Oil & Gas Royalty Trusts

Oil & Gas Producers

January 6, 2010

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
YOUR ATTENTION
(DAY.UN), NAL Oil & Gas Trust (NAE.UN), Penn West Energy Trust
IS DIRECTED TO (PWT.UN) and Vermilion Energy Trust (VET.UN) are expected to all be
THE IMPORTANT carrying out expanded horizontal multi-stage fracced well programs.
DISCLOSURES IN • Strong oil prices, reasonable Alberta royalty incentives (at least through 2010)
APPENDIX A. and positive economics we think will likely result in a 10 fold increase in
All figures in C$ unless otherwise activity over 2009. There is a wide range of land owners in a broad geographic
specified
area.

Roger Serin, P.Eng. Greg Shaw, CFA

403 299 7964 403 292 1204
roger.serin@tdsecurities.com greg.shaw@tdsecurities.com

Aaron Bilkoski (Associate) Joel Douglas, CA (Associate)

403 299 3294 403 299 3272
aaron.bilkoski@tdsecurities.com joel.douglas@tdsecurities.com

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.
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.
 Exhibit 1. Cardium Oil Pools (and Horizontal Wells)
R15 R5 R23W4

Pembina

T48 T48

Brazeau

Willesden Green

Ferrier

T38 T38

Caroline

Garrington

Ricinus

Crossfield
T28 T28
R14 R4 R23W4
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

Initial OOIP
Depth Oil Hztl Area Net Pay Porosity Pressure (Million Est
Field (ft KB) Wells Wells Discovery (Sections) (ft) (%) (psi) Bbl) Recovery
Crossfield 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

A Division of TD Securities Inc. 3

 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 Cardium formation consists
The conglomerate is variable with thickness ranging from 0 to 9 metres with an
of interbedded sandstone and
average more like 1 metre. As a result the conglomerate is estimated to contain less
shale, in some areas capped
than 10% of OOIP but has higher recoveries given its higher permeability. While
with conglomerate. Maximum
natural fracturing of the sandstone has been seen, these fractures are interpreted to
zone thickness is ~15 metres.
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

4 A Division of TD Securities Inc.

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)

300 18

250 15

200 12
CDOR (bbl/d)

Well Count
Well Count
150 9

100 6

50 3

0 0
0 50 100 150 200
Normalized Months

Source: geoScout, TD Newcrest

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.

A Division of TD Securities Inc. 5

 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

500 14

450 # Wells in Sample

12
400

350 10
Rate Based on Hours
PDOR (bbl/d)

300
8
250 Rate Based on
Calendar Day
6
200

150 4

100
2
50

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

Source: geoScout, TD Newcrest

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

120% 10
ATX IRR ATX Payout
9
ATX IRR (Incentives+Lwr Well Cost) ATX Payout (Incentives+Lwr Well Cost)
100%
BTX IRR 8 BTX Payout
BTX IRR (Incentives+Lwr Well Cost) BTX Payout (Incentives+Lwr Well Cost)
7
80%
Payout-yrs

6
IRR-%

60% 5
4
40%
3
2
20%
1
0% 0
$50 $60 $70 $80 $50 $60 $70 $80
Wellhead Price-$C/bbl Wellhead Price-$C/bbl

