Jul-10 Jan-11 Jul-11

Nasdaq Dow Jones

Dow Jones NASDAQ

10,000 15,000 20,000 25,000 30,000

Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 The DJIA ended

2011 with a slight recovery for the week at 12,218.

ARC Oil Sands Index gained 5.7% the last week of Dec.

Meanwhile, Canadian E&P stocks were essentially flat.

ATH received regulatory approval for its MacKay project.

ATH also sold its 40% MacKay interest to PetroChina.

PetroChina now has full ownership of the oil sands project.

Oil field services stocks fell the last week of December.

Fracturing companies, especially, have

had a rough time This is due to the recent press on environmental issues.

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July 3, 2006

70 80 90 100 110 120

Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11

$US/B 60 70 80 90 100 110 120 130

$US/B

WTI Crude (Spot) Dated Brent Crude

US Average Retail Gasoline (All Grades) Prices

Weekly Data; Rolling 3-Year History

Crude Oil

Daily Spot Crude Oil Prices

WTI NYMEX & Dated Brent Crude; Rolling 12-Month History

Spot crude oil prices (WTI) are principally driven by US stock levels, international supply/demand dynamics and related geopolitical influences.

Gasoline is one of the main products refined from crude oil. Gasoline prices are influenced by crude oil prices, seasonality and retail competition.

Here forward contract prices for WTI are plotted against months in the calendar year. Years are distinguished by color and/or symbol coding.

The daily close of the long end of the futures curve is important to watch for structural changes in the crude oil market.

Maya, Mexico’s main export crude, is a heavy sour crude with 22⁰ API and 3.5-4.0 % sulfur content.

Canadian heavy differentials vary depending on barrel-to-barrel competition at a limited number of US refineries with specialized refining capacity.

US Crude Oil Futures

West Texas Intermediate (WTI) 2012 to 2014

Daily World Heavy Oil Marker Crude Prices

Maya and Lloyd Blend at Chicago; Rolling 24-Month History

Daily Futures Crude Oil Prices: 24-Mth Contract

WTI NYMEX; Rolling 12-Month History

Canadian Oil Prices & Heavy Oil Differentials

Western Canadian Select (WCS) Differential; Rolling 12-Month History 8

9 10

11 12

7

The long-end of the curve was up modestly, 0.7%

the last week.

WTI and Brent were flat the last week of December.

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

$US/Gal

85.00 90.00 95.00 100.00 105.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec WTI $US/B

2012 2013 2014

20 40 60 80 100 120

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12

$US/B

Maya Oil Price at Chicago Lloyd Blend Oil Price at Chicago

0 5 10 15 20 25 30

50 60 70 80 90 100 110 120 130

WCS Diff.

Edmonton Light

Edm. Lt ($C/B) WCS Diff ($C/B)

2012 consensus for WTI is that it will remain around $100.

The Brent-WTI premium has narrowed to about $8.75/B.

Pipeline reversal and transport out of PADD 2 has helped.

Oil market concerns centre around tensions with Iran. And its threat

to shut down the Strait of Hormuz.

It is a critical shipping lane.

Approx. 17 MMB/d passed through the Strait in 2011.

Canadian heavy spreads continued to narrow in December.

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July 3, 2006

17.0 18.0 19.0 20.0 21.0 22.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec MMB/d

170 180 190 200 210 220 230 240 250

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec MMB

8.0 8.5 9.0 9.5 10.0

11 12 13 14 15 16 17

6.5 7.5 8.5 9.5 10.5 11.5

260 280 300 320 340 360 380

US Crude Oil Imports

Historical Tracks and Current Year Levels

Crude Oil

US Crude Oil Stocks

Weekly stock levels provide a snapshot of supply and demand. The grey lines span a historical range; the blue line plots current year levels.

13 14

15 16

17 18

The US must import crude oil to augment its domestic supply. The grey lines span a historical range; the blue line plots current year values.

Petroleum supplied represents the total consumption of petroleum products in the U.S. Oil consumption for the current year is in blue.

In the US, refinery runs mirror overall seasonal demand for petroleum products. Total operable capacity is approximately 17.6 MMB/d.

Gasoline stock levels can affect crude oil prices. Stock levels for the current year are represented by the blue line.

Gasoline consumption accounts for almost half of all oil use in the U.S.

