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Price Forecast                                  December 31, 2010

Forecast Commentary
Ralph Glass, Vice President Operations

Hydrocarbon Demand Remains                                              Figure 1
                                                                        World crude oil demand
Unchanged for the Foreseeable Future                                              100

  “The chief obstacle to the progress of the human race is the                     80

  human race.”                                                                     70

                                                - Don Marquis


As the world emerges from the 2008/2009 recession, albeit slowly                   40

for the Organization for Economic Co-operation and Development                     30

(OECD) group of countries (which includes the US, Canada, Japan                    20

and Western Europe), hydrocarbons are once again the fuel driving                  10

the recovery. But, it is not the OECD countries that are driving                    0
                                                                                          2007              2008     2009          2010                  2011

the demand for energy; rather, it is the developing nations whose                                                  Year
                                                                                                                                 Estimated            Forecasted

                                                                                            North America          Pacific                    China
thirst for economic advancement requires the cheap, established
                                                                                            Europe                 FSU                       Other Asia
energy available from oil, natural gas and coal. Figure 1 shows                             Latin America          Middle East               Africa
that the crude oil demand of the OECD countries has remained                      Data source: International Energy Agency
relatively flat over the last three years, dropping some 3.7 MMbbl/d
                                                                        gas is encouraging its expanded use throughout the world.
from 2009 levels. It is the non OECD countries, including China,
                                                                        In their World Energy Outlook 2010 the IEA indicated
India, Brazil and the Middle East, where the demand continues
                                                                        that natural gas may enter a “golden age” led by demand
to rise: from 2009 to 2011, these developing nations saw growth
                                                                        increases in China and the Middle East due to the current
around 5.6 MMbbl/d which is about a 5 percent growth per year
                                                                        construction of numerous new gas-fired power stations.
in demand.
                                                                        China, India and Korea continue to invest billions of dollars
Economic forecasts for 2011 predict the Chinese economy will            worldwide, including within Canada, to develop sources for
grow by 9.5 percent, India by 8.5 percent and Brazil by 5.5 percent.    long-term natural gas production. Seeking cheaper energy
These predictions of growth guarantee that the world’s energy           alternatives to expensive crude oil, these countries are
demand will continue to rise. China’s demand alone has grown            looking beyond the current world over-supply of natural gas
from 7.6 MMbbl/d in 2007 to a forecast of 9.6 MMbbl/d for 2011.         to options for a sustainable future. Natural gas is considered
China surpassed the United States as the world’s greatest overall       a cleaner alternative to coal and crude oil and current prices
energy consumer in late 2009. If their now consumer-driven              make it a cheap, efficient energy source. Adding to the
economy continues to increase its crude oil consumption at the          potential growth of natural gas is the fact that the reduction
current rate, 2 MMbbl/d over five years, we can anticipate that         of major energy capital and exploration projects, post
China will surpass the United States in terms of crude oil demand       the 2008 global recession, will eventually reverse current
by the year 2030. Of course, that assumes the United States will        oversupply issues. It’s important to remember that the
remain flat in their current demand. Should the US return to a          natural gas currently in “oversupply status” is not always
mode of economic expansion, energy demand will increase as it is        available to all the markets that actually need the natural
assumed any American expansion will be fueled by the established        gas. Parts of the world like Western Europe lack the storage
energies of oil, coal and natural gas.                                  facilities that North America has – when consumer demand
                                                                        for natural gas increases, as is currently happening in Great
Over the next few years it is anticipated that the rising world
                                                                        Britain, there is a dramatic increase in prices. Current British
demand for energy will continue to keep the price of crude oil
                                                                        NBP December prices are over US$10.00/Mcf due to the
well above the US$80.00/bbl mark for WTI. In their World Energy
                                                                        demand generated by Western Europe’s very cold weather.
Outlook 2010, the International Energy Agency (IEA) predicts
prices will continue to rise into the future, reaching US$200/bbl       Hydrocarbon consumption will continue to drive the
by 2035, which by today’s dollar is around US$115/bbl.                  economies of both the developing and the OECD
                                                                        economies. Supply, for both crude oil and natural gas, will
For the long term, AJM continues to maintain its WTI crude oil
                                                                        become a driving concern as we work to meet this demand
forecast at a real dollar value of US$100.00/bbl. However, the AJM
                                                                        over the next five-, ten-, and twenty-year time frames. The
December 31, 2010 forecast features slight increases in the short
                                                                        IEA’s World Energy Outlook 2010 stated that there is a place
term to reflect the higher prices seen in the latter part of 2010. In
                                                                        for Canada, with its vast crude oil and natural gas resources,
the near future, AJM anticipates WTI prices of US$85.00/bbl for
                                                                        in this economic expansion of the world. Canada’s biggest
2011, US$87.50/bbl for 2012 and US$88.00/bbl in 2013.
                                                                        challenge to taking its place in the economic changes will
While AJM’s international forecast is primarily focused on oil, it      be regarding access – how will Canada get its resources out
is important to consider that the relatively cheap price of natural     to the world market?
Price Forecast                                 December 31, 2010

