T H I S MO N THS FOCUS - NAT URAL G AS E X P O RT DE V E L O P ME NT

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A&D WATCH
NOVEMBER 2011

CIBC A&D Watch

The A&D Watch provides an update of the current assets on the market, summarizes recent transactions with production and reserves metrics, and highlights an active trend or play. Current publically available assets continue to be gas-weighted with large packages on the market (divestments or joint ventures) from several of the major players. With the current North American natural gas supply-demand imbalance, the North American gas strategy has begun to focus on Liquefied Natural Gas (LNG) exports. In 2010, 220 million metric tonnes of LNG was traded globally between 20 importing countries and 18 exporting countries. CIBCs enhanced oil and gas technical group has significant in-house expertise ready to serve our clients with all their M&A and A&D needs. CIBC maintains strong relationships with all industry players through its ongoing business.

Recent Publically Announced Canadian Assets in the Market

Shell JV Opportunity: 25-50% WI in Chinook Nikanassin unconventional gas, current production of 35 MMcf/d Husky JV Opportunity: 30-40% WI in liquids-rich Ansell Deep Basin assets, including existing production of 6,165 boe/d Nexen JV Opportunity: 40% WI in the Horn River, Cordova and Liard areas in Northeast BC, current gas production 40 MMcf/d Encana 73 MMcfe/d gas production in the Greater Sierra area JV Opportunity: Partner in existing 29 MMcfe/d gas production and future development opportunities in Greater Sierra and Horn River JV Opportunity: Partner in undeveloped Montney acreage in its Dawson and Cutbank areas of Northeast British Columbia Birchcliff Corporate sale.19,250 boe/d (76% natural gas) with focus on large scale resource plays in the Peace River Arch area of Alberta
B.C.
94-N 94-O

A L B E R TA
94-P

S A S K AT C H E WA N
T120 T110 T100 T90 T80 T70 T60

94-K

94-J

94-I

94-F

94-G

94-H

94-C

94-B

Ft. McMurray
93-P

93-N 93-K

93-O 93-J

93-I

Mosaic Energy 5,120 boe/d (68% gas weighted) strategic alternative process. Core operations in Northern Alberta (Jayar/Latorrell/Karr) and West Central Alberta (Edsen/Pine Creek/Carrot Creek) and Redwater Penn West 4,400 boe/d (80% liquids weighted) of production in the Kaybob, Alberta, Westerose, Alberta and Virden, Manitoba areas 1,180 boe/d (45% oil & NGLs) in Redwater properties with upside in Viking development ConocoPhillips 3,600 boe/d of low decline gas and oil production in the Camrose and Hanna areas in Alberta Rock Energy 3,150 boe/d (~73% oil and NGL) of production in the Grande Prairie, Alberta and Lloydminster region of Alberta and Saskatchewan Waseca 3,000 boe/d of heavy oil properties in the Lloydminster region of Alberta and Saskatchewan

T50 T40

Edmonton

T50 T40

T30

T30

T20 T10

Calgary Regina

T20 T10

R10

W6M

R20

R10

W4M

Recent Transaction Metrics Contents

- Introduction - Recent Publically Announced Assets in the Market - Recent Transaction Metrics - Natural Gas Export Development - CIBCs Recent Transactions - CIBCs Contacts Announced Date Oct. 26, 2011 Oct. 11, 2011 Sep. 9, 2011 Jul. 28, 2011 Jul. 19, 2011 Jul. 5, 2011 Jun. 17, 2011 May 24, 2011 May 11, 2011 Target Equal Energy Daylight Energy Ltd. Skana Exploration Milestone Exploration Inc. Zargon (Assets) Lakeridge Energy et al. Culane Energy Corp. Cinch Energy Corp. Orion Oil & Gas Corporation Acquiror Arsenal Energy Inc. Sinopec Bonavista Energy Corporation Bonavista Energy Corporation Undisclosed Shoreline Energy Corp. Killam Acquisition Company Ltd. Tourmaline Oil Corp. WestFire Energy Ltd.
(Cdn. $MM)