Gasoline consumption for the current year is in blue.

Total Weekly US Petroleum Supplied

US Motor Gasoline Stocks

US Weekly Refinery Runs

US Motor Gasoline Consumption

2010 2010

2010

2010 2010

2011

Total US crude oil inventories are down about 3.5% YOY.

Despite falling gasoline prices, demand has not picked up.

The PADD 2 stock situation is noteworthy.

While still at a 5 year high, stocks there are down

~10% from April.

Takeaway capacity additions have eased the oversupply.

Total US refinery utilization has been stable at ~83%.

But crude oil input to refiners in PADD 2 has

been strong. PADD 2 inputs were at 3.5 MMB/d, a 5-year high.

This adds to the strong demand for Canadian heavy barrels.

Demand is still materially lagging last year’s levels.

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July 3, 2006

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Nov-06 Nov-07 Nov-08 Nov-09 Nov-10

MMB/d

75 80 85 90

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

MMB/d 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

Feb-07 Feb-08 Feb-09 Feb-10 Feb-11

MMB/d 80 100 120 140 160 180

World oil spare capacity resides only in OPEC member countries. It is assumed that non-OPEC countries produce at full capacity.

OPEC Notional Spare Capacity

Monthly; Rolling 60-Month History 21

Global oil demand growth is largely driven by economic growth. The majority of new demand is coming from non-OECD countries.

Cdn oil sands is an important source of new supply to meet global oil demand growth. Production is projected to reach 2.1 MMBd by 2015.

OPEC’s production levels relative to its sustainable and spare capacity ties directly into near and long-term crude oil prices.

PADD I represents the heavily populated Northeast US market. That area is important because it represents a large fraction of heating oil demand.

Distillate stocks are mildly seasonal, but especially important to watch in the winter months when heating oil demand comes to the fore.

US Distillate Fuels Stocks - PADD I

US Distillate Fuels Stocks

23 24

22 20 19

OPEC Production Data Table

Recent Production Targets and Spare Capacity: MMB/Day

Global Oil Demand

Monthly; Rolling 60-Month History

Canadian Oil Sands Production

Monthly; Rolling 60-Month History

Crude Oil

Bitumen Synthetic

2010 2010

2011

OPEC set a new 30 MMB/d target.

It was necessary that OPEC show solidarity at this meeting.

IEA curbed its oil demand estimates due to weaker economy.

In ‘11, oil demand is expected to increase by 0.7 MMB/d.

20 30 40 50 60 70 80

Current Target

No v-11 P ro d'n

P ro d'n vs Target

Sustainable Capacity

Spare Capacity

A lgeria 1.20 1.29 0.09 1.31 0.02

A ngo la 1.52 1.69 0.17 1.90 0.21

Ecuado r 0.43 0.50 0.07 0.51 0.01

Iran 3.34 3.55 0.21 3.68 0.13

Kuwait 2.22 2.67 0.45 2.87 0.20

Libya 1.47 0.55 (0.92) 0.55 0.00

Nigeria 1.67 2.10 0.43 2.49 0.39

Qatar 0.73 0.82 0.09 0.90 0.08

Saudi A rabia 8.05 9.75 1.70 12.04 2.29

UA E 2.22 2.52 0.30 2.74 0.22

Venezuela 1.99 2.53 0.54 2.64 0.11

O P E C 11 2 4 .8 5 2 7 .9 7 3 .13 3 1.6 3 3 .6 6

Iraq 2.72 3.00 0.29

T O T A L O P E C 3 0 .6 9 3 4 .6 3 3 .9 5

Notice that the cartel is already producing above the new quota.

Watch Libya’s production number in 2012.

In ‘12, oil demand is expected to increase by 1.3 MMB/d.

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July 3, 2006

$2.00

$3.00

$4.00

$5.00

$6.00

Jan 5 Apr 5 Jul 4 Oct 2 Dec 31

Closing Spot Prices at North American Natural Gas Hubs

Superimposed on Relative Pipeline Flows

\

Henry Hub-AECO Spot Price Differential

Daily; Rolling 12-Month History

Spot North American Natural Gas Prices

Daily Prices; Rolling 12-Month History

Natural Gas

Historically the AECO price has traded at approximately 85% of the Henry Hub price (in $US/MMBtu).