Crude Oil Price and Market Demand Forecast
Forecast Considerations
•     Current forecasts for other Crude Oil reference                  WTI Crude Oil         (Real $)

      points are based on historical trends to the WTI                 $160

      price.                                                           $140

•     Brent, United Kingdom crude is based on                          $120

      38.3°API with 0.37% sulphur content. Brent blend
      is a light sweet North Sea crude oil that serves as

      an international benchmark grade.                                 $80

•     United States Gulf Coast Argus Sour Crude Index
      (ASCI) a blend of offshore Gulf Coast oil from                    $40

      Mars, Poseidon, and Southern Green Canyon.                        $20

•     OPEC Basket represents the current grouping                        $0
                                                                               2006   2007   2008    2009    2010    2011   2012   2013    2014   2015    2016    2017
      of crude oil prices from the OPEC member
                                                                                Historical              2010 Jan to Dec Futures              December 2010 Futures
                                                                                                        AJM September 30, 2010               AJM December 31, 2010
•     Nigerian Bonny Light 33.4°API FOB at local port
      of landing.

•     Mexico Maya 21.8°API FOB at local port of landing.

•     China Daqing 32.3°API FOB at local port of landing.

•     Russia Urals 31.7°API is the FOB delivered price to the Mediterranean destinations.

                     Average                    Gulf Coast                                  Nigerian                 Mexico                China
    Year                         Brent Spot                              OPEC                                                                            Russia Urals
                    WTI Spot                          ASCI                               Bonny Light                  Maya                Daqing
                     US$/bbl       US$/bbl        US$/bbl              US$/bbl               US$/bbl                US$/bbl               US$/bbl            US$/bbl
                        Real           Real          Real                     Real                  Real                Real                 Real                  Real
    2011              $85.00         $84.00        $80.65                $82.00                $84.00                $74.00                $82.55                $82.00
    2012              $87.50         $86.50        $83.15                $84.50                $86.50                $76.50                $85.05                $84.50
    2013              $88.00         $87.00        $83.65                $85.00                $87.00                $77.00                $85.55                $85.00
    2014              $90.00         $89.00        $85.65                $87.00                $89.00                $79.00                $87.55                $87.00
    2015              $95.00         $94.00        $90.65                $92.00                $94.00                $84.00                $92.55                $92.00
    2016             $100.00         $99.00        $95.65                $97.00                $99.00                $89.00                $97.55                $97.00
    2017             $100.00         $99.00        $95.65                $97.00                $99.00                $89.00                $97.55                $97.00
    2018             $100.00         $99.00        $95.65                $97.00                $99.00                $89.00                $97.55                $97.00
    2019             $100.00         $99.00        $95.65                $97.00                $99.00                $89.00                $97.55                $97.00
Natural Gas Price and Market Demand Forecast
Forecast Considerations
•      The NYMEX price is based on delivery at the                        NYMEX Natural Gas            (Real $)
       Henry Hub in Louisiana, the nexus of 16 intra- and                 $16

       interstate natural gas pipeline systems that draw                  $14
       supplies from the region’s prolific gas deposits.

•      The NYMEX market trades natural gas futures to
       the year 2021.

•      Gas prices have been determined independently
       from oil prices but still reflect the current
       competitive nature of the two fuels.                                $4

•      With the increase in the United States shale gas                    $2

       plays over the last few years AJM in its September                  $0
                                                                                2006         2007     2008        2009      2010      2011     2012        2013     2014
       30, 2009 price forecast introduced estimates for
                                                                                Historical                    2010 Jan to Dec Futures                 Dec 2010 Futures
       a number of US supply regions.
                                                                                AJM Sep 30, 2010              AJM December 31, 2010                   UK NBP AJM
•      Expanded world activity has also given cause to                                                                                                December 31, 2010

       provide an estimate for the United Kingdom NBP

                USD to GBP   USD to EUR                     Permian             San Juan            Gulf Coast            Louisiana      Rocky Mtn.
       Year                                  NYMEX                                                                                                                UK NBP
                  Exchange    Exchange                        Waha               Ignacio            (Onshore)            East Texas           Opal