Value

Gross Reserve Metrics

($/boe 2P)

W3M

W5M

Production Metrics
($/boe/d)

40.3 3,001.5 80.0 95.5 24.5 25.0 100.0 250.0 360.0

16.10 17.23 6.60 11.00 34.78 9.92 19.46 14.10 15.32

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W2M

R10

R20

R10

R20

R10

R20

26,833 78,927 42,000 35,038 91,231 38,627 112,728 73,354 65,457

N AT U RA L GAS E X P ORT DEV ELOPM E NT

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A&D WATCH
The Asian LNG market typically has long contract periods and pricing derived from oil. As global demand for LNG immensely increases, the majority of demand growth will be driven by Asian markets. The ultimate goal of the process is to allow North American natural gas to be economically exported to a global market and in turn benefit from higher prices abroad. LNG export capability will help to re-balance the longer term gas supplydemand in North America. PROCESS FLOW DIAGRAM

Energy infrastructure projects will unlock Canadas resource wealth

Jim Prentice, Senior Executive Vice President and Vice Chairman, CIBC What is LNG? LNG is simply the phase change from gas to liquid of the same gas molecules that make up traditional natural gas.

With the current North American natural gas supply-demand imbalance, coupled with robust global demand for LNG and pricing differentials, the North American gas strategy is now focused on LNG exports. The West Coast of North America is well positioned to benefit from LNG export dynamics because of the access to both an abundant source of economic gas supply and a higher priced Asian market. In order for natural gas to be exported from North America, regulatory bodies must approve the export (Canada National Energy Board; US Department of Energy & Federal Energy Regulatory Commission). Alaska has the only currently operational export terminal and Kitimat recently received regulatory approval to export gas. There are numerous facilities currently proposed and in various stages of the regulatory process. As of late, there have been a lot of exciting announcements related to North American LNG processes and the quest to viably export this resource throughout the world. LNG Process The process involves upstream producers extracting the hydrocarbon and transporting it via pipeline to an LNG facility where it is transformed into a liquid. By liquefying the natural gas, it is easier to store for transportation and allows the natural gas product to be sold in the global marketplace as opposed to only being available to the domestic market. Upon arrival at the LNG facility, the natural gas is cooled to a temperature that allows it to condense into a liquid state. This phase change dramatically reduces the volume of the natural gas (~1/600th the volume of natural gas in its gaseous phase) and allows for it to be transported at considerably more attractive economic rates. Upon arrival at its destination the LNG is regasified and transported via pipelines to potential end users. Canadian LNG - West Coast Interest in LNG facilities on the West Coast of British Columbia is a result of the desire to capitalize on both the shale gas plays located in N.E. British Columbia and the price differential between North American and Asian natural gas prices. At 54 degrees north, Kitimat is one of North Americas closest ports to the Asian markets (~4,300 nautical miles).
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Upstream

Pipeline

Liquefaction Plant Ballast Voyage Loaded Voyage

LNG Loading

LNG Unloading

Receiving Terminal & Regasication Facility

Distribution

FORECASTED GLOBAL LNG SUPPLY VERSUS DEMAND

500 450 400 MMt / year 350 300 250 200 150 100 50 0

Americas Europe Asia Committed Supply*

* Committed Supply includes export projects currently exporting or under construction. Source: CIBC World Markets Inc. & Poten and Partners.