Spot prices at AECO mostly piggyback off Henry Hub prices, the exchange rate and the cost of transportation. Local factors can also affect price.

26 27

All prices in $US/MMBtu

Closing Spot Prices at North American Natural Gas Hubs

Superimposed on Relative Pipeline Flows

AECO

Henry Hub

Kingsgate Sumas

Stanfield

Malin

Opal

Socal

San Juan

Permian

Niagara Ventura

Chicago

US$2.98 US$2.58

US$2.89 US$2.88 US$3.10

US$2.98

US$3.03

US$2.83 US$2.86

US$2.98

US$3.29

US$2.98

US$9.49 US$3.52

Boston 25

Henry Hub

$US/MMBtu

AECO

$C/GJ -$0.25

$0.00

$0.25

$0.50

$0.75

$1.00

Jan 4 Apr 4 Jul 3 Oct 1 Dec 30

$US/MMBtu

Prices across most hubs closed out a weak 2011.

Spot prices closed 2011 near their year-lows.

The Boston spot price was an exception, with unusual cold.

Prices reflect excess supplies and storage levels.

Sluggish start to winter weather has also stalled heating demand.

Henry Hub closed below

$3.00. That’s the first time since September 2009.

More disclosure on a CHK shale gas deal announced Nov.

Total will take a 25% int. in a JV that covers the Ohio Utica shale

Total will invest

$2.3 billion as part of the JV.

(7)

July 3, 2006

$2

$3

$4

$5

$6

$7

$8

$9

$10

$11

$US/MMBtu

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Bcf per Day

$4.00

$4.25

$4.50

$4.75

$5.00

$5.25

$5.50

$5.75

$6.00

$US/MMBtu

Daily Natural Gas Prices Futures Average

Average of 25-to-36 month out contracts; Rolling 12-Month History

US Natural Gas Futures

Nymex (Henry Hub) 2012 to 2014

Natural Gas Spot Prices: NBP vs Henry Hub

Within-Day Close; Rolling 12-Month History

Canadian Natural Gas Futures

AECO Hub

US LNG Import Volumes (Net)

Daily; Historical Tracks and Current Year Levels

Natural Gas Futures Prices: NBP vs Henry Hub

Quarterly Futures Averages

Natural Gas

The daily close of the long end of the futures curve is important to watch for structural changes in the natural gas market.

28 29

30 31

32 33

Here forward contract prices are plotted against months in the calendar year. Years are distinguished by color and/or symbol coding.

A notional point in the UK National Transmission System (NTS) used as a delivery point for gas. Prices are converted from sterling to dollars.

LNG Imports are an important component in meeting US natural gas demand. Source: Bentek

AECO futures mimic Henry Hub forward prices plus a differential. Due to less liquidity, forward AECO quotes do not extend out beyond one year.

The above graph shows the pricing difference between the US and the UK natural gas futures markets on a quarterly basis.

2010 2007

NBP

Henry Hub 2011

NBP

Henry Hub

0.00 2.00 4.00 6.00 8.00 10.00 12.00

Current Q Current Q+1 Current Q+2 Current Q+3

$US/MMBtu

$C/GJ $C/Mcf $US/MMBtu

AECO Spot Price 2.50 2.64 2.58

1-Month Fwd 2.62 2.76 2.71

AECO Nov 1 Yr Out 3.28 3.46 3.39

Rest of Gas Year 2.68 2.83 2.77

Fwd Winter Strip 3.23 3.41 3.34

2.00 3.00 4.00 5.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$US/MMBtu

2012 2013 2014

Oil and liquids will still remain target for producers in 2012.

Long-dated futures ended 2011 at $4.37.

There was some negative news late last week.

US EPA stayed the Cross State Air Pollution Rule (CSAPR).

Forced closure of many coal- fired plants 2012 now delayed.

Additional bullish hope for gas- fired generation a bit uncertain.

There is a CSAPR hearing scheduled for April.

Cheniere to start construction in 2012; first

exports 2015. SAC Capital Adv- isors reportedly bought a 5.7%

int. in Cheniere.

SAC is a $14 billion hedge fund run by Steven Cohen.

Prices in the Pacific Basin are even stronger at

~$17.00.

The case for LNG exports to those regions is very compelling.

Dry gas econ- omics are particularly weak as indicated below.