Source: geoScout, Value Navigator, TD Newcrest

6 A Division of TD Securities Inc.

 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

Calendar Day of Totalof Total
Cardium Avg
Oil Gas 6:1 Corp BOE Pool Net Prod'n
Rank Company Ticker bbl/d mmcf/d BOE/d % % Wells BOE/d
1 Penn West Energy Trust PWT.UN 25,000 14% 0% 1,318 18
2 Arc Resources Ltd AET.UN 5,080 7 6,297 10% 11% 550 14
3 Bonterra Oil & Gas Ltd BNE 2,111 4 2,854 59% 5% 359 8
4 Enerplus Resources Fund ERF.UN 2,000 3 2,519 3% 4% 224 22
5 Imperial Oil Limited IMO 1,579 1 1,779 1% 3% 136 15
6 Husky Energy Inc HSE 684 0 757 0% 2% 61 12
7 Triaxon Resources Ltd Private 382 1 536 45% 1% 92 6
8 Bonavista Energy Trust BNP.UN 376 3 809 1% 1% 57 17
9 Taqa North Ltd Private 343 3 882 1% 1% 45 22
10 Compton Petroleum Corporation CMT 227 0 267 1% 0% 22 13
11 Sabre Energy Ltd Private 203 0 280 6% 0% 32 9
12 Rondo Petroleum Inc Private 151 1 244 33% 0% 42 6
13 Advantage Oil & Gas Ltd AAV 150 0 161 1% 0% 19 9
14 Bellatrix Exploration Ltd BXE 142 0 158 2% 0% 31 5
15 Freehold Royalty Trust FRU.UN 103 0 141 14% 0% 16 9
16 NuVista Energy Ltd NVA 99 1 187 1% 0% 28 7
17 Skylight Energy Resources Ltd Private 88 0 128 88% 0% 31 4
18 Harvard International Resources Ltd Private 79 0 86 4% 0% 8 11
19 Onyx 2006 Inc Private 73 1 319 67% 0% 12 28
20 Sifton Energy Inc Private 66 0 87 13% 0% 11 8
21 Talisman Energy Inc TLM 55 1 147 0% 0% 12 12
22 Sword Energy Inc Private 55 0 79 1% 0% 16 5
23 Provident Energy Trust PVE.UN 51 0 81 0% 0% 10 7
24 Anderson Energy Ltd AXL 50 0 85 1% 0% 9 9
25 China National Petroleum Corp Private 39 0 42 12% 0% 9 5
26 Huegler Holdings Ltd Private 38 0 38 72% 0% 6 7
27 Vermilion Energy Trust VET.UN 28 0 36 0% 0% 3 18
28 Path Resources Ltd Private 27 0 33 87% 0% 9 4
29 Derrick Petroleum Ltd Private 27 0 37 100% 0% 6 6
30 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
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.

A Division of TD Securities Inc. 7

 Exhibit 9. Top Land Owners – Cardium Rights (Developed+Undeveloped)
CDN Net Net
Rank Company Ticker Hectares Sections
1 Penn West Energy Trust PWT.UN >215,000 >850
2 ConocoPhillips Canada Limited 227,910 890
3 Taqa North Ltd 138,257 540
4 Suncor Energy Inc SU 95,802 374
5 Bonavista Energy Trust BNP.UN 50,349 197
6 Devon Canada Corporation 49,419 193
7 Vermilion Energy Trust VET.UN 45,532 178
8 Imperial Oil Limited IMO 41,848 163
9 Arc Resources Ltd HSE 38,224 149
10 Husky Energy Inc 37,323 146
11 BP Canada Energy Company 36,474 142
12 Shell Canada Limited 34,578 135
13 Pengrowth Energy Trust PGF.UN 34,152 133
14 Enerplus Resources Fund ERF.UN 31,527 123
15 Compton Petroleum Corporation CMT 29,007 113
16 Exxonmobil Canada Ltd 28,187 110
17 Encana Corporation ECA 26,715 104
18 Bonterra Oil & Gas Ltd BNE 24,494 96
19 Harvest Energy Trust Private 22,432 88
20 Apache Canada Ltd 22,301 87
21 Daylight Resources Trust DAY.UN 22,221 87
22 Nuvista Energy Ltd NVA 22,196 87
23 Anderson Energy Ltd 21,887 85
24 Canadian Natural Resources Limited CNQ 20,319 79
25 Nal Resources Limited Private 20,201 79
26 EOG Resources Canada Inc 18,711 73
27 Talisman Energy Inc TLM 17,460 68
28 Nal Oil & Gas Trust NAE.UN 16,074 63
29 Britt Resources Ltd Private 16,001 63
30 Crew Energy Inc CR 14,414 56
31 Advantage Oil & Gas Ltd AAV 14,244 56
32 Mancal Energy Inc Private 12,450 49
33 Hunt Oil Company 12,334 48
34 Bellatrix Exploration Ltd. BXE 12,241 48
35 Angle Energy Inc NGL 11,744 46
36 Provident Energy Trust PVE.UN 11,739 46
37 996527 Alberta Ltd Private 11,600 45
38 Signalta Resources Limited Private 9,902 39
39 Vero Energy Inc VRO 9,354 37
40 Prospex Resources Ltd PSX 9,239 36
41 Regent Resources Ltd Private 8,967 35
42 Crocotta Energy Inc CTO 8,306 32
43 Centrica Canada Ltd Private 8,306 32
44 Zapata Energy Corporation ZCO 7,956 31
45 Fairborne Energy Ltd FEL 7,112 28
46 Berens Energy Ltd BEN 7,090 28
47 Ish Energy Ltd Private 6,844 27
48 Omers Energy Inc Private 6,449 25
49 O & G Resource Group Ltd Private 6,368 25
50 Zargon Energy Trust ZAR.UN 6,337 25