20 00 20 02 20 04 20 06 20 08 20 10 20 12 20 14 20 16 20 18 20 20 20 22 20 24 20 26 20 28 20 30 20 32 20 34
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N AT U RA L GAS E X P ORT DEV ELOPM E NT

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A&D WATCH
December 2010 KM LNG Operating General Partnership les Canadian Federal Export License application March 2011 Kitimat LNG front end engineering and design awarded to KBR March 2011 Apache and EOG welcome Encana to the Kitimat LNG development

KITIMAT PROJECT TIMELINE

2004 Kitimat proposed as an import terminal

August 2006 Canadian federal environmental assessment decision statement received

January 2010 Apache purchases 51% of project and becomes operator

December 2010 EOG closes agreement on purchase of 49% of project

2012 Final investment decision

2015 Expected onstream production (0.7 Bcf/day)

2017/2018 Phase 2 Operational (additional 0.7 Bcf/day)

2004

2005
June 2006 Canadian provincial environmental assessment approval

2006

2007

2008

2009

2010

2011

2012
October 2011 Canadas NEB grants Kitimat LNG a 20 year Export License to serve international markets July 2011 Kitimat LNG purchases Eurocan industrial site March 2011 Apache and EOG acquire all of Pacic Trail Pipelines

2013

2014

2015

2016

2017

2018

September 2008 Kitimat LNG announces plans to develop an export terminal on its existing planned import site

May 2010 EOG Resources Canada signs pre-acquisition agreement to purchase remaining 49% of project November 2010 Haisla First Nation votes overwhelmingly to approve land leases November 2010 Documents fully executed for land leases with related agreements

Horn River Basin

Prince Rupert Potential Terminal

Montney

Pacic Trail Pipeline Proposed

On October 13, 2011 the NEB approved the Kitimat LNG Partnerships application for a license to export LNG to external markets. This application is the first that the NEB has approved. Kitimat LNG The Kitimat LNG Partnership is comprised of Apache Canada (40% interest), EOG Resources (30% interest) and Encana (30% interest). They plan to build an LNG export terminal at Bish Cove near Kitimat for an estimated cost of $3.5 billion. Construction is anticipated to begin in 2012 with commencement of operations projected to begin in 2015. LNG exports for the first phase would be 0.7 Bcf/d loaded on tankers destined for Asia. The project is designed to include an expansion phase which would add an additional 0.7 Bcf/d in early 2018.
In addition, the Kitimat LNG Partnership plans to build an underground transportation pipeline (Pacific Trail Pipeline) concurrently with the terminal construction. This pipeline would run from Summit Lake to Bish Cove and connect the export terminal to Spectra Energys pipeline system which transports gas from northern B.C. and Alberta. Estimated cost for this pipeline is $1.0 billion with an expected capacity of 1.0 Bcf/d.
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Kitimat Future LNG Export to Asian Ports

Spectra Energy Main Pipeline Export to US Westcoast

Similar projects are being considered by other companies including B.C. LNG Export Co-Operative LLC (a joint venture between LNG Partners and the Haisla First Nation), Shell Canada and a joint venture between Progress Energy Resources and Petronas. The B.C. government envisions three LNG facilities operating by 2020. Shell Canada Shell has purchased a marine terminal near Kitimat as part of its early stage work to assess whether to build an LNG export facility to supply Asia with Canadian resources. The land was purchased from Cenovus Energy. Industry competitors welcome the move, weve broadly stated we would welcome as many LNG export facilities as can be constructed in North America said Randy Eresman, CEO of Encana Corp., a partner in the Kitimat LNG Operating Partnership.
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N AT U RA L GAS E X P ORT DEV ELOPM E NT