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July 3, 2006

0 5 10 15 20 25 30 35

'

40 50 60 70 80 90 100 110

3 4 5 6 7 8 9 10 11 12

'

44 48 52 56 60 64 68

0 200 400 600 800 1000 1200

# of Rigs

100 200 300 400 500 600 700 800 900 1000 1100 1200 1300

Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11

# of Rigs

Natural Gas

Tracking US natural gas supply helps monitor the growth in domestic production that started ramping up in late 2007.

Total US Dry Natural Gas Production

10 Day Moving Average; Historical Tracks and Current Year Levels

34 35

36 37

38 39

Weekly US Oil and Gas Drilling Activity

Baker Hughes Average Rig Counts; Rolling 24-Month History

Weekly US Horizontal Drilling Activity

Source: Baker Hughes

US Total Natural Gas Demand

US Total Natural Gas Power Demand

US Net Natural Gas Imports From Canada

Daily; Historical Tracks and Current Year Levels US rig activity is a leading indicator of continental supply. Gas-directed rigs

(blue line) are plotted on the left-hand axis, oil-directed on the right.

US Horizontal rig activity is a leading indicator of unconventional oil and gas supply. Horizontal wells are more productive than vertical wells.

Total US demand fluctuates between 50 Bcf/d in summer and 100 Bcf/d in the winter. Weather is still the most influential factor driving consumption.

The electric power industry has become an important driver of total US natural gas demand. It is the largest component by far in the summer.

The US is a large consumer of Canadian gas. However, the dynamic is changing as US domestic production continues to grow.

Oil Rigs

Gas Rigs

2011

2010

2011 2010

2010 2011

2011

2011 2010

2010

December average dry gas production came in at 63.6 Bcf/d.

Power burn has been particularly strong.

The US gas rig count ended 2011 at 809 rigs.

Gas demand in December has been lower than expected.

It had started to roll over the last few months.

The horizontal rig count has flattened out in recent weeks.

US oil rig count ended 2011 at 1,193, up 56%

for the year.

This is the first monthly drop in 10 months.

But there were some operational issues, that have since been fixed.

Current volumes are ~65 Bcf/d, up 4 Bcf/d over a year ago.

December 2011 imports were nearly 20% below the prior year.

The largest drop was in the US NE region.

Regional production (eg.

Marcellus) has been strong.

Meanwhile, US NE gas demand was down ~25%

in December.

This has been due to more moderate winter temperatures.

Coal-to-gas switching has accelerated.

(9)

July 3, 2006

(300) (250) (200) (150) (100) (50) 0 50 100 150

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Bcf

0 100 200 300 400 500 600 700 800

# of Rigs Drilling

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

750 760 770 780 790 800 810 820 830 840

Nov-09 Feb-10 Jun-10 Oct-10 Mar-11 Jul-11 Oct-11

Utilization

Rig Fleet Capacity

# of Rigs Utilization

0 50 100 150 200 250 300

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 HDDs

Week 0

20 40 60 80 100 120

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 CDDs

Week

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Tcf

US Weekly Heating Degree Days

Source: NOAA

Cdn Oil and Gas Rig Capacity and Utilization

CAODC Average Weekly Rig Count; Rolling 2-Year History

US Weekly Cooling Degree Days

Source: NOAA

Weekly Canadian Oil and Gas Drilling Activity

CAODC Average Weekly Rig Count

Weekly natural gas demand is directly tied to the weather. Current year is in dark blue; historical years are in grey.

Natural Gas

Rig utilization in Canada is a function of broad fundamentals and seasonality. Utilization always drops off during spring breakup.

Unlike US drilling activity Canadian rigs are dispatched seasonally. The active rig count for the current year is in blue.

40 41

42 43

44 45

Weekly US Natural Gas Storage Net Change

Weekly Injection or (Withdrawals); 2006 to Current

Total Working Natural Gas in US Storage

Historical Tracks, Current Year Levels and ARC Forecast

Weekly gas storage reports provide a snapshot of supply and demand.

Previous years are in light grey; the blue line plots current year levels.

The EIA reports changes in US natural gas inventories held in underground storage facilities on weekly basis.

2010

2010 2011

2010

2011

2010 2011

Withdrawals are off to a slow start this winter.

Stocks are currently 3.548 Bcf, a seasonally high level.

There is a positive outlook for drilling in 2012.

