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FQ-Intd-LC-OS-2007-04-Part 1pmd

VIEWS: 18 PAGES: 96

									Integrated,
Oil Sands and
Large Cap E&P



RESEARCH ANALYSTS:
Mark J. Friesen, CFA
Martin P. Molyneaux, CMA, CFA

COMMODITIES ANALYST:
Martin King

WESTERN CANADA LAND PRICES:
Cody R. Kwong, P.Geol.

RESEARCH ASSOCIATE:
Darren B. Engels, CA, CFA




April 2007


REGULATORY DISCLOSURES - Inside Front Cover
www.firstenergy.com
                                                                                            Integrated, Oil Sands and
                                                                                            Large Cap E&P April 2007


Table of Contents
Highlights and Key Assumptions . . . . . . . . . . . . . . . . . . 3                        CORPORATE UPDATES
Top Picks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4   Integrateds
Key Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4       Husky Energy Inc. - HSE . . . . . . . . . . . . . . . . . . . . . 46 - 47
                                                                                            Imperial Oil Resources Limited - IMO . . . . . . . . . 48 - 49
INTEGRATED, OIL SANDS AND LARGE CAP E&P                                                     Petro-Canada - PCA . . . . . . . . . . . . . . . . . . . . . . . . . 50 - 51
SUMMARY & OUTLOOK                                                                           Suncor Energy Inc. - SU . . . . . . . . . . . . . . . . . . . . . . 52 - 53
Sector Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 - 9
             Top 100 by Market Capitalization                                               Oil Sands
Canadian Integrateds: International Peer                                                    Canadian Oil Sands Trust - COS.UN . . . . . . . . . . 56 - 57
      Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 - 12            OPTI Canada Inc. - OPC . . . . . . . . . . . . . . . . . . . . . 58 - 59
Large Caps – A Challenging Year Spotlights Good                                             Synenco Energy Inc. - SYN . . . . . . . . . . . . . . . . . . . 60 - 61
      Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 - 16           UTS Energy Corporation - UTS . . . . . . . . . . . . . . . 62 - 63
             FD&A Including Future Development Capital                                      Western Oil Sands Inc. - WTO . . . . . . . . . . . . . . . . 64 - 65
             (FDC)
             FD&A Excluding Future Development Capital                                      Large Cap E&P
             Disaggregating FD&A Costs Into the Compo-                                      Anadarko Petroleum Corporation - APC . . . . . . . 68 - 69
             nent Parts – F&D and A                                                         Apache Corporation - APA . . . . . . . . . . . . . . . . . . 70 - 71
             Production Replacement                                                         Canadian Natural Resources Limited - CNQ . . . 72 - 73
             2006 Versus 3-Year Performance                                                 Devon Energy Corporation - DVN . . . . . . . . . . . . 74 - 75
             2007 Outlook                                                                   EnCana Corporation - ECA . . . . . . . . . . . . . . . . . . 76 - 77
Oil Sands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 - 19       EOG Resources, Inc. - EOG . . . . . . . . . . . . . . . . . . . 78 - 79
             Value of ‘Other Resources’                                                     Newfield Exploration Company - NFX . . . . . . . . 80 - 81
             Impact of Income Taxes & Changes to ACCA                                       Nexen Inc. - NXY . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 - 83
             Investment Recommendations - NAV vs. Stock                                     Pogo Producing Company - PPP . . . . . . . . . . . . . . 84 - 85
             Price Performance                                                              Talisman Energy Inc. - TLM . . . . . . . . . . . . . . . . . . 86 - 87
Investment Outlook . . . . . . . . . . . . . . . . . . . . . . . . . 20 - 23
                                                                                            APPENDICES
COMMODITY PRICE OVERVIEW                                                                    E&P Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 - 91
World Crude Oil Markets . . . . . . . . . . . . . . . . . . . . 26 - 32                     Energy Market Performance Monitor . . . . . . . . . . 92 - 94
North American Natural Gas Markets . . . . . . . . 33 - 39


WESTERN CANADA LAND PRICES
Land Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 - 44



                                          FOR REGULATORY DISCLOSURES, PLEASE GO TO OUR WEBSITE:

      WWW.FIRSTENERGY.COM/RESEARCH/REGULATORY.PHP OR FAX US AT 403.262.0666

                                     OUR POLICY ON THE DISSEMINATION OF RESEARCH CAN BE FOUND AT
                                 WWW.FIRSTENERGY.COM/RESEARCH/REGULATORY.PHP

              Sources for tabular data and charts are FirstEnergy Capital Corp. and Company Reports unless otherwise noted.
                                                                                                                3




Highlights
  The Energy sector has posted middle-of-the-road             tax. Offsetting these challenges, some oil sands
  first quarter returns of 0.7% compared to the               companies have created value by capturing addi-
  broader index return of 2.6%.                               tional opportunities.
  On a three-month basis the Equipment & Services             We have used a constant valuation of $1/Bbl for
  space has been the best performer, gaining 7.0% in          identified but undeveloped resources captured
  Q1 while Storage and Transportation (mainly the             within the oil sands companies. We believe that in
  pipeline companies) was the weakest sub-sector,             the context of past and recent transactions this
  giving back some of the big gains seen in Q4 2006           valuation of $1/Bbl is reasonable.
  when investors moved money out of Trusts and                While there are certainly themes and variables that
  into high yielding equities. Also note that for the         influence the entire group, we continue to believe
  second consecutive quarter Energy Trusts                    that differentiation between oil sands names needs
  underperformed the equities.                                to continue to be made clear and that the group
  U.S. energy names have performed better than                should not be treated as being entirely homoge-
  Canadian names.                                             neous.
  While valuations are higher, the Canadian                   We emphasize our recommendations:
  Integrateds on average have 40% higher reserve life              Integrateds: Petro-Canada (Top Pick)
  compared to the U.S. and European peer groups.                                  Husky & Synenco (Outperform)
  What's more, it is easily observed that higher
  multiples are awarded to those companies with a                 Large Caps:        Canadian Natural (Top Pick)
  higher portion of their production derived from oil                                Devon, EOG, Nexen & Talisman
  sands.                                                                             (Outperform)
  2006 was a challenging year for the oil and gas
  industry. While average netbacks appear to have                 Oil Sands:         UTS (Top Pick)
  remained steady, the cost of doing business jumped                                 OPTI (Outperform)
  considerably during the year. Finding, Develop-
  ment & Acquisition (FD&A) costs, which compa-
  nies reported during February and March, and
  resulting recycle ratios, reflect this collision of
  economic realities.
  We are encouraged by actions taken by manage-
  ment teams in the context of increasing challenged
  economics. Several companies within this peer
  group have made drastic reductions to their capital
  programs for the 2007 calendar year and those that
  are able, have shifted capital around to more
  attractive regions. While we are only seeing modest     Key Assumptions
  cost improvements on the service side of the
  business, we are seeing more supportive commod-
  ity prices. Natural gas prices have certainly firmed                                            2007e     2008e
  up nicely since the beginning of 2007 and oil prices,
  although starting the year on weak ground, have
                                                          WTI Crude Oil ($/Bbl)          $US       $68.00   $64.00
  returned in strength very quickly. Based on the
  expectation of stronger netbacks in 2007 than 2006,
  we would also expect stronger recycle ratios and        NYMEX Natural Gas ($/Mcf)      $US        $8.25    $8.50
  therefore better overall equity performance from the
  group.                                                  Lloyd Heavy Differential       $US       $21.50   $21.00
  We have updated our NAV’s for all the Companies
  in our oil sands universe. Without doubt the
  greatest challenges facing the sector have been         Alberta Power ($/MWh)          $CDN      $82.60   $87.04
  increasing capital cost estimates and an increased
  requirement to consider valuations in the context of    Canadian Dollar USD/CDN                   $0.91    $0.92
 4      FirstQuarterly            Integrated, Oil Sands and Large Cap E&P                            April 2007




Top Picks                                                                         Keep in mind that first synthetic crude oil from Horizon
                                                                                  and pre-tax annualized cash flows of ~$1.8 billion
                                                                                  ($3.25/share) are now less than 18 months away.
Integrateds
Petro-Canada (PCA)
                                                                                  Oil Sands
We have assigned Petro-Canada a Top Pick ranking as
                                                                                  UTS Energy Corporation (UTS)
we believe the valuation gap between the Company and
                                                                                  While the Company’s main project, Fort Hills, contin-
its Integrated peers is materially too wide, especially
                                                                                  ues to progress, management at UTS has done the best
when investors can now see growing Upstream volumes
                                                                                  job in the Oil Sands peer group of creating value
combined with Downstream operations expansions and
                                                                                  outside of its key project area. We are encouraged by
Oil Sands opportunities.
                                                                                  the level of detail provided at this early stage of evalua-
                                                                                  tion of the Company’s other leases and while we
Petro-Canada is currently trading at a 2007e DACF
                                                                                  acknowledge the risk associated with this type of asset,
multiple of 6.1x on our 2007e estimates. We see 45%
                                                                                  we are also aware of the attractive upside potential
upside in the shares price over the next twelve months
                                                                                  provided within UTS at this stage. We believe that the
to our target price of $68.00, implying a 2007e DACF
                                                                                  steps taken to create value within UTS have not been
multiple of 7.5x.
                                                                                  fully appreciated by the market, leaving UTS with the
                                                                                  most apparent valuation discrepancy in the Oil Sands
Large Caps                                                                        peer group at present.
Canadian Natural Resources Limited (CNQ)
The CNQ portfolio has never looked better. We continue                            We have $6.50 target price, which is based on 96% P/
to find the story and valuation very compelling. On our                           NAV ratio. Based on the strong level of implied return
2008 estimates, CNQ shares are trading at a 5.7x DACF                             from current market levels to our target price, we assign
multiple and 12x P/E ratio. Our recently increased 12                             a Top Pick rating to UTS.
month target price of $86.50 is based on a 5.9x 2009e
DACF multiple. With an anticipated 12 month return of
30%, we continue to carry a Top Pick ranking.


Key Estimates
                                                                                                           Q1 2007 Production Expectations
                                                          April 20,                                                            Q1 2007   Q1 2007
                                                           2007                                 Oil and    Natural               E&D       Cash  Q1 2007
                                                 Reporting Stock      Target    Implied         Liquids     Gas       Total     Capex      Flow  CFPS-D
                                                   Date    Price      Price      Return Ranking (Bbl/d)   (Mmcf/d)   (Boe/d)    ($Mm)     ($Mm) ($/Share)
INTEGRATEDS
Husky Energy Inc.                        HSE      17-Apr    $82.08     $91.00    10.9%    O     293,681     653      402,459    $915     $1,147    $2.68
Imperial Oil Resources Limited           IMO      1-May     $43.38     $45.00    3.7%     U     267,020     514      352,656    $200      $778     $0.82
Petro-Canada                             PCA      24-Apr    $46.75     $68.00    45.5%    T     279,691     765      407,191    $900     $1,032    $2.04
Shell Canada Limited                     SHC      1-May     $44.95     $40.25   -10.5%    U     164,764     513      250,214    $730      $868     $1.03
Suncor Energy Inc.                        SU      26-Apr    $91.50    $110.00    20.2%    O     251,000     197      283,833   $1,160     $622     $1.29
OIL SANDS
Canadian Oil Sands Trust                COS.UN    25-Apr    $28.83    $34.00    17.9%     M     108,750      0       108,750    $298      $220     $0.46
OPTI Canada Inc.                         OPC      27-Apr    $21.75    $28.00    28.7%     O         0        0          0       $225       -$3      N/A
Synenco Energy Inc.                      SYN      2-May     $12.24    $12.00    -2.0%     U         0        0          0       $145       -$2      N/A
UTS Energy Corporation                   UTS       TBA      $4.55     $6.50     42.9%     T         0        0          0        $5        -$1      N/A
Western Oil Sands Inc.                   WTO      26-Apr    $35.36    $40.00    13.1%     M      34,000      0        34,000    $179       $91     $0.55
LARGE CAPS
Anadarko Petroleum Corporation - US$;Net APC      1-May     $46.22    $49.00    6.0%      U     241,500    1,600     508,167   -$1,160    $898     $1.94
Apache Corporation - US$;Net             APA      26-Apr    $75.08    $86.00    14.5%     M     252,250    1,722     539,250   $1,925    $1,177    $3.53
Canadian Natural Resources Limited       CNQ      3-May     $66.35    $86.50    30.4%     T     322,898    1,711     608,026   $1,685    $1,539    $2.78
Devon Energy Corporation - US$;Net       DVN      2-May     $73.55    $89.00    21.0%     O     204,500    2,260     581,167   $1,400    $1,279    $2.85
EnCana Corporation - US$;Net             ECA      25-Apr    $53.47    $62.50    16.9%     M     132,875    3,420     702,875   $1,900    $1,726    $2.20
EOG Resources, Inc. - US$;Net            EOG      1-May     $73.98    $91.00    23.0%     O      36,425    1,403     270,258    $850      $630     $2.56
Newfield Exploration Company - US$;Net   NFX      26-Apr    $43.05    $53.00    23.1%     M      22,500     565      116,667    $450      $345     $2.66
Nexen Inc.                               NXY      26-Apr    $69.06    $89.00    28.9%     O     219,776     260      263,109    $720      $584     $2.17
Pogo Producing Company - US$;Net         PPP       TBA      $50.02    $53.00    6.0%      U      35,500     290       83,833    $185      $163     $2.80
Talisman Energy Inc.                     TLM      9-May     $21.66    $25.50    17.7%     O     239,000    1,360     465,667   $1,395    $1,005    $0.93
AVERAGES
Integrateds                                                                     14.0%
Oil Sands                                                                       20.1%
Large Caps                                                                      18.8%
                                                                                                                                                                                                                                                                                                                                                       5




                                                                                                                                                                                                                 the broader index gaining 11.4%. Strong returns from
Sector Review                                                                                                                                                                                                    several sectors, most especially Materials and Telecom
                                                                                                                                                                                                                 (on rising metals prices and M&A), have made the
In our previous FirstQuarterly, January 2007, we looked                                                                                                                                                          Energy space a relatively unattractive space to have
back at 2006 returns and noted that the S&P/TSX                                                                                                                                                                  invested money this past year, as oil and gas prices
Energy Index had the second worst annual returns                                                                                                                                                                 finally took a breather from their upward march.
(+3.2%) since 1998, following a 61% return in 2005. In
this edition we look at Q1 2007 returns, focusing on the                                                                                                                                                         Now looking at sub-sector returns within the energy
past three and twelve month time periods. In the past                                                                                                                                                            space, we see that on a three-month basis the Equip-
three months the Canadian stock market has outper-                                                                                                                                                               ment & Services space has been the best performer,
formed the U.S. stock market, with the S&P/TSX                                                                                                                                                                   gaining 7.0% in Q1 while Storage and Transportation
Composite Index returning a modest 2.6% against a                                                                                                                                                                (mainly the pipeline companies) was the weakest sub-
return of only 0.6% for the S&P 500 and a loss of 0.3%                                                                                                                                                           sector, giving back some of the big gains seen in Q4
for the DJIA. On a twelve-month basis, the NASDAQ                                                                                                                                                                2006 when investors moved money out of Trusts and
index has been a noticeable underperformer, while the                                                                                                                                                            into high yielding equities. Also note that for the
other major North American indices have posted                                                                                                                                                                   second consecutive quarter Energy Trusts
returns above 10%.                                                                                                                                                                                               underperformed the equities. On a twelve-month basis,
                                          North American Equity Indices: Total Return Q1'07                                                                                                                      Coal and Consumable Fuels (mainly uranium compa-
 16%
                    3-month
                                                                                                                                                                                                                 nies) have seen the most gains, followed by Storage and
                                                                                                                  13.8%
 14%                12-month
                                                                            12.4%
                                                                                                                                                                                                                 Transportation companies. Meanwhile the worst
 12%                               11.4%
                                                                                                                                                                                             11.8%
                                                                                                                                                                                                                 returns were felt by the Drillers, while Trusts
 10%                                                                                                                                                                                                             underperformed equities.
  8%                                                                                                                                                                                                                                          S&P/TSX Composite Index Energy Sub-Sectors:
                                                                                                                                                                                                                                                         Total Return Q1'07
  6%                                                                                                                                                                                                              25%
                                                                                                                                                                                                                                                                                    22.0%
                                                                                                                                                                                                                                   3-month
  4%                                                                                                                                                       3.5%                                                   20%
               2.6%                                                                                                                                                                                                                12-month
                                                              1.8%                                                                                                                                                                                                                                 13.8%
  2%                                                                                                                                                                                                              15%
                                                                                                                                            0.3%                                 0.6%
  0%                                                                                                                                                                                                              10%
                                                                                                                                                                                                                                                       7.0%
                                                                                                     -0.3%                                                                                                                                                          3.8%
                                                                                                                                                                                                                   5%                        2.4%                                2.7%
 -2%                                                                                                                                                                                                                                                                                                                           1.2%
                                                                                                                                                                                                                                                                                                                0.2%
                                                                                                                                                      NASDAQ
                              Composite




                                                                      S&P/TSX 60




                                                                                                                                                                                         S&P 500
                                                                                                                DJIA
                              S&P/TSX




                                                                                                                                                                                                                   0%

                                                                                                                                                                                                                   -5%     -2.2%                                                                                                               -2.2%
                                                                                                                                                                                                                               -2.4%           -4.0%                                          -4.3%                                 -4.2%
Source: Bloomberg                                                                                                                                                                                                 -10%
Note: NASDAQ return excludes return from dividends.                                                                                                                                                                                                        -8.8%

                                                                                                                                                                                                                  -15%
Breaking down the S&P/TSX Composite Index returns                                                                                                                                                                                                                     -17.1%
                                                                                                                                                                                                                                                                                                                   -14.6%                          -14.3%


into sectors, we observe that the Energy sector has
                                                                                                                                                                                                                  -20%
                                                                                                                                                                                                                               Integrateds




                                                                                                                                                                                                                                               E&Ps




                                                                                                                                                                                                                                                                      Drillers




                                                                                                                                                                                                                                                                                 Consumable




                                                                                                                                                                                                                                                                                                                              Energy Capped




                                                                                                                                                                                                                                                                                                                                               Energy Trusts
                                                                                                                                                                                                                                                        Equipmt &




                                                                                                                                                                                                                                                                                               Transportation



                                                                                                                                                                                                                                                                                                                 Refining &




                                                                                                                                                                                                                                                                                                                                               Capped Total
                                                                                                                                                                                                                                                                                                                 Marketing




                                                                                                                                                                                                                                                                                                                                               Return Index
                                                                                                                                                                                                                                                         Services




                                                                                                                                                                                                                                                                                                                               Total Return
                                                                                                                                                                                                                                                                                                 Storage &




                                                                                                                                                                                                                                                                                                                                Index (incl.
posted middle-of-the-road first quarter returns of 0.7%
                                                                                                                                                                                                                                                                                   Coal &

                                                                                                                                                                                                                                                                                    Fuels




                                                                                                                                                                                                                                                                                                                                  Trusts)
compared to the broader index return of 2.6%. The
Telecom and Industrials sectors were the top perform-                                                                                                                                                             Source: Bloomberg


ers, mostly on M&A activity in the space from both                                                                                                                                                               The following chart compares energy sub-sector returns
sides of the border. On a twelve-month basis, again                                                                                                                                                              from both sides of the border. Before we discuss
Energy has underperformed, losing 1.6% compared to                                                                                                                                                               returns we point out that two of the sub-sectors have
                                                                                                                                                                                                                 compositions much different across borders. In
                                   S&P/TSX Composite Index Sectors: Total Return Q1'07
  35%                                                                                                                                                                                                            Canada, Coal & Consumables is mostly uranium
                                                                                                                                                                               31.4%
  30%
                        3-month                                                                                                                                                                                  companies , while in the U.S. it is essentially coal
  25%
                        12-month                                                                                                                                 25.4%                                           producers. Refining & Marketing in Canada is a small
                                                                                                                                                                                                                 sub-sector, containing two natural gas midstream/
  20%

              14.7%                                                                  15.1%                                               14.8%
                                                                                                                                                                                                                 marketing companies, while in the U.S. this sub-sector
                                                                                                                                                                                                                 is oil refiners. In Q1, the movement of the sub-sector
  15%
                                                                                                                         10.3%                                                                       10.5%
  10%
                                             6.5%                                                                      6.9%
                                                                                                                                                                             7.9%
                                                                                                                                                                                                                 was directionally similar on both sides of the border.
           4.9%
   5%
                                                           0.7%
                                                                                   3.2%                                                                        3.2%                                              The exception is U.S. refiners, who posted a 23% three-
   0%
                                      -0.3%                                                                                            -0.4%
                                                                                                                                                                                                                 month return due to rebounding margins and M&A
   -5%
                                                             -1.6%                                -1.7%
                                                                                                                                                                                                                 activity.
                                                                                                                -8.3%                                                                              -5.8%
 -10%
                                                                                                                                                                                                                 On a twelve-month basis we note that Canadian
              Cons. Discr'y




                                           Cons. Staples




                                                             Energy




                                                                                     Financials




                                                                                                    Health Cr




                                                                                                                         Industrials




                                                                                                                                                                 Materials




                                                                                                                                                                               Telecom




                                                                                                                                                                                                     Utilities
                                                                                                                                         Info. Tech




                                                                                                                                                                                                                 uranium companies have been the best performers.
Source: Bloomberg
                                                                                                                                                                                                                 Storage and Transportation companies (i.e. Enbridge &
     6             FirstQuarterly                                           Integrated, Oil Sands and Large Cap E&P                                                                     April 2007




                                                Energy Sub-Sector Total Returns:
                                                3 Months Ending March 31, 2007
                                                                                                                                                                        Top 100 by Market Capitalization
25%                                                                                                                                                                     The table on page seven lists the world’s 100 largest oil &
                 Canada (S&P/TSX Comp.)                        USA (S&P 500)
                                                                                                                                                    23.5%
                                                                                                                                                                        gas producers and refiners as ranked by market capitali-
                                                                                                                                                                        zation (we formerly listed Top 60), along with 3-month
20%



15%
                                                                                                                                                                        and 12-month percentage price changes (local curren-
                                                                                                                                                                        cies).
10%
                                                        7.0%                                                     7.5%
                                             6.8%
                                                               5.8%                                                                                                     We would like to highlight one company that we have
  5%
                                      2.4%
                                                                               3.8%
                                                                                        1.9%
                                                                                                          2.7%                                                          previously not included in this survey, OAO Gazprom.
  0%
                                                                                                                                       0.0%           0.2%
                                                                                                                                                                        Gazprom ranks second in market capitalization at
             -2.2%
                        -0.9%                                                                                                                                           roughly US$240 million, behind ExxonMobil at ~$460
 -5%                                                                                                                            -4.3%                                   billion. Gazprom reports over 1,000 Tcfe of Proved
             Integrateds               E&Ps             Equipmt &                   Drillers            Coal &                   Storage &            Refining &
                                                        Services                                      Consumable
                                                                                                         Fuels
                                                                                                                               Transportation         Marketing         reserves (2005 numbers), predominantly natural gas. On
Source: Bloomberg
Note: S&P 500 Energy Sub-Sector returns exclude dividends.
                                                                                                                                                                        a Boe basis, Gazprom’s reserves are roughly 13x larger
                                                                                                                                                                        than ExxonMobil’s Proved reserve levels. Those attempt-
TransCanada) have also outperformed on both sides of                                                                                                                    ing to place a value on Gazprom must consider what
the border (M&A activity, need for yield). Overall                                                                                                                      natural gas prices the company will realize in the future,
though, U.S. energy names have performed better than                                                                                                                    as well as risks associated with investing in a company
Canadian names. Three key reasons why Canadian                                                                                                                          with such strong political ties to the Russian government.
energy names underperformed their U.S. peers over the
past twelve months: announced plans to eliminate                                                                                                                        Total Market Capitalization of the Top 100 names (as of
Trusts in Canada, announcements of significant                                                                                                                          April 2007) is roughly US$3.9 trillion. The top five names
increases in estimated capital costs for future oil sands                                                                                                               (ExxonMobil, Gazprom, Royal Dutch Shell, BP,
projects, and a much more significant curtailment of                                                                                                                    PetroChina)
exploration and development spending in Canada due                                                                                                                      accounted for over       Combined Market Capitalization
to lower natural gas prices and rising costs.                                                                                                                           US$1.3 trillion, or           US$ Billion   % of Top 100
                                                       Energy Sub-Sector Returns:                                                                                       34% of the entire     Top 5     $1,342            34%
                                                    12 Months Ending March 31, 2007
   25%
                                                                                                          22.0%
                                                                                                                                                                        group’s capitali- Top 10        $2,052            52%
                        21.2%                                                                                                          20.7%
                                                                                                                                                                        zation, while the     Top 25    $2,929            75%
   20%
                                                                                                                                                                                              Top 50    $3,538            90%
                                                                                                                                 13.8%                                  Top 25 names          Top 100
   15%                                                                                                                                                                                                  $3,922           100%
   10%
                                              9.2%                                                                                                                      account for 75%
                                                                                                                                                              4.3%      of total capitalization.
     5%
                                                                1.5%                                               n/a

     0%
                                                                                                                                                                        We have also looked at share price performance (in local
                 -2.4%
    -5%                                -4.0%
                                                                                            -5.1%                                                                       currencies) of these names as of March 31st on a 3-month
  -10%                                                   -8.8%                                                                                                          and 12-month basis.
  -15%
                    Canada (S&P/TSX Comp.)
                                                                                                                                                      -14.6%
                    USA (S&P 500)
  -20%
                                                                                -17.1%
                                                                                                                                                                        To the upside, Reliance Industries Limited, the Indian
                                                                                                                                                                        refining and petrochemicals company (partnered with
                 Integrateds                E&Ps          Equipmt &                  Drillers               Coal &                Storage &            Refining &
                                                           Services                                       Consumable            Transportation         Marketing

                                                                                                                                                                        Niko Resources on the offshore India D6 prospect), tops
                                                                                                             Fuels
 Source: Bloomberg
 Note: S&P 500 Energy Sub-Sector returns exclude dividends.
                                                                                                                                                                        the list on a 12-month basis with gains of 72% while U.S.
                                                Integrateds, Oil Sands, & Large Caps
                                                    Q1 2007 Return Performance                                                                                          west coast refiner Tesoro Corp.’s 3-month returns of 53%
          15%                                                                                                                                                           tops all others for the quarter. Strong organic results out
          10%
                                                                                                                                                                        of U.S. gas names XTO Energy Inc. and Noble Energy Inc.
                                                                                                                                                Avg: 3.8%
                                                                                                                                                                        have boosted those share prices as well. From our
           5%                                                                                                                                                           coverage universe, International producer Addax Petro-
           0%
                                                                                                                                                                        leum Corp. makes the Top 10 performers on a 12-month
                                                                                                                                                                        basis, returning 30% in the past twelve months (78%
 Return




          -5%                                                                                                                                                           since February 2006 IPO).
                  Avg: - 0.7%

          -10%
                                                    Avg: - 6.8%                                                                                                         To the downside, the only company in our coverage
          -15%                                                                                                                                                          universe that made the list was Canadian Oil Sands
          -20%
                                                                                                                                                                        Trust, down 13% over the past three months due to
                                                                                                                                                                        operational challenges and negative market sentiment
                                IMO




                                                        WTO




                                                                                                    EOG




                                                                                                                                       CNQ

                                                                                                                                              TLM
                  HSE




                                              PCA




                                                                      UTS




                                                                                                           ECA

                                                                                                                  NXY

                                                                                                                         APA




                                                                                                                                                     PPP



                                                                                                                                                                  NFX
                          SHC



                                       SU




                                                               OPC



                                                                            COS-U

                                                                                      SYN




                                                                                                                                 DVN




                                                                                                                                                            APC




Note: Returns for U.S. companies and ECA calculated based on US$ share prices.
                                                                                                                                                                        towards Trusts and oil sands.
                                                                                                                                                  7