Source: XI Technologies, TD Newcrest

8 A Division of TD Securities Inc.

 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

ARC Energy Trust Baytex Energy Trust
R15 R5 R23W4 R15 R5 R23W4

Pembina Pembina

T48 T48 T48 T48

Brazeau Brazeau

Willesden Green Willesden Green

Ferrier Ferrier

T38 T38 T38 T38

Caroline Caroline

Garrington Garrington

Ricinus Ricinus

Crossfield Crossfield
T28 T28 T28 T28
R14 R4 R23W4 R14 R4 R23W4

Bonavista Energy Trust Daylight Resources Trust

R15 R5 R23W4 R15 R5 R23W4

Pembina Pembina

T48 T48 T48 T48

Brazeau Brazeau

Willesden Green Willesden Green

Ferrier Ferrier

T38 T38 T38 T38

Caroline Caroline

Garrington Garrington

Ricinus Ricinus

Crossfield Crossfield
T28 T28 T28 T28
R14 R4 R23W4 R14 R4 R23W4

Source: geoScout, TD Newcrest

A Division of TD Securities Inc. 9

Exhibit 11. Land Ownership – Cardium Fairway (continued)
Enerplus Resources Fund NAL Oil & Gas Trust
R15 R5 R23W4 R15 R5 R23W4

Pembina Pembina

T48 T48 T48 T48

Brazeau Brazeau

Willesden Green Willesden Green

Ferrier Ferrier
T38 T38 T38 T38

Caroline Caroline
Garrington Garrington

Ricinus Ricinus

Crossfield Crossfield
T28 T28 T28 T28
R14 R4 R23W4 R14 R4 R23W4

Penn West Energy Trust Vermilion Energy Trust

R15 R5 R23W4 R15 R5 R23W4

Pembina Pembina

T48 T48 T48 T48

Brazeau Brazeau

Willesden Green Willesden Green

Ferrier Ferrier

T38 T38 T38 T38

Caroline Caroline

Garrington Garrington

Ricinus Ricinus

Crossfield Crossfield
T28 T28 T28 T28
R14 R4 R23W4 R14 R4 R23W4

Source: geoScout, TD Newcrest

Exhibit 12. Cardium Activity By Company (From Public Documents)

Company
ARC Energy Trust
Base Oil & Gas
Baytex Energy Trust
Bellatrix Exploration
Berens Energy
Bonavista Energy Trust
Bonterra Energy
Daylight Resources Trust
Detector Exploration
Enterra Energy Trust
Midway Energy
NAL Oil & Gas Trust
Nexstar Energy
Penn West Energy Trust
Redcliffe Exploration
West Energy
Vermilion Energy Trust
Activity Cardium Hztl Wells Lands Other
Q3/09-4 wells, Q4/09 add'l 6 wells, 2010-17 wells Drilling at Pembina and Garrington
Drilling up to 5 wells on farm-in
Up to 5 wells in 2010 budget
Drilled 2 wells Drilling Inventory 57 wells
First well >200 b/d on pump 70 (40 net sections) Drilling Inventory 170 (100 net) wells
Up to 6 wells by y/e 2009; up to 20 in 2010
By mid Oct had drilled 3 wells
First well drilled Q4/09 A signficant portion of 2010 budget
First well uneconomic - water swept conglomerate
Plans 10-16 in 2010 4,000 net acres
Drilling 3 wells by y/e 2009, up to 12 in 2010 23 net sections
By Q3/09 ~10 wells, 20-25 wells by y/e 2009 Early mover in play with first well in Q4/08
By mid Dec had participated in 8 wells 2,600 net undev acres To be acquired by Result Energy; Inventory 40 wells
Plans 20-30 in 2010
Drilling 1 well by y/e 2009 12 sections-65% WI
Q4/09 drilled 9 (6.6 net) wells 70 net sections 40 (32 net) locations
Drilling at least 1 well by y/e 2009

