2010.01.06 cardium industry bulletin

Oil & Gas Royalty Trusts Oil & Gas Producers January 6, 2010

Roger Serin, P.Eng. Greg Shaw, CFA 403 299 7964 403 292 1204 [email protected] [email protected] Aaron Bilkoski (Associate) Joel Douglas, CA (Associate) 403 299 3294 403 299 3272 [email protected] [email protected]

YOUR ATTENTION IS DIRECTED TO THE IMPORTANT DISCLOSURES IN APPENDIX A. All figures in C$ unless otherwise specified

Cardium Oil Opportunity - One of Alberta's Few Bright Spots Horizontal Drilling With Multi-stage Fraccing Opens The Door (And a Number of Players Line Up To Get In) • We think that with an extensive areal extent, high Original Oil In Place (OOIP)

and high remaining crude oil reserves – horizontal drilling and multi-stage fraccing has the potential to rejuvenate activity in the Cardium formation in central Alberta.

• OOIP in the Cardium formation is estimated at approximately 10 Billion bbls with average low recovery in the 20% range, although this varies widely.

• In our view it is most likely that the best horizontal drilling results in the Cardium will be from lower quality (i.e. higher shale content) tighter sands on the edges of existing pools.

• The Cardium formation consists of interbedded sandstone and shale, in some areas capped with conglomerate. The maximum zone thickness in the Cardium is approximately 15 metres.

• The trusts are currently dominant Cardium producers and land holders. In late 2009 and 2010, ARC Energy Trust (AET.UN), Baytex Energy Trust (BTE.UN), Bonavista Energy Trust (BNP.UN), Daylight Resources Trust (DAY.UN), NAL Oil & Gas Trust (NAE.UN), Penn West Energy Trust (PWT.UN) and Vermilion Energy Trust (VET.UN) are expected to all be carrying out expanded horizontal multi-stage fracced well programs.

• Strong oil prices, reasonable Alberta royalty incentives (at least through 2010) and positive economics we think will likely result in a 10 fold increase in activity over 2009. There is a wide range of land owners in a broad geographic area.

2 A Division of TD Securities Inc.

Cardium Potential We think that with an extensive areal extent, high OOIP and high remaining crude oil reserves – horizontal drilling and multi-stage fraccing has the potential to rejuvenate activity in the Cardium formation in central Alberta. The largest Cardium oil pool is the Pembina field, with about 7.8 billion bbls Original Oil in Place (OOIP). The reservoir trap is stratigraphic with no underlying water or gas cap. To date the main recovery drivers have been infill drilling and waterflood. With this, pool recoveries for the Cardium zone at Pembina and many offsetting fields are expected to be in the range of only 20% (see Exhibit 2). Horizontal drilling was experimented with in the early-mid 1990’s but results were generally disappointing. The very recent use of horizontal drilling with multi-stage fraccing has seen promising initial results and many operators have indicated plans for further development of the Cardium, both at Pembina and in offsetting Cardium pools with this technology. In this report we outline top operators and land owners in the Cardium fairway trend seen in Exhibit 1. The areal extent of the Cardium formation is large, nearly 30 miles long by 7 miles wide with OOIP in the Cardium approaching 10 billion barrels. NAL Oil & Gas Trust was an early mover in applying horizontal drilling and multi-zone fraccing to the Cardium formation, completing the first well in Q4/08. Since that time the trust has been the most active driller and plans to have over 20 horizontal wells drilled and completed in the Cardium by year-end 2009. As we discuss later, the geological deposition of the Cardium can lead to a wide variation in reservoir quality and we think this will impact horizontal well performance. In our view it is most likely that the best horizontal drilling results in the Cardium will be from lower quality (i.e. higher shale content) tighter sands on the edges of existing pools. Highlighting reservoir variability and risk, we note that Detector Exploration recently abandoned a horizontal Cardium well after penetrating a conglomerate section that was flooded from offsetting water injection.

OOIP in the Cardium is ~10 Billion bbls with low recovery, in the 20% range.

Horizontal drilling & multi-stage fraccing show promise in rejuvenating activity in the Cardium formation in Alberta.

It is most likely that the best horizontal drilling results in the Cardium will be from lower quality (i.e. higher shale content) tighter sands on the edges of existing pools.

A Division of TD Securities Inc. 3

Exhibit 1. Cardium Oil Pools (and Horizontal Wells)

PembinaPembina

Willesden GreenWillesden Green

GarringtonGarrington

BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus

CrossfieldCrossfieldT28

T38

T48

T28

T38

T48

R23W4R4R14

R23W4R5R15

PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus

CrossfieldCrossfield

Source: geoScout, TD Newcrest

Production from the Cardium formation in central Alberta is not new – pool discoveries were made in the 1950’s and early 1960’s. There are a number of large OOIP Cardium pools but Pembina dominates as seen in Exhibit 2. Given the low recovery, reservoir deposition and high OOIP, it is not surprising to us that horizontal drilling with multi-stage fraccing is of interest to increase recovery.

