nat gas export development_cibc_11-2011

A&D WATCH

Prepared by: CIBC World Markets Inc.

Gross ProductionAnnounced Date Target Acquiror Value Reserve Metrics Metrics (Cdn. $MM) ($/boe 2P) ($/boe/d)

Oct. 26, 2011 Equal Energy Arsenal Energy Inc. 40.3 16.10 26,833 Oct. 11, 2011 Daylight Energy Ltd. Sinopec 3,001.5 17.23 78,927 Sep. 9, 2011 Skana Exploration Bonavista Energy Corporation 80.0 6.60 42,000 Jul. 28, 2011 Milestone Exploration Inc. Bonavista Energy Corporation 95.5 11.00 35,038 Jul. 19, 2011 Zargon (Assets) Undisclosed 24.5 34.78 91,231 Jul. 5, 2011 Lakeridge Energy et al. Shoreline Energy Corp. 25.0 9.92 38,627 Jun. 17, 2011 Culane Energy Corp. Killam Acquisition Company Ltd. 100.0 19.46 112,728 May 24, 2011 Cinch Energy Corp. Tourmaline Oil Corp. 250.0 14.10 73,354May 11, 2011 Orion Oil & Gas Corporation WestFire Energy Ltd. 360.0 15.32 65,457

Recent Transaction Metrics

Edmonton

Ft. McMurray

Calgary

Regina

T120

T110

T100

T90

T80

T70

T60

T50

T40

T30

T20

T10

T50

T40

T30

T20

T10

94-O94-P

94-N

94-J 94-I

94-K

94-G 94-H

94-F

94-B94-C

93-O93-P

93-N

93-J 93-I

93-K

R10

W6M

W5M

W4MR2

0

R20

R10

R10

W3M W2MR2

0

R10

R10

R20

A L B E R TA S A S K AT C H E W A N

B . C .

ShellJV Opportunity: 25-50% WI in Chinook Nikanassin unconventional gas, current production of 35 MMcf/d

HuskyJV Opportunity: 30-40% WI in liquids-rich Ansell Deep Basin assets, including existing production of 6,165 boe/d

NexenJV Opportunity: 40% WI in the Horn River, Cordova and Liard areas in Northeast BC, current gas production 40 MMcf/d

Encana73 MMcfe/d gas production in the Greater Sierra areaJV Opportunity: Partner in existing 29 MMcfe/d gas production and future development opportunities in Greater Sierra and Horn RiverJV Opportunity: Partner in undeveloped Montney acreage in its Dawson and Cutbank areas of Northeast British Columbia

BirchcliffCorporate sale.19,250 boe/d (76% natural gas) with focus on large scale resource plays in the Peace River Arch area of Alberta

Mosaic Energy5,120 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 West4,400 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

ConocoPhillips3,600 boe/d of low decline gas and oil production in the Camrose and Hanna areas in Alberta

Rock Energy3,150 boe/d (~73% oil and NGL) of production in the Grande Prairie, Alberta and Lloydminster region of Alberta and Saskatchewan

Waseca3,000 boe/d of heavy oil properties in the Lloydminster region of Alberta and Saskatchewan

Recent Publically Announced Canadian Assets in the Market

Contents

- Introduction- Recent Publically Announced Assets in the Market- Recent Transaction Metrics- Natural Gas Export Development- CIBC’s Recent Transactions- CIBC’s Contacts

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.

CIBC’s 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.

NOVEMBER 2011

THIS MONTH’S FOCUS - NATURAL GAS EXPORT DEVELOPMENT

CLICK HERE to view CIBC’s website for current public mandates

http://www.cibcwm.com/wm/investment-banking/industry-expertise/oil-gas.html


A&D WATCH

NATURAL GAS EXPORT DEVELOPMENT


FORECASTED GLOBAL LNG SUPPLY VERSUS DEMAND

* Committed Supply includes export projects currently exporting or under construction.

0

50

100

150

200

250

300

350

400

450

500

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

MM

t /

year

Americas

Source: CIBC World Markets Inc. & Poten and Partners.

AsiaEurope

Committed Supply*

LNG Unloading

Loaded Voyage

Ballast Voyage

Upstream Pipeline LiquefactionPlant

LNG Loading

DistributionReceiving Terminal &Regasification Facility

PROCESS FLOW DIAGRAM

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 ProcessThe 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 CoastInterest 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 America’s closest ports to the Asian markets (~4,300 nautical miles).

“Energy infrastructure projects will unlockCanada’s resource wealth”

Jim Prentice, Senior Executive Vice President and Vice Chairman, CIBC

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 supply-demand in North America.