Rank        Ticker                        Co. Name                      Mkt Cap    Rank    Ticker                 Co. Name              Mkt Cap
    1     XOM US          EXXON MOBIL CORP                               $450      51     CHK US      CHESAPEAKE ENERGY CORP             $15.0
    2     GAZP RM         GAZPROM                                        $239      52     003600 KS   SK CORPORATION                     $13.9
    3     RDSA LN         ROYAL DUTCH SHELL PLC-A SHS                    $226      53     MOL HB      MOL HUNGARIAN OIL AND GAS NY       $13.5
    4     BP/ LN          BP PLC                                         $220      54     SNP RO      SNP PETROM SA                      $12.6
    5     857 HK          PETROCHINA CO LTD-H                            $207      55     COS-U CN    CANADIAN OIL SANDS TRUST           $12.2
    6     FP FP           TOTAL SA                                       $175      56     5001 JP     NIPPON OIL CORP                    $11.5
    7     CVX US          CHEVRON CORP                                   $168      57     IOCL IN     INDIAN OIL CORPORATION LTD         $11.5
    8     ENI IM          ENI SPA                                        $133      58     TATN* RU    TATNEFT-CLS                        $11.4
    9     COP US          CONOCOPHILLIPS                                 $119      59     MUR US      MURPHY OIL CORP                    $10.5
   10     386 HK          CHINA PETROLEUM & CHEMICAL-H                   $115      60     NBL US      NOBLE ENERGY INC                   $10.1
   11     PETR3 BZ        PETROBRAS - PETROLEO BRAS                      $108      61     RDGZ KZ     KAZMUNAIGAS EXPLORATION PROD        $9.7
   12     AQ FP           ELF AQUITAINE                                  $105      62     KMG LI      KAZMUNAIGAS EXPLORATION -GDR        $9.3
   13     ROSN RM         ROSNEFT OIL COMPANY                             $92      63     NEF GR      NESTE OIL OYJ                       $9.1
   14     LKOH RM         LUKOIL                                          $71      64     PTTEP TB    PTT EXPLOR & PROD PUBLIC CO         $9.1
   15     STL NO          STATOIL ASA                                     $60      65     PGN PW      POLISH OIL & GAS                    $9.1
   16     RIL IN          RELIANCE INDUSTRIES LIMITED                     $51      66     GALP PL     GALP ENERGIA SGPS SA-B SHRS         $8.9
   17     BG/ LN          BG GROUP PLC                                    $49      67     SUN US      SUNOCO INC                          $8.7
   18     ONGC IN         OIL & NATURAL GAS CORP LTD                      $47      68     OGDC PA     OIL & GAS DEVELOPMENT CO LTD        $8.6
   19     SNGS RM         SURGUTNEFTEGAZ                                  $45      69     UPL US      ULTRA PETROLEUM CORP                $8.4
   20     NHY NO          NORSK HYDRO ASA                                 $44      70     RPET IN     RELIANCE PETROLEUM LTD              $8.3
   21     OXY US          OCCIDENTAL PETROLEUM CORP                       $43      71     010950 KS   S-OIL CORPORATION                   $8.3
   22     REP SM          REPSOL YPF SA                                   $43      72     5016 JP     NIPPON MINING HOLDINGS INC          $7.6
   23     ECA CN          ENCANA CORP                                     $41      73     TSO US      TESORO CORP                         $7.3
   24     VLO US          VALERO ENERGY CORP                              $39      74     PKN PW      POLSKI KONCERN NAFTOWY S.A.         $7.3
   25     883 HK          CNOOC LTD                                       $37      75     PWT-U CN    PENN WEST ENERGY TRUST              $7.2
   26     SU CN           SUNCOR ENERGY INC                               $37      76     SWN US      SOUTHWESTERN ENERGY CO              $7.1
   27     IMO CN          IMPERIAL OIL LTD                                $37      77     ORG AU      ORIGIN ENERGY LIMITED               $6.5
   28     MRO US          MARATHON OIL CORP                               $34      78     5012 JP     TONENGENERAL SEKIYU KK              $6.4
   29     TNBP RU         TNK-BP HOLDING-BRD                              $34      79     MFGS RM     SLAVNEFT-MEGIONNEFTEGAZ             $6.2
   30     SHC CN          SHELL CANADA LTD                                $33      80     HINA LI     INA INDUSTRIJA NAFTE DD-GDR         $5.9
   31     DVN US          DEVON ENERGY CORPORATION                        $32      81     SRS IM      SARAS SPA                           $5.8
   32     CNQ CN          CANADIAN NATURAL RESOURCES                      $31      82     PXD US      PIONEER NATURAL RESOURCES CO        $5.7
   33     HSE CN          HUSKY ENERGY INC                                $31      83     TUPRS TI    TUPRAS-TURKIYE PETROL RAFINE        $5.7
   34     APA US          APACHE CORP                                     $25      84     STO AU      SANTOS LTD                          $5.6
   35     CEP SM          CIA ESPANOLA DE PETROLEOS SA                    $24      85     CAIR IN     CAIRN INDIA LIMITED                 $5.6
   36     WPL AU          WOODSIDE PETROLEUM LTD                          $22      86     NFX US      NEWFIELD EXPLORATION CO             $5.6
   37     SOL SJ          SASOL LTD                                       $22      87     ERF-U CN    ENERPLUS RESOURCES FUND             $5.5
   38     APC US          ANADARKO PETROLEUM CORP                         $21      88     CTX AU      CALTEX AUSTRALIA LIMITED            $5.5
   39     PCA CN          PETRO-CANADA                                    $21      89     AXC CN      ADDAX PETROLEUM CORP                $5.4
   40     6505 TT         FORMOSA PETROCHEMICAL CORP                      $20      90     RRC US      RANGE RESOURCES CORP                $5.3
   41     XTO US          XTO ENERGY INC                                  $20      91     TLW ID      TULLOW OIL PLC                      $5.3
   42     TLM CN          TALISMAN ENERGY INC                             $20      92     PPHN SW     PETROPLUS HOLDINGS AG               $5.1
   43     1605 JP         INPEX HOLDINGS INC                              $19      93     WTO CN      WESTERN OIL SANDS INC CL/A          $5.1
   44     OMV AV          OMV AG                                          $19      94     ELPE GA     HELLENIC PETROLEUM SA               $4.7
   45     PTT TB          PTT PCL                                         $18      95     5019 JP     IDEMITSU KOSAN CO LTD               $4.7
   46     NOTK RM         NOVATEK OAO                                     $18      96     5002 JP     SHOWA SHELL SEKIYU KK               $4.5
   47     HES US          HESS CORP                                       $18      97     CXG US      CNX GAS CORP                        $4.3
   48     EOG US          EOG RESOURCES INC                               $18      98     ERG IM      ERG SPA                             $4.3
   49     YPF GR          YPF S.A.-SPONSORED ADR                          $17      99     PGF-U CN    PENGROWTH ENERGY TRUST              $4.2
   50     NXY CN          NEXEN INC                                       $16      100    CNE LN      CAIRN ENERGY PLC                    $4.2
Source: FirstEnergy Capital Corp., Bloomberg
Mkt Cap in US$ Billion


                                          10 Best Performers                                     10 Worst Performers
                                     3- Month                      12- Month                    3- Month              12- Month
                          1    TSO US        52.7%            RIL IN       71.8%     1    SNGS RM      -18.7%   IOCL IN        -31.6%
                          2    HINA LI       28.2%            TSO US       47.0%     2    "PetroChina" -15.9%   MFGS RM        -31.5%
                          3    TUPRS TI      28.1%            "SINOPEC" 46.9%        3    MFGS RM      -15.7%   TNBP RU        -28.5%
                          4    "SK Corp"     26.6%            CEP SM       46.0%     4    TNBP RU      -14.6%   YPF GR         -28.2%
                          5    VLO US        26.1%            "SK Corp"    41.7%     5    YPF GR       -14.3%   CNE LN         -27.1%
                          6    RRC US        21.6%            NBL US       35.8%     6    KMG LI       -14.0%   OGDC PA        -24.6%
                          7    NBL US        21.6%            NOTK RM      32.9%     7    CNE LN       -13.9%   SNGS RM        -22.2%
                          8    "NipponOil"   20.1%            XTO US       30.8%     8    COS-U CN     -13.3%   PWT-U CN       -20.4%
                          9    "NipponMin'g" 18.8%            TUPRS TI     30.8%     9    ROSN RM      -11.5%   PKN PW         -18.5%
                         10    ERG IM        17.9%            AXC CN       30.4%    10    IOCL IN      -11.2%   PTTEP TB       -18.5%
                         Source: FirstEnergy Capital Corp., Bloomberg
                                                                                                                                                                                                                                                                                                                                                   8
                                                                                                                                                                                                                                                                                                                                                   FirstQuarterly




                                                                                                                                                                                                                                   $0
                                                                                                                                                                                                                                          $25
                                                                                                                                                                                                                                                           $50
                                                                                                                                                                                                                                                                              $75
                                                                                                                                                                                                                                                                                       $100
                                                                                                                                                                                                                                                                                                       $125




                                                                                                                  -20%
                                                                                                                         -10%
                                                                                                                                0%
                                                                                                                                     10%
                                                                                                                                           20%
                                                                                                                                                 30%
                                                                                                                                                       40%
                                                                                                                                                             50%
                                                                                                                                                                   60%




            -40%
                   -20%
                          0%
                               20%
                                     40%
                                           60%
                                                 80%
                                                                                                                                                                                                                       XOM US                                                                                 450.1
    XOM US                                                                                            XOM US
                                                                                                                                                                                                                     GAZP RM                                                                                  238.8
  GAZP RM                                                                                           GAZP RM
                                                                                                                                                                                                                      RDSA LN                                                                                 226.1
   RDSA LN                                                                                           RDSA LN
                                                                                                                                                                                                                         BP/ LN                                                                               219.7
      BP/ LN                                                                                            BP/ LN
                                                                                                                                                                                                                   "PetroChina"                                                                               207.1
"PetroChina"                                                                                      "PetroChina"
                                                                                                                                                                                                                          FP FP                                                                               175.3
       FP FP                                                                                             FP FP
                                                                                                                                                                                                                        CVX US                                                                                167.8
     CVX US                                                                                            CVX US
                                                                                                        ENI IM                                                                                                           ENI IM                                                                               133.1
      ENI IM                                                                                                                                                                                                            COP US                                                                        118.7
     COP US                                                                                           COP US
                                                                                                                                                                                                                    "SINOPEC"                                                                       115.3
 "SINOPEC"                                                                                         "SINOPEC"
                                                                                                                                                                                                                     PETR3 BZ                                                                   108.4
  PETR3 BZ                                                                                          PETR3 BZ
                                                                                                   AQ FP (Elf)                                                                                                      AQ FP (Elf)                                                               104.5
 AQ FP (Elf)                                                                                                                                                                                                         ROSN RM                                                         92.2
  ROSN RM                                                                                           ROSN RM
                                                                                                                                                                                                                      LKOH RM                                                 71.2
   LKOH RM                                                                                           LKOH RM
                                                                                                       STL NO                                                                                                           STL NO                                         60.2
     STL NO                                                                                                                                                                                                                                                     51.4
                                                                                                         RIL IN                                                                                                           RIL IN
       RIL IN                                                                                                                                                                                                                                                 49.3
                                                                                                        BG/ LN                                                                                                           BG/ LN
      BG/ LN                                                                                                                                                                                                           ONGC IN                               47.2
    ONGC IN                                                                                           ONGC IN
                                                                                                    SNGS RM                                                                                                          SNGS RM                               44.7
  SNGS RM
                                                                                                      NHY NO                                                                                                           NHY NO                              44.1
    NHY NO
                                                                                                      OXY US                                                                                                           OXY US                             43.0
    OXY US
                                                                                                      REP SM                                                                                                           REP SM                             42.8
    REP SM
                                                                                                       ECA CN                                                                                                           ECA CN                           41.2
     ECA CN
                                                                                                       VLO US                                                                                                           VLO US                          39.4
     VLO US
                                                                                                     "CNOOC"                                                                                                          "CNOOC"                         37.5
   "CNOOC"
                                                                                                        SU CN                                                                                                            SU CN                        37.0
      SU CN
                                                                                                       IMO CN                                                                                                           IMO CN                        36.8
     IMO CN
                                                                                                      MRO US                                                                                                           MRO US                       34.4
    MRO US
                                                                                                     TNBP RU                                                                                                          TNBP RU                       33.9
   TNBP RU


                                                                                                                                                                                     (Local Currency)




                                                                    (Local Currency)
                                                                                                       SHC CN                                                                                                           SHC CN                     33.1
     SHC CN
                                                                                                       DVN US                                                                                                           DVN US                     32.5
     DVN US
                                                                                                      CNQ CN                                                                                                           CNQ CN                     31.3
    CNQ CN
                                                                                                                                                                                                                                                                                                                                                   Integrated, Oil Sands and Large Cap E&P




                                                                                                       HSE CN                                                                                                           HSE CN                    30.9
     HSE CN
                                                                                                       APA US                                                                                                           APA US                24.7
     APA US
                                                                                                      CEP SM                                                                                                           CEP SM                 24.3
    CEP SM
                                                                                                                                                                                                                                                                                                              Top 50 By Market Cap (US$ Billion)




                                                                                                      WPL AU                                                                                                           WPL AU                22.3
    WPL AU
                                                                                                       SOL SJ                                                                                                           SOL SJ              21.8
     SOL SJ
                                                                                                                                                                                                                        APC US              21.3
                                                                                                                                                                         3 Month Price Change: Top 50 Market Cap




     APC US                                                                                            APC US
                                                                                                                                                                                                                                           20.6




                                                       12 Month Price Change: Top 50 Market Cap
     PCA CN                                                                                            PCA CN                                                                                                           PCA CN
  "Formosa"                                                                                         "Formosa"                                                                                                        "Formosa"             20.3
     XTO US                                                                                            XTO US                                                                                                           XTO US             20.2
     TLM CN                                                                                            TLM CN                                                                                                           TLM CN             20.2
      "Inpex"                                                                                           "Inpex"                                                                                                          "Inpex"          19.2
    OMV AV                                                                                            OMV AV                                                                                                           OMV AV             19.0
     PTT TB                                                                                            PTT TB                                                                                                           PTT TB           18.3
                                                                                                                                                                                                                                                                                                                                                   April 2007




  NOTK RM                                                                                           NOTK RM                                                                                                          NOTK RM             18.2
     HES US                                                                                            HES US                                                                                                           HES US           18.0
    EOG US                                                                                            EOG US                                                                                                           EOG US            17.9
     YPF GR                                                                                            YPF GR                                                                                                           YPF GR          16.9
     NXY CN                                                                                            NXY CN                                                                                                           NXY CN          16.1
                                                                                                                                                                                                                                           $0
                                                                                                                                                                                                                                                $2
                                                                                                                                                                                                                                                     $4
                                                                                                                                                                                                                                                                $6
                                                                                                                                                                                                                                                                            $8
                                                                                                                                                                                                                                                                                         $10
                                                                                                                                                                                                                                                                                                   $12
                                                                                                                                                                                                                                                                                                               $14
                                                                                                                                                                                                                                                                                                                            $16




                -40%
                       -20%
                              0%
                                   20%
                                         40%
                                               60%
                                                     80%
                                                                                                                          -20%
                                                                                                                                 -10%
                                                                                                                                        0%
                                                                                                                                             10%
                                                                                                                                                   20%
                                                                                                                                                         30%
                                                                                                                                                               40%
                                                                                                                                                                     50%
                                                                                                                                                                           60%
                                                                                                                                                                                                                                    CHK US                                                                                 15.0
     CHK US                                                                                                    CHK US                                                                                                             "SK Corp"                                                                         13.9
   "SK Corp"                                                                                                 "SK Corp"                                                                                                              MOL HB                                                                         13.5
     MOL HB                                                                                                    MOL HB                                                                                                               SNP RO                                                                  12.6
     SNP RO                                                                                                    SNP RO                                                                                                             COS-U CN                                                                12.2
   COS-U CN                                                                                                  COS-U CN                                                                                                            "NipponOil"                                                           11.5
  "NipponOil"                                                                                               "NipponOil"                                                                                                              IOCL IN                                                           11.5
      IOCL IN                                                                                                   IOCL IN                                                                                                           TATN* RU                                                             11.4
   TATN* RU                                                                                                  TATN* RU                                                                                                               MUR US                                                      10.5
     MUR US                                                                                                    MUR US                                                                                                                NBL US                                                   10.1
      NBL US                                                                                                    NBL US                                                                                                             RDGZ KZ                                                  9.7
    RDGZ KZ                                                                                                   RDGZ KZ                                                                                                                KMG LI                                               9.3
      KMG LI                                                                                                    KMG LI                                                                                                              NEF GR                                               9.1
     NEF GR                                                                                                    NEF GR                                                                                                            PTTEP TB                                                9.1
  PTTEP TB                                                                                                  PTTEP TB                                                                                                               PGN PW                                               9.1
    PGN PW                                                                                                    PGN PW                                                                                                               GALP PL                                             8.9
    GALP PL                                                                                                   GALP PL                                                                                                               SUN US                                            8.7
     SUN US                                                                                                    SUN US
                                                                                                                                                                                                                                  OGDC PA                                             8.6
   OGDC PA                                                                                                   OGDC PA
                                                                                                                                                                                                                                     UPL US                                          8.4
      UPL US                                                                                                    UPL US
                                                                                                                                                                                                                                    RPET IN                                         8.3
     RPET IN                                                                                                   RPET IN
                                                                                                                                                                                                                                "S_OilCorp"                                         8.3
 "S_OilCorp"                                                                                               "S_OilCorp"
                                                                                                                                                                                                                                "NipponMin'                                   7.6
 "NipponMin'                                                                                               "NipponMin'
                                                                                                                                                                                                                                    TSO US                                  7.3
     TSO US                                                                                                    TSO US
                                                                                                                                                                                                                                    PKN PW                                  7.3
     PKN PW                                                                                                    PKN PW
  PWT-U CN                                                                                                  PWT-U CN                                                                                                             PWT-U CN                                   7.2
     SWN US                                                                                                    SWN US                                                                                                               SWN US                                 7.1
     ORG AU                                                                                                    ORG AU                                                                                                               ORG AU                              6.5
     "Sekiyu"                                                                                                  "Sekiyu"                                                                                                             "Sekiyu"                           6.4
                                                                                                                                                                                                                                  MFGS RM                            6.2




                                                                          (Local Currency)
   MFGS RM                                                                                                   MFGS RM
                                                                                                                                                                                               (Local Currency)


      HINA LI                                                                                                   HINA LI                                                                                                              HINA LI                        5.9
      SRS IM                                                                                                    SRS IM                                                                                                               SRS IM                        5.8
     PXD US                                                                                                    PXD US                                                                                                               PXD US                         5.7
   TUPRS TI                                                                                                  TUPRS TI                                                                                                             TUPRS TI                        5.7
     STO AU                                                                                                    STO AU                                                                                                               STO AU                        5.6
     CAIR IN                                                                                                   CAIR IN                                                                                                              CAIR IN                       5.6
     NFX US                                                                                                    NFX US                                                                                                               NFX US                        5.6
                                                                                                                                                                                                                                  ERF-U CN                       5.5
                                                                                                                                                                                                                                                                                                                                  Top 51-100 By Market Cap (US$ Billion)




   ERF-U CN                                                                                                  ERF-U CN
     CTX AU                                                                                                    CTX AU                                                                                                               CTX AU                       5.5
     AXC CN                                                                                                    AXC CN                                                                                                               AXC CN                       5.4
                                                                                                                                                                                 3 Month Price Change: Top 51-100 Market Cap




                                                           12 Month Price Change: Top 51-100 Market Cap
     RRC US                                                                                                    RRC US                                                                                                               RRC US                      5.3
       TLW ID                                                                                                    TLW ID                                                                                                               TLW ID                    5.3
   PPHN SW                                                                                                   PPHN SW                                                                                                              PPHN SW                      5.1
     WTO CN                                                                                                    WTO CN                                                                                                               WTO CN                     5.1
    ELPE GA                                                                                                   ELPE GA                                                                                                              ELPE GA                   4.7
"IDEMITSU"                                                                                                "IDEMITSU"                                                                                                           "IDEMITSU"                    4.7
"ShowaShell                                                                                               "ShowaShell                                                                                                          "ShowaShell                  4.5
     CXG US                                                                                                    CXG US                                                                                                               CXG US                 4.3
      ERG IM                                                                                                    ERG IM                                                                                                               ERG IM               4.3
   PGF-U CN                                                                                                  PGF-U CN                                                                                                             PGF-U CN                4.2
      CNE LN                                                                                                    CNE LN                                                                                                               CNE LN               4.2
                                                                                                                                                                                                                                                                                                                                                                           9
 10   FirstQuarterly     Integrated, Oil Sands and Large Cap E&P                                                                                     April 2007




Canadian Integrateds:                                                                                        Integrateds: Valuation & Reserve Life
                                                                             25.0                                                                                                                                                                 25.0
International Peer                                                                                                                                                                                         P/E '07e
                                                                                                                                                                                                           P/CF '07e
Comparison                                                                   20.0                                                                                                                          RLI                                    20.0


On the surface, Canadian

                                                ('07E Bloomberg Consensus)
Integrateds look expensive                                                   15.0                                                                                                                                                                 15.0
versus their U.S. and European




                                                                                                                                                                                                                                                         Reserve Life
                                    P/E, P/CF

peers trading roughly 42%
higher than their international                                              10.0                                                                                                                                                                 10.0

counterparts. The average
Canadian P/E multiple is 15.3x
                                                                              5.0                                                                                                                                                                 5.0
versus the average U.S. multiple
of 11.2x and the average Euro-
pean multiple of 10.4x. A similar
                                                                              0.0                                                                                                                                                                 0.0
premium exists for P/CF mul-
                                                                                          IMO




                                                                                                                                   MRO


                                                                                                                                               XOM




                                                                                                                                                                                                    ENI
                                                                                                                                                                   FP (TotalSA)


                                                                                                                                                                                        STL




                                                                                                                                                                                                          CA avg
                                                                                                                                                                                                                   US avg
                                                                                                                                                                                                                            EUR avg
                                                                                                                                                                                                                                      Total avg
                                                                                    HSE


                                                                                                PCA




                                                                                                                 COP
                                                                                                                       CVX
                                                                                                                             HES




                                                                                                                                                       BP
                                                                                                                                                            RDSA


                                                                                                                                                                                  NHY


                                                                                                                                                                                              REP
                                                                                                      SHC
                                                                                                            SU




                                                                                                                                         MUR
tiples, with Canadian
Integrateds trading roughly 43%
higher than U.S. & Europeans on
                                    Source: Company documents, Bloomberg, FirstEnergy Capital Corp.
average.                            Note: RLI based on 2006 net Proven Reserves and Q4 2006 net production.



While valuations are higher, the Canadian Integrateds                                                                              taking. For oil sands barrels to be booked as
on average have 40% higher reserve life compared to the                                                                            Proved reserves, the following must occur:
U.S. and European peer groups. Now, all else being                                                                                 First, sufficient stratigraphic drilling densities
equal, if a company had an RLI 40% higher than its                                                                                 must exist to obtain a degree of confidence in
peer group, one would expect the P/E premium to be                                                                                 the size and quality of the resource. The
somewhat less than 40%, owing to the following                                                                                     resource base must be such that a potential
factors:                                                                                                                           project is economically justifiable. In conjunc-
    1) The barrels produced in later years have a                                                                                  tion with determining economics, a detailed
         lower present value.                                                                                                      plan must be developed. The Company must
    2) Oil sands projects tend to have flatter produc-                                                                             also apply for regulatory approval (government
         tion profiles, whereas a blow-down valuation                                                                              permission) to develop the project. If regulatory
         of conventional reserves assumes more produc-                                                                             approval is granted, the Company can then
         tion in earlier years. As a result, the present                                                                           decide whether to proceed. If the go-ahead is
         value per reserve barrel of a declining produc-                                                                           given, this should indicate that the Company
         tion profile is greater than if the production                                                                            has the financial and operational wherewithal
         profile was assumed flat (with a sudden drop                                                                              to undertake the project. Significant front-end
         off at the end).                                                                                                          engineering work and capital spending must
                                                                                                                                   then occur before reserves can be classified as
There are two main problems with accepting the above                                                                               Proven.
arguments:
    1) Producing oil sands assets require much less                                                              All of this is to say that the market is paying for compa-
        capital to maintain production versus a                                                                  nies with attractive oil sands potential, recognizing that
        conventional producer (albeit higher initial                                                             the potential of these assets is not fully reflected in
        capital).                                                                                                booked Proven reserve levels.
    2) The resource potential of oil sands players
        assets is not effectively reflected in a Proven                                                          The chart below plots reserves and resources of each of
        reserve number. In general, the amount of                                                                the Canadian Integrated companies. Although we do
        recoverable oil sands barrels held by Canadian                                                           not have complete comparable data for each classifica-
        Integrateds is much higher than the amount of                                                            tion of resources, the purpose of the chart is to show
        barrels booked as Proved reserves. Achieving                                                             that the size of oil sands resources is several times
        "Proved" reserve status for oil sands resources                                                          larger than the size of booked Proved reserves.
        can be a very lengthy and complicated under-
                                                                                                                                                                                                                                                                                     11




                                                              Canadian Integrateds:                                                   Take for example, Shell Canada Limited (SHC) who
                                                      Resource Size vs. Proven Reserve Levels
                                 16,000                                                                                               booked significant oil sands reserves in 2006. The
                                              1P         2P           3P       Recoverable
                                                                                                                                      approval of the AOSP Muskeg River mine expansion
                                 14,000
                                                                                                                                      triggered a 52% increase in the Company's oil sands
MmBoe (Conventional & Bitumen)




                                 12,000                                                                                               mining reserves in 2006. Observe that while reserves
                                 10,000
                                                                                                                                      increased by more than 50%, the Company’s P/E ratio
                                                                                                                                      hardly increased demsonstrating that, at least to some
                                  8,000
                                                                                                                                      extent, the market looks beyond the Proven reserve
                                  6,000
                                                                                                                                      number in an attempt to consider the ultimate potential
                                                                                                                                      of oil sands assets.
                                  4,000


                                  2,000
                                                                                                                                                                                                                         Reserve Life vs. P/E

                                    -
                                                                                                                                                                                  21
                                                                                                                                                                                           Canadian
                                               HSE                   IMO             PCA               SHC                 SU                                                              US
                                                                                                                                                                                                                                                                                     SU
      Source: FirstEnergy Estimates, Company Reports                                                                                                                                       European
                                                                                                                                                                                  19                                                                                SHC




                                                                                                                                            (2007e Bloomberg Consensus EPS)
                                                                                                                                                                                                                             SHC 12m ago
                                                                             Notes                                                                                                17

                                        - 1P represents Proven reserves                                                                                                                                                           MUR                 IMO

                                        - 2P represents Proven+Probable reserves                                                                                                  15

                                        - 3P represents Proven+Probable+Possible reserves


                                                                                                                                      P/E
                                        - Synthetic crude oil barrels converted to bitumen                                                                                        13               HSE
                                                                                                                                                                                                                XOM

                                          barrels at ratio of 1.15 Bbls bitumen per Bbl SCO                                                                                                         NHY
                                                                                                                                                                                                                                           BP
                                                                                                                                                                                  11                      HES
                                                                                                                                                                                              REP
                                        HSE:                                                                                                                                                                    ENI
                                                                                                                                                                                                                                        CVX
                                                                                                                                                                                                                                           FP (TotalSA)
                                                                                                                                                                                             STL
                                        - Reserves on a before royalties basis                                                                                                     9                        PCA
                                                                                                                                                                                                                 MRO
                                                                                                                                                                                                              RDSA
                                        - 3P = 3P Oil Sands + 2P Conventional                                                                                                                                                              COP
                                                                                                                                                                                   7
                                        IMO:
                                                                                                                                                                                       5      7             9                11            13             15   17         19   21         23
                                        - Recoverable Resources = Oil Sands Recoverable
                                                                                                                                                                                                                                    Reserve Life
                                          Resources + Conventional 1P Reserves                                                                                                                      (Year-End Net Proven Reserves / Annualized Q4 2006 Net Production)
                                        - Only 1P reserves from Cold Lake included, no                                                Source: FirstEnergy Capital Corp., Bloomberg, Company Reports
                                          other estimate found for Cold Lake resources
                                        PCA:
                                        - Reserves on a before royalties basis                                                                                                                                          Reserve Life vs. P/CF
                                        - Recoverable Resources = Oil Sands Recoverable                                                                                           14
                                          Resources + Conventional 2P Reserves                                                                                                             Canadian
                                                                                                                                                                                  13       US
                                        SHC:                                                                                                                                               European                                                   IMO
                                                                                                                                                                                  12
                                        - 2P Reserves = Oil Sands 2P Reserves + Conventional 1P                                                                                                                                                                      SHC
                                                                                                                                                                                                                                                                                    SU
                                          Reserves                                                                                                                                11                                         SHC 12m ago
                                                                                                                                               (2007e Bloomberg Consensus CFPS)




                                        - Recoverable Resources = Mineable Bitumen
                                                                                                                                                                                  10                            XOM
                                          Recoverable Resources (no estimate available for
                                          recoverable portion of est. 25 billion Bbls of in-situ                                                                                  9
                                                                                                                                                                                                                                  MUR
                                          bitumen in place) + Conventional 1P Reserves
                                                                                                                                      P/CF




                                                                                                                                                                                                                                           BP
                                                                                                                                                                                  8
                                        SU:                                                                                                                                                                                                CVX
                                                                                                                                                                                  7
                                        - 2P Reserves = 2P Bitumen Reserves +                                                                                                                      HSE
                                                                                                                                                                                                                MRO
                                                                                                                                                                                                                                           FP (TotalSA)
                                                                                                                                                                                                    NHY
                                          Conventional 1P Reserves                                                                                                                6
                                                                                                                                                                                                                   ENI
                                                                                                                                                                                                                      RDSA


                                        - Recoverable Resources = Oil Sands Recoverable                                                                                                      STL
                                                                                                                                                                                              REP                 HES                      COP
                                                                                                                                                                                  5
                                          Resources + Conventional 1P Reserves                                                                                                                              PCA

                                                                                                                                                                                  4
                                                                                                                                                                                       5      7             9                11            13             15   17         19   21         23
  Canadian Integrateds: Reserves & Resources Survey (MmBoe)                                                                                                                                                                         Reserve Life
                                                                                                                                                                                                     (Year-End Net Proven Reserves / Annualized Q4 2006 Net Production)
                                          Conventional           [            Oil Sands Bitumen1 Resources         ]                  Source: FirstEnergy Capital Corp., Bloomberg, Company Reports