Exhibit 2. Cardium Oil Pools

FieldDepth (ft KB)

Oil Wells

Hztl Wells Discovery

Area (Sections)

Net Pay (ft)

Porosity (%)

Initial Pressure

(psi)

OOIP (Million

Bbl) Est

RecoveryCrossfield 6,661 139 0 1956 65 5.9 11 3,642 153 16%Ferrier 5,223 424 6 1961 138 11.5 13.8 1,683 559 21%Garrington 6,033 441 3 1954 145 8.8 10.8 3,623 377 12%Lochend 7,233 112 0 1961 72 4.6 10 2,541 102 5%Pembina 5,089 3,032 27 1953 981 17.4 12.8 2,957 7,784 18%Willesden Green 4,507 731 1 1954 302 8.3 12.2 1,250 820 20% Source: geoScout, TD Newcrest


Geology At Pembina the Cardium formation consists of interbedded sandstone and shale, in some areas capped with conglomerate. Maximum zone thickness is ~15 metres. The conglomerate is variable with thickness ranging from 0 to 9 metres with an average more like 1 metre. As a result the conglomerate is estimated to contain less than 10% of OOIP but has higher recoveries given its higher permeability. While natural fracturing of the sandstone has been seen, these fractures are interpreted to be vertical and restricted areally and as such do not contribute significantly to well performance. Initially as seen in Exhibit 3, the stratigraphic framework of the Cardium formation at Pembina was divided into conglomerate and sandstone facies. Subsequently the sandstone facies have been divided into seven prograding parasequences. Reservoir quality improves vertically in each parasequence. There is also a directional flow trend, likely the result of directional permeability within the sandstone from induced fractures oriented southwest to northeast. The deposition has impacted secondary recovery and may impact development with horizontal drilling and multi-stage fraccing. Where the conglomerate is well developed, the majority of injected water enters this zone, reducing recovery of the underlying sandstone. While low recovery in the sandstone facies may make it a target for horizontal drilling and multi-stage fraccing, we expect much of the better horizontal well results to be on the edges of the exiting pools where reservoir quality erodes, typically the result of increasing shale content and where the conglomerate is less prevalent.

Exhibit 3. Cardium Stratigraphic Framework

Source: Cardium Stratigraphy of the Pembina Field – A.R. Nielsen

The Cardium formation consists of interbedded sandstone and shale, in some areas capped with conglomerate. Maximum zone thickness is ~15 metres.


Exhibit 4. Cardium Conglomerate Thickness over Pembina Field

Source: Alberta Geological Survey

Horizontal wells drilled in the Cardium in the Pembina pool in the early 1990’s, without the benefit of multi-stage fraccing, showed mixed results (see Exhibit 5). Exhibit 5. Cardium Hztl Wells Drilled in 1990’s (Not Multi-Stage Fracced)

0

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250

300

0 50 100 150 200

Normalized Months

CD

OR

(bbl

/d)

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6

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18

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l Cou

ntWell Count


The benefit of multi-stage fraccing is obvious as seen in Exhibit 6, with IP rates (first month) more than double those of conventional completed horizontal wells shown in Exhibit 5. In our view, it is important to recognize that the majority of the “new” horizontal wells using multi-stage fraccing have been on the edges of the main Cardium pools where reservoir quality is lower and recovery is also low. We caution readers that a) well results are early with limited data i.e. a dozen wells with only 5 wells having 6 months of production history; b) significant variability in IP rates and EUR are to be expected given the reservoir variability seen in the Cardium formation; and c) the data shown in Exhibit 6 is consistent with that in NAL Oil & Gas Trust’s December Investor presentation with production data shown on a b/d using producing hours versus a calendar day basis and in this regard is generally more indicative of well capability.


We have prepared economics for an “average” well as shown in Exhibit 6 with an estimate of EUR of 145 mstb. Note that this type well is estimated to produce an average of ~100 b/d in the first year, with a 1st month IP of ~ 250 b/d. Typically TD Newcrest would look at a range of Initial Production (IP) and Economic Ultimate Reserves (EUR) results based on a probability analysis but with public data available for only 13 wells and with only 5 of these wells having production data for more than 6 months, this type of probability analysis is not possible. Exhibit 6. Horizontal Multi-Stage Fracced Wells - Cardium

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100

150

200

250

300

350

400

450

500

0 1 2 3 4 5 6 7 8 9 10 11 12

Normalized Months

PDO

R (b

bl/d

)

0

2

4

6

8

10

12

14

Rate Based on Hours

Rate Based on Calendar Day

# Wells in Sample


Using a horizontal multi-stage fracced well cost of $3.5 million for a our analysis for economic returns is shown in Exhibit 7. A break-even wellhead crude oil price (10% IRR) is estimated at $62/bbl After Tax and $57/bbl Before Tax. Our analysis also considers the Alberta drilling incentive credits of $200/metre and the assumption that well costs come down by ~$0.5 million (something we think likely with larger program drilling and recent innovations). A break-even wellhead crude oil price (10% IRR) is estimated at $45/bbl After Tax and $42/bbl Before Tax.