Source: Public documents, TD Newcrest

10 A Division of TD Securities Inc.

Exhibit 13. Horizontal Cardium Wells Licensed
Well Rig Proj. On
Well ID Well Status Operator Licensed Well Spud Released Fm@TD Prodn
100/14-12-038-07W5/00 Location Angle Enrg Inc 12/10/2009 Cardium
100/05-17-049-06W5/00 Location ARC Rsrcs Ltd 12/11/2009 Card_ss
100/13-03-051-12W5/00 Location Baccalieu Enrg Inc 12/07/2009 12/16/2009 Cardium
100/04-01-046-09W5/00 Location Base Rsrcs Inc 12/23/2009 Card_ss
100/14-25-049-05W5/00 Location Baytex Enrg Ltd 12/03/2009 12/12/2009 Cardium
100/13-18-048-05W5/00 Location Baytex Enrg Ltd 12/09/2009 Cardium
100/16-25-049-05W5/00 Location Baytex Enrg Ltd 12/22/2009 Cardium
100/13-29-047-03W5/00 Location Bellatrix Expl Ltd 12/17/2009 Card_ss
100/03-27-048-08W5/00 Location Bellatrix Expl Ltd 12/22/2009 Card_ss
100/01-14-048-11W5/00 ABD Whipstock Berens Enrg Ltd 09/10/2009 09/13/2009 10/10/2009 Cardium
100/14-22-047-05W5/00 Pumping OIL Bonavista Petrl Ltd 08/20/2009 08/27/2009 09/05/2009 Cardium 2009/10
100/06-22-028-04W5/00 Location Bonavista Petrl Ltd 12/02/2009 Cardium
100/01-25-047-03W5/00 Pumping OIL Bonterra Enrg Corp 11/25/2008 12/03/2008 12/21/2008 Card_ss 2009/01
100/16-13-047-03W5/00 Pumping OIL Bonterra Enrg Corp 07/29/2009 08/10/2009 08/26/2009 Card_ss 2009/10
100/08-30-047-02W5/00 Pumping OIL Bonterra Enrg Corp 08/28/2009 09/19/2009 10/06/2009 Card_ss 2009/10
100/16-27-047-05W5/00 Drilled & Cased Bonterra Enrg Corp 10/15/2009 11/05/2009 11/21/2009 Card_ss
102/16-15-048-05W5/00 Location Bonterra Enrg Corp 12/01/2009 Card_ss
100/08-24-047-11W5/00 Location Bonterra Enrg Corp 12/22/2009 Card_ss
102/16-24-047-11W5/00 Location Bonterra Enrg Corp 12/22/2009 Card_ss
100/09-13-036-09W5/02 ABD Whipstock BP Cda Enrg Comp 09/27/1990 10/04/1990 10/11/1993 Cardium
100/05-18-036-08W5/03 Drainage Well BP Cda Enrg Comp 09/27/1990 10/04/1990 10/11/1993 Cardium
102/12-18-036-08W5/04 Pumping OIL BP Cda Enrg Comp 09/27/1990 10/04/1990 10/11/1993 Cardium 1993/10
100/01-17-038-07W5/02 ABD Whipstock Devon Cda Corp 06/23/1988 06/23/1988 02/05/1996 Cardium
100/01-17-038-07W5/03 Drainage Well Devon Cda Corp 06/23/1988 06/23/1988 02/05/1996 Cardium
100/02-17-038-07W5/04 Drilled & Cased Devon Cda Corp 06/23/1988 06/23/1988 02/05/1996 Cardium
100/02-08-039-07W5/00 ABD Whipstock Devon Cda Corp 11/19/1993 11/30/1993 01/15/1994 Cardium
100/02-08-039-07W5/02 ABD Whipstock OIL Devon Cda Corp 11/19/1993 11/30/1993 01/15/1994 Cardium 1994/02
100/09-08-039-07W5/03 Flowing OIL Devon Cda Corp 11/19/1993 11/30/1993 07/27/1994 Cardium 1994/08
100/08-31-039-07W5/00 Flowing OIL Devon Cda Corp 10/19/1994 10/26/1994 11/25/1994 Cardium 1994/12
100/13-08-052-12W5/00 Pumping OIL Emm Enrg Inc 07/12/1991 07/17/1991 08/03/1991 Cardium 1991/08
103/16-29-047-02W5/00 Location Exoro Enrg Inc 12/10/2009 12/16/2009 Cardium
100/11-05-054-13W5/00 Pumping OIL Iberdrola Cda Enrg 02/11/1997 03/28/1997 04/17/1997 Card_cgl 1997/05
100/01-29-033-03W5/00 Location Midway Enrg Ltd 12/02/2009 12/07/2009 Cardium
100/04-01-034-04W5/00 Location Midway Enrg Ltd 12/14/2009 Cardium
100/04-14-034-04W5/00 Location Midway Enrg Ltd 12/23/2009 Cardium
100/13-23-034-04W5/00 Location Midway Enrg Ltd 12/23/2009 Cardium
100/12-17-035-04W5/00 Pumping OIL NAL Rsrcs Lmtd 08/25/2008 09/18/2008 10/05/2008 Cardium 2008/11
100/05-33-034-04W5/00 Flowing OIL NAL Rsrcs Lmtd 09/18/2008 10/07/2008 10/25/2008 Cardium 2008/12