                                           1P      2P                 1P      2P     3P Recoverable     Oil-In-Place
HSE2                                        944      1,257              60   1,187     3,552                                40,860    What's more, it is easily observed that higher multiples
IMO                                         189                      1,566                               7,076
PCA2                                        772      1,258             554   1,025                      10,403
                                                                                                                                      are awarded to those companies with a higher portion
SHC                                         231                      1,225   1,475                       4,483    3
                                                                                                                            31,000    of their production derived from oil sands. This is due
SU                                           78                      2,229   4,432                      15,000                        to the long life nature of the resource as well as the
                                                                                                                                      minimal capital investment required once the project is
Source: Company Reports, FirstEnergy Estimates
Notes
                                                                                                                                      built, compared to production replacement costs for
             1) Converting Synthetic Crude Oil bbls to Bitumen bbls at a ratio of 1.15 bbls bitumen per bbl SCO                       conventional producers. In other words - lower replace-
             2) PCA & HSE reserves & resources shown on a before royalties basis                                                      ment risk of the companies’ asset base.
             3) SHC: 4,483 Million bbls recoverable resources for mining bitumen only. SHC doesn' give
                                 estimate for in-situ recoverable resources (in-situ oil-in-place estimated at 25 Billion barrels).
             4) 1P = Proven Reserves
                                 2P = Proven + Probable Reserves
                                 3P = Proven + Probable + Possible Reserves
                12                                 FirstQuarterly                Integrated, Oil Sands and Large Cap E&P            April 2007




In conclusion, this exercise serves to reinforce our view
that the market is willing to pay a premium for compa-
nies with long life low risk and predictable assets.
Conversely, we believe that large producing companies
with mostly conventional production are being as-
signed a valuation discount because of market scepti-
cism regarding the quality and quantity of those
companies' reinvestment opportunities in a world
where the remaining large oil resource plays are almost
exclusively in the hands of countries with questionable
political/cultural stability, save for the Canadian oil
sands.
                                                          Canadian Integrateds: Production Breakdown
                                             350



                                             300
2006 Production after Royalties




                                             250



                                             200
                                  (MBoe/d)




                                             150



                                             100


                                              50



                                               0
                                                         SU                IMO          SHC              PCA           HSE

                                                         Liquids: Oil Sands*            Liquids: Conventional          Gas
* Oil Sands includes Mining and In-situ (including Cold Lake production for IMO)




                                                              % Production from Oil Sands vs. Valuation
           100%                                                                                                              25.0
                                                               % Oil Sands                            P/E '07E
                         90%


                         80%                                                                                                 20.0


                         70%


                         60%                                                                                                 15.0


                         50%


                         40%                                                                                                 10.0


                         30%


                         20%                                                                                                 5.0


                         10%


                                   0%                                                                                        -
                                                    SU               IMO          SHC              PCA           HSE
Source: FirstEnergy Capital Corp., Bloomberg, Company Reports
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       13




Large Caps – A Challenging Year                                                                                                                                                                                                                                                                                                                                                                                                                Large Cap Sector
                                                                                                                                                                                                                                                                                                                                                                                                                                     Cash Flow Netback Versus FD&A Costs

Spotlights Good Companies
                                                                                                                                                                                                                                                                                                                                                                                                           $30
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   2006
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     2005




                                                                                                                                                                                                                                                                                                                                                                             Cash Flow Netback (US$/Boe)
                                                                                                                                                                                                                                                                                                                                                                                                           $25
2006 was a challenging year for the oil and gas indus-
try. Natural gas prices exited 2006 56% below their
levels at the beginning of the year while service costs                                                                                                                                                                                                                                                                                                                                                    $20
                                                                                                                                                                                                                                                                                                                                                                                                                                              2004
continued to reflect the robust 2005 natural gas price
environment. On the surface, oil prices faired better by                                                                                                                                                                                                                                                                                                                                                                  2000
                                                                                                                                                                                                                                                                                                                                                                                                                                          2003

                                                                                                                                                                                                                                                                                                                                                                                                           $15
exiting the year relatively flat but the price rally of the                                                                                                                                                                                                                                                                                                                                                                      2001

first half of the year, which continued to drive service                                                                                                                                                                                                                                                                                                                                                                             2002
sector inflation, led to a very difficult second half of the                                                                                                                                                                                                                                                                                                                                               $10
                                                                                                                                                                                                                                                                                                                                                                                                                 $5                              $10                              $15                 $20                          $25
year when the entire price rally was given back into an                                                                                                                                                                                                                                                                                                                                                                                                   Net Proved FD&A Costs (US$/Boe)
environment of rising costs.                                                                                                                                                                                                                                                                                                                                                                               Source: FirstEnergy Capital Corp. and Company Reports




                                                                                                                                                                 Oil & Gas Prices
                                                                                                                                                                                                                                                                                                                                                                             different. While average netbacks appear to have
                                                                $78                                                                                                                                                                                                                                                      $13                                                 remained steady, the cost of doing business jumped
                                                                $72                                                                                                                                                                                                                                                      $12
                                                                                                                                                                                                                                                                                                                                                                             considerably during the year. Finding, Development &
                                                                                                                                                                                                                                                                                                                                                                             Acquisition (FD&A) costs, which companies reported
                                                                                                                                                                                                                                                                                                                                             NYMEX Natural Gas Front-Month

                                                                $66                                                                                                                                                                                                                                                      $11
                                                                                                                                                                                                                                                                                                                                                                             during February and March, and resulting recycle
                                                                $60                                                                                                                                                                                                                                                      $10
                                                                                                                                                                                                                                                                                                                                                                             ratios, reflect this collision of economic realities.
   WTI Front-Month $ Boe
                                 (6:1, 50/50 Oil/Gas) US$/Boe




                                                                                                                                                                                                                                                                                                                               (US$/Mmbtu)




                                                                $54                                                                                                                                                                                                                                                      $9


                                                                $48                                                                                                                                                                                                                                                      $8                                                  FD&A Including Future Development Capital
                                                                $42                                                                                                                                                                                                                                                      $7                                                  (FDC)
                                                                $36                                                                                                                                                                                                                                                      $6                                                  Our universe of North American Large Caps, which
                                                                $30
                                                                                                WTI
                                                                                                                                                                                                                                                                                                                         $5
                                                                                                                                                                                                                                                                                                                                                                             includes all the Canadian Large Caps and a represen-
                                                                                                Boe (6:1)
                                                                                                NYMEX Gas                                                                                                                                                                                                                                                                    tative handful of U.S. Large Caps, reported FD&A costs
                                                                                                                                                                                                                                                                                                                                                                             (including FDC) of US$28.62/Boe (Proven, Net), up
                                                                $24                                                                                                                                                                                                                                                      $4
                                                                      12/29/05
                                                                                 01/20/06

                                                                                             02/10/06
                                                                                                        03/03/06
                                                                                                                   03/24/06
                                                                                                                              04/14/06

                                                                                                                                         05/05/06
                                                                                                                                                    05/26/06
                                                                                                                                                               06/16/06
                                                                                                                                                                          07/07/06

                                                                                                                                                                                     07/28/06
                                                                                                                                                                                                08/18/06
                                                                                                                                                                                                           09/08/06
                                                                                                                                                                                                                      09/29/06

                                                                                                                                                                                                                                 10/20/06
                                                                                                                                                                                                                                            11/10/06
                                                                                                                                                                                                                                                       12/01/06
                                                                                                                                                                                                                                                                  12/22/06

                                                                                                                                                                                                                                                                             01/12/07
                                                                                                                                                                                                                                                                                        02/02/07
                                                                                                                                                                                                                                                                                                   02/23/07
                                                                                                                                                                                                                                                                                                              03/16/07




                                                                                                                                                                                                                                                                                                                                                                             60% from results posted for 2005. The weighted
Source: FirstEnergy Capital Corp., Bloomberg
                                                                                                                                                                                                                                                                                                                                                                             average recycle ratio generated by these results, which
                                                                                                                                                                                                                                                                                                                                                                             considers FD&A results in the context of netbacks,
Equity returns for the sector were also disappointing,                                                                                                                                                                                                                                                                                                                       dropped 36% to an unacceptable 1.0x from an accept-
barely hanging on to positive returns for the year
following record 2005 performance. The picture of                                                                                                                                                                                                                                                                                                                                                                                    FD&A Costs - Including Changes in FDC
performance in the context of economics though makes                                                                                                                                                                                                                                                                                                                                                                                        Net Proved Reserves
                                                                                                                                                                                                                                                                                                                                                                                                           $50
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            2006          3 Year Average
much more sense. Year-over-year, average netbacks                                                                                                                                                                                                                                                                                                                                                          $45

were relatively flat as the oil price rally in the middle of                                                                                                                                                                                                                                                                                                                                               $40

2006 served to offset weaker natural gas prices when                                                                                                                                                                                                                                                                                                                                                       $35

considered on an annual average basis, but quarterly                                                                                                                                                                                                                                                                                                                                                       $30
                                                                                                                                                                                                                                                                                                                                                                             US$/Boe




performance through the year was obviously very                                                                                                                                                                                                                                                                                                                                                            $25

                                                                                                                                                                                                                                                                                                                                                                                                           $20
                                                                                             Large Cap Sector
                                                                                                                                                                                                                                                                                                                                                                                                           $15
                                                                           S&P TSX Energy Index Return Versus Proved Reycle Ratio
                                                                                                                                                                                                                                                                                                                                                                                                           $10
                             100%
                                                                                                                                                                                                                                                                                                                                                                                                             $5

                                                                                                                                                                                                                                                                                                                                                                                                             $0
                                         80%
Energy Index Yearly Return (%)




                                                                                                                                                                                                                                                                                                                                                                                                                       APC




                                                                                                                                                                                                                                                                                                                                                                                                                                                             DVN
                                                                                                                                                                                                                                                                                                                                                                                                                                    APA




                                                                                                                                                                                                                                                                                                                                                                                                                                                                            ECA




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          NFX



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                NXY



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            PPP




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   AVERAGE
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          TLM
                                                                                                                                                                                                                                                                                                                                                                                                                                                 CNQ




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    EOG




                                                                                                                                                                                                                                                       2005
                                         60%                                                                                                                                                                                                                                                                                                                                                                 Source: FirstEnergy Capital Corp. and Company Reports


                                                                                                                                                                                                                                                                                                         2000
                                         40%                                                                                                                                                                                                                                                                                                                                 able 1.5x achieved in 2005. The only company within
                                                                                                                                                                                                                      2004                                                                                                                                                   our Large Cap peer group to post an economically
                                         20%
                                                                                                                                                                                                  2003
                                                                                                                                                                                                                                                                                                                                                                             acceptable recycle ratio based on the FD&A costs
                                                                                            2002
                                                                                                                                                                                     2001
                                                                                                                                                                                                                                                                                                                                                                             including FDC was EOG at 1.5x, commendable perfor-
                                                                                  2006
                                                          0%                                                                                                                                                                                                                                                                                                                 mance in a very challenging North American natural
                                                            1.00                                        1.25                                        1.50                                        1.75                                        2.00                                         2.25                                 2.50
                                                                                                                                                               Cash Flow Recycle Ratio (x)
                                                                                                                                                                                                                                                                                                                                                                             gas price environment.
                                          Source: FirstEnergy Capital Corp. and Company Reports
 14           FirstQuarterly                                  Integrated, Oil Sands and Large Cap E&P                                    April 2007




                Cash Flow Recycle Ratio - Including Changes in FDC                                                    On the surface these results are indeed very disappoint-
                              Net Proved Reserves                                                                     ing for the group but further consideration is needed to
    2.0
                                                                                                                      fully understand this performance. As it turns out, only
                                                                                           2006   3 Year Average
    1.8

    1.6                                                                                                               two Companies in the group significantly
    1.4                                                                                                               underperformed the economic hurdle rate of 1.4-1.5x,
    1.2                                                                                                               namely Anadarko and Pogo. In the case of Anadarko,
    1.0                                                                                                               the Company made two very large acquisitions at high
X




    0.8
                                                                                                                      costs per Boe that skewed the results for the entire
    0.6
                                                                                                                      group. The Company also had very poor organic
    0.4
                                                                                                                      performance, replacing only 7% of its production with
    0.2
                                                                                                                      its own drill bit, which only exacerbated the poor
    0.0
                                                                                                                      results. Anadarko posted the weakest recycle ratio of
                                        CNQ




                                                                   EOG
               APC




                                                     DVN
                            APA




                                                             ECA




                                                                           NFX



                                                                                   NXY



                                                                                           PPP




                                                                                                           AVERAGE
                                                                                                  TLM
                                                                                                                      the Large Cap group at 0.6x. Pogo, which posted a sub-
     Source: FirstEnergy Capital Corp. and Company Reports                                                            economic recycle ratio of 0.9x had generally poor
                                                                                                                      performance with both organic and acquisition efforts,
FD&A Excluding Future Development Capital                                                                             which also served to drag down the group average.
When considering FD&A without the burden of FDC,
results were slightly better for the group at US$22.15/                                                               Offsetting this poor performance was the strong
Boe. However, 2006 results were up a staggering 75%                                                                   performance of others. Canadian Natural achieved a
from the comparable 2005 performance. The weighted                                                                    recycle ratio of 1.6x, Talisman posted up a 1.7x result
average recycle ratio based on this past year’s FD&A                                                                  and Apache, Devon and EOG all posted strong recycle
performance was a disappointing 1.2x, which was                                                                       ratios of 1.8x. EnCana posted the most impressive
down 41% from the very strong 2005 result of 2.1x.                                                                    recycle ratio for 2006 at 2.4x. It is interesting to note

                                                                         2006 FD&A Results - Proved Reserves
                                                                                                                                         2006 Production Replacement
                                                             Including FDC                               Excluding FDC
                                                             FD&A        Recycle         FD&A           Recycle        F&D   Net Acq.                Net
                                                             Costs        Ratio          Costs           Ratio        Costs   Costs      Organic Acquisitions Total
                                       APC                   $46.32        0.6           $41.14           0.6        $310.21 $36.07       7.2%     384.1%     391.4%
                                       APA                   $22.16        1.3           $15.16           1.8         $20.58  $9.47      106.1%    101.1%     207.1%
                                       CNQ                   $20.65        1.1           $14.29           1.6         $10.78  $19.78     179.7%    115.0%     294.7%
                                       DVN                   $21.23        1.3           $15.76           1.8         $13.41  $24.25     174.4%    49.3%      223.8%
                                       ECA                   $19.91        1.4           $11.39           2.4         $15.86   N/A       140.3%    -50.0%      90.4%
                                       EOG                   $18.66        1.5           $15.10           1.8         $14.16  $74.45     202.3%     3.2%      205.5%
                                       NFX                   $27.20        1.2           $21.95           1.5         $20.74   N/A       215.9%     -4.6%     211.3%
                                       NXY                   $37.05        1.0           $25.00           1.4         $24.32 $338.65     151.3%     0.3%      151.7%
                                       PPP                   $37.85        0.6           $26.63           0.9         $26.20  $27.31     117.6%    75.9%      193.5%
                                       TLM                   $27.89        1.1           $17.15           1.7         $18.69   N/A       136.7%     2.3%      138.9%
                                      Average                $28.62        1.0           $22.15           1.2         $18.06  $28.79     133.7%     82.8%     216.6%

                                                                   3 Yr. Avg FD&A Results - Proved Reserves                                  3 Yr. Avg Production
                                                             Including FDC               Excluding FDC                                           Replacement

                                                             FD&A        Recycle         FD&A           Recycle       F&D     Net Acq.                Net
                                                             Costs        Ratio          Costs           Ratio       Costs      Costs    Organic Acquisitions Total
                                       APC                   $40.08        0.6           $33.54           0.7        $16.32     $60.06   116.3%    75.5%      191.9%
                                       APA                   $15.90        1.6           $11.21           2.3        $12.07     $8.85    167.0%    61.0%      228.0%
                                       CNQ                   $16.92        1.3           $11.76           1.8        $10.38     $15.27   158.7%    62.7%      221.4%
                                       DVN                   $17.60        1.4           $12.71           1.9        $10.91    -$13.83   151.8%    -10.4%     141.5%
                                       ECA                   $13.86        1.7            $9.06           2.6        $11.85      N/A     168.4%    -26.2%     142.2%
                                       EOG                   $15.69        1.6           $12.00           2.1        $11.36     $31.60   195.1%      6.4%     201.5%
                                       NFX                   $22.33        1.3           $17.30           1.7        $17.79      N/A     170.3%     60.7%     231.0%
                                       NXY                   $34.80        0.8           $28.13           1.0        $40.64     $14.26    60.0%     54.1%     114.1%
                                       PPP                   $34.17        0.7           $27.23           0.9        $26.54     $27.66    72.6%    116.9%     189.5%
                                       TLM                   $22.35        1.1           $16.25           1.5        $14.15     $24.86   135.4%    33.0%      168.4%
                                      Average                $21.19        1.2           $15.93           1.5        $12.98     $31.05   149.2%     29.2%     178.3%

                                       Note: Results in US$, Net.
                                                                                                                                                                                                                                              15




that the companies that posted the best overall recycle                                                               The strongest organic performance in our peer group
ratio results are the same companies that have been the                                                               was achieved by Canadian Natural Resources and
most proactive in making cuts to their capital programs,                                                              Devon, both of which were able to achieve these results
clearly signaling that these management teams under-                                                                  with large bookings of heavy oil reserves, and in the
stand the challenges of the current environment and are                                                               case of Devon, Barnett Shale reserves. EOG posted
demonstrating an acute awareness and respect of the                                                                   strong organic F&D results primarily based on book-
economic realities in which they operate.                                                                             ings from the Barnett Shale resource play beginning to
                                   FD&A Costs - Excluding Changes in FDC
                                                                                                                      bear more tangible fruit for the Company.
                                           Net Proved Reserves                                                                                            F&D Costs - Excluding Changes in FDC
           $50
                                                                                            2006   3 Year Average
           $45
                                                                                                                                         $310                     Net Proved Reserves
                                                                                                                                 $50
                                                                                                                                                                                                                   2006         3 Year Average
           $40                                                                                                                   $45
           $35                                                                                                                   $40
           $30                                                                                                                   $35
US$/Boe




           $25                                                                                                                   $30




                                                                                                                      US$/Boe
           $20                                                                                                                   $25
           $15                                                                                                                   $20
           $10                                                                                                                   $15
            $5                                                                                                                   $10
            $0                                                                                                                    $5
                       APC




                                                            DVN
                                   APA




                                                                    ECA




                                                                                NFX



                                                                                      NXY



                                                                                            PPP




                                                                                                            AVERAGE
                                                                                                   TLM
                                                CNQ




                                                                          EOG




                                                                                                                                  $0




                                                                                                                                            APC




                                                                                                                                                                                  DVN
                                                                                                                                                         APA




                                                                                                                                                                                          ECA




                                                                                                                                                                                                      NFX



                                                                                                                                                                                                            NXY



                                                                                                                                                                                                                   PPP




                                                                                                                                                                                                                                         AVERAGE
                                                                                                                                                                                                                                TLM
                                                                                                                                                                     CNQ




                                                                                                                                                                                                EOG
            Source: FirstEnergy Capital Corp. and Company Reports


                                                                                                                                  Source: FirstEnergy Capital Corp. and Company Reports

                     Cash Flow Recycle Ratio - Excluding Changes in FDC
          3.0
                                   Net Proved Reserves                                                                Production Replacement
                     2006         3 Year Average
                                                                                                                      Every company in our peer group was able to replace its
          2.5
                                                                                                                      2006 production – well, sort of. EnCana appears to be
          2.0                                                                                                         the exception, replacing only 90% of last year’s produc-
                                                                                                                      tion, however that all-in result is a consequence of large
          1.5
                                                                                                                      divestitures completed during the year. On an organic
X




          1.0
                                                                                                                      basis, EnCana replaced 140% of its 2006 production,
                                                                                                                      which is more or less in line with the peer group
          0.5                                                                                                         average. While Anadarko appears to have replaced
          0.0
                                                                                                                      nearly four times its 2006 production, this is somewhat
                                                                                                                      of an artificial result as it was entirely driven by two
                     APC




                                                           DVN
                                  APA




                                                                    ECA




                                                                                NFX



                                                                                      NXY



                                                                                            PPP




                                                                                                            AVERAGE
                                                                                                   TLM
                                              CNQ




                                                                          EOG




                                                                                                                      large acquisitions – Kerr McGee and Western Gas
           Source: FirstEnergy Capital Corp. and Company Reports                                                      Resources. On an organic basis, Anadarko only
                                                                                                                      replaced 7% of its annual production – very poor
Disaggregating FD&A Costs Into the                                                                                    performance by anyone’s measure! The organic
Component Parts – F&D and A                                                                                           performance for Anadarko was poor because of nega-
We like to consider All-In FD&A costs, as this is the best                                                            tive revisions taken in the Gulf of Mexico. Subsequent
measure of performance encompassing all decisions                                                                                         Production Replacement - Organic + Net Acquisitions
undertaken by management regarding organic F&D                                                                                                 Barrel of Equivalent Net Proved Reserves
programs as well as corporate and asset transactions                                                                            450%
                                                                                                                                                                                                                         2006     3 Year Average

during the year; however, breaking these results down                                                                           400%

into their parts can provide insight into core operating                                                                        350%

performance versus transaction oriented activity.                                                                               300%

                                                                                                                                250%
                                                                                                                      %




With only one exception, every company in this group                                                                            200%

reported stronger organic performance than net acquisi-                                                                         150%

tion activity. Apache is the only company in our group                                                                          100%

that consistently reports stronger net acquisition results                                                                      50%

than organic F&D results. Since Apache’s organic F&D                                                                             0%
                                                                                                                                                                                                                                 TLM
                                                                                                                                                                      CNQ




                                                                                                                                                                                                EOG
                                                                                                                                            APC




                                                                                                                                                                                  DVN
                                                                                                                                                         APA




                                                                                                                                                                                          ECA




                                                                                                                                                                                                      NFX



                                                                                                                                                                                                             NXY



                                                                                                                                                                                                                    PPP




                                                                                                                                                                                                                                            AVERAGE




results are in line with the group average results, the
implication is that Apache is very good at acquiring
and divesting assets.
                                                                                                                      Source: FirstEnergy Capital Corp. and Company Reports
 16            FirstQuarterly                                 Integrated, Oil Sands and Large Cap E&P            April 2007




to closing the two large acquisitions, Anadarko has
been undertaking a very large asset rationalization
program, so the total production replacement result for
the Company will be meaningless again in 2007.
                               Production Replacement - Organic
                            Barrel of Equivalent Net Proved Reserves
    250%
                                                                                        2006   3 Year Average


    200%



    150%
%




    100%



     50%



       0%
                                                                                               TLM
                                            CNQ




                                                                    EOG
                   APC




                                                        DVN
                               APA




                                                              ECA




                                                                          NFX



                                                                                NXY



                                                                                      PPP




                                                                                                       AVERAGE




Source: FirstEnergy Capital Corp. and Company Reports



EOG and Newfield achieved the strongest organic
production replacement, both replacing more than
twice what was produced during the year. Canadian
Natural and Devon also posted very strong organic
results.

2006 Versus 3-Year Performance
Comparing the recent 2006 results versus the 3-Year
performance yields only one surprise. Given the
challenging environment of the past year it seems
logical that most companies posted weaker finding
costs and recycle ratios than their long term perfor-
mance averages. Nexen was the only exception to that
trend as 2005 saw no net additions to Proved reserves
despite Capex exceeding asset sales by ~CDN$750 Mm.

2007 Outlook
We are encouraged by actions taken by management
teams in the context of increasing challenged econom-
ics. Several companies within this peer group have
made drastic reductions to their capital programs for
the 2007 calendar year and those that are able, have
shifted capital around to more attractive regions. While
we are only seeing modest cost improvements on the
service side of the business, we are seeing more sup-
portive commodity prices. Natural gas prices have
certainly firmed up nicely since the beginning of 2007
and oil prices, although starting the year on weak
ground, have returned in strength very quickly. Based
on the expectation of stronger netbacks in 2007 than
2006, we would also expect stronger recycle ratios and
therefore better overall equity performance from the
group.

Watch for our upcoming 2006 FD&A study.
                                                                                                                   17




Oil Sands                                                    Canadian Oil Sands, Synenco and Western Oil Sands
                                                             have not communicated any events that have a mean-
(excerpt from FirstFacts dated April 19, 2007)               ingful impact on the value of ‘Other Resources’ to these
                                                             companies.
We have updated our NAV’s for all the Companies in
our oil sands universe. For the purpose of this analysis     Impact of Income Taxes & Changes to ACCA
we have applied our current commodity price outlook to
                                                             Aside from increasing capital costs, the other main
our calculation of both 2005 and 2006 NAV’s in order to
                                                             event which occurred late last year that impacts the way
remove the impact of any changes in our outlook of oil
                                                             we look at valuations was the Government’s decision to
prices (the single greatest factor impacting valuation) on
                                                             disallow income trusts conversions. We had previously
our valuation analysis. The result is that our calcula-
                                                             taken the simplified, but pragmatic, view that oil sands
tions presented here consider only the impact of time (ie.
                                                             companies would convert to trusts whenever taxability
project execution), additional resource capture and any
                                                             became an issue after project payout. Obviously, with
resulting changes to project timing, capital cost esti-
                                                             Ottawa’s move to disallow more trust conversions, we
mates and project metrics such as expected operating
                                                             are now of the opinion that valuations should be based
costs and specific product differentials. Since changes in
                                                             on an after tax asset values.
oil and natural gas prices is the single greatest factor
influencing valuation and since changes in commodity
                                                             Unfortunately, shifting from a pre-tax valuation to an
prices impact everyone in the sector, we removed the
                                                             after-tax valuation causes our perception of value to
outlook of oil and natural gas prices from our analysis
                                                             drop across the peer group. On average, based on
in order to focus on the factors over which management
                                                             updated 2006 NAV’s, base case valuations drop by 23%
has more direct control and influence.
                                                             with the application of tax and all-in valuations drop by
                                                             18%.
Without doubt the greatest challenges facing the sector
have been increasing capital cost estimates and an
                                                             Not only have we had to factor in the impact of taxes,
increased requirement to consider valuations in the
                                                             we have also had to consider changes to the tax struc-
context of tax. Offsetting these challenges, some oil
                                                             ture with Ottawa removing the Accelerated Capital Cost
sands companies have created value by capturing
                                                             Allowance (ACCA).
additional opportunities.
                    Rating & Target Summary                  Unlike the ruling on income trusts, the impact and
                       Current    Target Implied             implementation of the changes to the ACCA seem to be
       Company Rating    Price     Price  Return
                                                             fairly measured by comparison. The Government has
                                                             allowed for existing projects to be grandfathered and
       COS.UN    M    $29.25    $34.00      16%
       OPC       O    $21.79    $28.00      28%
                                                             allowed for a gradual transition period on new projects
       SYN       U    $12.30    $12.00      -2%              with changes not beginning to take effect until 2011 and
       UTS       T     $4.51     $6.50      44%              not becoming fully implemented until 2015. The allow-
       WTO       M    $34.90    $40.00      15%              able depletion rate will be gradually phased down from
                                            20%              100% to 25%.