Exhibit 7. Economics Hztl Multi-Stage Fracced Wells - Cardium

0%

20%

40%

60%

80%

100%

120%

$50 $60 $70 $80

Wellhead Price-$C/bbl

IRR

-%

ATX IRRATX IRR (Incentives+Lwr Well Cost)BTX IRRBTX IRR (Incentives+Lwr Well Cost)

0

1

2

3

4

5

6

7

8

9

10

$50 $60 $70 $80

Wellhead Price-$C/bbl

Payo

ut-y

rs

ATX PayoutATX Payout (Incentives+Lwr Well Cost)BTX PayoutBTX Payout (Incentives+Lwr Well Cost)

Source: geoScout, Value Navigator, TD Newcrest


A question becomes then – who is best positioned to benefit from this technology innovation underway in the re-development of the Cardium? Exhibit 8 shows the Top 30 Cardium crude oil producers within the map area shown in Exhibit 1 with companies under coverage highlighted.

Exhibit 8. Top Cardium Oil Producers of Total of Total

Oil Gas 6:1 Corp BOE Cardium

PoolAvg

Prod'nRank Company Ticker bbl/d mmcf/d BOE/d % % BOE/d

1 Penn West Energy Trust PWT.UN 25,000 14% 0% 1,318 182 Arc Resources Ltd AET.UN 5,080 7 6,297 10% 11% 550 143 Bonterra Oil & Gas Ltd BNE 2,111 4 2,854 59% 5% 359 84 Enerplus Resources Fund ERF.UN 2,000 3 2,519 3% 4% 224 225 Imperial Oil Limited IMO 1,579 1 1,779 1% 3% 136 156 Husky Energy Inc HSE 684 0 757 0% 2% 61 127 Triaxon Resources Ltd Private 382 1 536 45% 1% 92 68 Bonavista Energy Trust BNP.UN 376 3 809 1% 1% 57 179 Taqa North Ltd Private 343 3 882 1% 1% 45 2210 Compton Petroleum Corporation CMT 227 0 267 1% 0% 22 1311 Sabre Energy Ltd Private 203 0 280 6% 0% 32 912 Rondo Petroleum Inc Private 151 1 244 33% 0% 42 613 Advantage Oil & Gas Ltd AAV 150 0 161 1% 0% 19 914 Bellatrix Exploration Ltd BXE 142 0 158 2% 0% 31 515 Freehold Royalty Trust FRU.UN 103 0 141 14% 0% 16 916 NuVista Energy Ltd NVA 99 1 187 1% 0% 28 717 Skylight Energy Resources Ltd Private 88 0 128 88% 0% 31 418 Harvard International Resources Ltd Private 79 0 86 4% 0% 8 1119 Onyx 2006 Inc Private 73 1 319 67% 0% 12 2820 Sifton Energy Inc Private 66 0 87 13% 0% 11 821 Talisman Energy Inc TLM 55 1 147 0% 0% 12 1222 Sword Energy Inc Private 55 0 79 1% 0% 16 523 Provident Energy Trust PVE.UN 51 0 81 0% 0% 10 724 Anderson Energy Ltd AXL 50 0 85 1% 0% 9 925 China National Petroleum Corp Private 39 0 42 12% 0% 9 526 Huegler Holdings Ltd Private 38 0 38 72% 0% 6 727 Vermilion Energy Trust VET.UN 28 0 36 0% 0% 3 1828 Path Resources Ltd Private 27 0 33 87% 0% 9 429 Derrick Petroleum Ltd Private 27 0 37 100% 0% 6 630 Exxonmobil Canada Ltd Private 26 0 42 0% 0% 4 23

Note - Triaxon acquired by Crescent Point and assets subsequently sold to Penn West - PWT production from company, net wells and per well estimates from XI Technologies

Net Wells

Calendar Day

Source: XI Technologies, TD Newcrest

We note that a number of companies with limited current production from the Cardium have a meaningful land position and many smaller companies have seen strong share price performance on the back of wells drilled or licensed in the Cardium. Companies under coverage that have publically indicated an increasing focus in the Cardium using horizontal drilling and multi-stage fraccing include (sorted alphabetically) – ARC Energy Trust, Bonavista Energy Trust, Daylight Resources Trust, NAL Oil & Gas Trust, Penn West Energy Trust and Vermilion Energy Trust. Within the general Cardium fairway we determined developed and undeveloped land holdings by owner with rights to the Cardium formation. This information is shown for the Top 50 land owners in Exhibit 9. Note this does not include lands held through brokers and includes developed and undeveloped lands given the potential to drill horizontal wells on developed lands.