A&D WATCH

20172016201520142013201220112010200920082007200620052004 2018

2004Kitimat proposed asan import terminal

August 2006Canadian federalenvironmental

assessment decision statement received

June 2006Canadian provincial

environmental assessment approval

January 2010Apache purchases

51% of project andbecomes operator

May 2010EOG Resources Canada signspre-acquisition agreement to

purchase remaining49% of project

November 2010Haisla First Nation

votes overwhelminglyto approve land leases

November 2010Documents fully

executed for landleases with related

agreements

December 2010KM LNG Operating

General Partnershipfiles Canadian Federal

Export License application

December 2010EOG closes agreement

on purchase of 49%of project

March 2011Kitimat LNG front endengineering and designawarded to KBR

March 2011Apache and EOG welcome Encanato the Kitimat LNGdevelopment

October 2011Canada’s NEBgrants Kitimat LNG a20 year Export Licenseto serve international markets

July 2011Kitimat LNG purchasesEurocan industrial site

March 2011Apache and EOG acquireall of Pacific Trail Pipelines

2012Final investmentdecision

2015Expected onstream production

(0.7 Bcf/day)

2017/2018 Phase 2 Operational

(additional 0.7 Bcf/day)

KITIMAT PROJECT TIMELINE

September 2008Kitimat LNG announces plansto develop an export terminal

on its existing planned import site



Prince Rupert Potential Terminal

KitimatFuture LNG Export

to Asian Ports

Spectra EnergyMain PipelineExport to USWestcoast

Pacific Trail Pipeline Proposed

Horn River Basin

Montney

On October 13, 2011 the NEB approved the Kitimat LNG Partnership’s 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 Energy’s 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.

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 CanadaShell 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, “we’ve 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.



A&D WATCH

Additional Recent North American LNG NewsCheniere Energy PartnersCheniere 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 Energy’s 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.

Gas Resource Play

Sabine Pass Operator: CheniereInitial Capacity: 1.0 Bcf/dExpansion Capacity: 1.5 Bcf/d

Kitimat LNG Operator: Kitmat LNGInitial Capacity: 0.7 Bcf/dExpansion Capacity: 1.4 Bcf/dShell Kitimat LNGOperator: ShellCapacity: to be determined

Jordan Cove Operator: VeresenInitial Capacity: 1.0 Bcf/dExpansion Capacity: 1.5 Bcf/d

RECENT ACTIVITY

PipelinePacific Connector

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.





A&D WATCH



ASIAN LNG IMPORTING COUNTRIES

Japan7.55 million metric tonnesAugust 2011

Taiwan1.17 million metric tonnesAugust 2011

China1.15 million metric tonnes

September 2011

South Korea2.25 million metric tonnes

July 2011

India0.75 million metric tonnes

July 2011

Asian LNG Importers Annual Volume Latest Month(1)

Country 2009 2010 2011 (mmt) (mmt) (mmt)

Japan 64.6 70.1 7.55South Korea 25.8 32.6 2.25China 9.1 8.9 1.15Taiwan 8.6 10.8 1.17India 5.5 9.4 0.75Total 113.6 131.8 (1) Latest month for which data is publically available

1 million metric tonnes LNG = 48.7 billion cubic feet NG

LNG Export OpportunitiesFrom 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.

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 MarketsThe 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.

Source: Bloomberg



A&D WATCH



Export Facilities

# Facility Name Operator Location Status Capacity (Bcf/d)

1 Kenai ConocoPhillips Alaska, U.S. Operational 0.242 Point Fortin BP PLC Trinidad and Tobago Operational 2.003 Kitimat LNG Kitimat LNG Inc British Columbia, Can. Proposed 1.404 Douglas Channel Maverick/First Nations British Columbia, Can. Proposed 0.135 Kitimat Marine LNG Shell Canada British Columbia, Can. Proposed TBA6 Jordan Cove Veresen Inc Oregon, U.S. Proposed 1.007 Freeport Freeport LNG LLC Texas, U.S. Proposed 1.808 Sabine Pass Cheniere Energy Inc Louisiana, U.S. Proposed 2.209 Lake Charles Southern Union/BG Louisiana, U.S. Proposed 2.0010 Cove Point Dominion Resources Inc Maryland, U.S. Proposed 1.00 Import Facilities

