Download - Unconventional Natural Gas
A Compelling Case. A Focused Vision.
October 2006
Unconventional Natural Gas
TSX VENTURE: SPI
SPI
The corporate information contained in this presentation contains forward-looking forecast information. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonably accurate by Canadian Spirit Resources Inc. (CSRi) at the time of preparation, may prove to be incorrect. The actual results achieved during the forecast period will vary from the information provided herein and the variations may be material. Consequently, there is no representation by CSRi that actual results achieved during the forecast period will be the same in whole or in part as those forecast.
Disclosure Statement
SPI
Who We Are
A junior public exploration and development company focused on unconventional natural gas
Seasoned management team with expertise in unconventional natural gas development
Operations focused on Farrell Creek area of northeast B.C.
Farrell Creek resource estimated at over 1 tcf on the company’s 40,000 acres of land
Currently in pre-production stage with production and cash flow generation expected in Q3 2007
SPI
CSRi at a Glance
Shares outstanding 28.8 million
Listing TSX Venture: SPI
Recent share price $1.92
Market capitalization $55 million
Management and Directors 2.5%
Institutional shareholders 22.5%
Largest shareholder Sprott Asset Management (18.8%)
(As at September 15, 2006)
SPI
CSRi at a Glance
Total land holdings 40,000 acres
(62 sections)
Contingent resource*
Gething coals 12 – 16 bcf/section
Gething shales 11 – 17 bcf/section
Total contingent resource 1.4 – 2.0 tcf
Market cap / recoverable mcf $0.06 per mcf
*(Sproule Associates, April 17, 2006, Gething Formation only at Farrell Creek, B.C.)
Calculated on average contingent resource of 1.6 tcf at an estimated 60% recovery rate.
SPI
Unconventional Natural Gas
Unconventional natural gas includes natural gas from coal, shale gas, as well as gas from tight sands
Typically large, long-life resource
Unconventional natural gas is a rapidly growing sector in North America’s energy industry
Significant production in the U.S., 10 years ahead of Canada
SPI
Conventional vs. Unconventional Gas
Can evaluate with well logs
Immediate gas flow to well bore
May fracture to stimulate
Inorganic reservoir rock gas has migrated to reservoir trap
Permeability not depth dependant
Few wells to develop
Water/gas ratio increases
Reserve determination follows established guidelines
Needs specialized lab tests on cores
Gas diffuses slowly to fractures
Always fracture to stimulate
Organic reservoir rock is its own source rock
Permeability decreases with depth
Multiple wells and facilities
Water/gas ratio decreases
Requires production testing to demonstrate reserves
Source: Modified from AJM Petroleum Consultants
SPI
Fort St. John
Substantial Resource Play
Total unconventional gas potential in British Columbia is estimated at 90 tcf, of which 60 tcf is located in the Peace River Coalfield (shown in dark blue on locator map) where CSRi’s Farrell Creek property is located.
SPI
Focused Approach
Land
62 sections
Working Interest
94% average
Deep Rights
on over 80% of land
SPI
Farrell Creek, NE B.C.
Land
62 sections
Well Spacing
4 – 8 wells per section
Potential Well Locations
200 – 500
Productivity per Well
250 – 300 mcf/d
Total Potential Production
50 – 150 mmcf/d
SPI
Resource Report
Sproule Associates Limited Preliminary ReportApril 17, 2006:
Farrell Creek Gething Formation - Contingent gas-in-place resource potential
Coals12 – 16 bcf per
section
Shales 11 – 17 bcf per section
Total contingent resources 1.4 – 2.0 tcf
SPI
Farrell Creek Geology
Average depth to top of Cadomin is 900m
SPI
Farrell Creek Gething Formation
Coal Multiple thin seams
As many as 30 individual seams
Net coal thickness: average 25 – 50 feet
Gas content: 230 – 550 scf/ton
Shale Rich in organics
Interbedded with coal
Represents 50 – 65% of the formation
Gas content: 12 – 58 scf per ton
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Staged Approach
CSRi Today
Typical Stages of an Unconventional Gas Program
Source: Modified from Lamarre Geological
SPI
Accomplishments to Date
Drilling Program has:
Confirmed resource parameters
Confirmed geological and resource consistency
Generated data for resource assessment
Demonstrated productive repeatability
Commenced production testing – three wells flaring
Commenced preliminary facility design and pipeline hot-tap application
SPI
Financial Summary
($ millions) 2004 2005June 2006
Cash & term deposits $6.0 $10.7 $3.3
Shareholders’ equity $18.8 $29.0 $28.6
Revenue $0.074 $0.499 $0.569
Net income($1.742
) ($3.806)($2.911
)
Cash flow($0.528
) ($0.468)($0.564
)
Net income/share ($0.09) ($0.15) ($0.11)
SPI
2006 Capital Program
($ millions)June 2006
Exploration $9.7
Land $0.1
Capitalized G&A $0.6
$10.4
Estimated expenditures to September 30 $7.9
Estimated fourth quarter capital $2.5
Estimated net cash position September 30 $6.0
Ongoing net monthly G&A costs $90,000
SPI
Risks
Production rate per well
Well density and recovery factor
Equipment and service costs
Natural gas prices
SPI
CSRi – Unique Strengths
Significant resource: 1.4 – 2.0 tcf (Gething only)
High working interest land position: 40,000 acres
Multiple prospective targets
Resource knowledge and expertise of technical team
Ready access to infrastructure and pipeline
Advancing towards development phase of resource
Creating Shareholder Value
Balanced Approach. Focused Vision.
SPI
Canadian Spirit Resources Inc.
Suite 1950, Ford Tower
633 6th Avenue S.W.
Calgary, Alberta T2P 2Y5
Telephone (403) 539-5005
E-mail: [email protected]
TSX Venture: SPI
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