Exhibit 9. Top Land Owners – Cardium Rights (Developed+Undeveloped)

Rank Company CDN Ticker

Net Hectares

Net Sections

1 Penn West Energy Trust PWT.UN >215,000 >8502 ConocoPhillips Canada Limited 227,910 8903 Taqa North Ltd 138,257 5404 Suncor Energy Inc SU 95,802 3745 Bonavista Energy Trust BNP.UN 50,349 1976 Devon Canada Corporation 49,419 1937 Vermilion Energy Trust VET.UN 45,532 1788 Imperial Oil Limited IMO 41,848 1639 Arc Resources Ltd HSE 38,224 14910 Husky Energy Inc 37,323 14611 BP Canada Energy Company 36,474 14212 Shell Canada Limited 34,578 13513 Pengrowth Energy Trust PGF.UN 34,152 13314 Enerplus Resources Fund ERF.UN 31,527 12315 Compton Petroleum Corporation CMT 29,007 11316 Exxonmobil Canada Ltd 28,187 11017 Encana Corporation ECA 26,715 10418 Bonterra Oil & Gas Ltd BNE 24,494 9619 Harvest Energy Trust Private 22,432 8820 Apache Canada Ltd 22,301 8721 Daylight Resources Trust DAY.UN 22,221 8722 Nuvista Energy Ltd NVA 22,196 8723 Anderson Energy Ltd 21,887 8524 Canadian Natural Resources Limited CNQ 20,319 7925 Nal Resources Limited Private 20,201 7926 EOG Resources Canada Inc 18,711 7327 Talisman Energy Inc TLM 17,460 6828 Nal Oil & Gas Trust NAE.UN 16,074 6329 Britt Resources Ltd Private 16,001 6330 Crew Energy Inc CR 14,414 5631 Advantage Oil & Gas Ltd AAV 14,244 5632 Mancal Energy Inc Private 12,450 4933 Hunt Oil Company 12,334 4834 Bellatrix Exploration Ltd. BXE 12,241 4835 Angle Energy Inc NGL 11,744 4636 Provident Energy Trust PVE.UN 11,739 4637 996527 Alberta Ltd Private 11,600 4538 Signalta Resources Limited Private 9,902 3939 Vero Energy Inc VRO 9,354 3740 Prospex Resources Ltd PSX 9,239 3641 Regent Resources Ltd Private 8,967 3542 Crocotta Energy Inc CTO 8,306 3243 Centrica Canada Ltd Private 8,306 3244 Zapata Energy Corporation ZCO 7,956 3145 Fairborne Energy Ltd FEL 7,112 2846 Berens Energy Ltd BEN 7,090 2847 Ish Energy Ltd Private 6,844 2748 Omers Energy Inc Private 6,449 2549 O & G Resource Group Ltd Private 6,368 2550 Zargon Energy Trust ZAR.UN 6,337 25

Source: XI Technologies, TD Newcrest


For companies under coverage (ARC Energy Trust, Baytex Energy Trust, Bonavista Energy Trust, Daylight Resources Trust, NAL Oil & Gas Trust, Penn West Energy Trust and Vermilion Energy Trust) we show land holdings in the Cardium fairway (note not just Cardium rights) in Exhibit 10.

Exhibit 10. Land Ownership – Cardium Fairway Baytex Energy TrustARC Energy Trust

Bonavista Energy Trust Daylight Resources Trust

PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


T38

T48

T28

T38

T48

R23W4R4R14

R23W4R5R15

PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


T38

T48

T28

T38

T48

R23W4R4R14

R23W4R5R15

PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


T38

T48

T28

T38

T48

R23W4R4R14

R23W4R5R15

PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


T38

T48

T28

T38

T48

R23W4R4R14

R23W4R5R15

PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus




Exhibit 11. Land Ownership – Cardium Fairway (continued)

Penn West Energy Trust Vermilion Energy Trust

NAL Oil & Gas TrustEnerplus Resources Fund

PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


T38

T48

T28

T38

T48

R23W4R4R14

R23W4R5R15

PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


T38

T48

T28

T38

T48

R23W4R4R14

R23W4R5R15

PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


T38

T48

T28

T38

T48

R23W4R4R14

R23W4R5R15

PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus


T38

T48

T28

T38

T48

R23W4R4R14

R23W4R5R15

PembinaPembina



BrazeauBrazeau

CarolineCaroline

FerrierFerrier

RicinusRicinus



Exhibit 12. Cardium Activity By Company (From Public Documents) Company Activity Cardium Hztl Wells Lands Other