# Facility Name Operator Location Status Capacity (Bcf/d)

11 Costa Azul Sempra Energy Mexico Operational 1.0012 Altamira Shell Mexico Operational 0.7013 Gulf Gateway Excelerate Energy Louisiana, U.S. Operational 0.5014 Freeport Cheneire/Freeport LNG Texas, U.S. Operational 1.5015 Golden Pass Qatar Petroleum, Exxon, ConocoPhillips Texas, U.S. Operational 2.0016 Cameron Sempra LNG Louisiana, U.S. Operational 1.5017 Lake Charles Southern Union/BG Louisiana, U.S. Operational 2.1018 Sabine Pass Cheniere Energy Louisiana, U.S. Operational 4.0019 Elba Island El Paso Corp Georgia, U.S. Operational 1.7520 Cove Point Dominion Resources Inc Maryland, U.S. Operational 1.8021 Everett LNG Facility Distrigas of Mass. Mass., U.S. Operational 1.0022 Northeast Gateway Excelerate Energy Mass., U.S. Operational 0.8023 Canaport Canaport LNG LP New Brunswick, Can. Operational 1.0024 Andres AES Corp Dominican Republic Operational 0.2725 Guayanilla Bay Edison Mission Energy Puerto Rico Operational 0.1026 Manzanillo LNG KMS (Kogas/Mitsui/Samsung) Mexico Construction 0.5027 Pascagoula Gulf Gulf LNG Energy Mississippi, U.S. Construction 1.5028 Oregon LNG Oregon LNG Oregon, U.S. Proposed 1.0029 St. Helens Port Westward LNG LLC Oregon, U.S. Proposed 0.7030 Creole Trail Cheniere Energy Louisiana, U.S. Proposed 3.30

LNG TERMINALS AND SHIPPING ROUTES

1

12

2

5 34

11

13

1415 16

1718 19

20

2221

23

24 25

2730

2829

6

87

26

10

9

EUROPE

SOUTH AMERICA

ASIA~4,500 Nautical Miles~10 days

~9,000 Nautical Miles~20 days



Export Terminal

Import Terminal

Shipping Route



Shane PopowichExecutive Director, Calgary

[email protected]

Art KorpachVice Chairman, Calgary

[email protected]

Jeff ShawChief Engineer, Calgary

[email protected]

Denise PoleyChief Geophysicist/Geologist, Calgary

[email protected]

Dave SmithChief Geologist, Calgary

[email protected]

Mark HorsfallManaging Director, Head of Global Energy, Calgary

[email protected]

Duff AckerleySr. Communications Coordinator, Calgary

[email protected]


A&D WATCH

Jordan HoroschakExecutive Director, Houston

[email protected]

Chris FolanManaging Director, London

+44 (0) 207 234 [email protected]

Stuart CooperA&D Advisory, London+44 (0) 207 234 6808

[email protected]

Li QuanAsian Coverage, Beijing/Calgary

[email protected]

Katherine PilgerPetroleum Engineer, Calgary

[email protected]

CIBC EXPERTISE


has sold its interests in

Tunisia assetsto

An Undisclosed Buyer

C$25 million

Financial Advisor to Talisman

March 2010

sold itsWarburg Assets to

C$147 million

Financial Advisor to Talisman

November 2009

C$15 million

Financial Advisor to North Peace

November 2010

has been sold to

C$82 million

Financial Advisor to Excelsior Energy

November 2010

sold a first package ofundeveloped oil and gas

acreage inSoutheast Saskatchewan to

Financial Advisor to Tundra

May 2010

Undisclosed

sold a second package ofundeveloped oil and gas

acreage inSoutheast Saskatchewan

to

Financial Advisor to Tundra

August 2010

has been sold to

North Peace EnergyCorp.

Southern PacificResource Corp.

has formed a strategic partnership with

SCDM Énergie

$15 Million

Financial Advisor to Petrolia

August 2010

has been sold through a series of transactions to

Undisclosed Buyers

Undisclosed Amount

Financial Advisor to Martin Head

March 2010

sold selectWestern Canadian

assets to an

Undisclosed Buyer

C$65 million

Financial Advisor to Encana

January 2009

Talisman Energy Inc.

Talisman Energy Inc.

West Energy Ltd.

Excelsior Energy

AthabascaOil Sands Corp.

Tundra Oil & GasPartnership Petrolia

Martin HeadOil & Gas Ltd.

Tundra Oil & GasPartnership

NAL EnergyCorporation

Encana

has been sold to

Undisclosed buyer

Undisclosed Amount

Financial Advisor to Sifton Energy Inc.

December 2010

Sifton Energy Inc.Sold

Gulf of Mexico assetsto

US$22 million

Financial Advisor to Providence

March 2011

has been sold to

Undisclosed buyerand

created a new growth oriented producer

C$229 million

Financial Advisor to Spartan

June 2011

SpartanExploration Ltd. Providence

Dynamic OffshoreResources

has sold Onshore/Offshore ItalyNatural Gas Assets to

Undisclosed buyerC$66 million

Financial Advisor to Mediterranean

May 2011

MediterraneanOil & Gas Plc.

has sold the Aurora Property to

C$25 million

Financial Advisor to Encana

August 2011

Encana

Undisclosed buyer

Select CIBC A&D Transactions