                                                             The average impact of the changes to the ACCA is 1.8%
Value of ‘Other Resources’                                   on NAV; however, the impact on NAV ranges from a
We have used a constant valuation of $1/Bbl for              low of -0.2% to a high of -5.2% (see Table page 19).
identified but undeveloped resources captured within
the oil sands companies. We believe that in the context      Investment Recommendations - NAV vs.
of past and recent transactions (see Table on top of next
page) this valuation of $1/Bbl is reasonable, if not
                                                             Stock Price Performance
conservative.                                                Disaggregating the parts we see that on a pre-tax basis
                                                             and with a constant oil and natural gas price outlook
UTS and OPTI have both done a good job in capturing          that NAV’s dropped by an average of 22% year-over-
and proving up additional resource opportunities. For        year. This drop clearly shows the impact of increased
the companies that have not captured additional              capital cost assumptions, which was the main story in
resource opportunity, valuation of ‘Other Resource’ has      the oil sands space during 2006.
been adjusted to reflect the updated number of shares
outstanding from year-end 2005 to year-end 2006.             Some companies, namely OPTI and UTS, did an effec-
                                                             tive job of capturing other opportunities as a means of
  18         FirstQuarterly                      Integrated, Oil Sands and Large Cap E&P                                        April 2007




                                                                   Historical Oil Sands Transactions
                                                                                                                            Estimated
                                                                                                                Total     Recoverable    Implied                                          Expected
                                                                                    Transaction         Consideration        Resource   Valuation    Mining /                                 First
      Date         Acquiror                Target (Company - Project)               Type                       ($Mm)     (Net Mmbbls)      ($/Bbl)    In-Situ Working Interest (%)      Production
  1    2/1/2003    Canadian Oil Sands EnCana - Syncrude interest                    Working Interest          $1,070.0           819       $1.31       Mining                 10.0%         Current
  2 7/11/2003 Canadian Oil Sands EnCana - Syncrude interest                         Working Interest           $417.0            307       $1.36       Mining                 3.75%         Current
  3     7/2004     Shell Canada            EnCana - Lease 9 & Lease 17              Asset                     <$100.0           1,000      <$0.10      Mining                100.0%            N/A
  4    7/9/2004    UTS                     True North - Fort Hills & Lease 14       Corporate                  $125.0           2,184      $0.06       Mining                 78.0%           2008
  5    3/1/2005    Petro-Canada            UTS - Fort Hills                         Working Interest           $300.0           1,680      $0.18       Mining                 60.0%           2010
  6    4/8/2005    CNOOC                   MEG - Christina Lake                     Working Interest           $150.0            334       $0.45       In-Situ               16.69%           2007
  7 5/31/2005 Sinopec                      Synenco - Northern Lights                Working Interest           $149.7            600       $0.25      Mining                40.0%             2011
                                                                                                                                                     Mining /
  8    8/2/2005    Total S.A.              Deer Creek                               Corporate                 $1,667.0          2,012      $0.83      In-Situ 100% (84% of Joslyn)      2006 & 2011
  9    9/6/2005    Teck Cominco            Petro-Canada & UTS - Fort Hills          Working Interest           $250.0            280       $0.89       Mining                 10.0%           2010
 10    9/6/2005    Teck Cominco            UTS - Fort Hills                         Working Interest           $225.0            140       $1.61       Mining                   5.0%          2010
 11    5/8/2006    Shell Canada            Blackrock - Seal & Orion                 Corporate                 $2,058.0           603       $3.41       In-Situ               100.0%         Current
 12 7/24/2006 KNOC                         Newmont Mining - Black Gold              Asset                      $310.0            305       $1.02       In-Situ               100.0%           2010
 13 10/5/2006 ConocoPhillips               EnCana - Christina Lake & Foster Creek   Joint Venture             $4,423 *          3,250      $1.36       In-Situ                50.0%         Current
 14 11/29/2006 Canadian Oil Sands Talisman - Syncrude interest                      Working Interest           $475.0            106       $4.49       Mining                 1.25%         Current


                                                                                    Gross Overriding                                                 Mining /
 15 11/29/2006 Suncor                      Talisman - Lease 23                      Royalty                    $107.5             35       $3.07      In-Situ                   2.0%         2017+


                                                                                                                                                                 22% of Shell Canada
                                                                                                                                                     Mining /    not already owned by
 16 1/23/2007 Royal Dutch Shell            Shell Canada                             Corporate **              $8,700.0           858       $5.00      In-Situ       Royal Dutch Shell       Current
 17 3/22/2007 Enerplus                     ISH - Kirby                              Asset                      $182.5            220       $0.83       In-Situ               100.0%      2011/2012

 18 4/19/2007 Teck Cominco                 UTS - Lease 14                           Asset                      $200.0            200       $1.00       Mining                 50.0%            N/A


* FCC Estimate based on average U.S. downstream transaction metrics
** FCC Estimates. See Western Oil Sands FACTs dated October 24, 2006 for details
Source: FirstEnergy Capital Corp. & Company Reports



offsetting the negative value events beyond their own                                                   reached during 2006. While that might seem efficient at
control. On average for the group, all-in pre-tax NAV’s                                                 the group level, in our opinion stock prices for all
dropped by 12% year-over-year.                                                                          companies have not reacted in accordance with com-
                                                                                                        pany specific results.
However, since there has been a shift in perspective
from PT to AT, we believe that the best way to consider                                                 We see UTS exhibiting the greatest discrepancy between
the change in valuation year-over-year is to compare                                                    stock price performance and of change in asset value.
2006 all-in AT NAV’s to 2005 all-in PT NAV’s. The
group average valuation has dropped by 26% on this                                                      On average, we believe that the peer group is attrac-
measure.                                                                                                tively valued, currently trading at less than 90% of all-
                                                                                                        in 8% AT NAV (see table below).
On average, stock prices within this oil sands peer
group have dropped 27% from their respective highs                                                      We believe that our target prices reflect reasonable

                           NAV vs Stock Price Performance                                                                                   Valuation
                                          2006 All-In     Stock Price
                2006 / 2005 2006 / 2005    AT NAV /      Performance                                            Price / 2006 Price / 2006            Target / 2006 Target / 2006
                 Base Case    All-In PT   2005 All-In (Current vs Last                                          All-In 8% PT    All-In 8%            All-In 8% PT All-In 8% AT
        Company    PT NAV          NAV       PT NAV       Year's High)                                                   NAV     AT NAV                       NAV           NAV

        COS.UN                      -4%                    -4%                  -10%                   -13%               96%           102%                     112%               119%
        OPC                        -24%                    -8%                  -19%                   -12%               71%            80%                      91%               103%
        SYN                        -38%                   -38%                  -64%                   -57%               62%           105%                      60%               102%
        UTS                        -23%                     7%                  -12%                   -43%               54%            67%                      79%                96%
        WTO                        -21%                   -15%                  -24%                   -10%               73%            82%                      84%                94%
        Average                    -22%                   -12%                  -26%                   -27%               71%            87%                      85%               103%
                                                                                                                                                               19




                        Adjusted 2005 NAV *                                  2006 NAV - Pre Tax & After Tax                            Tax Impact
                       Base   Value of                                                   Value of                           Impact of             Impact of Change
                       Case      Other     All-In                2006 Base 2006 Base        Other        All-In  All-In   Tax on 2006   Impact of to ACCA on 2006
                       NAV Resources 2005 NAV                    Case NAV Case NAV Resources        2006 NAV 2006 NAV      Base Case Tax on 2006         All-In NAV
Company             (8% PT)         ** (8% PT)                     (8% PT)   (8% AT)           **     (8% PT) (8% AT)            NAV  All-In NAV      (AT 8% DCF)

COS.UN                $27.48             $4.35          $31.83     $26.31     $24.43       $4.17      $30.48    $28.60           -7%          -6%            -0.2%
OPC                   $21.34            $12.05          $33.39     $16.13     $12.61      $14.49      $30.62    $27.10          -22%         -11%            -1.0%
SYN                   $32.09             $0.00          $32.09     $19.99     $11.71       $0.00      $19.99    $11.71          -41%         -41%            -5.2%
UTS                    $6.75             $0.97           $7.72      $5.18      $3.67       $3.10       $8.28     $6.77          -29%         -18%            -2.4%
WTO                   $38.60            $17.68          $56.28     $30.33     $24.97      $17.57      $47.90    $42.54          -18%         -11%            -0.4%
                                                                                                                                -23%         -18%            -1.8%
* A djusted fo r current co mmo dity price o utlo o k
** 'Other Reso urces' assigned a value o f $ 1 /Bbl



expectations of value accretion. Our targets represent an
average peer group valuation of 103% of 2006 all-in 8%
AT NAV.

While there are certainly themes and variables that
influence the entire group, we continue to believe that
differentiation between oil sands names needs to
continue to be made clear and that the group should not
be treated as being entirely homogeneous.
20   FirstQuarterly                                             Integrated, Oil Sands and Large Cap E&P                                                                                               April 2007



Investment Outlook
                                                                                                                Integrateds and Large Caps
                                                                                                                Total Capitalization to Boe/d
                                                                200,000
                                                                                                                                                                                              2007e                          2008e
                                                                180,000
                      Total Capitalization to Boe/d (6:1) ($)


                                                                160,000

                                                                140,000
                                                                                                    Avg: 111,947
                                                                120,000

                                                                100,000
                                                                                                                                                                                               Avg: 64,320
                                                                 80,000

                                                                 60,000

                                                                 40,000

                                                                 20,000

                                                                       0




                                                                                                                                                                                                                   TLM
                                                                                                                    HSE




                                                                                                                                                              NXY

                                                                                                                                                                     PPP




                                                                                                                                                                                                                              NFX
                                                                                 SHC

                                                                                             SU




                                                                                                                               PCA




                                                                                                                                                     APC




                                                                                                                                                                                                    ECA

                                                                                                                                                                                                           DVN




                                                                                                                                                                                                                                     APA
                                                                                                        IMO




                                                                                                                                                                                 CNQ

                                                                                                                                                                                        EOG
                      Note: Averages reflect 2007 estimates.
                      Note: U.S. Companies and ECA report in U.S. $Net.




                                                                                                                    Integrateds and Large Caps
                                                                                                                           Gas Leverage
                                                                100%
                                                                                       2007e                              2008e

                                                                80%
                      Percent Natural Gas (6:1)




                                                                                                                                                                                                     Avg: 58%
                                                                60%


                                                                                  Avg: 23%
                                                                40%



                                                                20%



                                                                 0%
                                                                           SHC

                                                                                       PCA




                                                                                                                          SU




                                                                                                                                                            ECA




                                                                                                                                                                                DVN




                                                                                                                                                                                                APA

                                                                                                                                                                                                           APC
                                                                                                              IMO




                                                                                                                                                EOG




                                                                                                                                                                                                                             CNQ
                                                                                                                                                                                                                   TLM
                                                                                                  HSE




                                                                                                                                                                    NFX




                                                                                                                                                                                       PPP




                                                                                                                                                                                                                                     NXY




                      Note: Averages reflect 2007 estimates.
                      Note: U.S. Companies and ECA report in U.S. $Net




                                                                                                    Integrateds, Oil Sands and Large Caps
                                                                                                               Total Production
                                                                900,000
                                                                                             2007e                                 2008e

                                                                750,000

                                                                                                                                                                                                     Avg: 461,391
                                                                600,000
                      Boe/d




                                                                                 Avg: 361,104
                                                                450,000


                                                                300,000


                                                                                                                                        Avg: 36,527
                                                                150,000


                                                                       0
                                                                                       HSE




                                                                                                                                                             UTS




                                                                                                                                                                                                                 NXY



                                                                                                                                                                                                                              NFX
                                                                                                                                                                                                                                    PPP
                                                                             PCA




                                                                                                    SU

                                                                                                              SHC


                                                                                                                               COS.UN



                                                                                                                                               OPC
                                                                                                                                                      SYN




                                                                                                                                                                          ECA



                                                                                                                                                                                       DVN

                                                                                                                                                                                              APA


                                                                                                                                                                                                           APC
                                                                                             IMO




                                                                                                                                         WTO




                                                                                                                                                                                 CNQ




                                                                                                                                                                                                                       EOG
                                                                                                                                                                                                     TLM




                      Note: Averages reflect 2007 estimates.
                      Note: U.S. Companies and ECA report in U.S. $Net
                                                                                                                                                                                            21




                                          Integrateds, Oil Sands and Large Caps
                                               Net Debt to Enterprise Value
70%
                        2007e               2008e
60%


50%


40%
                                                                        Avg: 27%
                                                                                                                                               Avg: 24%
30%


20%
                         Avg: 6%
10%


   0%
                                            IMO




                                                                          WTO




                                                                                                                               CNQ




                                                                                                                                                                                     EOG
                                                                                                                                              TLM
                                    HSE




                                                                                           UTS


                                                                                                             PPP




                                                                                                                                       NFX


                                                                                                                                                     NXY
                PCA

                        SU
                              SHC




                                                         SYN
                                                                OPC


                                                                                  COS.UN




                                                                                                                     APC




                                                                                                                                                                DVN
                                                                                                                                                                       ECA

                                                                                                                                                                              APA
Note: Averages reflect 2007 estimates.
Note: U.S. Companies and ECA report in U.S. $Net




                                                         Integrateds and Large Caps
                                                         Entry Net Debt to Cash Flow
          5.5
                             2007e                     2008e
          5.0

          4.5

          4.0

          3.5

          3.0

          2.5                                                                                                                        Avg: 1.7
          2.0

          1.5                Avg: 0.5
          1.0

          0.5

          0.0

     (0.5)
                  PCA

                             SU


                                     SHC




                                                                               APC




                                                                                                                                                    ECA

                                                                                                                                                                APA


                                                                                                                                                                        DVN
                                                         IMO




                                                                                                       CNQ




                                                                                                                                                                                    EOG
                                                 HSE




                                                                                           PPP




                                                                                                                   NXY




                                                                                                                                        NFX
                                                                                                                               TLM




Note: Averages reflect 2007 estimates.
Note: U.S. Companies and ECA report in U.S. $Net




                                            Integrateds, Oil Sands and Large Caps
                                                         Diluted CFPS
          20.00
                                  2007e                        2008e


          15.00
$/Share




          10.00




           5.00




           0.00
                                                                                                                                                                                      TLM
                      HSE




                                                                                UTS




                                                                                                                                 PPP
                                                                                                                                        NXY
                                                                                                                                               NFX
                             PCA
                                    SU
                                           SHC




                                                                                       OPC
                                                                                                 SYN
                                                               WTO




                                                                                                               APA
                                                                                                                         DVN




                                                                                                                                                                       ECA
                                                                                                                                                                              APC
                                                  IMO




                                                                      COS.UN




                                                                                                                                                          CNQ
                                                                                                                                                                 EOG




Note: Averages reflect 2007 estimates.
Note: U.S. Companies and ECA report in U.S. $Net
22   FirstQuarterly                           Integrated, Oil Sands and Large Cap E&P                                                                                              April 2007




                                                                                     Integrateds and Large Caps
                                                                                   Debt Adjusted Cash Flow Multiple
                            14.0

                                                                                                                                                                                    2007e                    2008e
                            12.0

                                                                             Avg: 9.7
                            10.0


                                       8.0

                                                                                                                                                                              Avg: 5.7
                                       6.0


                                       4.0


                                       2.0


                                       0.0
                                                                                  HSE




                                                                                                                                PPP


                                                                                                                                             NXY




                                                                                                                                                                                                                     NFX
                                                                                                                                                                            TLM
                                                   SU




                                                                      SHC




                                                                                              PCA




                                                                                                                   APC




                                                                                                                                                                                     ECA


                                                                                                                                                                                                 DVN


                                                                                                                                                                                                         APA
                                                          IMO




                                                                                                                                                   CNQ


                                                                                                                                                                EOG
                      Note: Averages reflect 2007 estimates.
                      Note: U.S. Companies and ECA report in U.S. $Net




                                                                            Integrateds, Oil Sands and Large Caps
                                                                                     Net Revenue ($/Boe)
                                              $70.00
                                                                                                    Avg: $61.75                                                                   2007e                2008e
                                              $60.00
                                                                     Avg: $41.79                                                                                                  Avg: $47.41
                                              $50.00
                      Revenue/Boe ($)




                                              $40.00

                                              $30.00

                                              $20.00

                                              $10.00

                                               $0.00
                                                              PCA


                                                                            SHC


                                                                                              SU




                                                                                                               COS.UN
                                                                                                                         SYN
                                                                                                                                 OPC




                                                                                                                                                    DVN




                                                                                                                                                                                    APC
                                                                                                                                                                                           APA


                                                                                                                                                                                                       ECA
                                                                                   IMO




                                                                                                      WTO




                                                                                                                                                                                                               CNQ
                                                                                                                                                                                                                     EOG
                                                                                                                                                                                                 TLM
                                                                     HSE




                                                                                                                                         UTS




                                                                                                                                                           NXY
                                                                                                                                                                      PPP
                                                                                                                                                                            NFX




                                      Note: Averages reflect 2007 estimates.
                                      Note: U.S. Companies and ECA report in U.S. $Net




                                                                             Integrateds, Oil Sands and Large Caps
                                                                                   Operating Netback ($/Boe)
                                              $60.00
                                                                                                                                                                             2007e                      2008e

                                              $50.00
                                                                                                    Avg: $42.62                                                                   Avg: $37.98
                                                              Avg: $30.73
                      Operating Netback ($)




                                              $40.00



                                              $30.00



                                              $20.00



                                              $10.00



                                               $0.00
                                                                                        IMO



                                                                                                    WTO




                                                                                                                                                                                                       EOG



                                                                                                                                                                                                                      CNQ
                                                                                                                                                                                                 TLM
                                                                      HSE




                                                                                                                                       UTS



                                                                                                                                                   NXY

                                                                                                                                                          NFX




                                                                                                                                                                                           PPP
                                                        PCA

                                                               SHC



                                                                              SU




                                                                                                          COS.UN

                                                                                                                    SYN

                                                                                                                               OPC




                                                                                                                                                                  APC

                                                                                                                                                                            DVN

                                                                                                                                                                                   APA




                                                                                                                                                                                                               ECA




                      Note: Averages reflect 2007 estimates.
                      Note: U.S. Companies and ECA report in U.S. $Net
                                                                                                                                                                                                        23




                                                                 Integrateds, Oil Sands and Large Caps
                                                                       Cash Flow Netback ($/Boe)
                              $50.00
                                                                                                                                                       2007e                             2008e
                              $45.00
                                              Avg: $24.94
                              $40.00
                                                                                    Avg: $34.89
                                                                                                                                                       Avg: $27.34
                              $35.00
   Cash Flow Netback ($)      $30.00

                              $25.00

                              $20.00
                              $15.00

                              $10.00

                               $5.00

                               $0.00




                                                                                                                                                                     TLM
                                                   HSE




                                                                                                                     UTS




                                                                                                                                         NXY




                                                                                                                                                             NFX




                                                                                                                                                                                    PPP
                                             SHC


                                                          PCA
                                                                 SU




                                                                                                       SYN
                                                                                                              OPC




                                                                                                                                 ECA




                                                                                                                                                     DVN




                                                                                                                                                                                           APA
                                                                                                                                                                                                  APC
                                                                        IMO


                                                                                    WTO
                                                                                              COS.UN




                                                                                                                                               CNQ




                                                                                                                                                                             EOG
                          Note: Averages reflect 2007 estimates.
                          Note: U.S. Companies and ECA report in U.S. $Net




                                                             Integrateds, Oil Sands and Large Caps
                                                                   Net Income Netback ($/Boe)
                              $40.00
                                                                                                                                                       2007e                             2008e
                              $35.00
                                                                                    Avg: $25.69
                              $30.00
                                                   Avg: $19.15
 Net Income Netback ($)




                              $25.00

                              $20.00

                              $15.00
                                                                                                                                                                    Avg: $8.7
                              $10.00

                               $5.00

                               $0.00
                                                   SHC
                                                          PCA


                                                                        SU




                                                                                                       SYN
                                                                                                              OPC




                                                                                                                             DVN
                                                                                                                                       ECA


                                                                                                                                                     APA


                                                                                                                                                                     APC
                                            IMO




                                                                                    WTO
                                                                                              COS.UN




                                                                                                                                               CNQ




                                                                                                                                                                            EOG
                                                                                                                                                             TLM
                                                                 HSE




                                                                                                                     UTS




                                                                                                                                                                                    NFX
                                                                                                                                                                                           NXY
                                                                                                                                                                                                 PPP




       Note: Averages reflect 2007 estimates.
       Note: U.S. Companies and ECA report in U.S. $Net




                                                           Integrateds, Oil Sands and Large Caps
                                                              Cash Flow as a % of Net Revenue
                          100%
                                                                                                                                                 2007e                             2008e
                              90%
                                             Avg: 60%
                              80%
Cash Flow as a % of Revenue




                              70%
                                                                                Avg: 56%                                                               Avg: 58%
                              60%

                              50%

                              40%

                              30%

                              20%

                              10%

                              0%
                                                                  IMO



                                                                              WTO




                                                                                                                           CNQ



                                                                                                                                           EOG



                                                                                                                                                           TLM
                                                    HSE




                                                                                                               UTS




                                                                                                                                                 NXY



                                                                                                                                                                   NFX




                                                                                                                                                                                          PPP
                                      SHC

                                             SU



                                                           PCA




                                                                                     COS.UN

                                                                                                 SYN

                                                                                                        OPC




                                                                                                                                   ECA




                                                                                                                                                                           DVN

                                                                                                                                                                                   APA



                                                                                                                                                                                                 APC




                          Note: Averages reflect 2007 estimates.
                          Note: U.S. Companies and ECA report in U.S. $Net
24   FirstQuarterly    Integrated, Oil Sands and Large Cap E&P   April 2007




                      THIS PAGE INTENTIONALLY LEFT BLANK.
                    25




Commodity
Price
Overview




RESEARCH ANALYST:
Martin King
 26      FirstQuarterly                Integrated, Oil Sands and Large Cap E&P                                        April 2007




World Crude Oil Markets                                                            expect price spreads will widen by the end of 2007
                                                                                   owing to seasonal factors and potential issues sur-
Despite some huge volatility in crude oil prices over the
                                                                                   rounding pipeline apportionment.
course of Q1 2007, we have elected to only slightly
                                                                                   • Longer-term we have modestly narrowed our light-
lower our WTI crude oil price expectations for 2007
                                                                                   heavy crude oil price spreads as expanding pipeline
from US $68 per barrel to US $66 per barrel. For 2008,
                                                                                   capacity and less competition from Venezuelan and
we have left our forecast of US $64 per barrel un-
                                                                                   Mexican heavy crude oil partly offset growing Cana-
changed, while we have added US $2 to US $3 per
                                                                                   dian oil sands related heavy crude oil production.
barrel to our price expectations from 2009 to 2012.

 FirstEnergy Crude Oil Price Outlook                                               We Told You So. When all seemed lost in the early
                                                                                   stages of Q1 2007 and prices were plunging to US $50
                                 West Texas                       Brent
                                                                                   per barrel, with many expecting things to go even lower,
          US $/BBL             Old       NEW                 Old        NEW
  2006     Average            $68.00    $66.25              $67.24     $66.11      we bravely stuck our neck out calling for a price
                                                                                   bottom at US $50 per barrel and a rapid rebound into
  2007       Q1               $67.00        $58.23          $66.25        $58.62
           Q2 est.            $69.00        $67.03          $68.25        $66.53
                                                                                   the US $60s per barrel range. Not to put too fine a
           Q3 est.            $69.00        $71.00          $68.25        $70.50   point on it, but that is essentially what happened
           Q4 est.            $67.00        $67.75          $66.25        $67.25   (Figure 1).
         Average est.         $68.00        $66.00          $67.25        $65.73
  2008     Q1 est.            $65.00        $65.00          $64.50        $64.50                             Figure 1: Price of Nymex WTI Crude Oil
           Q2 est.            $66.00        $66.00          $65.50        $65.50    US$/Barrel
                                                                                    $78.00
           Q3 est.            $64.00        $64.00          $63.50        $63.50
           Q4 est.            $61.00        $61.00          $60.50        $60.50
         Average est.         $64.00        $64.00          $63.50        $63.50    $74.00

  2009 Average est.           $60.00        $62.00          $60.00        $62.00    $70.00
 Notes: All historical averages computed using weekday data only.
 Source: FirstEnergy Capital Corp., Bloomberg; est. refers to forecasted value.     $66.00


                                                                                    $62.00
Key conclusions from this crude oil price forecast
update include:                                                                     $58.00                    2005 Avg. Price: $56.70
• More related to weaker than anticipated crude oil                                                           2006 Avg. Price: $66.25
prices in Q1 2007, than a view for weakening funda-                                 $54.00                    2007 YTD Price: $58.23
mentals, we have slightly lowered our 2007 forecast                                                           (YTD price to March 31, 2007)

average price for WTI to US $66 per barrel from US $68                              $50.00
                                                                                         Jan-06 Mar-06 May-06                      Jul-06   Sep-06 Nov-06 Jan-07 Mar-07
per barrel, previously.                                                            Source: FirstEnergy Capital Corp., Bloomberg.

• We see the balance of short-term demand and supply
issues as starting to skew crude oil price risks to the
                                                                                   By appealing to the fundamentals of the marketplace as
upside for the middle quarters of 2007.
                                                                                   we saw them, and trying to get past the very hyperac-
• Robust demand growth, tight supplies, and snug
                                                                                   tive static of those early days, prices have responded
inventory levels will be the fundamental drivers, not
                                                                                   and finally firmed up into the mid US $60s per barrel at
geopolitical ones, in potentially pushing prices into the
                                                                                   the start of Q2 2007. From our perspective, this is a
US $70 per barrel realm again in 2007. This could be
                                                                                   much more fundamentally “fair” value for crude oil
exaggerated by what may be a reluctance by OPEC to
                                                                                   prices after the unusual and unsustainable lows in Q1,
provide additional barrels to the market, with the cartel
                                                                                   and a more readily defensible value given the present
fearing that negative demand risks outweigh placing
                                                                                   state of the crude oil market.
more supply on the market.
• Longer-term we see the market as evolving to one in
                                                                                   However, getting to this point has not been easy as
which prices closer to US $60 per barrel, rather than the
                                                                                   huge waves of pessimism had repeatedly spilled over
mid-US $50s per barrel, are more reasonable given our
                                                                                   from global equity markets during Q1 2007, acting as a
views concerning spare capacity and OPEC market
                                                                                   catalyst for bouts of liquidation across the commodity
share.
                                                                                   sector, including crude oil. We believe that these
• Heavy crude oil price differential expectations have
                                                                                   ripples from the equity sector are finally starting to
been narrowed sharply for 2007 owing to fewer barrels
                                                                                   subside and that we are now firmly on a course for
on the market via OPEC actions and very strong
                                                                                   crude oil prices in 2007 that may surprise more to the
refinery demand in North America. However, we
                                                                                   upside than the downside.
                                                                                                                                                                                                     27




Although we have slightly lowered our average price                                                   (2) Our less optimistic assessment for Non-OPEC
expectations for 2007 (effectively creating no change in                                              supply growth prospects in 2007, though dismissed
average prices relative to 2006), we see the short-term                                               early on, have now found a wide following (Figure 3).
price risks, especially Q2 and Q3 2007, as being heavily                                              As more information starts to filter in from the globe
skewed to the upside from our current forecast. Note                                                  that many supply projects are facing further delays,
that we have forecast prices to again surpass US $70                                                  greater technical hurdles, lower performance, or steeper
per barrel for at least one quarter, just as we did in our                                            declines in more mature areas, Non-OPEC supply
forecast last year - and got it right. If anything, we see                                            growth projections have been steadily revised down,
the short-term fundamentals, not the geopolitical risk,                                               with some now coming in below our own pessimistic
as forming an even tighter picture for the crude oil                                                  assessment.
market in 2007 than they did in 2006. If prices were
able to surpass US $70 per barrel in 2006, then it                                                                     Figure 3: Change in Non-OPEC Crude Oil Supply
                                                                                                                               (Includes Former Soviet Union, Excludes Angola)
seems even more likely in our view that prices will                                                    Thousand B/d
rise to or past this point in 2007 before subsiding in the                                             1,400

closing months of the year.                                                                            1,200      1,136           1,147                                          Forecast

                                                                                                       1,000                                 952 956
Short-Term Drivers. Lowering our average crude oil
price expectations for 2007 is merely to acknowledge                                                     800               731                                       742
the arithmetic imposed by the prices of Q1, rather than                                                                                                                    549
                                                                                                         600
to say that we are looking to soften our fundamental                                                                                                           391
view of the market. As alluded to earlier, we think those                                                400                                                                     382 325

fundamental drivers of the short-term market have                                                        200
                                                                                                                                                                                            170
become even more compelling and powerful. There are                                                                                                    (190)                                      (150)
                                                                                                            0
indeed many drivers to consider:
                                                                                                        (200)
(1) Global oil and petroleum product demand growth                                                                 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
remains very strong (Figure 2). Despite many predic-
                                                                                                       Source: FirstEnergy Capital Corp., IEA.


tions that the crude oil price spikes of mid-2006 would
finally cut the legs out from under the global economic                                               (3) Though greeted with skepticism initially, OPEC
expansion, these have been more of a bump in the road                                                 production cuts have been largely successful in
for economic activity. If anything, expectations for                                                  reining in production over the past five months,
global demand growth have actually been revised up                                                    capitalizing on two successive agreements to reduce
in early 2007, remaining at levels on par or better than                                              output by 1.7 million B/d. With about 1.3 million B/d
the two previous years. With that in mind, we have                                                    of this cutback now having taken place, global balances
maintained our view for 1.7 million B/d of oil demand                                                 have tightened considerably (Figure 4). There is still
growth for 2007, still one of the highest views on the Street.                                        the possibility that OPEC might curtail output even
                                                                                                      further, although we see this as being very unnecessary
                     Figure 2: Change in World Crude Oil Demand                                       (more about this below).
 Million B/d
 3.5
                                           3.12                                                       (4) Thanks to factors (1) to (3), OECD inventory levels
                                                                               Forecast
 3.0                                                                                                  have undergone some sharp downward swings in the
                                                                       2005 and 2006 demand
                                                                       impacted by Non-OECD
                                                                                                      past two quarters, in fact, some of the largest back-to-
 2.5                                                                   destocking, hurricanes         back quarterly changes seen in more than a decade.
                                                                       and warm winter in             Furthermore, inventory builds in the middle quarters of
 2.0                                                                   North America.
                                                                1.72                                  2007 look more mild than in some previous years
                                    1.52                                      1.54
                                                                                     1.47 1.49 1.42   (Figure 5).
 1.5                                              1.31                 1.24

 1.0
         0.70 0.68 0.61                                  0.80                                         (5) Adding all of the above together always bring us
                                                                                                      back to the same issue: days of forward cover, that
 0.5
                                                                                                      ultimate measure of the market’s comfort with demand
 0.0                                                                                                  and inventory levels, has undergone a sharp reduction
          2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012                            from the sloppy look of late 2006. We expect that this
 Source: FirstEnergy Capital Corp., IEA.                                                              measure will fall further before stabilizing (Figure 6).
28           FirstQuarterly                               Integrated, Oil Sands and Large Cap E&P                                April 2007




                    Figure 4: OPEC 10 Crude Oil Production versus                                                 China. These two nations alone could account for
Thousand B/d
                                   Official Quota                                                                 upward of 175 thousand B/d of strategic reserve
 29,000                                                                                                  29,000   “demand” over the middle quarters of this year, and
  28,000                                                                                                 28,000
                                                                                                                  occurring at a time when we believe that the market
                                                                                                                  may be especially tight.
  27,000                                                                                                 27,000