ARC Energy Trust Q3/09-4 wells, Q4/09 add'l 6 wells, 2010-17 wells Drilling at Pembina and GarringtonBase Oil & Gas Drilling up to 5 wells on farm-inBaytex Energy Trust Up to 5 wells in 2010 budgetBellatrix Exploration Drilled 2 wells Drilling Inventory 57 wellsBerens Energy First well >200 b/d on pump 70 (40 net sections) Drilling Inventory 170 (100 net) wellsBonavista Energy Trust Up to 6 wells by y/e 2009; up to 20 in 2010Bonterra Energy By mid Oct had drilled 3 wellsDaylight Resources Trust First well drilled Q4/09 A signficant portion of 2010 budgetDetector Exploration First well uneconomic - water swept conglomerateEnterra Energy Trust Plans 10-16 in 2010 4,000 net acresMidway Energy Drilling 3 wells by y/e 2009, up to 12 in 2010 23 net sections NAL Oil & Gas Trust By Q3/09 ~10 wells, 20-25 wells by y/e 2009 Early mover in play with first well in Q4/08Nexstar Energy By mid Dec had participated in 8 wells 2,600 net undev acres To be acquired by Result Energy; Inventory 40 wellsPenn West Energy Trust Plans 20-30 in 2010Redcliffe Exploration Drilling 1 well by y/e 2009 12 sections-65% WIWest Energy Q4/09 drilled 9 (6.6 net) wells 70 net sections 40 (32 net) locationsVermilion Energy Trust Drilling at least 1 well by y/e 2009 Source: Public documents, TD Newcrest


Exhibit 13. Horizontal Cardium Wells Licensed

Well ID Well Status OperatorWell

Licensed Well SpudRig

ReleasedProj.