100/09-17-034-04W5/00 Flowing OIL NAL Rsrcs Lmtd 10/10/2008 10/26/2008 11/15/2008 Cardium 2009/01
100/08-18-037-03W5/00 Pumping OIL NAL Rsrcs Lmtd 10/31/2008 11/18/2008 11/30/2008 Card_ss 2009/01
100/04-25-035-05W5/00 Pumping OIL NAL Rsrcs Lmtd 11/13/2008 01/18/2009 02/03/2009 Cardium 2009/04
100/14-10-034-04W5/00 Flowing OIL NAL Rsrcs Lmtd 01/14/2009 02/04/2009 02/21/2009 Cardium 2009/04
100/08-10-034-04W5/00 Flowing OIL NAL Rsrcs Lmtd 06/30/2009 07/22/2009 08/11/2009 Cardium 2009/09
100/16-16-034-04W5/00 Flowing OIL NAL Rsrcs Lmtd 08/12/2009 09/03/2009 09/19/2009 Cardium
102/01-25-035-05W5/00 Drilled & Cased NAL Rsrcs Lmtd 08/20/2009 09/27/2009 10/15/2009 Cardium
100/04-26-035-05W5/00 Drilled & Cased NAL Rsrcs Lmtd 08/20/2009 09/08/2009 09/26/2009 Cardium
100/15-20-034-04W5/00 Location NAL Rsrcs Lmtd 12/14/2009 Cardium
100/14-09-034-04W5/00 Location NAL Rsrcs Lmtd 12/15/2009 Cardium
100/16-09-034-04W5/00 Location NAL Rsrcs Lmtd 12/15/2009 Cardium
100/15-16-048-11W5/00 Location Nuvista Enrg Ltd 12/23/2009 Cardium
100/13-12-046-08W5/00 Location Onyx 2006 Inc 12/08/2009 12/13/2009 Cardium
103/04-07-048-07W5/02 Drainage Well Penn West Petrl Ltd 07/18/1955 09/30/2000 10/10/2000 Card_ss
103/04-07-048-07W5/03 Pumping OIL Penn West Petrl Ltd 07/18/1955 09/30/2000 10/10/2000 Card_ss 2000/10
100/03-36-052-13W5/02 Pumping OIL Penn West Petrl Ltd 10/24/1985 11/23/1995 11/29/1995 Cardium 1995/12
100/03-30-052-12W5/00 ABD Whipstock Penn West Petrl Ltd 11/01/1994 11/04/1994 12/01/1994 Cardium
100/03-30-052-12W5/02 WTR Injection Penn West Petrl Ltd 11/01/1994 11/04/1994 12/01/1994 Cardium 1994/12
100/05-21-050-09W5/00 Drainage Well Penn West Petrl Ltd 07/18/1995 09/03/1995 09/26/1995 Card_ss
100/13-24-047-10W5/00 WTR Injection Penn West Petrl Ltd 09/21/2007 11/27/2007 12/20/2007 Cardium
100/15-15-042-08W5/00 Pumping OIL Penn West Petrl Ltd 10/05/2007 11/02/2007 11/24/2007 Card_ss 2008/03
100/11-24-047-10W5/00 Drilled & Cased Penn West Petrl Ltd 04/20/2009 07/15/2009 08/09/2009 Cardium
103/06-28-047-09W5/00 Pumping OIL Penn West Petrl Ltd 05/22/2009 06/03/2009 06/23/2009 Cardium 2009/09
103/11-32-047-09W5/00 Location Penn West Petrl Ltd 12/14/2009 Cardium
102/14-22-047-09W5/00 Location Penn West Petrl Ltd 12/22/2009 Cardium
100/15-22-047-09W5/00 Location Penn West Petrl Ltd 12/22/2009 Cardium
100/05-26-048-11W5/00 ABD Whipstock Rondo Petrl Inc 09/10/2009 10/07/2009 10/26/2009 Cardium
100/13-27-048-11W5/00 Location Rondo Petrl Inc 12/23/2009 Card_ss
100/13-18-049-06W5/00 Location Sifton Enrg Inc 12/09/2009 Card_ss
102/16-22-047-03W5/00 Location Spry Enrg Ltd 12/22/2009 Card_ss
100/12-10-048-04W5/00 Location Standard Enrg Inc 12/22/2009 Card_ss
100/13-10-048-04W5/00 Location Standard Enrg Inc 12/22/2009 Card_ss
100/12-04-041-08W5/02 ABD OIL Zone Suncor Enrg Inc 09/30/1997 11/10/1997 12/11/1997 Cardium 1998/03
100/02-06-040-07W5/00 ABD OIL Suncor Enrg Inc 10/23/1997 12/15/1997 01/16/1998 Cardium 1998/03
100/02-16-047-01W5/02 Drainage Well Triaxon Enrg Inc 10/18/1984 03/28/2007 04/09/2007 Cardium
100/01-23-050-12W5/00 Location Vermilion Rsrcs Ltd 12/08/2009 12/18/2009 Cardium
100/04-11-051-12W5/00 Location Vermilion Rsrcs Ltd 12/23/2009 Card_ss
100/01-05-051-12W5/00 Location Vero Enrg Inc 12/01/2009 12/11/2009 Cardium
100/16-11-050-06W5/00 Location West Enrg Ltd 12/04/2009 12/10/2009 Cardium
102/16-23-047-03W5/00 Location West Enrg Ltd 12/23/2009 Cardium
Source: geoScout, TD Newcrest