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A&D WATCH
RECENT ACTIVITY

Additional Recent North American LNG News Cheniere Energy Partners Cheniere Energy plans to expand its Sabine Pass LNG import terminal, located at Cameron Parish, Louisiana, to a bi-directional facility capable of both importing and exporting LNG. Cheniere Energy recently signed an $8.0 billion deal with BG Group PLC to export liquefied natural gas. BG will buy 3.5 million metric tonnes (mmt) of LNG a year from Cheniere in a 20-year sales agreement. This deal allows Cheniere to proceed with its Sabine Pass expansion project, which would be the first LNG liquefaction plant built in the U.S. in fifty years. The Sabine Pass LNG import terminal has been operational since 2008. Construction is anticipated to start in 2012 to expand it to a bi-directional facility with exports of LNG anticipated to begin in 2015. The initial expansion project would be capable of liquefying 1.0 Bcf/d of natural gas from two LNG trains. Additional liquefaction capacity could be added in the future if there was a demand for it. The Sabine Pass facility is located in close proximity to five of the six major US shale gas plays, as well as other unconventional gas plays. There is an extensive network of existing gas pipelines that would be able to deliver natural gas to the Sabine Pass LNG terminal. Cheniere Energys announcement continues to confirm the growing interest in LNG exports to the global market and the significant impact that they will have in the short term. Veresen Inc. Jordan Cove, located in the deep water port at Coos Bay, Oregon, could present another viable West Coast export project, including both an LNG terminal and a natural gas pipeline with gas supply from both the U.S. Rocky Mountains and Canada. CIBC is currently advising Veresen in seeking proposals to contract for long-term use of the Jordan Cove Energy Project and the Pacific Connector Gas Pipeline and to fund development costs of the project through to a final investment decision. The Jordan Cove Energy LNG Terminal would be capable of 1.0 Bcf/d output capacity including full containment tanks and process facilities and offers a short vessel transit distance (7 nautical miles) from the facility to the Pacific Ocean. The facility would have expansion potential for up to 1.5 Bcf/d. The Pacific Connector Gas Pipeline would be a 234 mile, 36-inch, 1.0 Bcf/d pipeline that has expansion potential for up to 1.5 Bcf/d. Access to key supply basins is provided by interconnecting with TransCanada, Williams, El Paso and PG&E pipeline systems. Subsidiaries of Veresen, PG&E Corporation and Williams each hold an interest in the pipeline.

Kitimat LNG
Operator: Kitmat LNG Initial Capacity: 0.7 Bcf/d Expansion Capacity: 1.4 Bcf/d

Shell Kitimat LNG

Operator: Shell Capacity: to be determined

Pipeline Pacic Connector

Jordan Cove
Operator: Veresen Initial Capacity: 1.0 Bcf/d Expansion Capacity: 1.5 Bcf/d

Sabine Pass
Operator: Cheniere Initial Capacity: 1.0 Bcf/d Expansion Capacity: 1.5 Bcf/d

Gas Resource Play

FERC certification was approved in 2009 for construction and operation of the LNG import facility, as well as the connector gas pipeline. Jordan Cove is ideally positioned on the North American West Coast to enable LNG exports as well as to retain integration with large U.S. markets.

Page 4

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N AT U RA L GAS E X P ORT DEV ELOPM E NT

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A&D WATCH
West Coast LNG export dynamics is a very attractive. There is a limited number of LNG projects planned along the West Coast and the shipping distances from the West Coast to Asia are significantly shorter than from other LNG exporting nations. Shorter trade routes are important because an LNG tanker utilizes its cargo as fuel so being even one day closer to Asia can have an impact. Global LNG Markets The global trade of LNG has grown significantly since it began in 1964, with worldwide demand for LNG expected to continue to grow. In 2010, over 220 million metric tonnes of LNG was traded globally between 20 importing countries and 18 exporting countries. The demand for LNG imports is forecast to be over 450 mmt/y by 2035, with growth being led by the Asian markets. Asian markets currently comprise about 60% of the global LNG trade. The five major importing countries are Japan, South Korea, Taiwan, China and India. While Japan, South Korea and Taiwan have established LNG markets, China and India have only more recently began to establish LNG import markets. Even before the earthquake in Japan, Asian markets were forecast to increase their LNG imports. After the earthquake, the potential now exists for a dramatic increase in LNG demand not yet accounted for in existing models as Asian countries shift away from their dependence on nuclear energy. For example, in Japan only 10 of 54 reactors remain on the grid.

LNG Export Opportunities From about 2000 to 2008, it was forecast that the gas supply in North America would be insufficient to meet demand and that imports of LNG would be required. However, in 2008 technological advances in horizontal drilling and multi-stage fracturing unlocked the development of unconventional sources of gas in North America. In just over a year the success of shale gas plays changed the gas market from undersupplied to significantly oversupplied. The North American LNG strategy has now shifted from one of LNG imports to LNG exports, with numerous proposals to build LNG export terminals in North America. It is now a race to build LNG liquefaction capacity by either building a new facility or converting an existing re-gasification facility to a liquefaction facility.

