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<< Previous page | Next Page >> Coalbed methane ('CBM') has emerged as a bona fide resource play in western Canada with significant drilling and production now attributable to the play. To date we have focused our commercial development efforts on the Horseshoe Canyon formation in three separate areas within the central Alberta fairway. Horseshoe Canyon coals are typically dry and do not have the water handling issues often associated with CBM production. Key Facts about our CBM: Represents a small part of our production and reserves today but is expected to grow in 2006 to approximately 10.8 MMcf/day (1,800 BOE/day). At year-end, approximately 21 billion cubic feet (3.5 MMBOE) of proved plus probable reserves were added by our CBM development activities resulting in total CBM reserves of approximately 32 billion cubic feet (5.3 MMBOE). Similar to shallow gas development, the key to success for CBM involves the ability to execute large, multi-well development programs cost efficiently and to manage the post-drilling operations of these low-pressure wells. We are participating in a pilot project (CO2 Sequestration and Enhanced Methane Recovery "CSEMP") on our land in the Pembina area with several other government and industry participants to study the potential to sequester CO2 and increase methane gas recovery from the Ardley coal. Leveraging our considerable experience gained from shallow gas development to efficiently exploit CBM. 2005 Activities We invested $42 million to drill 130 gross wells (83 net) which added 6.5 MMcf/day of initial gas production during 2005 at an on-stream cost of $38,300/BOE/day. Drilling activities were focused at our operated areas of Bashaw/Chigwell and Trochu while we also participated in non-operated drilling at Joffre. At Bashaw/Chigwell, we drilled 56 gross wells (38.9 net) and installed gas compression facilities. At Trochu, we drilled 18 gross wells (15.1 net) and at Joffre, we participated in 38 gross wells (19.8 net) and the expansion of a gas sales pipeline. We also invested in pilot programs at several other areas. Additional behind pipe gas in excess of 3 MMcf/day which was originally planned to be on stream in 2005 is now expected to come on stream during 2006 contributing to the high on-stream cost of our 2005 program. The delay is due to weather hampering our drilling program at our main development areas and industry gas transmission capacity issues in the Bashaw/Chigwell area. We have also engaged in laboratory work and field testing of various coals throughout Alberta and British Columbia to determine the commercial viability of these opportunities on our existing land holdings. 2006 Outlook We plan to invest $49 million on further CBM development in 2006. Our plans include the participation in 150 gross wells (87 net), with the majority of drilling occurring at Bashaw and Trochu. As a follow-up to successful piloting in 2005, the Gadsby property has emerged as an additional commercial development area for 2006. Piloting efforts in 2006 will focus on the Mannville formation and other coals in central Alberta and will likely include the drilling of horizontal wells to exploit this resource. Our pilot projects will also include the drilling of 8 higher density wells (from 4 to 8 wells per section) in the Horseshoe Canyon formation on existing acreage at Bashaw. Success could lead to significant follow-on drilling in subsequent years.   << Previous page | Next Page >>