2012 Forecast

HDDs at 2011 year-end were 24% lower than the prior year.

2011 rig activity was the strongest in the past 5 years.

PSAC is calling for a 10% increase in wells drilled.

With normal weather we could have 2 Tcf at the end of March

First quarter 2012 weather will be key to

watch. It will determine inventories and relative price support for 2012

The near-term forecast is not that gas price

supportive. The forecast calls for HDDs that are 17%

below normal.

(10)

July 3, 2006

0 50 100 150 200 250 300 350 400 450

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Bcf

0 2 4 6 8 10 12 14 16

1 6 11 16 21 26 31 36 41 46 51

Week Well Completions (000s)

0 1 2 3 4 5 6 7 8 9 10 11

1 6 11 16 21 26 31 36 41 46 51

Week Well Completions (000s)

0 5 10 15 20 25 30

# of Licenses (000s)

Alberta Natural Gas Demand

TransCanada Intra-AB Deliveries; Current Year and Historic Tracks

Natural Gas

Daily Western Canadian Pipeline Receipts

TransCanada (NOVA), Alliance, WestCoast & TransGas Pipelines

All combined, TCPL, Alliance, WestCoast and TransGas pipelines move over 13 Bcf/d of natural gas out of Western Canada.

As Alberta’s economy grows, and as more oil sands projects come on line, it will be increasingly important to monitor the Province’s gas demand.

Alberta’s natural gas storage levels provide a good metric if the producing region is well stocked. Abnormally high or low storage can affect the basis.

Canadian well licenses are a leading indicator of WCSB drilling activity.

Cumulative well licenses for the current year are in blue.

Relative year-over-year drilling activity is highlighted in this chart.

Cumulative oil well completions for the current year are shown in blue.

Relative year-over-year drilling activity is highlighted in this chart.

Cumulative gas well completions for the current year are shown in blue.

Alberta Natural Gas Storage Levels

Daily; Current Year and Historic Tracks

Canadian Cumulative Oil Well Completions

Current Year vs Years Prior

Canadian Cumulative Well Licensing Activity

Canadian Cumulative Gas Well Completions

46 47

48 49

51 50

2010

2011

2010

2011 2011

2010

2010 2011

2011

2010

2011 2010

There has been a very slow start to the current heating season.

2012 should be another record year for oil activity.

12 13 14 15 16 17 18

2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Bcf/d

Alberta’s mild December tempered gas demand levels.

Record land sales will lead drilling activity next year.

Shut-ins remain a possibility due to storage facility limits.

This would not bode well for Canadian spot prices.

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July 3, 2006

65000 70000 75000 80000 85000 90000 95000 100000 105000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Megawatts

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

$ Billions

Alberta Crown Land Sales - Oil Sands Only

Average Price per Hectare; Bi-Weekly

Alberta Crown Land Sales – Excluding Oil Sands

Year-over-Year; Cumulative

Land prices are an important component of F&D costs. In Alberta, sales of petroleum and natural gas rights are held every two weeks.

Rising commodity prices and an opportunity constrained basin have made land more valuable especially in choice regions such as the oil sands.

Source: The Ux Consulting Company, LLC http://www.uxc.com/.

The capacity of electricity generated from US nuclear power plants is 99,910 megawatts. Source: Nuclear Regulatory Commission.

Nymex offers a liquid market to hedge physical coal contracts. In power markets, coal competes for market share against oil and gas.

Weekly US electrical power output can be compared against output at the same time for years prior. Current year is plotted in blue.

Uranium Spot Prices (U

3

O

8

)

Month-End Price; Rolling Two-Year History

NYMEX CAPP Coal Prices – Near Month

Daily; Rolling One-Year History

Weekly US Nuclear Electricity Generation

Weekly US Electrical Power Output

All Sources of Power Generation

Other Indicators

52 53

54 55

56 57

2010

2010 2011

2011 1 10 100 1,000 10,000

2005 2007 2009 2011

$ per Ha (Log Scale)

$40

$50

$60

$70

$80

$90

Dec-10 Mar-11 Jun-11 Sep-11 Dec-11

$US/Ton

30 40 50 60 70 80

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11

$US/lb

60 70 80 90 100

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Gigawatthours (000s)

The last land sale of 2011 brought in $146 milion.

The year’s tally was $3.54 billion.