ASIAN LNG IMPORTING COUNTRIES

2.25 million metric tonnes July 2011

South Korea

1.15 million metric tonnes September 2011

China

Japan Taiwan

7.55 million metric tonnes August 2011 1.17 million metric tonnes August 2011

Asian LNG Importers

Country
(mmt)

Annual Volume Latest Month(1) 2009 2010 2011

(mmt) (mmt)

0.75 million metric tonnes July 2011

India

Japan South Korea China Taiwan India Total

64.6 25.8 9.1 8.6 5.5 113.6

70.1 32.6 8.9 10.8 9.4 131.8

7.55 2.25 1.15 1.17 0.75

(1) Latest month for which data is publically available 1 million metric tonnes LNG = 48.7 billion cubic feet NG

Source: Bloomberg
Page 5 Prepared by: CIBC World Markets Inc.

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A&D WATCH
Export Facilities # Facility Name 1 2 3 4 5 6 7 8 9 10 Kenai Point Fortin Kitimat LNG Douglas Channel Kitimat Marine LNG Jordan Cove Freeport Sabine Pass Lake Charles Cove Point

LNG TERMINALS AND SHIPPING ROUTES

Operator ConocoPhillips BP PLC Kitimat LNG Inc Maverick/First Nations Shell Canada Veresen Inc Freeport LNG LLC Cheniere Energy Inc Southern Union/BG Dominion Resources Inc

Location Alaska, U.S. Trinidad and Tobago British Columbia, Can. British Columbia, Can. British Columbia, Can. Oregon, U.S. Texas, U.S. Louisiana, U.S. Louisiana, U.S. Maryland, U.S.

Status Operational Operational Proposed Proposed Proposed Proposed Proposed Proposed Proposed Proposed

Capacity
(Bcf/d)

1 4 5 3
~4,500 Nautical Miles ~10 days

0.24 2.00 1.40 0.13 TBA 1.00 1.80 2.20 2.00 1.00

~4,500 Nautical Miles ~10 days

29 28 6 30 15 16 27 14 7 8 18 9 17 13 12

23 22 21 1020 11 19

Import Facilities # Facility Name

Operator

Location

Status Operational Operational Operational Operational Operational Operational Operational Operational Operational Operational Operational Operational Operational Operational Operational Construction Construction Proposed Proposed Proposed

Capacity
(Bcf/d)

EUROPE

ASIA

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Costa Azul Altamira Gulf Gateway Freeport Golden Pass Cameron Lake Charles Sabine Pass Elba Island Cove Point Everett LNG Facility Northeast Gateway Canaport Andres Guayanilla Bay Manzanillo LNG Pascagoula Gulf Oregon LNG St. Helens Creole Trail

~4,500 Nautical Miles ~10 days

~9,000 Nautical Miles ~20 days

26

24

25 2

Export Terminal Import Terminal Shipping Route

SOUTH AMERICA

~4,500 Nautical Miles ~10 days

Sempra Energy Mexico Shell Mexico Excelerate Energy Louisiana, U.S. Cheneire/Freeport LNG Texas, U.S. Qatar Petroleum, Exxon, ConocoPhillips Texas, U.S. Sempra LNG Louisiana, U.S. Southern Union/BG Louisiana, U.S. Cheniere Energy Louisiana, U.S. El Paso Corp Georgia, U.S. Dominion Resources Inc Maryland, U.S. Distrigas of Mass. Mass., U.S. Excelerate Energy Mass., U.S. Canaport LNG LP New Brunswick, Can. AES Corp Dominican Republic Edison Mission Energy Puerto Rico KMS (Kogas/Mitsui/Samsung) Mexico Gulf LNG Energy Mississippi, U.S. Oregon LNG Oregon, U.S. Port Westward LNG LLC Oregon, U.S. Cheniere Energy Louisiana, U.S.