Fm@TDOn

Prodn100/14-12-038-07W5/00 Location Angle Enrg Inc 12/10/2009 Cardium100/05-17-049-06W5/00 Location ARC Rsrcs Ltd 12/11/2009 Card_ss100/13-03-051-12W5/00 Location Baccalieu Enrg Inc 12/07/2009 12/16/2009 Cardium100/04-01-046-09W5/00 Location Base Rsrcs Inc 12/23/2009 Card_ss100/14-25-049-05W5/00 Location Baytex Enrg Ltd 12/03/2009 12/12/2009 Cardium100/13-18-048-05W5/00 Location Baytex Enrg Ltd 12/09/2009 Cardium100/16-25-049-05W5/00 Location Baytex Enrg Ltd 12/22/2009 Cardium100/13-29-047-03W5/00 Location Bellatrix Expl Ltd 12/17/2009 Card_ss100/03-27-048-08W5/00 Location Bellatrix Expl Ltd 12/22/2009 Card_ss100/01-14-048-11W5/00 ABD Whipstock Berens Enrg Ltd 09/10/2009 09/13/2009 10/10/2009 Cardium100/14-22-047-05W5/00 Pumping OIL Bonavista Petrl Ltd 08/20/2009 08/27/2009 09/05/2009 Cardium 2009/10100/06-22-028-04W5/00 Location Bonavista Petrl Ltd 12/02/2009 Cardium100/01-25-047-03W5/00 Pumping OIL Bonterra Enrg Corp 11/25/2008 12/03/2008 12/21/2008 Card_ss 2009/01100/16-13-047-03W5/00 Pumping OIL Bonterra Enrg Corp 07/29/2009 08/10/2009 08/26/2009 Card_ss 2009/10100/08-30-047-02W5/00 Pumping OIL Bonterra Enrg Corp 08/28/2009 09/19/2009 10/06/2009 Card_ss 2009/10100/16-27-047-05W5/00 Drilled & Cased Bonterra Enrg Corp 10/15/2009 11/05/2009 11/21/2009 Card_ss102/16-15-048-05W5/00 Location Bonterra Enrg Corp 12/01/2009 Card_ss100/08-24-047-11W5/00 Location Bonterra Enrg Corp 12/22/2009 Card_ss102/16-24-047-11W5/00 Location Bonterra Enrg Corp 12/22/2009 Card_ss100/09-13-036-09W5/02 ABD Whipstock BP Cda Enrg Comp 09/27/1990 10/04/1990 10/11/1993 Cardium100/05-18-036-08W5/03 Drainage Well BP Cda Enrg Comp 09/27/1990 10/04/1990 10/11/1993 Cardium102/12-18-036-08W5/04 Pumping OIL BP Cda Enrg Comp 09/27/1990 10/04/1990 10/11/1993 Cardium 1993/10100/01-17-038-07W5/02 ABD Whipstock Devon Cda Corp 06/23/1988 06/23/1988 02/05/1996 Cardium100/01-17-038-07W5/03 Drainage Well Devon Cda Corp 06/23/1988 06/23/1988 02/05/1996 Cardium100/02-17-038-07W5/04 Drilled & Cased Devon Cda Corp 06/23/1988 06/23/1988 02/05/1996 Cardium100/02-08-039-07W5/00 ABD Whipstock Devon Cda Corp 11/19/1993 11/30/1993 01/15/1994 Cardium100/02-08-039-07W5/02 ABD Whipstock OIL Devon Cda Corp 11/19/1993 11/30/1993 01/15/1994 Cardium 1994/02100/09-08-039-07W5/03 Flowing OIL Devon Cda Corp 11/19/1993 11/30/1993 07/27/1994 Cardium 1994/08100/08-31-039-07W5/00 Flowing OIL Devon Cda Corp 10/19/1994 10/26/1994 11/25/1994 Cardium 1994/12100/13-08-052-12W5/00 Pumping OIL Emm Enrg Inc 07/12/1991 07/17/1991 08/03/1991 Cardium 1991/08103/16-29-047-02W5/00 Location Exoro Enrg Inc 12/10/2009 12/16/2009 Cardium100/11-05-054-13W5/00 Pumping OIL Iberdrola Cda Enrg 02/11/1997 03/28/1997 04/17/1997 Card_cgl 1997/05100/01-29-033-03W5/00 Location Midway Enrg Ltd 12/02/2009 12/07/2009 Cardium100/04-01-034-04W5/00 Location Midway Enrg Ltd 12/14/2009 Cardium100/04-14-034-04W5/00 Location Midway Enrg Ltd 12/23/2009 Cardium100/13-23-034-04W5/00 Location Midway Enrg Ltd 12/23/2009 Cardium100/12-17-035-04W5/00 Pumping OIL NAL Rsrcs Lmtd 08/25/2008 09/18/2008 10/05/2008 Cardium 2008/11100/05-33-034-04W5/00 Flowing OIL NAL Rsrcs Lmtd 09/18/2008 10/07/2008 10/25/2008 Cardium 2008/12100/09-17-034-04W5/00 Flowing OIL NAL Rsrcs Lmtd 10/10/2008 10/26/2008 11/15/2008 Cardium 2009/01100/08-18-037-03W5/00 