  26,000                                                                                                 26,000   As always, less quantifiable but ever present in terms of
                                                                                                                  keeping prices simmering this summer, will be the long
  25,000                                                                                                 25,000
                                                                                                                  shadow of geopolitical nonsense, worries over gaso-
  24,000                                                                                                 24,000   line inventories and refinery outages for the upcoming
  23,000                                                                                                 23,000
                                                                                                                  driving season, and the level of activity and intensity
                                                                 OPEC 10 Quota                                    for the upcoming hurricane season. All three of these
  22,000                                                         OPEC 10 Production                      22,000   factors have already begun to hype the market for the
  21,000                                                                                                 21,000   next few months at a minimum. Although they do not
            Jan-02            Jan-03             Jan-04             Jan-05         Jan-06     Jan-07              drive our fundamentals view of the market and price
Source: FirstEnergy Capital Corp., Bloomberg, Oil Market Intelligence.
                                                                                                                  direction, they nevertheless add to price volatility and
                                                                                                                  amplify price averages up and down.
                            Figure 5: Swing in OECD Commercial
                            Crude/Product Inventories by Quarter                                                  The Inventory War Begins? Okay. All of the stuff
Thousand B/d
1,500                                                                                                             above sounds good, but what does this really all mean?
                                                                                               Forecast           Basically it comes down to this: global demand
 1,000                                                                                                            strength has proven to be much better than many
                                                                                                                  expected, while supplies have tightened thanks to
    500                                                                                                           fewer Non-OPEC barrels, and OPEC showing very
                                                                                                                  respectable compliance with production cutting
        0
                                                                                                                  agreements. The end result is that perhaps things
                                                                                                                  have actually gone too far in terms of taking barrels
   (500)
                                                                                                                  off the market.
(1,000)
                                                                                                                  Specifically, we are concerned that OPEC may have
(1,500)                                                                                                           actually tightened global balances overly fast, despite
         2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1                                          warm winter weather in the Northern Hemisphere for
Source: FirstEnergy Capital Corp., IEA.
                                                                                                                  much of the past heating season. We have repeatedly
                                                                                                                  alluded to this possibility in prior research and see the
                   Figure 6: OECD Days of Forward Demand Cover                                                    risks of this happening as becoming more acute of
  Days of Cover                                                                                                   late. With OPEC still concerned about prospects for
  61                                                                                                        61
                                               Quarterly Days of
                                                                                                                  slow global demand growth - a view that we do not
  59                                           Demand Cover                                   Forecast      59    share - the cartel may be slow to react over the course
                                               4 Quarter Moving                                                   of 2007 in terms of placing additional barrels into the
                                               Average
  57                                                                                                        57    marketplace.
  55                                                                                                        55
                                                                                                                  With inventories in the OECD and the Non-OECD
  53                                                                                                        53    nations having taken a negative hit in the past number
                                                                                                                  of months, and days of forward cover coming off
  51                                                                                                        51
                                                                                                                  sharply, we see the 2007 global crude oil market as
  49                                                                                                        49
                                                                                                                  coming down to a struggle to refill inventories, both
                                                                                                                  commercial and strategic. Our fear is that OPEC will
  47                                                                                                        47    be slow to respond, resulting in inventories rising too
   1996 Q1           1998 Q1          2000 Q1          2002 Q1           2004 Q1    2006 Q1    2008 Q1            slowly, while at the same time, days of forward cover
 Source: FirstEnergy Capital Corp., IEA.
                                                                                                                  become significantly more stressed relative to recent
                                                                                                                  quarters. It is this potential lack of sufficient addi-
(6) 2007 fill schedules for strategic petroleum reserves
                                                                                                                  tional barrels from OPEC that underscores our view
are another factor that will add pressure at the margin.
                                                                                                                  that prices may have much more fundamentally
Two primary countries to monitor will be a new refill
                                                                                                                  driven upside risk in 2007 than they did in 2006.
program for the United States, and a continuing one in
                                                                                                                                                                                                             29




In our global oil balances we are forecasting that there                                                        had previously forecast, we are both acknowledging
will be some positive production response from OPEC                                                             the long standing forward curve which has consis-
for the next several quarters, but the very real possibil-                                                      tently been well over US $60 for some time, and what
ity exists that the cartel may be reluctant to aggres-                                                          appears to be a growing sense that the longer-term
sively come forward with additional barrels (Figure 7).                                                         market will be driven more and more by OPEC
With the globe attempting to refill inventories, the price                                                      actions (Figure 9). With the cartel’s supply market
bidding war for crude oil barrels in 2007 may have just                                                         share anticipated to continue to rise in the next few
begun. Will OPEC now respond with sufficient fire-                                                              years, we are becoming increasingly comfortable with
power to settle the issue?                                                                                      the notion that OPEC will be able to manage, albeit
                                                                                                                with bouts of high price volatility, a world that is able
                   Figure 7: Estimated "Call" on OPEC Crude Oil                                                 to withstand and grow in an environment of crude oil
Million B/d               and OPEC Crude Oil Production                                                         prices in the US $60 per barrel range (Figure 10).
35.0                                                                                                     35.0
                    Call on OPEC                                                          Forecast
                                                                                                                             Figure 9: FirstEnergy Crude Oil Price Forecast versus
 33.0               OPEC Production                                                                      33.0                               the Nymex Futures Strip
                                                                                                                 US $/BBL
 31.0                                                                                                    31.0    $80.00   Although our longer-term forecast is well below the                            $80.00
                                                                                                                                 Nymex curve, it remains one of the highest on Street.
                                                                                                                 $75.00                                                                                  $75.00
 29.0                                                                                                    29.0
                                                                                                                 $70.00                                                                                  $70.00

 27.0                                                                                                    27.0    $65.00                                                                                  $65.00

                                                                                                                 $60.00                                                                                  $60.00
 25.0                                                                                                    25.0
                                                                                                                 $55.00                                                                                  $55.00
 23.0                                                                                                    23.0
                                                                                                                 $50.00                                    Actuals                                       $50.00
      2003 Q1             2004 Q1                2005 Q1           2006 Q1          2007 Q1        2008 Q1
Source: FirstEnergy Capital Corp., IEA.                                                                                                                    Nymex: April. 2, 2007
Note: Difference between line and column represents inventory build or draw.                                     $45.00                                                                                  $45.00
                                                                                                                                                           FirstEnergy Forecast: Apr. 2007
                                                                                                                 $40.00                                                                                  $40.00
The 90 Million B/d World. As much as we have                                                                             Jan-06        Jan-07         Jan-08    Jan-09   Jan-10   Jan-11   Jan-12   Jan-13

concerns that OPEC may inadvertently provide the                                                                Source: FirstEnergy Capital Corp., Bloomberg.


basis of some large short-term price fireworks in 2007,                                                                         Figure 10: OPEC Share of Global Crude Oil Supply
the cartel also forms part of our call to raise our longer-
                                                                                                                  47%
term price forecast. In passing through our latest                                                                                                                                    Forecast
analysis, we have chosen to raise our longer-term                                                                 46%
                                                                                                                                                                                                     45.2%
price call by several dollars per barrel to the end of the                                                        45%
                                                                                                                                                                                                 44.3%
decade and beyond, feeling that the time is ripe to                                                               44%
                                                                                                                                                                                         43.3%
make such a move (Figure 8).                                                                                      43%
                                                                                                                                                                                    42.9%
                                                                                                                                                                               42.3%
                                                                                                                                                                     42.1% 42.1%
                                                                                                                                                                42.0%
                                                                                                                  42%
          Figure 8: Actual and Forecasted Average Price of                                                                  41.2%
                      West Texas Intermediate                                                                                                               40.9%
 US $/BBL                                                                                                         41%              40.4%
 $80.00                                                                                                                                             39.7%
                                                                                                                  40%
                       Current Forecast                                        $68.00
 $70.00                                                                                                           39%                       38.7%
                       Jan. 2007 Forecast $66.25                                   $64.00
                                                                                        $62.00
                                                                               $66.00        $60.00
 $60.00                                                                                          $57.00           38%
                                                      $56.70                         $60.00
 $50.00
                                                                                          $57.00 $55.00           37%
                                                                                                                            2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
 $40.00                                                                               Forecast                   Source: FirstEnergy Capital Corp., IEA.


 $30.00
                                                                                                                With global demand projected to be averaging 90
 $20.00                                                                                                         million B/d by 2010, and OPEC providing close to 50%
 $10.00
                                                                                                                of this total, we see prices near US $60 per barrel as
                                                                                                                being something that consumers will be able to with-
  $0.00                                                                                                         stand (Figure 11). Moreover, longer-term project supply
             1998          2000           2002           2004          2006        2008     2010      2012
 Source: FirstEnergy Capital Corp., Bloomberg.
                                                                                                                economics in regions outside of the OPEC sphere have
                                                                                                                appreciated to the point where we believe that prices
With prices now expected to be closer to the US $60 per                                                         north of US $50 per barrel at a minimum will be needed
barrel range by 2010 rather than US $57 per barrel we
 30           FirstQuarterly                             Integrated, Oil Sands and Large Cap E&P                                                           April 2007




                               Figure 11: World Crude Oil Demand                                                       guard against being too drastically undersupplied with
Million B/d
97.0                                                                                 Forecast
                                                                                                                       respect to forward demand (Figure 13).
 94.0
                                                                                                          93.4
                                                                                                   91.9                                 Figure 13: OECD Days of Forward Demand Cover
                                                                                            90.5                       Days of Cover
 91.0                                                                                89.0                              75                                                                          75
 88.0
                                                                              87.4
                                                                       86.2                                                                                       Quarterly Days of
                                                                84.5                                                   70                                         Demand Cover                     70
 85.0                                               83.7
                                             82.4                                                                                                                 4 Quarter Moving    Forecast
 82.0                                                                                                                  65                                         Average                          65
                                      79.3
 79.0                77.7
           76.5 77.1                                                                                                   60                                                                          60
 76.0

 73.0                                                                                                                  55                                                                          55

 70.0                                                                                                                  50                                                                          50
           2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: FirstEnergy Capital Corp., IEA.
                                                                                                                       45                                                                          45
to justify the costs of doing business in the more                                                                         1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
                                                                                                                            Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1
technically challenging areas of the globe.
                                                                                                                       Source: FirstEnergy Capital Corp., IEA.



You will note that in our longer-term forecast we still do
have prices declining from the high US $60s per barrel                                                                 These are two basic points amongst many which could
to the upper US $50s per barrel by 2012 (see Figure 8).                                                                be made to support higher crude oil prices. However,
This reflects a combination of two factors:                                                                            we see the globe as needing higher notional crude oil
                                                                                                                       prices going forward if it is going to deal with the
(1) We see growing spare wellhead and refining                                                                         challenging issues of recovering oil from more uncon-
capacity as being factors that allow prices to gradually                                                               ventional sources (oil sands, super deep water, shale,
move lower over time (Figure 12). However, with                                                                        etc.), slower Non-OPEC supply growth, tighter fuel
virtually all of that spare capacity concentrated within                                                               specifications, more refineries in more far flung corners
the OPEC sphere, this will generate the flexibility these                                                              of the globe, pass through the present wave of resource
nations will need to manage crude oil prices somewhat                                                                  nationalization, construct the infrastructure to deliver
more effectively and at higher levels than in the past.                                                                more and complex fuels to end users, and, ultimately,
                                                                                                                       provide the necessary incentive for consumers to adapt
                      Figure 12: Estimated Global Spare Crude Oil                                                      to higher prices and bring about the next step in the
                             Wellhead Productive Capacity                                                              evolution of crude oil consumption.
 Thousand B/d
 14,000                                                                                                          25%
                                                            Spare Capacity                                             All of these issues will take a great deal of time and
                                                                                                     F
 12,000                                                                                                                money to be dealt with effectively, and will take higher
                                                                                                     o           20%
                                                            Spare Capacity as
                                                                                                     r                 prices on average than any experienced in the previous
 10,000                                                     % of World Supply
                                                                                                     e                 35 years. At this stage, there is nothing that particu-
   8,000                                                                                             c           15%   larly compels us to justify a declining price stance
                                                                                                     a                 beyond 2008; however, evolving demand patterns may
   6,000                                                                                             s
                                                                                                                 10%   eventually force a lower equilibrium price upon the
                                                                                                     t
   4,000                                                                                                               market post-2010.
                                                                                                                 5%
   2,000                                                                                                               The Canadian Crude Oil Market. Just as we did in
         0                                                                                                       0%
                                                                                                                       our previous quarterly update, we have again trimmed
             1980        1984         1988      1992            1996     2000        2004     2008        2012         (i.e. narrowed) our expectations for light-heavy crude
Source: FirstEnergy Capital Corp., IEA, US DOE/EIA, Pennwell.
                                                                                                                       oil price differentials. The main difference this time is
                                                                                                                       that we have made a material reduction by reducing the
(2) Balancing out some of the price dampening effects                                                                  forecasted price differential average by about $5 per
of greater wellhead spare capacity, we are forecasting                                                                 barrel for 2007. For 2008 and beyond, we have slightly
that the inventory situation, as measured by days of                                                                   lowered our price differential expectations.
forward cover in the OECD nations, will remain at the
lower end of the long-term historic range, providing                                                                   The remarkable performance of light-heavy crude oil
some basic upside pressure for prices as market agents                                                                 price differentials so far in 2007 has taken us com-
                                                                                                                                                                               31




                                                                                                                   Figure 14: Canadian Crude Oil Differential
  FirstEnergy Crude Oil Price Differential Outlook                                                          Differential: West Texas Intermediate Versus Lloyd Heavy Blend
                                                                                            US$/BBL
                             Ed Light-Bow Cdn$               WTI-Lloyd US$                  $35.00                                                                           $35.00
             $/BBL             Old       NEW                 Old       NEW
  2006      Average           $22.49    $20.92              $21.97    $21.57                $30.00                                                                           $30.00

  2007       Q1               $25.00        $16.77          $23.00        $16.60
                                                                                            $25.00                                                                           $25.00
           Q2 est.            $22.00        $18.00          $20.00        $17.00
           Q3 est.            $22.00        $17.00          $20.00        $16.00
                                                                                            $20.00                                                                           $20.00
           Q4 est.            $25.00        $22.00          $23.00        $21.00
         Average est.         $23.50        $18.44          $21.50        $17.65
                                                                                            $15.00                                                                           $15.00
  2008     Q1 est.            $25.00        $24.00          $23.00        $23.00
           Q2 est.            $21.00        $20.00          $19.00        $19.00            $10.00                                                                           $10.00
           Q3 est.            $22.00        $21.00          $20.00        $20.00
           Q4 est.            $24.00        $23.00          $22.00        $22.00             $5.00                                                                           $5.00
         Average est.         $23.00        $22.00          $21.00        $21.00                                              2004          2005    2006      2007
                                                                                             $0.00                                                                           $0.00
  2009 Average est.           $21.50        $20.50          $19.50        $19.50                     Jan 5 Feb 16 Mar 30 May 11 Jun 22 Aug 3 Sep 14 Oct 26 Dec 7
                                                                                            Source: FirstEnergy Capital Corp., Bloomberg.
 Notes: All historical averages computed using weekday data only.
 Source: FirstEnergy Capital Corp., Bloomberg; est. refers to forecasted value.             will continue as we have lowered our near-term price
                                                                                            differential forecast from the low US $20s per barrel to
pletely by surprise (Figure 14). The persistence of the                                     the mid-teens. With North American refineries starting
Lloyd-WTI price differential near US $15 per barrel has                                     to ramp up activity going into the upcoming driving
come in nearly US $10 per barrel under our expecta-                                         season and the usual hype to increase gasoline invento-
tions. With a more narrow price spread and rising                                           ries now getting underway, we expect that any and all
crude oil prices anticipated over the next few months                                       barrels of crude oil will be well bid over the next three to
at a minimum, this is obviously all good news for                                           five months. This is underscored by our views outlined
heavy oil Producers.                                                                        earlier on what is shaping up to be a relatively tight
                                                                                                                        global supply and demand
                                                                                                                        balance for 2007.
  FirstEnergy Canadian Crude Oil Price Outlook
                                 Edmonton Light                     Bow River Stream                Lloyd Heavy Blend                        Beyond the seasonal factors,
       Cdn $/BBL                 Old      NEW                        Old       NEW                    Old       NEW                          we do have more concerns
  2006 Average                  $75.49   $72.83                     $53.08    $51.91                $52.01     $50.55                        for the light-heavy price
  2007       Q1                 $74.36          $67.03              $48.36         $50.26            $48.04                 $48.63           differential after the middle
           Q2 est.              $75.74          $76.48              $53.74         $58.48            $54.14                 $57.83           quarters of this year. Given
           Q3 est.              $74.91          $79.48              $51.91         $62.48            $52.46                 $62.15           our view that OPEC will have
           Q4 est.              $72.72          $74.78              $47.72         $52.78            $48.09                 $51.94           to increase supply in the
         Average est.           $74.43          $74.44              $50.43         $56.00            $50.68                 $55.14           second half of 2007 to keep the
  2008     Q1 est.              $70.15          $71.32              $45.15         $47.32            $45.65                 $46.41           market better balanced, some
           Q2 est.              $71.24          $72.43              $50.24         $52.43            $51.09                 $51.93           of the barrels coming from the
           Q3 est.              $69.07          $69.83              $47.07         $48.83            $47.83                 $48.35           cartel will eventually be more
           Q4 est.              $65.80          $66.53              $41.80         $43.53            $42.39                 $42.86           heavy and sour. At some
         Average est.           $69.07          $70.03              $46.07         $48.03            $46.74                 $47.39           point, this should start to
  2009 Average est.             $64.89          $67.63              $43.39         $47.13            $44.14                 $46.70           place more pressure on light-
                                                                                                                                             heavy price differentials by Q4
  Notes: All historical averages computed using weekday data only.
                                                                                                                                             2007 and force them wider.
  Source: FirstEnergy Capital Corp., Bloomberg; est. refers to forecasted value.

                                                                                                                       In addition, we are becoming
Contributing to this very agreeable price differential                                      more concerned with what we see as potential pipe-
situation has been a growing acclimatization to the new                                     line apportionment issues on the major heavy oil
heavy oil pipeline infrastructure that went into service                                    pipelines from Canada and the newly minted pipelines
in 2006. Slowly adding up since that time has been a                                        into southern U.S. PADD II and Gulf Coast regions.
gradual reduction by OPEC of heavy and sour barrels                                         Combining this and the OPEC factor with the usual
reaching the market, which has helped to tighten global                                     seasonal slowdown in demand for heavy oil after the
light-heavy crude oil price differentials in general.                                       summer paving season, we anticipate the light-heavy
We expect for the spring and summer months of 2007                                          price differentials will widen out again and beyond the
that this very agreeable price differential performance                                     very attractive levels seen in the first half of 2007.
 32   FirstQuarterly      Integrated, Oil Sands and Large Cap E&P   April 2007




Beyond 2007 however, we have modestly trimmed our
forecast of light-heavy price spreads. Although we still
expect that supply growth from oil sands related
projects will be placing additional downward pressure
on heavy crude oil prices and forcing price spreads
wider, the modest reduction in the price differential has
been motivated by a more pessimistic assessment of
both Mexican and Venezuelan heavy crude oil pros-
pects to at least 2010.

With Mexico now facing well publicized declines in
some of its more prominent fields and Venezuela
essentially declaring forced nationalization of its heavy
oil bearing Orinoco tar sands, we expect that both of
these events will actually reduce the amount of heavy
oil entering the United States from these nations. As
such, Canadian heavy oil Producers should face a more
favourable price environment for their product. Beyond
2010, more Canadian pipeline transportation projects
will be taking shape and coming into service, with
several already well along in the regulatory and
permitting process.
                                                                                                                                                                                              33




North American Natural Gas Markets                                                           United States still turned out to be warmer than normal,
                                                                                             the arrival of the coldest February in 30 years (Figure
We have elected to leave our natural gas price forecast                                      1) helped to change attitudes and alter the timing of the
for 2007 unchanged at US $8.25 per Mmbtu. Further-                                           price rally’s emergence. The longer the cold stayed, the
more, we have chosen to leave our natural gas price for                                      closer to the present the natural gas price rally was
2008 to 2012 also unchanged, still expecting prices to                                       drawn.
hold in the range of US $8.00 of US $8.50 per Mmbtu.
                                                                                                             Figure 1: United States Feb. Heating Degree Days
                                                                                                                               1931 to 2007
  FirstEnergy Natural Gas Price Outlook                                                      Degree Days
                                                                                             1,200
                                  Nymex US$                      Aeco Cdn$                                                                                                    Feb.
            $/Mmbtu              Old     NEW                   Old      NEW                                                                                                   2007
                                                                                             1,000
  2006      Average             $6.80    $6.98                $6.35     $6.54                                                    Warmer                            Colder

  2007        Q1                $7.25         $7.18           $7.12          $7.38             800
            Q2 est.             $8.00         $8.08           $7.79          $8.24
            Q3 est.             $8.75         $8.75           $8.63          $8.93
                                                                                               600
            Q4 est.             $9.00         $9.00           $8.91          $9.06
          Average est.          $8.25         $8.25           $8.11          $8.40
                                                                                               400
  2008      Q1 est.             $8.75         $8.75           $8.80          $8.95
            Q2 est.             $8.00         $8.00           $7.99          $8.12
                                                                                               200
            Q3 est.             $8.50         $8.50           $8.53          $8.63
            Q4 est.             $8.75         $8.75           $8.80          $8.90
          Average est.          $8.50         $8.50           $8.53          $8.65                 0

                                                                                                       1954
                                                                                                       1998
                                                                                                       1991
                                                                                                       1999
                                                                                                       1984
                                                                                                       1990
                                                                                                       2005
                                                                                                       1961
                                                                                                       1997
                                                                                                       1952
                                                                                                       1949
                                                                                                       1943
                                                                                                       2006
                                                                                                       2001
                                                                                                       1956
                                                                                                       1945
                                                                                                       1946
                                                                                                       1975
                                                                                                       1996
                                                                                                       1977
                                                                                                       1939
                                                                                                       1955
                                                                                                       1937
                                                                                                       1959
                                                                                                       1973
                                                                                                       1969
                                                                                                       1960
                                                                                                       1933
                                                                                                       1966
                                                                                                       2003
                                                                                                       1964
                                                                                                       1994
                                                                                                       1993
                                                                                                       1942
                                                                                                       1989
                                                                                                       2007
                                                                                                       1958
                                                                                                       1936
                                                                                                       1978
  2009 Average est.             $8.50         $8.50           $8.56          $8.63           Source: FirstEnergy Capital Corp., U.S. NOAA

  Notes: All historical averages computed using weekday data only.
  Source: FirstEnergy Capital Corp., Bloomberg, Enerdata; est. refers to forecasted value.   In fact, the price rally is already here, at least in its
                                                                                             early stages, and we suspect its durability may outlast
                                                                                             nearly all expectations (Figure 2). So far, partly thanks
Key conclusions from this natural gas price forecast                                         to that cold weather of February, the price rally and
update include:                                                                              strong price expectations that we presented in our
• We have made no change to our natural gas price                                            previous quarterly forecast - and which placed us at the
forecast for 2007 or beyond, still calling for prices                                        highest extreme of price expectations for 2007 - have
between US $8.00 and US $8.50 per Mmbtu.                                                     now become much more the mainstream for the market.
• Natural gas market developments in Q1 have lined
up more or less with our view of the market with the
                                                                                                              Figure 2: Price of Nymex Near Month Natural Gas
projected price rally now having arrived and to be
sustained for the balance of 2007.                                                            US$/Mmbtu
                                                                                              $12.00
• A long list of discouraging supply and slightly better
                                                                                                                        2005 Avg: US $9.02
demand signals still confirm that the North American                                          $11.00
                                                                                                                        2006 Avg: US $6.98
natural gas market is facing one of its more difficult                                        $10.00                    2007 YTD: US $7.18
challenges in filling natural gas storage to comfortable                                                                (YTD to Mar. 31, 2007)
                                                                                                $9.00
levels in 2007.
• Longer-term we still see the North American natural                                           $8.00
gas market as being one that is supply constrained,                                             $7.00
thus requiring very strong prices to hold demand in
check, while at the same time encouraging enough                                                $6.00
                                                                                                                                                                With winter's end, the
domestic drilling/supply and LNG imports to keep the                                            $5.00                                                           modest beginnings of
market balanced.                                                                                                                                                the price rally.
                                                                                                $4.00
                                                                                                    Jan-06                Apr-06              Jul-06   Oct-06        Jan-07          Apr-07
Timing is Everything. In our previous quarterly                                               Source: FirstEnergy Capital Corp., Bloomberg.

forecast we adamantly stated that at some point in
2007, a natural gas price rally was going to occur. All                                      With that said, the growing pressures that would have
that remained open to question was the timing of the                                         eventually generated the price rally, cold February or
rally, and that was essentially a function of how severe                                     not, and its sustainability remain very much in place.
the winter heating season of 2006-07 turned out to be.                                       From the extreme to mainstream, our same pricing and
Although the overall winter heating season for the                                           market story goes on.
  34          FirstQuarterly                              Integrated, Oil Sands and Large Cap E&P                                         April 2007




More of the Same. With what appears to be the                                                                           Figure 4: Western Canada Estimated Natural Gas
projected natural gas price rally now more firmly in                                                    No. of Rigs                Directed Drilling Rig Count
                                                                                                        700                                                                                            700
place, the elements that will continue to sustain and                                                                                     2004              2005        2006        2007
likely amplify its growth are all very much the same                                                     600                                                                                           600
as what we outlined three months ago. In some cases,
some of those elements may have actually become                                                          500                                                                                           500

even more price supportive, suggesting some upside to
                                                                                                         400                                                                                           400
the price rally that has taken hold. However, at this
stage, after getting a very reluctant market on side with                                                300                                                                                           300
our thinking, we are not going to push our luck, seeing
the negative and positive risks to prices as being                                                       200                                                                                           200

somewhat evenly balanced for the remainder of 2007,                                                      100                                                                                           100
                                                                                                                                                      Multi-year low for
hence no change to our price forecast.                                                                                               101
                                                                                                                                                       active gas rigs.
                                                                                                            0                                                                                          0
The combination of supply and demand factors that we                                                        Jan-5         Feb-23         Apr-13         Jun-1      Jul-20   Sep-7    Oct-26   Dec-14

projected would be the drivers of the price rally have
                                                                                                        Source: FirstEnergy Capital Corp., Baker-Hughes, CAODC.


taken on greater importance and even closer scrutiny                                                    escalated over the past year, we expect that that the gas
now that the whole market is watching.                                                                  rig count will see some gradual reduction in the next
                                                                                                        few months as Producers reduce spending in the over-
(1) Canadian natural gas supply continues to deterio-                                                   inflated service cost environment. This will have
rate as it has done since Q3 2006 (Figure 3). Supply                                                    increasingly negative consequences on U.S. domestic
declines to date match our forecast for a reduction near                                                natural gas supply in H2 2007.
0.3 Bcf/d in the early stages of 2007. Given what
appears to be an even more extreme pullback in natural                                                                     Figure 5: U.S. Gas Directed Drilling Rig Count
gas related drilling in Western Canada than even our                                                     No. of Rigs
                                                                                                         1,600                                                                                    1,600
pessimistic expectations (Figure 4), we would not be
surprised to see the natural gas supply decline begin                                                    1,500                                                                                    1,500
to accelerate toward 0.5 to 0.6 Bcf/d by the middle
                                                                                                         1,400                                                                                    1,400
months of this year. Despite the recent firming of
natural gas prices, we expect that Producers will not                                                    1,300                                                                                    1,300
show any kind of sustained uptick in gas related
                                                                                                         1,200                                                                                    1,200
spending until we draw closer to the next winter
drilling season.                                                                                         1,100                                                                                    1,100

                                                                                                         1,000                                                                                    1,000
                   Figure 3: Estimated Natural Gas Field Receipts
                                 in Western Canada                                                         900                                                                                    900
 Mmcf/d                                                                                                                                   2004              2005        2006        2007
 18,000                                                                                        18,000
                                                                                                           800                                                                                    800
 17,750                                                                                        17,750
                                                                                                                Jan-5 Feb-16 Mar-30 May-11 Jun-22 Aug-3 Sep-14 Oct-26 Dec-7
 17,500                                                                                        17,500    Source: Baker-Hughes.