1.00 0.70 0.50 1.50 2.00 1.50 2.10 4.00 1.75 1.80 1.00 0.80 1.00 0.27 0.10 0.50 1.50 1.00 0.70 3.30

Page 6

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CI BC EXPERTISE
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A&D WATCH
Spartan Exploration Ltd.
and created a new growth oriented producer

Select CIBC A&D Transactions

Encana
has sold the Aurora Property to

Mediterranean Oil & Gas Plc.

has sold Onshore/Offshore Italy Natural Gas Assets to

Providence
Sold Gulf of Mexico assets to

Sifton Energy Inc.

has been sold to

Excelsior Energy
has been sold to

Undisclosed buyer
C$25 million
Financial Advisor to Encana August 2011

Undisclosed buyer
C$229 million
Financial Advisor to Spartan June 2011

has been sold to

Undisclosed buyer
C$66 million
Financial Advisor to Mediterranean May 2011

Dynamic Offshore Resources

US$22 million
Financial Advisor to Providence March 2011

Undisclosed buyer Undisclosed Amount

Financial Advisor to Sifton Energy Inc. December 2010

Athabasca Oil Sands Corp.

C$82 million
Financial Advisor to Excelsior Energy November 2010

North Peace Energy Corp.

has been sold to

Tundra Oil & Gas Partnership

sold a second package of undeveloped oil and gas acreage in Southeast Saskatchewan to

Petrolia
has formed a strategic partnership with

Tundra Oil & Gas Partnership

sold a rst package of undeveloped oil and gas acreage in Southeast Saskatchewan to

Talisman Energy Inc.

has sold its interests in Tunisia assets to

Southern Pacic Resource Corp.

C$15 million
Financial Advisor to North Peace November 2010

SCDM nergie
$15 Million
Financial Advisor to Petrolia August 2010

Undisclosed
Financial Advisor to Tundra August 2010

NAL Energy Corporation

Financial Advisor to Tundra May 2010

An Undisclosed Buyer C$25 million

Financial Advisor to Talisman March 2010

Martin Head Oil & Gas Ltd.

has been sold through a series of transactions to

Talisman Energy Inc.

sold its Warburg Assets to

Encana
sold select Western Canadian assets to an

Undisclosed Buyers Undisclosed Amount

Financial Advisor to Martin Head March 2010

West Energy Ltd.

C$147 million
Financial Advisor to Talisman November 2009

Undisclosed Buyer C$65 million

Financial Advisor to Encana January 2009

Mark Horsfall Managing Director, Head of Global Energy, Calgary 403-260-0501 mark.horsfall@cibc.ca Denise Poley Chief Geophysicist/Geologist, Calgary 403-260-0502 denise.poley@cibc.ca
Page 7

Art Korpach Vice Chairman, Calgary 403-260-0504 art.korpach@cibc.ca Dave Smith Chief Geologist, Calgary 403-260-0505 davidw.smith@cibc.ca

Shane Popowich Executive Director, Calgary 403-216-3009 shane.popowich@cibc.ca Katherine Pilger Petroleum Engineer, Calgary 403-216-3013 katherine.pilger@cibc.ca

Chris Folan Managing Director, London +44 (0) 207 234 6152 chris.folan@cibc.co.uk

Jordan Horoschak Executive Director, Houston 281-848-3141 jordan.horoschak@us.cibc.com Stuart Cooper A&D Advisory, London +44 (0) 207 234 6808 stuart.cooper@cibc.co.uk Li Quan Asian Coverage, Beijing/Calgary 403-216-6858 quan.li@cibc.ca
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Jeff Shaw Chief Engineer, Calgary 403-216-3004 jeff.shaw@cibc.ca

Duff Ackerley Sr. Communications Coordinator, Calgary 403-260-0514 duff.ackerley@cibc.ca