Shallow natural gas has been a core development area for Enerplus since the late 1990s. The shallow natural gas formations in southern Alberta and southwest Saskatchewan consist of massive, tightly packed sandstone that covers an area of over 10,000 square kilometres. These zones are typically less than 800 metres in depth and upper Cretaceous in age, with most production coming from the Milk River, Medicine Hat, and Second White Specks producing zones. Our largest shallow natural gas producing properties are Shackleton, Bantry, Hanna Garden, Verger and Medicine Hat South, all of which are located in Alberta with the exception of Shackleton, which is in southwest Saskatchewan.

In 2009 we invested $61 million in our shallow gas assets, net of DRCs, with most of our spending at Shackleton, Bantry, Verger, and Hanna Garden. Due to weakening gas prices in the second quarter we suspended our summer drilling program at Shackleton, preserving our drilling inventory pending higher sustainable natural gas prices, and with the implementation of the Alberta royalty drilling incentive program, we shifted our shallow gas drilling to Alberta. In total we drilled 259 net shallow gas wells including 120 net wells that attracted drilling royalty credits of approximately $17 million.

With the current natural gas price outlook, our projected shallow gas spending in 2010 has been reduced to approximately $40 million net of DRCs. We plan to drill approximately 156 net wells with a focus on infill drilling at Shackleton, Hanna Garden, Bantry, and Verger where our most attractive opportunities exist and to take advantage of government drilling incentives of approximately $15 million. We anticipate that 60% of our total wells in 2010 will be shallow gas wells targeting the Milk River, Second White Specks, and Medicine Hat formations.

Key Statistics:

• 2010 expected production: 121,800 Mcf/day (24% of total production)
• 2010 development capital plan: $41 million, 156 net wells
• 18% of proved plus probable reserves
• Reserve life index of 8.2 years

For further information on all of our resource plays, click here.

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