 17,250                                                                                        17,250
                                                                                                        (3) Even with all the active drilling and natural gas
 17,000                                                                                        17,000   wells that have been completed, we believe the U.S. is
 16,750                                                                                        16,750   not seeing any kind of sizable supply response after
 16,500                                                                                        16,500   adjusting for hurricane losses (Figure 6). In other
 16,250                                                                                        16,250   words, any supply gains that seem to be occurring are
 16,000                                                                                        16,000
                                                                                                        more related to normalization of supply from an
                                      2002                    2003                     2004             artificially low base of late 2005 and early 2006. Trends
 15,750                                                                                        15,750
                                      2005                    2006                     2007             over the last few months are somewhat chilling in our
 15,500                                                                                        15,500
                                                                                                        view as the year-over-year supply gains have been
               Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: FirstEnergy Capital, Alliance Pipeline, ATCO Pipelines, Duke Energy, TCPL, TransGas.
                                                                                                        slowly tending to zero. This is not an encouraging
                                                                                                        trend, especially if the rig count does indeed pull back
(2) Despite all of the hoopla about the incredible                                                      modestly as we are suggesting.
resiliency of the U.S. gas directed drilling rig count, it
has effectively stalled out for the past couple of months                                               (4) U.S. LNG supply is one element of the supply
just above 1,450 rigs (Figure 5). As service costs have                                                 story that provides some of the price downside risk to
                                                                                                                                                                                                           35




              Figure 6: Year-over-Year Change in U.S. Natural Gas                                        LNG has hit new daily record highs in the last few
                Production after Adjusting for Hurricane Losses                                          months (Figure 8). Given the sorry state of natural gas
 BCF/d
 1.5                                                                                                     prices across much of Europe and lackluster prices in
                                                                                                         parts of Asia, the landing of record amounts of LNG on
  1.0                                                                                                    U.S. shores could very well persist into Q3 2007 before
                                                                                                         European/Asian restocking and power generation
  0.5
                                                                                                         needs begin to pull LNG spot cargoes back to other
                                                                                                         parts of the world.
  0.0


 (0.5)
                                                                                                         (5) Natural gas demand growth in the United States
                                                                                                         may be perking up slightly more than we had previ-
 (1.0)                                                                                                   ously expected for 2007 (Figure 9). Originally, we saw
                                                                                                         little in the way of industrial demand growth for 2007 -
 (1.5)                                                                                                   and still do. What is giving us pause, and looking to
      Jan-05 Apr-05              Jul-05       Oct-05        Jan-06 Apr-06   Jul-06   Oct-06   Jan-07     more positive demand growth aspects, has been sharp
Source: FirstEnergy Capital Corp. U.S. MMS, U.S. DOE/EIA.
                                                                                                         up moves in some of the more timely indicators of
                                                                                                         industrial natural gas demand such as rail shipments
offset the price upside from dismal North American                                                       of chemicals (Figure 10) and steel production. Both
supply growth (Figure 7). With U.S. netback prices for                                                   have come off low starting points at the end of 2006 and
landed LNG that are still some of the best in the world,                                                 have now nicely accelerated. Partly related to the rail
LNG shipments to the United States have been                                                             shipments story will likely be the growing use of
reaching record levels and the send out of re-gasified                                                   natural gas in the production of ethanol for gasoline

                          Figure 7: United States Imports of LNG                                                                    Figure 9: U.S. Industrial Sector Natural
 BCF/d                                                                                                                                       Gas Demand Growth
 3.0                                                                                               3.0                                   (Excludes Combined Heat & Power Operations)
                                                                                                          BCF/d
                Monthly Imports                                                                           1.0
  2.5           12 Month Moving Average                                                            2.5                                                     0.6
                                                                                                          0.5
                                                                                                                                                                                               0.2
                                                                                                                                          0.2                             0.1                        0.1
  2.0                                                                                              2.0                                                            (0.7)          (1.1) (0.4)
                                                                                                                    (0.7) (0.8)                    (1.9)
                                                                                                          0.0

  1.5                                                                                              1.5
                                                                                                         (0.5)
                                                                                                                                                                                               Forecast
  1.0                                                                                              1.0
                                                                                                         (1.0)

  0.5                                                                                              0.5
                                                                                                         (1.5)

  0.0                                                                                              0.0   (2.0)
     Jan-01          Jan-02          Jan-03             Jan-04   Jan-05     Jan-06     Jan-07                       1998 1999             2000 2001 2002          2003 2004 2005 2006          2007 2008
 Source: FirstEnergy Capital Corp., US DOE/EIA.                                                          Source: FirstEnergy Capital Corp., IEA.


                Figure 8: Daily Throughput of Regasified LNG from                                                     Figure 10: U.S. Weekly Railcar Loadings of Chemicals
                       United States LNG Import Terminals                                                                                           (Four Week Moving Average)
                                                                                                         Loadings
 Mmcf/d                                                                                                  32,000                                                                                      32,000
 3,500

                      Daily Throughput                                                                   31,000                                                                                      31,000
 3,000
                      30 Day Moving Average
                                                                                                         30,000                                                                                      30,000
 2,500
                                                                                                         29,000                                                                                      29,000
 2,000
                                                                                                         28,000                                                                                      28,000

 1,500
                                                                                                         27,000                                                                                      27,000

 1,000
                                                                                                         26,000                          2004              2005           2006         2007          26,000

    500                                                                                                  25,000                                                                                      25,000
      Jan-05         May-05        Sep-05         Jan-06      May-06   Sep-06   Jan-07    May-07                  Jan-5 Feb-16 Mar-30 May-11 Jun-22 Aug-3 Sep-14 Oct-26 Dec-7
 Source: FirstEnergy Capital Corp., Company Postings.                                                    Source: FirstEnergy Capital Corp., Bloomberg.
 36           FirstQuarterly                                Integrated, Oil Sands and Large Cap E&P                                          April 2007




(6) Steadily increasing natural gas demand by the                                                            somewhere through either less demand (meaning
Canadian oil sands in late 2006 and for 2007 is no                                                           higher prices) or more LNG imports (meaning higher
longer the sexy story it was in 2006, but it is also                                                         prices to sustain the recent surge). Either way you cut
undeniably important in affecting Canadian natural                                                           it, it seems price supportive at a minimum.
gas balances (Figure 11).
                                                                                                             That recent surge in LNG imports may be just enough to
                   Figure 11: Estimated Monthly Natural Gas                                                  have brought some greater sense of balance back to the
               Consumption for Production/Upgrading of Oil Sands                                             natural gas market in the closing weeks of March
Mmcf/d
1,200                                                                                                        (Figure 13). However, the market would have to trend
                                                                                           Forecast
                                                                                                             back to a situation of oversupply for an extended period
1,000                                                                                                        of time before we would have to reconsider downgrad-
                                                                                                             ing our price forecast. As things currently stand, we do
   800                                                                                                       not think there are enough spot LNG imports avail-
                                                                                                             able or enough additional Canadian natural gas
   600                                                                                                       supply that could achieve this more balanced to
                                                                                                             oversupplied situation. The reduction to the chronic
   400
                                                                                                             undersupply of natural gas in the United States will
                                                                                                             only be a gradually unwinding situation with the
   200
                                                                                                             arrival of the storage injection season, but will occur in
                                                                                                             an environment of rising natural gas prices.
       0
       Jan-04        Jul-04       Jan-05           Jul-05    Jan-06    Jul-06   Jan-07     Jul-07   Jan-08
Source: FirstEnergy Capital Corp., National Energy Board.
                                                                                                                            Figure 13: Estimated Year-over-Year Change in
                                                                                                                           Weather Adjusted U.S. Natural Gas Market Balance
Adding It All Up. From the Canadian side of the border                                                       Bcf/d
                                                                                                             8.0                                                                                8.0
and looking into the U.S. market, adding up those                                                                                              Versus 2005/2006                      "Looser"
Canadian supply and demand factors results in one                                                            6.0                               4 Week Mov. Avg.                       Market    6.0
inescapable conclusion in our view. U.S. net imports of                                                      4.0                               8 Week Mov. Avg.                                 4.0
Canadian natural gas are going lower in 2007 versus
                                                                                                             2.0                                                                                2.0
previous years, and may record one of the single largest
one-year declines seen in many years (Figure 12).                                                            0.0                                                                                0.0

                                                                                                             (2.0)                                                                              (2.0)
                          Figure 12: United States Net Imports of
                                 Natural Gas from Canada                                                     (4.0)                                                                              (4.0)
BCF/d
12.0                                                                                                         (6.0)
                                                                                                                                                                         "Tighter"              (6.0)
                                                                                            Forecast                                                                      Market
                                          9.8        9.9                                                     (8.0)                                                                              (8.0)
10.0                            9.5
                     9.1                                              8.8    9.2    8.9                          Jan-06 Feb-06 Apr-06 Jun-06 Jul-06 Sep-06 Oct-06 Dec-06 Feb-07 Mar-07
                                                              8.7
           8.3                                                                              8.3     8.1      Source: FirstEnergy Capital Corp., Bloomberg, US DOE/EIA, NOAA.
 8.0

                                                                                                             The Storage Game. How high and how low storage
 6.0
                                                                                                             levels reach over the course of the calendar year, along
 4.0
                                                                                                             with the varying factors that influence those highs and
                                                                                                             lows, remain the driving force behind natural gas
 2.0                                                                                                         prices. As we stated in our previous quarterly analysis,
                                                                                                             and reiterate in this forecast update, we see the previ-
 0.0                                                                                                         ously discussed factors as coming together to generate
           1998      1999      2000       2001       2002    2003     2004   2005   2006    2007    2008     U.S. natural gas storage levels that are at generally
Source: FirstEnergy Capital Corp., U.S. DOE/EIA.
                                                                                                             comfortable levels by the end of October 2007 near
                                                                                                             3,400 Bcf (Figure 14). This is still modestly below the
The higher import profile that we are seeing for LNG in                                                      levels of October 2006, but the price path in reaching
2007 is now just enough to offset the lower expectations                                                     that goal will be far different than the one in 2006.
for Canadian imports. But will it be enough? Should
Canadian supply falter even more than we are cur-                                                            In an environment where supply trends continue to
rently thinking, then the overall net import picture for                                                     stagnate in the case of the United States or are even
the United States will tighten. This has to be offset                                                        worse in the case of Canada, and non-weather related
                                                                                                                                                                       37




             Figure 14: United States Working Gas Storage Levels                             A Winter of Discontent? Another weather unknown
BCF
                             at the End of October                                           that cannot be answered until it occurs is the severity of
4,000
                                                                                     3,376
                                                                                             the next heating season of 2007-08. With the United
                                                                                             States now having experienced its fourth consecutive
           3,467                                                                    3,452
3,500                                                                                        warmer-than-normal winter (Figure 15), can it really
                                                                                             count on yet another warm winter in 2007-08 to avoid
3,000                                                                                        worries about filling natural gas storage this year?

2,500
                                                                                                           Figure 15: United States Cumulative Heating Degree
                                                                                                                 Days during the Winter Heating Season
2,000                                                                                        HDDs
                                                                                             5,000

                                                                                             4,500
1,500                                                                                                                      30-year average.
                                                                                             4,000

1,000                                                                                        3,500
          1990        1992        1994           1996   1998   2000   2002   2004   2006
Source: FirstEnergy Capital Corp., US DOE/EIA.
                                                                                             3,000

                                                                                             2,500
demand is improving, filling storage becomes a much                                          2,000
more pressing issue in 2007 than it was in 2006 when
                                                                                             1,500
these trends were less pressing or not present. With the
                                                                                             1,000
market now seeing the same mix of worrying factors
                                                                                                500
that we do, the race is now on to fill storage.
                                                                                                   0
                                                                                                         1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Aside from the supply/demand fundamentals, the                                               Source: FirstEnergy Capital Corp., U.S. NOAA.
early stages of the injection season are fraught with
major concerns over two major weather unknowns,
                                                                                             We say the unequivocal answer is no. Given that past
both of which have proven in the past to have drastic
                                                                                             colder-than-normal winters have generated sizable
impacts on market balances - usually negative. The first
                                                                                             cumulative withdrawals well in excess of 2,000 Bcf,
is the extent and duration of summer heat extremes
                                                                                             starting the next heating season with 3,400 Bcf in the
and the impacts on the power generation market.
                                                                                             ground at the end of October 2007 may be what
Although the power generation community appears to
                                                                                             makes the difference between being just comfortable
be better prepared from the perspective of more coal
                                                                                             rather than very concerned about storage levels at the
stocks on hand and the likelihood that summer 2007
                                                                                             end of March 2008. One could argue that having
will not be as hot as summer 2006, the worry persists
                                                                                             storage levels near 3,500 Bcf could be the more appro-
that natural gas demand in this sector could again
                                                                                             priate goal for a storage industry that has to deal with
swamp the market and result in drastically low storage
                                                                                             what could be unprecedented demand for natural gas
injections or withdrawals in high summer as it did in
                                                                                             in the event of a colder-than-normal winter. Simply put,
2006.
                                                                                             we just don’t see the collective natural gas market as
                                                                                             gambling on another warmer-than-normal winter for
The other big unknown is the intensity of the 2007
                                                                                             2007-08. Thus, buy now, buy often and pay up.
hurricane season. With forecasts now lining up for a
return to higher storm activity, after the slow period of
                                                                                             Even with the lofty goal of near 3,400 Bcf of natural gas
2006, worries are growing anew that any supply
                                                                                             in storage by the end of October 2007, we are projecting
disruptions in the Gulf of Mexico will only add to
                                                                                             that the surplus in storage levels to the five-year
onshore supply concerns. The potential for having both
                                                                                             average will be slowly approaching zero by the
offshore and onshore supply being impacted negatively
                                                                                             middle months of the 2007 injection season (Figure
in 2007 is another troublesome aspect for the market.
                                                                                             16). It is the reduction of this particular storage sur-
                                                                                             plus, so often used as the barometer of what is “nor-
Until both of these weather prospects are known with
                                                                                             mal” for the market, that will continue to support and
much greater certainty later in the summer, natural gas
                                                                                             push natural gas prices to higher levels going into the
prices will remain well supported. Simply put, in the
                                                                                             second half of 2007. Widening of the storage surplus
present deteriorating supply environment with the
                                                                                             does not lead to lower prices in the closing months of
possibility of improving demand, no natural gas
                                                                                             2007, rather it is the rising prices that we are forecasting
storage site wants to be left behind. Buy now, buy often
                                                                                             that will help to widen the surplus as demand is
and pay up.
 38         FirstQuarterly                             Integrated, Oil Sands and Large Cap E&P                 April 2007




curtailed and more supply is drawn in from overseas in                                         more and more countries building LNG re-gasification
the form of LNG.                                                                               terminals, the squeeze will remain on domestic United
                                                                                               States and Canadian natural gas supply to at least
              Figure 16: United States Deficit/Surplus in Working                              2010, and perhaps beyond, before readily sufficient
                          Natural Gas Storage Levels                                           quantities of LNG make a sizable contribution to the
 800
                                                      Year-over-Year Deficit/Surplus           North American supply situation and force lower
                                                      Deficit/Surplus to 5-Year Average        natural gas prices.
 600

                                                                                               For these reasons, we have maintained our longer-term
 400                                                                         Forecast
                                                                                               price outlook at or above US $8.00 per Mmbtu. For the
                                                                                               next several years we see any supply inroads being
 200
                                                                                               made by LNG as simply filling in those gaps left behind
    0
                                                                                               by reductions in domestic supply. Generating just a
                                                                                               minimal supply reduction in North America will
(200)                                                                                          require fairly aggressive drilling programs that will
                                                                                               only be supported by a strong price forecast.
(400)
     Jan-06        Apr-06         Jul-06          Oct-06   Jan-07   Apr-07   Jul-07   Oct-07   Anything lower in terms of a longer-term price outlook
Source: FirstEnergy Capital Ciorp., US DOE/EIA.
                                                                                               is not sustainable in our view as this would mean less
                                                                                               drilling, less domestic supply, and not enough LNG to
Longer Term. Moving beyond the lengthy description                                             fill the gap. Eventually the market would have to
we have provided in the prior analysis for 2007, the                                           rebalance at higher average prices.
North American natural gas market remains one filled
with still large nagging concerns surrounding ad-                                              Other potential longer-term price supportive issues
equate domestic supplies. As it has been since 2000,                                           could include: (1) the possibility of pushing more
this market remains one that is largely supply con-                                            electric power load onto natural gas-fired generation to
strained, with demand being forced into line with                                              deal with carbon/Kyoto issues and (2) is there even
available supplies through the rationing process                                               enough natural gas on hand in North America to fill
brought on by steadily higher natural gas prices.                                              additional storage sites that are expected to be coming
                                                                                               into service over the next few years? This additional
From our perspective, there is little on the immediate                                         working natural gas storage capacity could be well over
supply front for at least the next several years that                                          100 Bcf in the next 2 to 3 years. That’s 100 Bcf or more
would suggest that a huge wave of natural gas is                                               natural gas that the market just may not have.
waiting to wash over the market. Both the United
States and Canada are facing the same steadily growing                                         Conclusions. The natural gas market in 2007 looks to
issues of higher decline rates, smaller reserve sizes and                                      be shaping up very much as we had suggested it would
lower productivity wells. Yes, there are additional                                            in our previous quarterly analysis. The timing of the
domestic supplies coming from unconventional sources                                           emergence of the price rally was largely dependent on
such as coalbed methane, tight gas, and shale gas, but                                         winter weather and its impacts on storage levels. With
these sources require higher prices than their conven-                                         the cold weather of late January and all of February, the
tional brethren to be developed and replace those                                              price rally is now here and is expected to stay for the
declining conventional supplies.                                                               balance of 2007. The next turning point up or down for
                                                                                               natural gas prices may not be until the start of 2008,
To allow demand to grow further, rather than be held in                                        and this will be entirely dependent on the unknown
check by even higher prices, will require more natural                                         severity of the next winter heating season.
gas supply from other sources outside of the traditional
supply bounds of Canada and the Lower 48 states.                                               For the time being, we remain confident that we
Northern gas from the Mackenzie Delta and Alaska                                               continue to make the right call on the magnitude and
North Slope is still nearly a decade away, at a mini-                                          direction for natural gas prices and see the risks as
mum.                                                                                           being very well balanced. Aside from the weather, any
                                                                                               of the most likely upside price risks stemming from
That leaves LNG. Even this is unlikely to generate a                                           greater erosion of Canadian supplies, market desires for
significant sustained reduction in natural gas prices                                          even higher storage levels than we are forecasting, or
back below US $6.00 per Mmbtu. With supply costs                                               better than expected demand growth, are well con-
and liquefaction costs rising in supply countries, and                                         trasted against the downside price risks associated
                                                                                                 39




               Figure 17: Expectations for Henry Hub Price in 2007
                                        (Nymex value as of Apr. 4, 2007)
 US $/Mmbtu                    (Consensus estimate does not include Nymex value)   FirstEnergy
 $8.50
                                                                     Nymex
 $8.00                                Consensus

 $7.50

 $7.00

 $6.50

 $6.00

 $5.50

 $5.00
              1      2     3      4     5     6     7 8 9 10 11 12 13 14 15 16 17 18
                                                    Number of Analysts
Source: FirstEnergy Capital Corp., Reuters, Bloomberg.




with even greater LNG imports, better performance from
U.S. supplies, and a stellar electrical output from the
non-gas fired portion of the power generation market.

For the time being, the natural gas market as a whole
seems to be have adopted our previously extreme
view concerning the future direction of natural gas
prices. While we appear to remain one of the highest
values on the Street in terms of our projected natural gas
price for 2007, we are no longer alone, while the
forward market for 2007 and 2008 continues to drive on
to or above our price forecasts (Figures 17 and 18).

From extreme to mainstream. It’s nice to be loved.

                            Figure 18: Nymex Calendar Year 2008
                                    Natural Gas Strip Price
 US $/Mmbtu
 $9.00
                                              FirstEnergy 2008 Natural Gas
  $8.85
                                              Price Forecast released in
  $8.70                                       Oct. 2006: US $8.50.
  $8.55
  $8.40
  $8.25
  $8.10
  $7.95
  $7.80
  $7.65
  $7.50
      Oct-2-06           Nov-6-06        Dec-11-06 Jan-15-07 Feb-19-07 Mar-26-07 Apr-30-07
Source: FirstEnergy Capital Corp., Reuters.
40   FirstQuarterly    Integrated, Oil Sands and Large Cap E&P   April 2007




                      THIS PAGE INTENTIONALLY LEFT BLANK.
                         41




        Western
        Canada Land
        Prices




RESEARCH ANALYST:
Cody R. Kwong, P.Geol.
 42    FirstQuarterly         Integrated, Oil Sands and Large Cap E&P                                    April 2007




Land Sales
                               Western Canada                                                                              5-Yr. Avg. 2006    2007    % Change
                               Land Sales Summary                   2001     2002     2003     2004     2005     2006     (2002-2006) YTD     YTD      '07-'06

While WCSB land sale           Alberta (including Oilsands)
                               Bonus ($MM)                          $1,087   $502     $902     $1,105   $2,158   $3,428     $1,619   $1,692   $430      -75%
activity observed to date      Acres (M)                             9,679   6,870    7,764     7,703    7,665   10,445      8,089    3,573   2,244     -37%
in 2007 pales in com-          $/Acre                                $112     $73     $116      $143     $282     $328       $200     $474    $191      -60%
parison to the record          Alberta Oilsands Leases
setting pace of 2006,          Bonus ($MM)                           $83      $25      $17      $83     $388     $2,017     $506     $930     $224      -76%
annualized activity is         Acres (M)                             583      438      145      739      784      4,133     1,248    1,168    953       -18%
                               $/Acre                               $142      $57     $116     $112     $495      $488      $405     $796     $235      -70%
still expected to be in
line with 5-year aver-         British Columbia
                               Bonus ($MM)                          $436     $296     $650     $236     $570     $641       $479     $125     $102      -18%
ages. Alberta oil sands        Acres (M)                            2,086    2,153    1,848    1,350    1,498    1,722      1,714     416      233      -44%
leases have retreated the      $/Acre                               $209     $138     $352     $175     $381     $372       $279     $301     $439      46%

least on an absolute           Saskatchewan
acreage basis, but prices      Bonus ($MM)                           $56     $104     $172     $93      $122     $171       $132      $67      $99       48%
                               Acres (M)                             948     1,809    4,144    2,255    2,242    1,258      2,342     469      289      -39%
paid for these leases          $/Acre                                $59      $57     $42      $41      $54      $136       $57      $143     $342      140%
have dropped dramati-
                               Manitoba
cally, likely reflective of    Bonus ($MM)                           $0.9     $0.2     $0.3     $1.3     $5.8     $8.8       $3.3    $0.9     $0.0      -99%
more speculative or            Acres (M)                              53       7        11       38      169      104         66       9        2       -74%
longer lead time               $/Acre                                $17      $32      $27      $34      $34      $85        $50     $104      $5       -95%

projects.                      Total Western Canada
                               Bonus ($MM)                          $1,580    $902    $1,724   $1,435   $2,856   $4,250     $2,233   $1,885   $631      -67%
                               Acres (M)                            12,766   10,838   13,767   11,345   11,574   13,529     12,211   4,467    2,768     -38%
                               $/Acre                                $124      $83     $125     $126     $247     $314       $183     $422    $228      -46%
                               Source: Daily Oil Bulletin




                                                                             Western Canada Land Sales
                                  6,000                                                                                                                $500
                                                                                               M Acres
                                                                                               $/Acre
                                  5,000
                                                                                                                                                       $400

Now taking a breather             4,000
from the record high                                                                                                                                   $300
prices in 2006, land sale
                                  3,000
purchases so far in 2007
are still markedly higher                                                                                                                              $200
than the historical               2,000
average observed prior
to H2 2005 on a $/acre                                                                                                                                 $100
                                  1,000
basis.

                                         0                                                                                                             $0
                                               Mar-07
                                              1995Q1
                                                  Q3
                                              1996Q1
                                                  Q3
                                              1997Q1
                                                  Q3
                                              1998Q1
                                                  Q3
                                              1999Q1
                                                  Q3
                                              2000Q1
                                                  Q3
                                              2001Q1
                                                  Q3
                                              2002Q1
                                                  Q3
                                              2003Q1
                                                  Q3
                                              2004Q1
                                                  Q3
                                              2005Q1
                                                  Q3
                                              2006Q1
                                                  Q3
                                              2007Q1
                                               Jan-07




                                  Data Source: Daily Oil Bulletin
                                                                                                            43




                                       Alberta Land Sales
5,000                                                            $600
                    M Acres
                    $/Acre
4,000
                                                                         With the frenzied oil sands lease
                                                                 $400    buying of 2006 now in the rearview
3,000                                                                    mirror, the volume of Alberta land
                                                                         sales has returned to more cyclical
2,000
                                                                         levels. However, producers con-
                                                                 $200    tinue to pay elevated prices for land
                                                                         compared to historical figures
1,000                                                                    previous to 2006.

      0                                                          $0




           Mar-07
          1995Q1
              Q3
          1996Q1
              Q3
          1997Q1
              Q3
          1998Q1
              Q3
          1999Q1
              Q3
          2000Q1
              Q3
          2001Q1
              Q3
          2002Q1
              Q3
          2003Q1
              Q3
          2004Q1
              Q3
          2005Q1
              Q3
          2006Q1
              Q3
          2007Q1
           Jan-07
Data Source: Daily Oil Bulletin




                                  British Columbia Land Sales
1,000                                                           $1,000
                 M Acres
 900
                 $/Acre
 800                                                            $800
                                                                         B.C. land sale volumes in Q1 2007
 700
                                                                         were the lowest observed since the
 600                                                            $600     first quarter of 1999. That said,
 500                                                                     producers surgical approach to
 400                                                            $400     prospect generation was evidenced
                                                                         by the $564/acre average price paid
 300
                                                                         in the January 2007 land sale, the
 200                                                            $200     fifth highest average price ever paid
 100                                                                     at a B.C. land sale.
     0                                                          $0
           Mar-07
          1995Q1
              Q3
          1996Q1
              Q3
          1997Q1
              Q3
          1998Q1
              Q3
          1999Q1
              Q3
          2000Q1
              Q3
          2001Q1
              Q3
          2002Q1
              Q3
          2003Q1
              Q3
          2004Q1
              Q3
          2005Q1
              Q3
          2006Q1
              Q3
          2007Q1
           Jan-07




Data Source: Daily Oil Bulletin



                                   Saskatchewan Land Sales
2,500                                                            $250
                 M Acres
                 $/Acre
2,000                                                            $200



1,500                                                            $150
                                                                         Manitoba is off to a slow start with
                                                                         its lone land sale in Q1 2007 featur-
1,000                                                            $100    ing 2,214 acres of land purchased at
                                                                         $4.90/acre.
 500                                                             $50



     0                                                           $0
           Mar-07
          1995Q1
              Q3
          1996Q1
              Q3
          1997Q1
              Q3
          1998Q1
              Q3
          1999Q1
              Q3
          2000Q1
              Q3
          2001Q1
              Q3
          2002Q1
              Q3
          2003Q1
              Q3
          2004Q1
              Q3
          2005Q1
              Q3
          2006Q1
              Q3
          2007Q1
           Jan-07




Data Source: Daily Oil Bulletin
 44   FirstQuarterly     Integrated, Oil Sands and Large Cap E&P                                                 April 2007




                                                                                                  Manitoba Land Sales
                                              300                                                                                                                      $125
                                              280                    M Acres
                                              260                    $/Acre
While not included in our data up to          240                                                                                                                      $100
the end of Q1 2007, the April 2nd,            220
2007 land sale fetched ~$70 Mm                200
                                              180                                                                                                                      $75
($755.39/acre), setting a new record          160
for the average price paid on an              140
individual Saskatchewan land sale.            120                                                                                                                      $50
                                              100
Year-to-date bonus tally of ~$98.7
                                               80
Mm could see 2007 challenge the                60                                                                                                                      $25
yearly record of the ~$199.7 Mm                40
fetched in 1994.                               20
                                                0                                                                                                                      $0




                                                                Mar-07
                                                               1995Q1
                                                                   Q3
                                                               1996Q1
                                                                   Q3
                                                               1997Q1
                                                                   Q3
                                                               1998Q1
                                                                   Q3
                                                               1999Q1
                                                                   Q3
                                                               2000Q1
                                                                   Q3
                                                               2001Q1
                                                                   Q3
                                                               2002Q1
                                                                   Q3
                                                               2003Q1
                                                                   Q3
                                                               2004Q1
                                                                   Q3
                                                               2005Q1
                                                                   Q3
                                                               2006Q1
                                                                   Q3
                                                               2007Q1
                                                                Jan-07
                                                      Data Source: Daily Oil Bulletin




                                                                                             Alberta Oil Sands Land Sales
                                        2,000                                                                                                                         $1,600
                                                                       M Acres
                                        1,800
                                                                       $/Acre                                                                                         $1,400
                                        1,600
The volume of oil sands leases                                                                                                                                        $1,200
                                        1,400
purchased in Q1 2007 are down
                                                                                                                                                                      $1,000
only 18% from the aggressive            1,200
acquisitions captured in Q1 2006.       1,000                                                                                                                         $800
However, average price paid has
                                                  800
fallen by 70%, likely indicating                                                                                                                                      $600
recent land acquisitions are more                 600
                                                                                                                                                                      $400
speculative and/or have longer                    400
development lead times.                                                                                                                                               $200
                                                  200

                                                           0                                                                                                          $0

                                                                Mar-07
                                                               1995Q1
                                                                   Q3
                                                               1996Q1
                                                                   Q3
                                                               1997Q1
                                                                   Q3
                                                               1998Q1
                                                                   Q3
                                                               1999Q1
                                                                   Q3
                                                               2000Q1
                                                                   Q3
                                                               2001Q1
                                                                   Q3
                                                               2002Q1
                                                                   Q3
                                                               2003Q1
                                                                   Q3
                                                               2004Q1
                                                                   Q3
                                                               2005Q1
                                                                   Q3
                                                               2006Q1
                                                                   Q3
                                                               2007Q1
                                                                Jan-07



                                         Data Source: Daily Oil Bulletin



                                                               Western Canada Land Sales - Acres Purchased vs. Wells Drilled
                                                           6,000                                                                                                  9,000
                                                                                                                 M Acres
                                                                                                                 Wells Drilled                                    8,000
                                                           5,000
                                                                                                                                                                  7,000
One must look back at least 12
quarters from Q1 2007 to observe                           4,000                                                                                                  6,000
fewer acres of land purchased before
                                         Acres Purchased