A Division of TD Securities Inc. 11

 Exhibit 14. Horizontal Cardium Wells Licensed Since Q4/08
R15 R5 R23W4

T48 T48

T38 T38

T28 T28
R14 R4 R23W4

Source: geoScout, TD Newcrest

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.

12 A Division of TD Securities Inc.

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.

A Division of TD Securities Inc. 13

 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

Distribution of Research Ratings^ Investment Banking Services Provided*

REDUCE 80%
6% BUY
70%
60%
60% 66%
50%
40%
30%
20% 31%
HOLD 2%
10%
34%
0%
BUY HOLD REDUCE

Current as of December 2, 2009

^ Percentage of subject companies under each rating * Percentage of subject companies within each of the
category—BUY (covering Action List BUY, BUY and three categories (BUY, HOLD and REDUCE) for which
Spec. BUY ratings), HOLD and REDUCE (covering TD Securities Inc. has provided investment banking
TENDER and REDUCE ratings). services within the last 12 months.

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TD Newcrest makes its research products available in electronic and/or printed formats
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research is available by password to entitled institutional clients
at https://www.tdsresearch.com

14 A Division of TD Securities Inc.

Analyst Certification
Each analyst of TD Securities Inc. whose name appears on page 1 of this research
report hereby certifies that (i) the recommendations and opinions expressed in the
research report accurately reflect the research analyst's personal views about any and
all of the securities or issuers discussed herein that are within the analyst’s coverage
universe and (ii) no part of the research analyst's compensation was, is, or will be,
directly or indirectly, related to the provision of specific recommendations or views
expressed by the research analyst in the research report.

Disclaimer
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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.

A Division of TD Securities Inc. 15