The big drivers in 2011 were plays like the Duvernay.

And, Swan Hills tight carbonates, Montney, and others.

The 2011 oil sands land sales totaled $105 million.

But, natural gas prices have been weak too. Coal and natural

gas are compet- ing fuels in power generation.

Coal prices have fallen since the summer.

(12)

July 3, 2006

Estimated Capital Flow in the Canadian Oil and Gas Economy for 2011

Industry Revenue, Cash Flow, Reinvestment, Drilling Activity and Production

Oil & Gas Prices

Production Volume

Debt, Equity

E&P Revenue

Service Sector Revenue

Land, Acquisitions Operating

Expenditures

Reserve Additions

Capital Flow in the Canadian Oil and Gas

Economy

Royalties & Taxes G&A

Exploration &

Development

Cash Flow

CAPEX

Dividends and Distributions Foreign Investment and Capital Outflow

Drilling Activity

$C55.12 per BOE

5.7 Million BOE/day

$C 55.6 Billion

$C 115.0 Billion

$C50.5 Billion

12,800 Wells

Canadian Industry Metrics

Canadian Industry Statistics: Historical Data and Forecast

58

P ric e

Average Price

Conv.

Liquids Bit umen +

Synt het ic Nat ural

Gas Tot al Volume

Tot al Revenue

Af t er-t ax Cash Flow

Conv. Oil and Gas Oilsands

Reinvest Rat io

Wells Compl.

Avg Rig Fleet

Avg Rig Ut iliz.

Oil Wells

Gas Wells

Dry Wells

$/ BOE

Average M BOE/ d

M BOE/ d (@ 6:1)

$C millions

$C millions x:1

# / Year

# of

Rigs % % % %

19 9 7 16.73 1,996 527 2,598 5,121 31,280 14,933 17,128 1,914 1.28 16,484 504 84% 52% 29% 17%

19 9 8 13.58 2,044 591 2,663 5,298 26,263 11,002 15,072 1,527 1.51 9,744 575 51% 32% 47% 19%

19 9 9 18.60 1,990 568 2,745 5,303 35,996 16,846 13,743 2,422 0.96 10,605 582 46% 26% 59% 13%

2 0 0 0 29.41 2,056 608 2,840 5,504 59,094 26,543 18,795 4,223 0.87 16,485 606 63% 33% 54% 12%

2 0 0 1 31.22 2,024 659 2,889 5,572 63,481 29,064 21,998 5,907 0.96 17,933 636 62% 26% 62% 10%

2 0 0 2 27.71 2,102 741 2,886 5,729 57,939 29,433 18,107 6,746 0.84 14,459 660 45% 27% 63% 9%

2 0 0 3 35.95 2,075 863 2,800 5,738 75,298 37,644 23,855 5,048 0.77 19,851 672 62% 23% 70% 6%

2 0 0 4 39.79 2,045 993 2,827 5,865 85,179 43,959 26,828 6,183 0.75 21,593 702 63% 21% 72% 6%

2 0 0 5 51.53 2,007 990 2,840 5,837 107,455 56,442 34,815 10,437 0.81 21,925 736 68% 22% 70% 6%

2 0 0 6 46.98 1,964 1,126 2,850 5,941 103,294 54,171 38,345 14,337 1.00 22,127 801 65% 22% 71% 7%

2 0 0 7 49.28 2,055 1,199 2,810 6,070 109,274 54,985 31,184 18,065 0.88 19,144 858 38% 28% 66% 6%

2 0 0 8 68.22 1,977 1,213 2,700 6,174 153,751 81,212 36,223 18,113 0.67 20,729 879 41% 30% 60% 8%

2 0 0 9 42.26 1,837 1,331 2,514 5,683 87,664 38,981 22,335 11,227 0.86 8,708 854 25% 41% 47% 12%

2 0 10 e 48.14 1,788 1,482 2,425 5,695 100,086 45,142 35,666 17,195 1.05 12,119 800 40% 48% 43% 9%

2 0 11e 55.12 1,769 1,612 2,336 5,718 115,033 55,613 35,464 15,000 0.91 12,800 800 45% 55% 40% 5%

Canadian Industry Metrics

C a pit a l Inf lo w R e inv e s t m e nt D rilling We ll S plit P ro duc t io n V o lum e

Revised 2011 and 2012 estimates will be available in January.