                                                                                                                                                                           Wells Drilled




                                                                                                                                                                  5,000
Q1 2007 in Western Canada. After a                         3,000
challenging 2006, producers appear                                                                                                                                4,000
to be only “biting off what they can                       2,000                                                                                                  3,000
chew” in Q1 2007, as we see less
                                                                                                                                                                  2,000
acreage posted and likely fewer                            1,000
wells drilled than a year ago.                                                                                                                                    1,000

                                                               0                                                                                                  0
                                                                    1995Q1

                                                                             Q4

                                                                                  Q3

                                                                                        Q2

                                                                                              1998Q1



                                                                                                            Q3

                                                                                                                  Q2

                                                                                                                       2001Q1

                                                                                                                                Q4

                                                                                                                                     Q3

                                                                                                                                          Q2

                                                                                                                                               2005Q1

                                                                                                                                                        Q4

                                                                                                                                                             Q3
                                                                                                       Q4




                                        Data Source: Daily Oil Bulletin
                                                     45




      Husky Energy Inc. - HSE
Imperial Oil Resources Limited - IMO   Corporate
        Petro-Canada - PCA
      Suncor Energy Inc. - SU          Updates -
                                       Integrateds
 46        FirstQuarterly                 Integrated, Oil Sands and Large Cap E&P                                                               April 2007




 HUSKY ENERGY INC.                                                                                                                                                                      HSE - $82.08
                                                                                                                                                                                              (as of April 20, 2007)
Year end Dec 31,                              2005a         2006a        2007e        2008e     Quarterly Information                                                   2005a           2006a          2007e           2008e
Production
Oil & Liquids           Bbl/d                201,693      247,613      300,789       325,384    Oil & Liquids - Bbl/d                                     Q1          206,900          239,400        293,681         324,998
Gas                     Mmcf/d                 680.0        672.3        656.8         596.8                                                              Q2          194,000          231,800        273,465         325,156
Total                   Boe/d                315,025      359,663      410,253       424,846                                                              Q3          190,000          253,200        313,470         320,279
Production per Share    Boe/Share                 0.3          0.3          0.3           0.4                                                             Q4          215,900          265,700        322,086         331,093
                        %                      -4.1%        14.4%        13.3%          3.1%                                                             Avg.         201,693          247,613        300,789         325,384
Debt Adjusted PPS       Boe/Share                 0.2          0.3          0.3           0.4
                        %                      -1.4%        18.1%        16.5%          7.8%    Gas - Mmcf/d                                              Q1            676.2              685.4        652.7           668.8
                                                                                                                                                          Q2            689.3              672.8        657.0           618.6
Cash flow               $Mm                    3,756        4,504         5,336        4,718                                                              Q3            679.2              669.1        657.3           572.2
CFPS                    Basic                  $8.86       $10.62        $12.54       $11.04                                                              Q4            675.3              662.2        660.0           529.3
                        Diluted                $8.80       $10.57        $12.45       $10.95                                                             Avg.           680.0              672.3        656.8           596.8
P/CF                    Basic                    6.7          7.4           6.5          7.4
                        Diluted                  6.7          7.4           6.6          7.5    Total Production - Boe/d                                  Q1          319,600          353,633        402,459         436,460
                                                                                                                                                          Q2          308,883          343,933        382,969         428,258
Earnings                $Mm                    2,003        2,729         3,075        2,761                                                              Q3          303,200          364,717        423,027         415,648
EPS                     Basic                  $4.72        $6.43         $7.23        $6.46                                                              Q4          328,450          376,067        432,092         419,309
                        Diluted                $4.69        $6.41         $7.17        $6.41                                                             Avg.         315,025          359,663        410,253         424,846
P/E                     Basic                   12.5         12.1          11.4         12.7
                        Diluted                 12.6         12.2          11.4         12.8    CFPS - $/Share                                           Q1             $1.91            $2.28          $2.68           $2.80
                                                                                                                                                         Q2             $1.89            $2.60          $3.00           $2.79
Capital Data                                                                                                                                             Q3             $2.22            $2.86          $3.47           $2.75
Capex                   $Mm                    3,149        3,201         3,180        2,670                                                             Q4             $2.82            $2.82          $3.30           $2.61
Capex vs. Cash Flow     %                      83.9%        71.1%         59.6%        56.6%                                                            Total           $8.80           $10.57         $12.45          $10.95
Exit Net Debt           $Mm                    2,661        2,006           539         (835)
Entry Debt/CF           Years                     0.8          0.6           0.4                EPS - $/Share                                            Q1             $0.90              $1.24        $1.43           $1.69
Market Cap.             $Mm                   25,022       33,379        35,271       35,435                                                             Q2             $0.91              $2.31        $1.68           $1.67
                                                                                                                                                         Q3             $1.31              $1.59        $2.13           $1.59
Share Data                                                                                                                                               Q4             $1.58              $1.27        $1.94           $1.45
Basic shares            Mm                     424.1        424.3         426.3        428.3                                                            Total           $4.69              $6.41        $7.17           $6.41
Options                 Mm                       4.1          3.4           3.4          3.4
Warrants                Mm                       0.0          0.0           0.0          0.0    Note: CFPS and EPS are calculated on a diluted basis.
Diluted shares          Mm                     424.1        427.7         429.7        431.7
Fully diluted shares    Mm                     431.4        430.2         432.2        434.2

Pricing
WTI                     $US                    $56.65       $66.23       $66.00       $64.00
Oil                     $C wellhd              $42.92       $60.58       $53.83       $47.24
Gas                     $C wellhd               $8.08        $5.99        $6.64        $8.70
Exchange Rate           US$ / CDN$              $0.83        $0.88        $0.88        $0.91



                                                                                                                                                      Husky Energy Inc. (TSX: HSE)
Year end Dec 31,                              2005a         2006a        2007e        2008e                                                              Statistical Review: 2004 - 2007
                                                                                                                        $90.00                                                                                  6,000,000
Net Asset Value                                $56.40       $65.49
                                                                                                                        $80.00
Share Price Y/E                                $59.00       $78.04       $82.08       $82.08                                                                                                                    5,000,000
                                                                                                                        $70.00



                                                                                                                                                                                                                            Daily Trading Volume
                                                                                                  Daily Closing Price




Valuation Data                                                                                                                                                                                                  4,000,000
DACFM                   x                        7.4           8.1          6.7          7.3                            $60.00

Target DACFM            x                       10.9           8.9          7.4          8.1
                                                                                                                        $50.00                                                                                  3,000,000

EV/BOED                 $/Boed                87,876       98,382        87,287       81,441                            $40.00
Target EV/BOED          $/Boed               130,956      113,795        96,630       90,505                                                                                                                    2,000,000
                                                                                                                        $30.00
EBITDA                  $Mm                  4,034.6       5,083.4      6,458.3      6,101.5                                                                                                                    1,000,000
                                                                                                                        $20.00
EV/EBITDA               x                        6.9           7.0          5.5          5.7
P/NAV                   x                        1.0           1.2
                                                                                                                        $10.00                                                                                  0
Cash Flow Netback       $/Boed               $25.67        $29.96        $34.61       $30.76
                                                                                                                                 Jan-04
                                                                                                                                 Mar-04
                                                                                                                                 May-04
                                                                                                                                  Jul-04
                                                                                                                                             Sep-04
                                                                                                                                             Nov-04
                                                                                                                                                      Jan-05
                                                                                                                                                      Mar-05
                                                                                                                                                      May-05
                                                                                                                                                       Jul-05
                                                                                                                                                                Sep-05
                                                                                                                                                                Nov-05
                                                                                                                                                                Jan-06
                                                                                                                                                                Mar-06
                                                                                                                                                                            May-06
                                                                                                                                                                             Jul-06
                                                                                                                                                                                      Sep-06
                                                                                                                                                                                      Nov-06
                                                                                                                                                                                      Jan-07
                                                                                                                                                                                      Mar-07
                                                                                                                                                                                                   May-07
                                                                                                                                                                                                    Jul-07
                                                                                                                                                                                                   Sep-07
                                                                                                                                                                                                   Nov-07




Pricing
WTI                     $US                    56.65        66.23         66.00        64.00                              52 Week High:         $84.40    52 Week Low:        $59.25    Avg. Monthly Trading Volume
Oil                     $C wellhd              42.92        60.58         53.83        47.24                              52 Week High On:      Apr-17-07 52 Week Low On:     May-17-06       443,460 Shares
Gas                     $C wellhd               8.08         5.99          6.64         8.70                              Source: Bloomberg
Exchange Rate           US$ / CDN$              0.83          0.88         0.88         0.91


Note: Net asset value is 10% after-tax on P+P reserves for conventional E&P,and 8%
pre-tax for Oil Sands




                   Opinion: OUTPERFORM
               12 MONTH TARGET PRICE $91.00
            Analyst: Martin P. Molyneaux, CMA, CFA
                                                                                                                                                             47


FD&A Costs                                             2005a           2006a    3-Yr. Avg. 5-Yr. Avg.    Corporate Profile
                                                                                                           Husky is a Canadian Integrated oil and gas producer
FD&A (Proven)                                          $15.51         $18.99     $16.91        $16.42
                                                                                                           with upstream operations throughout Western Canada,
Cash Flow Netback                                      $27.60         $30.82     $24.65        $20.75
                                                                                                           offshore Canada’s East Coast, along with international
Recycle Ratio (Proven)                                    1.8            1.6       1.5            1.3
                                                                                                           assets offshore China, Java, and Indonesia.
                                                                                                           The Company’s midstream and downstream busi-
Reserves
                                                                                                           nesses include the Lloydminster heavy oil upgrader &
Oil & Liquids
                                                                                                           pipeline system, two refineries, two new and expanding
Proven Reserves (MMbbls)                                517.0           507.0
                                                                                                           Ethanol Plants, and over 500 retail outlets across
Production (B/d)                                       201,693        247,613
                                                                                                           Canada.
Proven RLI (Years)                                        7.5            5.8       6.9            7.0    Operational Update
Proven Reserve Repl. %                                   157%            88%      110%          91%        In-Situ Oil Sands: At Tucker, steaming began last fall,
Natural Gas                                                                                                exiting 2006 at 7,200 B/d on the way to 30,000 B/d
Proven Reserves (Bcf)                                   1771.0         1799.0                              within the next 24 months, for 2007 Husky is targeting
Production (Mmcf/d)                                      680             672                               12,000 to 18,000 B/d here. At Sunrise, front-end
Proven RLI (Years)                                        9.1            9.2       9.1            9.3      engineering (complete by Q3 2007) is the next step in
Proven Reserve Repl. %                                   90%            115%      115%         114%        this 200,000 B/d project. At Caribou Lake and Saleski,
                                                                                                           Husky was busy with stratigraphic drilling this winter,
Notes: Above figures are in US$ and exclude Oil Sands (i.e. Tucker, Sunrise)
Reserves & Production are net of royalties
                                                                                                           while in 2006 expanded Saleski acreage by 54% to over
FD&A excludes changes in Future Development Costs                                                          239,000 acres.
                                                                                                           East Coast: At White Rose, approval was granted in
                                                                                                           March to expand production capacity to 140,000 B/d,
                                                                                                           and should be complete mid-year. 2007 production is
                                                                                                           guding 120,000 to 125,000 B/d (100% basis, HSE is
                                                                                                           72.5%). Through February, Terra Nova production
                                                                                                           (HSE 12.51%) has returned to 2005 levels.
                                      2006 Proven Reserve Analysis
                                                                                                           China: following the discovery of a 4 to 6 Tcf contin-
                              PUD Oil (Mboe)
                                  12%
                                                                                 PD Gas (Mboe)             gent resource at the Liwan gas discovery well in 2006,
                                                                                     29%
                                                                                                           Husky has locked up a deepwater rig for three years
                                                                                                           starting 2008, signed PSCs for other exploration blocks,
                                                                                                           and is expanding its 3-D seismic database. An explora-
                                                                                                           tion well on block 04/35 East China Sea is expected to
                                                                                                           spud in Q2. With 7.6 million acres of exploration
                                                                                                           acreage, Husky is the largest foreign block holder
                                                                                                           offshore China.
           PD Oil (Mboe)                                                        PUD Gas (Mboe)             Lloydminster Upgrader: Debottlenecking to 82,000 B/d
               51%                                                                   8%
                                                                                                           should be complete after Q2 turnaround. Front-end
Excludes Bitumen Reserves (60 Million barrels before royalties at year-end
                                                                                                           engineering work to increase capacity to 150,000 B/d
2006 )                                                                                                     by 2010 should be complete by year-end.
                                                                                                           Ethanol: Minnedosa ethanol plant expansion to 130
                                                                                                           Mm Litres per year should be completed in Q3, bringing
                                                                                                           total ethanol capacity to 260 Mm Litres annually.
                                                   P/E Diluted                                           Financial Outlook
 18.0
                                                                                    HSE                    Husky’s $3.2 billion CapEx budget for 2007 is similar to
 16.0
                                                                     16.0
                                                                                    Integrated Average     last year. We forecast cash flow to grow to ~ $5.3
 14.0                                 14.5
                                                                                           15.0            billion, leaving only a couple of months of debt to cash
 12.0
                                                                                                           flow. It clearly has a lot of flexibility to undertake
                       12.2
                                                                                  11.5                     accretive projects.
 10.0
                                                        10.3
                                                                                                         Investment Summary
   8.0
                                                                                                           Husky has significant upside value offered in its Oil
   6.0
                                                                                                           Sands components, East Coast and international
   4.0                                                                                                     opportunities, as well as its growing midstream and
   2.0
                                                                                                           downstream operations.
                                                                                                           We rank Husky shares Outperform with a 12 month
   0.0
                               2006                          2007e                   2008e
                                                                                                           target of $91.00 reflecting 8.1x 2008e DACFM and 14.2x
Source: FirstEnergy Capital Corp.
                                                                                                           2008 P/E ratios.
 48        FirstQuarterly                 Integrated, Oil Sands and Large Cap E&P                                                             April 2007



 IMPERIAL OIL RESOURCES
 LIMITED                                                                                                                                                                                   IMO - $43.38
                                                                                                                                                                                               (as of April 20, 2007)
Year end Dec 31,                              2005a         2006a        2007e        2008e     Quarterly Information                                                    2005a             2006a          2007e           2008e

Production
Oil & Liquids           Bbl/d                260,970      271,011      281,867       294,315    Oil & Liquids - Bbl/d                                     Q1           260,000            263,000       267,020          274,292
Gas                     Mmcf/d                   564          556          491           447                                                              Q2           267,000            273,000       280,185          311,906
Total                   Boe/d                354,978      363,750      363,651       368,874                                                              Q3           250,000            281,000       302,368          311,038
Production per Share    Boe/Share                0.1           0.1          0.1           0.1                                                             Q4           267,000            267,000       277,696          280,187
                        %                       5.8%         8.1%         4.4%          5.6%                                                             Avg.          260,970            271,011       281,867          294,315
Debt Adjusted PPS       Boe/Share                0.1           0.1          0.1           0.2
                        %                       5.5%         9.3%         7.2%          6.9%    Gas - Mmcf/d                                              Q1                 522             580             514                468
                                                                                                                                                          Q2                 576             557             498                454
Cash flow               $Mm                    3,159        4,608         3,259        3,537                                                              Q3                 579             560             483                441
CFPS                    Basic                  $3.09        $4.73         $3.49        $3.94                                                              Q4                 579             529             468                428
                        Diluted                $3.06        $4.71         $3.48        $3.93                                                             Avg.                564             556             491                447
P/CF                    Basic                   12.5           9.1         12.4         11.0
                        Diluted                 12.6          9.1          12.5         11.0    Total Production - Boe/d                                  Q1           347,000            359,667       352,656          352,226
                                                                                                                                                          Q2           363,000            365,833       363,208          387,551
Earnings                $Mm                    2,590        2,980         2,546        2,604                                                              Q3           346,500            374,333       382,864          384,468
EPS                     Basic                  $2.53        $3.06         $2.73        $2.90                                                              Q4           363,500            355,167       355,746          351,475
                        Diluted                $2.51        $3.04         $2.71        $2.89                                                             Avg.          354,978            363,750       363,651          368,874
P/E                     Basic                   15.3         14.0          15.9         14.9
                        Diluted                 15.4         14.1          16.0         15.0    CFPS - $/Share                                            Q1                $0.54           $0.90          $0.82           $1.06
                                                                                                                                                          Q2                $0.69           $0.88          $0.80           $0.89
Capital Data                                                                                                                                              Q3                $0.72           $1.09          $0.97           $1.01
Capex                   $Mm                    1,432        1,190         1,100        1,200                                                              Q4                $1.10           $1.16          $0.86           $0.94
Capex vs. Cash Flow     %                      45.3%        25.8%         33.8%        33.9%                                                             Total              $3.06           $4.71          $3.48           $3.93
Exit Net Debt           $Mm                    1,042          627          (335)        (819)
Entry Debt/CF           Years                    0.4           0.2           N/A          N/A   EPS - $/Share                                             Q1                $0.37           $0.60          $0.63           $0.81
Market Cap.             $Mm                   38,592       41,002        39,797       38,232                                                              Q2                $0.62           $0.84          $0.61           $0.64
                                                                                                                                                          Q3                $0.67           $0.84          $0.78           $0.75
Share Data                                                                                                                                                Q4                $0.86           $0.75          $0.67           $0.68
Basic shares            Mm                     997.9        953.0         915.4        879.4                                                             Total              $2.51           $3.04          $2.71           $2.89
Options                 Mm                       4.2          3.4           3.6          3.6
Warrants                Mm                       0.0          0.0           0.0          0.0    Note: CFPS and EPS are calculated on a diluted basis.
Diluted shares          Mm                     999.5        955.1         917.4        881.3
Fully diluted shares    Mm                   1,003.7        958.5         921.0        884.9

Pricing
WTI                     -   $US               $56.65       $66.23        $66.00       $64.00
Oil                     -   $C wellhd         $36.83       $42.40        $46.29       $39.86
Gas                     -   $C wellhd          $9.02        $7.18         $8.78        $9.00
Exchange Rate           -   US$ / CDN$         $0.83        $0.88         $0.88        $0.91




Year end Dec 31,                              2005a         2006a        2007e        2008e                                             Imperial Oil Resources Limited (TSX: IMO)
                                                                                                                                                         Statistical Review: 2004 - 2007
Net Asset Value                                $29.47       $29.93
                                                                                                                       $50.00                                                                                   7,000,000
Share Price Y/E                                $38.61       $42.93       $43.38       $43.38                           $45.00
                                                                                                                                                                                                                6,000,000
Valuation Data                                                                                                         $40.00


                                                                                                                                                                                                                            Daily Trading Volume
DACFM                   x                       14.2           9.2         12.4         10.8                                                                                                                    5,000,000
                                                                                                 Daily Closing Price




                                                                                                                       $35.00
Target DACFM            x                       14.9           9.7         12.9         11.2
                                                                                                                       $30.00
                                                                                                                                                                                                                4,000,000
EV/BOED                 $/Boed               111,652      114,444      108,516       101,427                           $25.00
Target EV/BOED          $/Boed               129,645      119,879      112,603       105,298                                                                                                                    3,000,000
                                                                                                                       $20.00
EBITDA                  $Mm                  4,791.7       4,886.8      4,736.7      4,823.8                           $15.00                                                                                   2,000,000
EV/EBITDA               x                        8.3           8.5          8.3          7.8
P/NAV                   x                        1.3                                                                   $10.00
                                                                                                                                                                                                                1,000,000
Cash Flow Netback       $/Boed               $14.45        $16.59        $14.67       $14.17                            $5.00

Pricing                                                                                                                 $0.00                                                                                   0
                                                                                                                                Mar-04
                                                                                                                                May-04




                                                                                                                                Mar-05
                                                                                                                                May-05




                                                                                                                                Mar-06
                                                                                                                                May-06




                                                                                                                                Mar-07
                                                                                                                                May-07
                                                                                                                                Jan-04



                                                                                                                                 Jul-04
                                                                                                                                Sep-04
                                                                                                                                Nov-04
                                                                                                                                Jan-05



                                                                                                                                 Jul-05
                                                                                                                                Sep-05
                                                                                                                                Nov-05
                                                                                                                                Jan-06


                                                                                                                                 Jul-06
                                                                                                                                Sep-06
                                                                                                                                Nov-06
                                                                                                                                Jan-07



                                                                                                                                 Jul-07
                                                                                                                                Sep-07
                                                                                                                                Nov-07




WTI                     -   $US                56.65        66.23         66.00        64.00
Oil                     -   $C wellhd          36.83        42.40         46.29        39.86
Gas                     -   $C wellhd           9.02         7.18          8.78         9.00
Exchange Rate           -   US$ / CDN$          0.83         0.88          0.88         0.91                              52 Week High:       $45.02      52 Week Low:         $35.20      Avg. Monthly Trading Volume
                                                                                                                          52 Week High On:    Aug-9-06    52 Week Low On:      Oct-3-06          676,916 Shares
Note: Net asset value is 10% after-tax on P+P reserves for conventional E&P,and 8%                                        Source: Bloomberg
pre-tax for Oil Sands




                   Opinion: UNDERPERFORM
               12 MONTH TARGET PRICE $45.00
            Analyst: Martin P. Molyneaux, CMA, CFA
                                                                                                                                                                              49


FD&A Costs                                            2005a            2006a           3-Yr. Avg. 5-Yr. Avg.           Corporate Profile
                                                                                                                         Imperial is the Canadian subsidiary of ExxonMobil
FD&A (Proven)                                             N/A           $2.13              $3.23              $5.54
                                                                                                                         and one of Canada’s largest Integrated companies.
Cash Flow Netback                                                     $22.62              $17.67             $14.45
                                                                                                                         Imperial is a major Oil Sands player, with wholly
Recycle Ratio (Proven)                                    N/A             10.6                 5.5              2.6
                                                                                                                         owned operations at Cold Lake and a 25% interest in
Reserves
                                                                                                                         Syncrude.
                                                                                                                         Key early-stage assets include the 3 Tcf Taglu gas field
Oil & Liquids                                                                                                            in the Mackenzie Delta, majority ownership of Kearl
Proven Reserves (MMbbls)                                 766              812.0                                          Oil Sands leases, and a 9% interest in the Sable Island
Production (B/d)                                     178,082          167,123
                                                                                                                         gas project offshore Nova Scotia.
Proven RLI (Years)                                       11.1              13.9                12.3            13.3
                                                                                                                         Imperial owns Canada’s largest refining and petro-
Proven Reserve Repl. %                                   22%              175%                 59%             49%
Natural Gas
                                                                                                                         leum product distribution network, its four refineries
Proven Reserves (Bcf)                                    747              710.0
                                                                                                                         having a combined throughput capacity of ~502,000
Production (Mmcf/d)                                      564              556.4
                                                                                                                         Bbl/d. Imperial’s Chemicals segment operates in
Proven RLI (Years)                                         4.0              4.2                 4.1              5.1     Sarnia and Dartmouth.
Proven Reserve Repl. %                                   77%              80%                  44%             21%
                                                                                                                       Operational Update
Notes: Above figures are in US$ and exclude Syncrude Oil Sands but include Cold Lake                                     Cold Lake: Lower heavy oil discounts in 2006 resulted
Reserves & Production are net of royalties
FD&A excludes changes in Future Development Costs
                                                                                                                         in 40% higher price realizations at Cold Lake. Q1 2007
                                                                                                                         should see slightly restricted volumes due to the
                                                                                                                         cyclical nature of the field.
                                                                                                                         Syncrude: In March it was announced that the new
                                                                                                                         Coker 8-3 will need downtime in Q2 for maintenance
                                                                                                                         work. The coker had been operating at reduced yields.
                                                                                                                         As a result, planned maintenance on other coking
                                                                                                                         units is being pushed out until 2008.
                                         2006 Proven Reserve Analysis
                                                                                                                         Kearl: The Oil Sands mining project received regula-
                    PUD Oil (MBbl)                           PD Gas (Mboe)             PUD Gas (Mboe)                    tory approval in February. Project partners IMO (70%)
                        26%                                      11%                        2%
                                                                                                                         and XOM (30%) have not yet given the green light. The
                                                                                                                         timeline submitted to the review panel called for initial
                                                                                                                         100,000 Bbl/d production of non-upgraded bitumen
                                                                                                                         beginning in 2010, but this is not set in stone.
                                                                                                                         Expanded Oil Sands Acreage: Year-end Oil Sands net
                                                                                                                         acreage of 163,000 acres increased 57% from 2005.
                                                                                                                         Mackenzie Gas Project: On behalf of all project
                                                                                    PD Oil (MBbl)                        partners, Imperial issued a report announcing a
                                                                                        61%                              revised cost estimate of $15.1 billion dollars (excluding
  Excludes Oil Sands Mining Reserves (718 Mm net proven barrels at year-end 2006)                                        future development) in March, basically doubling the
                                                                                                                         previous estimate given from 2003/2004, with produc-
                                                                                                                         tion start-up now looking like 2014 at the earliest.
                                                                                                                         Imperial hopes to receive a government response to its
                                                                                                                         requests within weeks.
                                                  P/E Diluted
                                                                                                                         Downstream: Planned capital spending of $250
 20.0                                                                                                                    million for 2007 may be somewhat light now after
 18.0
                                                                                        IMO
                                                                                                                         repairs were needed on the Nanticoke Ontario refinery
                                                                                        Integrated Average
                                                                                                                         following a February fire.
 16.0                                                              16.5
                                                      16.0
 14.0                                                                                   15.0
                                                                                                      15.5             Financial Outlook
                        14.2          14.0
 12.0
                                                                                                                         Imperial is essentially debt free exiting out of 2006. For
                                                                                                                         2007 the Company is guiding to capital spending of
 10.0
                                                                                                                         roughly ~$1 billion, including $700 million for up-
   8.0
                                                                                                                         stream projects and $250 million for petroleum prod-
   6.0                                                                                                                   ucts.
   4.0
                                                                                                                       Investment Summary
   2.0
                                                                                                                         While the fundamentals of IMO remain positive, we see
   0.0                                                                                                                   better combinations of growth and valuation in other
                               2006                        2007e                            2008e
Source: FirstEnergy Capital Corp.                                                                                        Integrated names. We continue to rate shares of IMO
                                                                                                                         Underperform, our 12 month target of $45.00 reflects a
                                                                                                                         2008e DACFM of 11.2x and 15.6x 2007 P/E ratio.
 50        FirstQuarterly                  Integrated, Oil Sands and Large Cap E&P                                                            April 2007




 PETRO-CANADA                                                                                                                                                                           PCA - $46.75
                                                                                                                                                                                              (as of April 20, 2007)
Year end Dec 31,                               2005a         2006a         2007e      2008e     Quarterly Information                                                   2005a           2006a           2007e              2008e
                                               Syria          Syria         Syria                                                                                      Syria             Syria           Syria
Production                               Removed Q4       Removed       Removed                                                                                  Removed Q4          Removed         Removed
Oil & Liquids           Bbl/d               270,642       220,193       289,170      306,434    Oil & Liquids - Bbl/d                                    Q1         283,700          224,971         279,691              306,216
Gas                     Mmcf/d                  824            741           747         703                                                             Q2         284,300           205,000         280,511             308,334
Total                   Boe/d               407,927        343,707       413,663     423,588                                                             Q3         285,100           211,667         286,887             306,479
Production per Share    Boe/Share                0.3           0.2           0.3          0.3                                                            Q4         229,900           239,074         309,291             304,725
                        %                     -6.9%         -13.3%         21.8%        2.4%                                                            Avg.        270,642          220,193         289,170              306,434
Debt Adjusted PPS       Boe/Share               0.3            0.2            0.3         0.3
                        %                    -12.9%         -12.4%         19.6%       -0.5%    Gas - Mmcf/d                                             Q1               881              779                   765                719
                                                                                                                                                         Q2               815              726                   753                708
Cash flow               $Mm                     3,286        3,948         4,724       4,798                                                             Q3               821              725                   741                698
CFPS                    Basic                   $7.55        $7.05         $9.48       $9.57                                                             Q4               779              735                   730                688
                        Diluted                 $7.79        $6.95         $9.34       $9.43                                                            Avg.              824              741                   747                703
P/CF                    Basic                     6.2          6.8           4.9         4.9
                        Diluted                   6.0          6.9           5.0         5.0    Total Production - Boe/d                                 Q1          430,533         354,804          407,191             425,978
                                                                                                                                                         Q2          420,133         326,000          405,971             426,325
Earnings                $Mm                     1,797        1,643         2,964       2,974                                                             Q3          421,933         332,500          410,380             422,758
EPS                     Basic                   $3.48        $3.29         $5.95       $5.97                                                             Q4          359,733         361,574          430,886             419,347
                        Diluted                 $3.56        $3.23         $5.86       $5.88                                                            Avg.         407,927         343,707          413,663             423,588
P/E                     Basic                    13.4         14.5           7.9         7.8
                        Diluted                  13.1         14.8           8.0         7.9    CFPS - $/Share                                           Q1             $1.63             $1.67           $2.04                $2.34
                                                                                                                                                         Q2             $1.84             $1.49           $2.25                $2.41
Capital Data                                                                                                                                             Q3             $2.03             $1.88           $2.43                $2.43
Capex                   $Mm                     3,606        2,629         4,100       4,600                                                             Q4             $2.29             $1.91           $2.62                $2.25
Capex vs. Cash Flow     %                      109.8%        66.6%         86.8%       95.9%                                                            Total           $7.79             $6.95           $9.34                $9.43
Exit Net Debt           $Mm                     2,780        3,284         3,067       4,286
Entry Debt/CF           Years                     1.0          0.7            0.7         0.6   EPS - $/Share                                            Q1             $0.25             $0.40           $1.12                $1.46
Market Cap.             $Mm                    24,447       24,145        23,640      23,640                                                             Q2             $0.75             $0.92           $1.43                $1.51
                                                                                                                                                         Q3             $1.18             $1.16           $1.59                $1.56
Share Data                                                                                                                                               Q4             $1.38             $0.75           $1.72                $1.36
Basic shares            Mm                      515.1        498.2         498.2       498.2                                                            Total           $3.56             $3.23           $5.86                $5.88
Options                 Mm                       10.0          8.1           7.5         7.5
Warrants                Mm                        0.0          0.0           0.0         0.0    Note: CFPS and EPS are calculated on a diluted basis.
Diluted shares          Mm                      524.0        505.7         505.7       505.7
Fully diluted shares    Mm                      533.5        519.2         519.2       519.2