Pumping OIL NAL Rsrcs Lmtd 10/31/2008 11/18/2008 11/30/2008 Card_ss 2009/01100/04-25-035-05W5/00 Pumping OIL NAL Rsrcs Lmtd 11/13/2008 01/18/2009 02/03/2009 Cardium 2009/04100/14-10-034-04W5/00 Flowing OIL NAL Rsrcs Lmtd 01/14/2009 02/04/2009 02/21/2009 Cardium 2009/04100/08-10-034-04W5/00 Flowing OIL NAL Rsrcs Lmtd 06/30/2009 07/22/2009 08/11/2009 Cardium 2009/09100/16-16-034-04W5/00 Flowing OIL NAL Rsrcs Lmtd 08/12/2009 09/03/2009 09/19/2009 Cardium102/01-25-035-05W5/00 Drilled & Cased NAL Rsrcs Lmtd 08/20/2009 09/27/2009 10/15/2009 Cardium100/04-26-035-05W5/00 Drilled & Cased NAL Rsrcs Lmtd 08/20/2009 09/08/2009 09/26/2009 Cardium100/15-20-034-04W5/00 Location NAL Rsrcs Lmtd 12/14/2009 Cardium100/14-09-034-04W5/00 Location NAL Rsrcs Lmtd 12/15/2009 Cardium100/16-09-034-04W5/00 Location NAL Rsrcs Lmtd 12/15/2009 Cardium100/15-16-048-11W5/00 Location Nuvista Enrg Ltd 12/23/2009 Cardium100/13-12-046-08W5/00 Location Onyx 2006 Inc 12/08/2009 12/13/2009 Cardium103/04-07-048-07W5/02 Drainage Well Penn West Petrl Ltd 07/18/1955 09/30/2000 10/10/2000 Card_ss103/04-07-048-07W5/03 Pumping OIL Penn West Petrl Ltd 07/18/1955 09/30/2000 10/10/2000 Card_ss 2000/10100/03-36-052-13W5/02 Pumping OIL Penn West Petrl Ltd 10/24/1985 11/23/1995 11/29/1995 Cardium 1995/12100/03-30-052-12W5/00 ABD Whipstock Penn West Petrl Ltd 11/01/1994 11/04/1994 12/01/1994 Cardium100/03-30-052-12W5/02 WTR Injection Penn West Petrl Ltd 11/01/1994 11/04/1994 12/01/1994 Cardium 1994/12100/05-21-050-09W5/00 Drainage Well Penn West Petrl Ltd 07/18/1995 09/03/1995 09/26/1995 Card_ss100/13-24-047-10W5/00 WTR Injection Penn West Petrl Ltd 09/21/2007 11/27/2007 12/20/2007 Cardium100/15-15-042-08W5/00 Pumping OIL Penn West Petrl Ltd 10/05/2007 11/02/2007 11/24/2007 Card_ss 2008/03100/11-24-047-10W5/00 Drilled & Cased Penn West Petrl Ltd 04/20/2009 07/15/2009 08/09/2009 Cardium103/06-28-047-09W5/00 Pumping OIL Penn West Petrl Ltd 05/22/2009 06/03/2009 06/23/2009 Cardium 2009/09103/11-32-047-09W5/00 Location Penn West Petrl Ltd 12/14/2009 Cardium102/14-22-047-09W5/00 Location Penn West Petrl Ltd 12/22/2009 Cardium100/15-22-047-09W5/00 Location Penn West Petrl Ltd 12/22/2009 Cardium100/05-26-048-11W5/00 ABD Whipstock Rondo Petrl Inc 09/10/2009 10/07/2009 10/26/2009 Cardium100/13-27-048-11W5/00 Location Rondo Petrl Inc 12/23/2009 Card_ss100/13-18-049-06W5/00 Location Sifton Enrg Inc 12/09/2009 Card_ss102/16-22-047-03W5/00 Location Spry Enrg Ltd 12/22/2009 Card_ss100/12-10-048-04W5/00 Location Standard Enrg Inc 12/22/2009 Card_ss100/13-10-048-04W5/00 Location Standard Enrg Inc 12/22/2009 Card_ss100/12-04-041-08W5/02 ABD OIL Zone Suncor Enrg Inc 09/30/1997 11/10/1997 12/11/1997 Cardium 1998/03100/02-06-040-07W5/00 ABD OIL Suncor Enrg Inc 10/23/1997 12/15/1997 01/16/1998 Cardium 1998/03100/02-16-047-01W5/02 Drainage Well Triaxon Enrg Inc 10/18/1984 03/28/2007 04/09/2007 Cardium100/01-23-050-12W5/00 Location Vermilion Rsrcs Ltd 12/08/2009 12/18/2009 Cardium100/04-11-051-12W5/00 Location Vermilion Rsrcs Ltd 12/23/2009 Card_ss100/01-05-051-12W5/00 Location Vero Enrg Inc 12/01/2009 12/11/2009 Cardium100/16-11-050-06W5/00 Location West Enrg Ltd 12/04/2009 12/10/2009 Cardium102/16-23-047-03W5/00 Location West Enrg Ltd 12/23/2009 Cardium Source: geoScout, TD Newcrest