                                            US$/Mcf     US$/Mcf                 US$/Mcf              US$/Mcf              US$/Mcf            US$/Mcf              US$/Mcf
                      Rate         Rate        Real            Real                    Real               Real                 Real              Real                Real
    2011             1.500        1.200       $4.50           $4.00                 $4.10               $4.35                $4.50             $4.00                $5.85
    2012             1.500        1.200       $5.00           $4.50                 $4.60               $4.85                 $5.00            $4.50                $6.35
    2013             1.500        1.200       $5.50           $5.00                 $5.10                $5.35                $5.50            $5.00                $6.85
    2014             1.500        1.200        $5.75          $5.25                 $5.35                $5.60                $5.75            $5.25                $7.10
    2015             1.500        1.200       $6.00           $5.50                 $5.60                $5.85                $6.00            $5.50                $7.35
    2016             1.500        1.200        $6.10          $5.60                 $5.70                $5.95                $6.10            $5.60                $7.45
    2017             1.500        1.200       $6.25           $5.75                 $5.85                $6.10                $6.25            $5.75                $7.60
    2018             1.500        1.200       $6.40           $5.90                 $6.00                $6.25                $6.40            $5.90                $7.75
Pricing Philosophy                                                                     Crude Oil Quality
                                                                                       API˚ & Sulphur %wt
AJM looks to both the futures and the past when we create
our forecasts.                                                                         United States Crude Reference
                                                                                       Price Points:
Price forecasting takes into account many variables that can influence future
prices. While experience tells us we must continually review the tools we use to        West Texas Intermediate (WTI)
predict future oil and gas prices, one constant is the impact that the geopolitical                         39.6˚                                 0.24%wt
                                                                                        Alaska North Slope (ANS)
landscape has on pricing. This impact is most accurately reflected in the financial
                                                                                                            31.9˚                                 0.93%wt
industry’s futures market for commodities. That is why the futures market is the
                                                                                        California Kern River
main influence in the creation of AJM’s price forecast.
                                                                                                            13.4˚                                  1.20%wt
At AJM, we understand that sound analysis of changing trends can influence              Heavy Louisana Sweet
the decisions made about mergers, acquisitions, divestitures and investments.                               32.9˚                                 0.35%wt
One of the ways we ensure our price forecasts are as accurate as possible is            Louisiana Light Sweet
                                                                                                            35.6˚                                  0.37%wt
to review our pricing assumptions on a quarterly basis. Accurate and realistic
                                                                                        Mars Blend US Gulf of Mexico
information ensures better long-term decisions for our clients.
                                                                                                            28.9                                   2.05%wt
                                                                                        Wyoming Sweet
These forecasts are AJM’s best estimate of how the future                                                   37.2˚                                 0.33%wt
will look.
                                                                                       International Crude Reference
In preparing the price forecast, AJM considers the current monthly trends, the
                                                                                       Price Points:
actual and trends for the year to date, and the prior year actuals in determining
the forecast. The base forecast for both oil and gas is based on NYMEX futures          United Kingdom Brent
                                                                                                            38.3˚        0.37%wt
in US dollars. Crude oil and natural gas forecasts are based on yearly variable
                                                                                        US Gulf Coast Argus Sour Crude (ASCI)
factors weighted to a higher percent for the current data and then reflecting a
                                                                                                    Approx. 29.1˚        2.00%wt
higher percent to prior year historical data for the later years. Gas prices have
                                                                                        OPEC Basket (1)
been determined independently from oil prices but still reflect the current
                                                                                        Venezuelan BCF-17 Bachaquero
competitive nature of the two fuels and reflect historical oil-to-gas ratios for the
                                                                                                           16.5˚                                   2.53%wt
latter years of the gas forecast.
                                                                                        Venezuelan Merey
AJM prepares our price and market forecasts based on information we collect                                16.0˚                                   2.45%wt
from numerous government agencies, industry publications, oil refineries,               Nigerian Bonny Light
natural gas marketers and industry trends. Inflation forecasts and exchange                                33.4˚                                   0.16%wt
rates have also been considered.                                                        Arabia UAE Dubai Feteh
                                                                                                           30.4˚                                    2.13%wt
While these forecasts are considered reasonable, changing market conditions or          Mexico Maya
additional information may require alteration from the indicated effective date.                           21.8˚                                   3.33%wt
                                                                                        China Daqing
                                                                                                           32.3˚                                    0.11%wt
                                                                                        Russia Urals
                                                                                                           31.7˚                                    1.35%wt
About AJM                                                                               Indonesia Minas
                                                                                                           35.3˚                                  0.09%wt
AJM has been providing evaluation                 AJM Petroleum Consultants
                                                                                       (1) The current OPEC Reference Basket (ORB) is made up of the
services to the oil and gas industry              East Tower, Fifth Avenue Place       following crudes: Saharan Blend - Algeria; Girassol - Angola; Oriente -
                                                                                       Ecuador; Iran Heavy - Islamic Republic of Iran; Basra Light - Iraq; Kuwait
since 1999. AJM offers expertise in               6th Floor, 425 - 1st Street S.W.     Export - Kuwait; Es Sider - Libya; Bonny Light - Nigeria; Qatar Marine
all areas of oil and gas, including the           Calgary, AB, Canada T2P 3L8          - Qatar; Arab Light - Suadi Arabia; Murban - UAE; Merey - Venezuela.

unconventional reserves and resources
                                                  main 403.648.3200
of coalbed methane, tight gas, shale
                                                  fax 403.265.0862
gas, bitumen and heavy oil.

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