Exhibit 14. Horizontal Cardium Wells Licensed Since Q4/08

T28

T38

T48

T28

T38

T48

R23W4R4R14

R23W4R5R15


Conclusion While there are a limited number of producing wells drilled horizontally with multi-stage fraccing (see Exhibit 6 and Exhibit 13), that is expected to change. As we show in Exhibit 13 there are 36 wells licensed or spud with no production data yet available. We wouldn’t be surprised to see up to 150 horizontal wells drilled in the Cardium in the fairway shown over the next 12-24 months. Extension of the Alberta royalty and well incentives will be key to this level of activity. In terms of scale, many trusts find themselves with a significant land position in the Cardium trend – their historical bias to areas of mature production. While many trusts have an opportunity base in the Alberta light oil Cardium play, we expect ARC Energy Trust, Bonavista Energy Trust, Daylight Resources Trust and NAL Oil & Gas Trust to spend proportionally more of their 2010 capex on this play type. M&A will likely continue as smaller companies with a foot print in this play realize capital costs are high on a per well basis and there is execution risk.


APPENDIX A. IMPORTANT DISCLOSURES Company Ticker Disclosures Advantage Oil & Gas Ltd. AAV-T n/a Baytex Energy Trust BTE.UN-T 1, 2, 4 Bonavista Energy Trust BNP.UN-T 1, 2, 4 Celtic Exploration Ltd. CLT-T 9 Crescent Point Energy Corp. CPG-T 1, 2, 4, 9 Crew Energy Inc. CR-T 1, 2, 4, 9 Daylight Resources Trust DAY.UN-T 1, 2, 4 Enerplus Resources Fund ERF.UN-T 1, 2, 4, 9, 10 Galleon Energy Inc. GO-T 1, 2, 4, 9 NuVista Energy Ltd. NVA-T 1, 2, 4, 9 Paramount Energy Trust PMT.UN-T 2, 4 Paramount Resources Ltd. POU-T 9 Pengrowth Energy Trust PGF.UN-T 1, 2, 4, 9 Penn West Energy Trust PWT.UN-T 1, 2, 4, 9 Progress Energy Resources Corp. PRQ-T 1, 2, 4, 9 Provident Energy Trust PVE.UN-T 2, 4 Storm Exploration Inc. SEO-T n/a Trilogy Energy Trust TET.UN-T n/a Vermilion Energy Trust VET.UN-T 1, 2, 4 Zargon Energy Trust ZAR.UN-T 1, 2, 4 1. TD Securities Inc., TD Securities (USA) LLC or an affiliated company has

managed or co-managed a public offering of securities within the last 12 months with respect to the subject company.

2. TD Securities Inc., TD Securities (USA) LLC or an affiliated company has received compensation for investment banking services within the last 12 months with respect to the subject company.

3. TD Securities Inc., TD Securities (USA) LLC or an affiliated company expects to receive compensation for investment banking services within the next three months with respect to the subject company.

4. TD Securities Inc. or TD Securities (USA) LLC has provided investment banking services within the last 12 months with respect to the subject company.

5. A long position in the securities of the subject company is held by the research analyst, by a member of the research analyst’s household, or in an account over which the research analyst has discretion or control.

6. A short position in the securities of the subject company is held by the research analyst, by a member of the research analyst’s household, or in an account over which the research analyst has discretion or control.

7. A long position in the derivative securities of the subject company is held by the research analyst, by a member of the research analyst’s household, or in an account over which the research analyst has discretion or control.

8. A short position in the derivative securities of the subject company is held by the research analyst, by a member of the research analyst’s household, or in an account over which the research analyst has discretion or control.

9. TD Securities Inc. and/or an affiliated company is a market maker, or is associated with the specialist that makes a market, in the securities of the subject company.

10. TD Securities Inc. and/or affiliated companies own 1% or more of the equity securities of the subject company.

11. A partner, director or officer of TD Securities Inc. or TD Securities (USA) LLC, or a research analyst involved in the preparation of this report has, during the preceding 12 months, provided services to the subject company for remuneration.

12. Subordinate voting shares. 13. Restricted voting shares. 14. Non-voting shares. 15. Common/variable voting shares. 16. Limited voting shares.


Additional Important Disclosures Price Graphs

Full disclosures for all companies covered by TD Newcrest can be viewed at https://www.tdsresearch.com/equities/disclosures by TD Newcrest's institutional equity clients. Research Ratings Action List BUY: The stock’s total return is expected to exceed a minimum of

15%, on a risk-adjusted basis, over the next 12 months and it is a top pick in the Analyst’s sector.

BUY: The stock’s total return is expected to exceed a minimum of 15%, on a risk-adjusted basis, over the next 12 months.

SPECULATIVE BUY: The stock's total return is expected to exceed 30% over the next 12 months; however, there is material event risk associated with the investment that could result in significant loss.

HOLD: The stock’s total return is expected to be between 0% and 15%, on a risk-adjusted basis, over the next 12 months.

TENDER: Investors are advised to tender their shares to a specific offer for the company's securities

REDUCE: The stock’s total return is expected to be negative over the next 12 months.

Overall Risk Rating in order of increasing risk: Low (10.1% of coverage universe), Medium (29.1%), High (49.6%), Speculative (11.2%) Distribution of Research Ratings

^ Percentage of subject companies under each ratingcategory—BUY (covering Action List BUY, BUY andSpec. BUY ratings), HOLD and REDUCE (coveringTENDER and REDUCE ratings).

* Percentage of subject companies within each of thethree categories (BUY, HOLD and REDUCE) for whichTD Securities Inc. has provided investment bankingservices within the last 12 months.

Current as of December 2, 2009

Investment Banking Services Provided*

31%

66%

2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

BUY HOLD REDUCE

Distribution of Research Ratings^

HOLD34%

REDUCE6% BUY

60%

Research Dissemination Policy TD Newcrest makes its research products available in electronic and/or printed formats and simultaneously distributes them to its institutional clients who are entitled to receive them. The Action Notes are distributed by email, and are available in PDFform on First Call, Bloomberg, Reuters, Capital IQ, FactSet and TheMarkets.com. Research Reports are distributed by email; they are also printed and distributed by courier to our entitled clients. PDFs of Reports are available on First Call, Bloomberg and Reuters. All research is available by password to entitled institutional clients at https://www.tdsresearch.com


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