Pricing
WTI                     $US                    $56.70       $66.23        $66.00      $64.00
Oil                     $C wellhd              $59.29       $63.42        $64.38      $60.08
Gas                     $C wellhd               $8.53        $7.00         $8.60       $8.55
Exchange Rate           US$ / CDN$              $0.83        $0.88         $0.88       $0.91

                                                                                                                                                       Petro-Canada (TSX: PCA)
                                                                                                                                                        Statistical Review: 2004 - 2007
Year end Dec 31,                               2005a         2006a         2007e      2008e
                                                                                                                       $70.00                                                                                      20,000,000
Net Asset Value                                $46.72       $42.46
                                                                                                                                                                                                                   18,000,000
                                                                                                                       $60.00
Share Price Y/E                                 $46.65       $47.75        $46.75     $46.75                                                                                                                       16,000,000




                                                                                                                                                                                                                                Daily Trading Volume
                                                                                                                       $50.00
                                                                                                 Daily Closing Price




                                                                                                                                                                                                                   14,000,000
Valuation Data
DACFM                   x                         7.9           6.7            5.5       5.6                                                                                                                       12,000,000
                                                                                                                       $40.00
Target DACFM            x                        11.3           9.2            7.7       7.8
                                                                                                                                                                                                                   10,000,000
                                                                                                                       $30.00
EV/BOED                 $/Boed                 66,744       79,805        64,561      65,926                                                                                                                       8,000,000
Target EV/BOED          $/Boed                 94,171      109,597        90,537      91,294
                                                                                                                       $20.00                                                                                      6,000,000

EBITDA                  $Mm                   5,062.2       5,157.9       7,163.7    7,001.7                                                                                                                       4,000,000
EV/EBITDA               x                         5.4           5.3           3.7        4.0                           $10.00
                                                                                                                                                                                                                   2,000,000
P/NAV                   x                         1.0           1.1
Cash Flow Netback       $/Boed                 $19.50       $38.25        $24.89      $22.92                            $0.00                                                                                      0
                                                                                                                                Jan-04
                                                                                                                                Mar-04
                                                                                                                                May-04
                                                                                                                                 Jul-04
                                                                                                                                          Sep-04
                                                                                                                                          Nov-04
                                                                                                                                          Jan-05
                                                                                                                                          Mar-05
                                                                                                                                          May-05
                                                                                                                                           Jul-05
                                                                                                                                                                Sep-05
                                                                                                                                                                Nov-05
                                                                                                                                                                Jan-06
                                                                                                                                                                Mar-06
                                                                                                                                                                May-06
                                                                                                                                                                 Jul-06
                                                                                                                                                                                Sep-06
                                                                                                                                                                                Nov-06
                                                                                                                                                                                Jan-07
                                                                                                                                                                                Mar-07
                                                                                                                                                                                May-07
                                                                                                                                                                                 Jul-07
                                                                                                                                                                                Sep-07
                                                                                                                                                                                                        Nov-07




Note: Net asset value is 10% after-tax on P+P reserves for conventional E&P,
and 8% pre-tax for Oil Sands
                                                                                                                          52 Week High:       $57.80     52 Week Low:       $41.02        Avg. Monthly Trading Volume
                                                                                                                          52 Week High On:    Apr-21-06 52 Week Low On:     Mar-16-07          1,700,602 Shares
                                                                                                                          Source: Bloomberg




                     Opinion: TOP PICK
               12 MONTH TARGET PRICE $68.00
            Analyst: Martin P. Molyneaux, CMA, CFA
                                                                                                                                                                                   51


FD&A Costs                                                      2005a          2006a        3-Yr. Avg. 5-Yr. Avg.
                                                                                                                            Corporate Profile
FD&A (Proven)                                                  $11.41         $62.38              $16.32           $9.92      Petro-Canada is a $23 billion Integrated company with
Cash Flow Netback                                              $21.85         $23.40              $20.82          $17.97      upstream operations consisting of four business seg-
Recycle Ratio (Proven)                                               1.9           0.4               1.3             1.8      ments: North America Natural Gas; East Coast Oil, Oil
Reserves
                                                                                                                              Sands, and International (Northwest Europe, North
                                                                                                                              Africa/Near East; and Northern Latin America).
Oil & Liquids                                                                                                                 Downstream operations consist of two refineries
Proven Reserves (MMbbls)                                          446.0          401.0                                        (Edmonton and Montreal) with nearly 1,600 outlets.
Production (B/d)                                               189,041        156,164
Proven RLI (Years)                                                   6.7            6.2               6.3             5.4
                                                                                                                            Operational Update
Proven Reserve Repl. %                                            186%            21%              135%            193%       2006 Reserve Adds: Excluding Oil Sands, net reserve
Natural Gas                                                                                                                   additions costs appeared disappointing at $71 per Boe
Proven Reserves (Bcf)                                           1,741.0        1,546.0                                        (Net Capex of $1,061 Mm adding only 15 MmBoes).
Production (Mmcf/d)                                              106.8           97.3                                         However dispositions of 45 Mm Boes (mostly Syria) for ~
Proven RLI (Years)                                                   8.2            7.4               7.8             8.0
                                                                                                                              $15 per Boe skewed the results. Organic F&D costs were
Proven Reserve Repl. %                                             11%             8%               37%             84%
                                                                                                                              $27.48 per Boe on 60 MmBoes of reserve additions.
Notes: Above figures are in US$ and exclude Oil Sands (i.e. Syncrude, Mackay River)                                           East Coast: Hibernia (20% WI) volumes will be lower
Reserves & Production are net of royalties
FD&A excludes changes in Future Development Costs
                                                                                                                              than expected in Q1 2007 due to power problems. At
                                                                                                                              Terra Nova (34% WI) the FPSO is currently running at
                                                                                                                              design capacity. White Rose (27.5% WI) has reached
                                                                                                                              peak day volumes of 125,000 B/d. In the Company’s
                                                                                                                              2007 guidance PCA has been very conservative regard-
                                                                                                                              ing East Coast oil volumes.
                                                                                                                              Oil Sands: The Syncrude project continues to surround
                                     2006 Proven Reserve Analysis                                                             itself with questions of reliability. Both the MacKay
                                                                                                                              River SAGD and the Fort Hills mining/upgrading
                                                                                              PUD Oil (MBbl)                  projects continue to gather momentum. We expect to see
                                                                                                  11%
                                                                                                                              Fort Hills scope study (mine 2010, upgrader 2011) and
                                                                                                                              preliminary cost estimates in mid-2007.
                                                                                                                              International: In the North Sea, Buzzard (29.9% WI,
    PD Oil (MBbl)                                                                                                             60,000 Boe/d) began ramping up production early in Q1
       50%
                                                                                                                              and will result in a material increase in financial results.
                                                                                                                              Rigs have been secured for the 20 well 2007 drilling
                                                                                                                              program. Golden Eagle in the North Sea is a success.
                                            PUD Gas (Mboe)                               PD Gas (Mboe)                        Refining: The Edmonton refinery conversion project
                                                 5%                                          34%
                                                                                                                              will be onstream in 2008. The Montreal coker project
Excludes Oil Sands Reserves totalling 151 Mm bbls Bitumen (Mackay River) and 289 Mm bbls of Synthetic Crude Oil
(Syncrude).
                                                                                                                              continues to gain momentum with a Capex expectation
                                                                                                                              of $750 million to $1 billion and an operational date of
                                                                                                                              2009.
                                                                                                                            Financial Outlook
                                                                                                                              PCA has disclosed a 2007 Capex program of $4.1 billion
                                                                                                                              versus our estimated cash flow of $4.8 billion, which
                                                                                                                              should result in Petro-Canada’s net debt continuing to
                                                  P/E Diluted
 18.0
                                                                                                                              decrease.
                                                                                            PCA
 16.0                                                                                       Integrated Average              Investment Summary
                                                                   16.5
                                                                                                       15.5                   PCA’s portfolio of profitable growth opportunities has
 14.0                 14.5
                                     14.0                                                                                     never looked better. We believe that the valuation gap
 12.0                                                                                                                         between PCA and its Integrated peers is materially too
 10.0                                                                                                                         wide, especially when investors can see clear growth
   8.0
                                                                                                                              plans for the North Sea and Oil Sands production, and
                                                       8.0                                  7.9                               Downstream operations expansions.
   6.0
                                                                                                                              An expected rate of return of over 45% continues to be
   4.0                                                                                                                        the highest of the Canadian Integrated group, for which
   2.0                                                                                                                        it garners Petro-Canada a Top Pick rating. Our 12
                                                                                                                              month target of $68.00 is reflective of a 2008e DACFM of
   0.0
                              2006                           2007e                                2008e
                                                                                                                              7.8x or 11.6x 2008 P/E ratios.
Source: FirstEnergy Capital Corp.
52         FirstQuarterly                Integrated, Oil Sands and Large Cap E&P                                                              April 2007




SUNCOR ENERGY INC.                                                                                                                                                                           SU - $91.50
                                                                                                                                                                                              (as of April 20, 2007)
Year end Dec 31,                            2005a        2006a        2007e          2008e      Quarterly Information                                                   2005a          2006a           2007e        2008e

Production
Oil & Liquids           B/d                  174,509      263,205      265,699       318,097    Oil & Liquids - B/d                                Q1                143,800           267,600         251,000      287,850
Gas                     Mmcf/d                    190          192          197           190                                                      Q2                131,400           270,600         268,000      287,850
Total                   Boe/d                206,140      295,203      298,532       349,763                                                       Q3                151,100           245,600         270,500      347,850
Production per Share    Boe/Share                 0.2          0.2          0.2           0.3                                                      Q4                270,600           269,000         273,000      347,850
                        %                     -22.8%        40.5%        -0.2%         18.7%                                                       Avg.              174,509           263,205         265,699      318,097
Debt Adjusted PPS       Boe/Share                 0.1          0.2          0.2           0.2
                        %                     -19.6%        45.4%        -1.7%         15.2%    Gas - Mmcf/d                                       Q1                     191              196             197          190
                                                                                                                                                   Q2                     175              189             197          190
Cash flow               $MM                     2,587        4,582         3,406        4,101                                                      Q3                     200              191             197          190
CFPS                    Basic                   $5.67        $9.86         $7.24        $8.71                                                      Q4                     193              192             197          190
                        Diluted                 $5.54        $9.62         $7.06        $8.50                                                      Avg.                   190              192             197          190
P/CF                    Basic                    12.9           9.3         12.6         10.5
                        Diluted                  13.2           9.5         13.0         10.8
                                                                                                Total Production - Boe/d                           Q1                175,633           300,267         283,833      319,517
                                                                                                                                                   Q2                160,567           302,100         300,833      319,517
Earnings                $Mm                     1,295        3,012         2,266        2,253
                                                                                                                                                   Q3                184,433           277,433         303,333      379,517
EPS                     Basic                   $2.84        $6.48         $4.82        $4.79
                                                                                                                                                   Q4                302,767           301,000         305,833      379,517
                        Diluted                 $2.77        $6.32         $4.70        $4.67
                                                                                                                                                   Avg.              206,140           295,203         298,532      349,763
P/E                     Basic                    25.8         14.1          19.0         19.1
                        Diluted                  26.5         14.5          19.5         19.6
                                                                                                CFPS - $/Share                                      Q1                   $0.86            $2.90          $1.29          $1.95
Dividend                $/Share                  0.22          0.28         0.30         0.30                                                       Q2                   $0.66            $2.80          $1.90          $2.10
Yield                   %                       0.3%          0.3%         0.3%         0.3%                                                        Q3                   $1.40            $2.45          $2.04          $2.34
                                                                                                                                                    Q4                   $2.61            $1.56          $1.83          $2.11
Capital Data                                                                                                                                       Total                 $5.54            $9.62          $7.06          $8.50
Capex                   $Mm                    3,215        3,613         5,270        4,600
Capex vs. Cash Flow     %                     124.3%        78.9%        154.7%       112.2%
Exit Net Debt           $Mm                    3,026        1,911         3,939        4,604    EPS - $/Share                                       Q1                   $0.32            $1.60          $0.78          $1.07
Entry Debt/CF           Years                     0.9          0.7           0.6          1.0                                                       Q2                   $0.24            $2.59          $1.29          $1.17
Market Cap.             $Mm                   33,604       43,060        43,060       43,060                                                        Q3                   $0.73            $1.45          $1.40          $1.29
                                                                                                                                                    Q4                   $1.48            $0.75          $1.23          $1.14
Share Data                                                                                                                                         Total                 $2.77            $6.32          $4.70          $4.67
Basic shares            Mm                     458.4        470.6         470.6        470.6
Options                 Mm                     10.96        11.85         11.85        11.85    Note: CFPS and EPS are calculated on a diluted basis.
Warrants                Mm                          0            0             0            0
Diluted shares          Mm                     469.3        482.4         482.4        482.4
Fully Diluted shares    Mm                     475.5        484.3         490.4        484.3


Year end Dec 31,                            2005a        2006a        2007e          2008e

Net Asset Value         $/Share               $64.82       $65.66

Share Price Y/E         $/Share               $73.31       $91.50

Valuation Data
DACFM                                           17.3           9.9         13.5         11.5                                                     Suncor Energy Inc. (TSX: SU)
Target DACFM                                    20.6          11.8         16.0         13.6                                                            Statistical Review: 2004 - 2007

EV/BOED                 $/Boed               177,695      152,337      157,433       136,273                           $120.00                                                                                 6,000,000
Target EV/BOED          $/Boed               265,131      186,244      190,962       164,891

EBITDA                  $Mm                  1,355.2       3,149.9      2,665.8       2,694.2                          $100.00                                                                                 5,000,000
EV/EBITDA               x                       27.0          14.3         17.6          17.7
                                                                                                                                                                                                                           Daily Trading Volume
                                                                                                 Daily Closing Price




P/NAV                   x                        1.1           1.4                                                      $80.00                                                                                 4,000,000
Cash Flow Netback       $/Boed               $32.54        $22.11        $27.38       $28.35

Note: Net asset value is 10% after-tax on P+P reserves for conventional E&P,and 8%                                      $60.00                                                                                 3,000,000
pre-tax for Oil Sands
Source: FirstEnergy Capital Corp. and Company Reports
                                                                                                                        $40.00                                                                                 2,000,000


                                                                                                                        $20.00                                                                                 1,000,000


                                                                                                                         $0.00                                                                                 0
                                                                                                                                 Jan-04
                                                                                                                                 Mar-04
                                                                                                                                 May-04
                                                                                                                                  Jul-04
                                                                                                                                             Sep-04
                                                                                                                                             Nov-04
                                                                                                                                             Jan-05
                                                                                                                                             Mar-05
                                                                                                                                             May-05
                                                                                                                                              Jul-05
                                                                                                                                                               Sep-05
                                                                                                                                                               Nov-05
                                                                                                                                                               Jan-06
                                                                                                                                                               Mar-06
                                                                                                                                                               May-06
                                                                                                                                                                Jul-06
                                                                                                                                                                                 Sep-06
                                                                                                                                                                                 Nov-06
                                                                                                                                                                                 Jan-07
                                                                                                                                                                                 Mar-07
                                                                                                                                                                                 May-07
                                                                                                                                                                                  Jul-07
                                                                                                                                                                                                      Sep-07
                                                                                                                                                                                                      Nov-07




                                                                                                                          52 Week High:       $101.05    52 Week Low:       $73.89        Avg. Monthly Trading Volume
                                                                                                                          52 Week High On:    Apr-21-06 52 Week Low On:     Oct-3-06           1,525,754 Shares
                                                                                                                          Source: Bloomberg




                  Opinion: OUTPERFORM
             12 MONTH TARGET PRICE $110.00
           Analyst: Martin P. Molyneaux, CMA, CFA
                                                                                                                                                                           53


FD&A Costs                                                2005a         2006a           3-Yr. Avg. 5-Yr. Avg.         Corporate Profile
                                                                                                                        Suncor is a $43.5 billion enterprise focused on produc-
FD&A (Proven)                                            $31.98        $65.11              37.37             $44.98
                                                                                                                        tion from its Oil Sands business, one of the largest on
Cash Flow Netback                                        $36.47        $25.20             $28.59             $24.26
                                                                                                                        a corporate volume basis in Canada. Its four major
Recycle Ratio (Proven)                                        1.1           0.4             0.8                 0.5
                                                                                                                        business divisions include: Oil Sands, conventional
Reserves
                                                                                                                        natural gas production from Western Canada, along
                                                                                                                        with Refining & Marketing in both Ontario and
Oil & Liquids                                                                                                           Colorado.
Proven Reserves (MMbbls)                                       7.0           7.0                                        With further expansion of Upgrader 2, volumes are on
Production (B/d)                                            2,600         2,300                                         track to reach 350,000 B/d in 2008. Suncor is targeting
Proven RLI (Years)                                             8.1           9.7            6.4                 7.5     500,000 to 550,000 B/d in the 2010-2012 timeframe via
Proven Reserve Repl. %                                         0%        100%               67%                40%      the construction of Upgrader 3, along with other
Natural Gas                                                                                                             components.
Proven Reserves (Bcf)                                       449.0         426.0
                                                                                                                      Operational Update
Production (Mmcf/d)                                          137            141
                                                                                                                        Oil Sands: Suncor recently reported Q1 2007 volumes
Proven RLI (Years)                                             8.8           8.2            8.6                 9.1
                                                                                                                        of 248,000 B/d, which is behind our start of quarter
Proven Reserve Repl. %                                      106%            57%             81%                53%
                                                                                                                        expectation by 7,500 B/d. The late January disruption
Notes: Above figures are in US$ and are for the Natural Gas Segment Only                                                was more impactful for a longer period of time than
Reserves & Production are net of royalties                                                                              we had anticipated. Currently the Company is calling
FD&A excludes changes in Future Development Costs
                                                                                                                        for 2006 volumes to average 260,000 to 270,000 B/d,
                                                                                                                        along with operating costs of $21.50 to $22.50 per
                                                                                                                        barrel. To date the growth projects leading to 350,000
                                                                                                                        B/d in 2008 are on time and on budget, though cost
                                                                                                                        pressures continue to be an issue. The journey to
                                     2006 Proven Reserve Summary                                                        beyond 350,000 B/d will see detailed cost estimates
                                                                                                                        released in mid-2007. Between now and 2012 Suncor
                             PD Oil (MBbl)
  PUD Gas (Mboe)                 8%
                                               PUD Oil (MBbl)
                                                   1%
                                                                                                                        plans to add 240,000 to 290,000 B/d of volumes,
       13%
                                                                                                                        which is clearly the best growth of the Oil Sands
                                                                                                                        players. One ingredient to contain cost inflation will
                                                                                                                        be the mobile crushing units, with #1 in operation and
                                                                                                                        plans to bring on four more over the next five years.
                                                                                                                        Phase 2 of Firebag continues to deliver growing
                                                                                                                        volumes as the steaming matures.
                                                                                                                        Natural Gas: Drilling results have been good but
                                                                                      PD Gas (Mboe)
                                                                                          78%
                                                                                                                        onstream timing and reserve additions costs have
                                                                                                                        been challenging.
  Natural Gas business only: Excludes 903 Mm net proven bbls of In-situ bitumen and
  1,507 Mm equivalent bbls of mined Synthetic Crude Oil as of year-end 2006
                                                                                                                        Downstream: The Sarnia refining operation continues
                                                                                                                        the transformation to enable it to consume around
                                                                                                                        45,000 B/d of sour crude oil by mid-2007.
                                                                                                                      Financial Outlook
                                                                                                                        With planned spending of around $5.3 billion in
                                                                                                                        2007, we estimate exit 2007 net debt of around $3.9
                                                   P/E Diluted                                                          billion. The Company indicated a high level of cash
 25.0
                                                                                              SU
                                                                                                                        tax for Oil Sands in 2007. However with high levels of
                                                                                              Integrated Average        Capex this year, it expects that to abate materially in
 20.0                                                                                                                   2008. How and when Suncor allocates future Capex
                                                       19.5                                 19.6                        will impact cash flows materially.
 15.0                                                                16.0                                             Investment Summary
                                                                                                      15.0
                      14.5           14.5                                                                               Our 12 month target of $110.00 reflects 2009e mul-
 10.0
                                                                                                                        tiples of 14.7x 2009e DACFM or 19x P/E ratio and
                                                                                                                        $150,500 per Boe/d. We continue to assign Suncor a
                                                                                                                        relative ranking of Outperform.
   5.0
                                                                                                                        Our confidence in this team grows with every passing
                                                                                                                        quarter. Suncor simply thinks through and executes
   0.0                                                                                                                  its business plan better than any other Oil Sands
                              2006                           2007e                                2008e
Source: FirstEnergy Capital Corp.
                                                                                                                        player.
54   FirstQuarterly    Integrated, Oil Sands and Large Cap E&P   April 2007




                      THIS PAGE INTENTIONALLY LEFT BLANK.
                                                55




Canadian Oil Sands Trust - COS.UN
     OPTI Canada Inc. - OPC         Corporate
    Synenco Energy Inc. - SYN
  UTS Energy Corporation - UTS
  Western Oil Sands Inc. - WTO
                                    Updates -
                                    Oil Sands
 56        FirstQuarterly                  Integrated, Oil Sands and Large Cap E&P                                                               April 2007




 CANADIAN OIL SANDS TRUST                                                                                                                                                    COS.UN - $28.83
                                                                                                                                                                                              (as of April 20, 2007)
Year end Dec 31,                              2005a         2006a        2007e         2008e       Quarterly Information                                             2005a           2006a             2007e              2008e
Production
Production, Net to COS.UN Boe/d               76,213        91,667       110,600      119,606      Syncrude - B/d                                       Q1         157,456         204,813           296,000             300,000
Production per Share      Boe/Share              0.1           0.1           0.1          0.1      Production                                           Q2         232,229         241,000           252,500             334,000
                          %                   -12.8%        18.6%         17.3%         8.1%                                                            Q3         238,000         283,001           325,000             334,000
Debt Adjusted PPS         Boe/Share              0.1           0.1           0.1          0.1                                                           Q4         226,086         303,000           330,000             334,000
                          %                   -18.7%        20.2%         18.9%         8.4%
                                                                                                                                                       Avg.        214,746         266,679           301,034             325,546
Cash flow                   $Mm               $1,015       $1,121        $1,112        $1,261
CFPS                        Basic              $2.21        $2.41         $2.32         $2.63
                                                                                                   Production - B/d                                     Q1          55,881          72,688           108,750             110,220
                            Diluted            $2.21        $2.40         $2.32         $2.63      Net to COS.UN                                        Q2          82,418          85,531            92,769             122,712
P/CF                        Basic               11.4         12.0          12.4          11.0                                                           Q3          85,942         100,437           119,405             122,712
                            Diluted             11.4         12.0          12.4          11.0                                                           Q4          80,238         107,535           121,242             122,712
                                                                                                                                                       Avg.         76,213          91,667           110,600             119,606
Earnings                    $Mm                 $841         $835         $531           $614
EPS                         Basic              $1.83        $1.79         $1.11         $1.28      CFPS - $/Share                                      Q1            $0.20            $0.30             $0.46              $0.51
                            Diluted            $1.83        $1.78         $1.11         $1.28                                                          Q2            $0.62            $0.70             $0.38              $0.76
P/E                         Basic               13.7          16.1         26.0          22.5                                                          Q3            $0.79            $0.77             $0.74              $0.72
                            Diluted             13.7         16.2          26.1          22.5                                                          Q4            $0.57            $0.63             $0.75              $0.65
                                                                                                                                                      Total          $2.21            $2.40             $2.32              $2.63
Capital Data
Capex                       $Mm                $800          $568         $484          $275
                                                                                                   EPS - $/Share                                       Q1            $0.13            $0.20             $0.20              $0.23
Capex vs. Cash Flow         %                   79%           51%           44%          22%
                                                                                                                                                       Q2            $0.48            $0.72             $0.16              $0.39
Exit Net Debt               $Mm              $1,654        $1,271        $1,427       $1,420
                                                                                                                                                       Q3            $0.83            $0.59             $0.37              $0.35
Entry Debt/CF               Years                1.8           1.5          1.1           1.1
                                                                                                                                                       Q4            $0.37            $0.27             $0.38              $0.31
Market Cap.                 $Mm             $11,623       $13,579       $13,815      $13,815
                                                                                                                                                      Total          $1.83            $1.78             $1.11              $1.28
Enterprise Value            $Mm             $13,277       $14,850       $15,242      $15,235

Share Data                                                                                         Note: CFPS and EPS are calculated on a diluted basis.
Basic shares                Mm                 462.5        471.0         479.2         479.2
Options                     Mm                   0.0          0.0           0.0           0.0
Warrants                    Mm                   0.0          0.0           0.0           0.0
Diluted shares              Mm                 462.5        471.0         479.2         479.2
Fully diluted shares        Mm                 462.5        471.0         479.2         479.2
                                                                                                                                                 2007E Operating Costs $/Bbl
Pricing
WTI                         $US               $56.66       $66.26        $66.04        $63.99                                                                    Turnarounds &
Oil                         $C wellhd         $71.58       $73.79        $71.36        $69.98                                                                   Other Upgrading                            R&D & Other-
                                                                                                         Overburden
Exchange Rate               US$ / CDN$         $0.83        $0.88         $0.88         $0.91                                                                     Costs / Bbl                                $/Bbl
                                                                                                     Removal & Other
                                                                                                     Extraction Costs /
                                                                                                            Bbl
Year end Dec 31,                              2005a         2006a        2007e         2008e                                                                                                                         COS
                                                                                                                                                                                                                Adjustments -
Net Asset Value                               $31.83        $28.60                                                                                                                                                  $/Bbl

Share Price Y/E                               $25.13        $28.83        $28.83       $28.83

Valuation Data
DACFM                       x                   11.9          13.7         13.0          11.5
Target DACFM                x                   15.5          14.2         15.1          13.4                                                                                                        Mine & Extract:
                                                                                                                                        Upgrading:                                                  Natural Gas Cost
EV/BOED                     $/Boed         $174,209      $161,998      $137,812     $127,375                                        Natural Gas Cost                                                      / Bbl
Target EV/BOED              $/Boed         $228,037      $188,562      $160,212     $148,089                                              / Bbl

EBITDA                      $Mm               $1,145       $1,207        $1,185        $1,330
EV/EBITDA                   x                   11.6         12.3          12.9          11.5
P/NAV                       %                    79%
Cash Flow Netback           $/Boed            $37.40       $34.08        $28.32        $30.12                                               Canadian Oil Sands Trust (TSX: COS.UN)
                                                                                                                                                         Statistical Review: 2004 - 2007
Pricing
WTI                         $US               $56.66       $66.26        $66.04        $63.99                              $45.00                                                                             25,000,000
Oil                         $C wellhd         $71.58       $73.79        $71.36        $69.98
Exchange Rate               US$ / CDN$         $0.83        $0.88         $0.88         $0.91                              $40.00

                                                                                                                           $35.00                                                                             20,000,000
Note: 2005 Net Asset Value is 8% pre-tax based on stage III expansion & resource value and based
                                                                                                                                                                                                                            Daily Trading Volume
                                                                                                     Daily Closing Price




on our current commodity price outlook.
                                                                                                                           $30.00
Note: 2006 Net asset value is 8% after-tax based on Stage III expansion & resources value                                                                                                                     15,000,000
Source: FirstEnergy Capital Corp. and Company Reports                                                                      $25.00

                                                                                                                           $20.00
                                                                                                                                                                                                              10,000,000
                                                                                                                           $15.00

                                                                                                                           $10.00
                                                                                                                                                                                                              5,000,000
                                                                                                                            $5.00


                   Opinion: MARKET PERFORM                                                                                  $0.00                                                                             0
                                                                                                                                    Mar-04
                                                                                                                                    May-04

                                                                                                                                    Sep-04
                                                                                                                                    Nov-04

                                                                                                                                    Mar-05
                                                                                                                                    May-05

                                                                                                                                                               Sep-05
                                                                                                                                                               Nov-05

                                                                                                                                                               Mar-06
                                                                                                                                                               May-06

                                                                                                                                                                                 Sep-06
                                                                                                                                                                                 Nov-06

                                                                                                                                                                                 Mar-07
                                                                                                                                                                                 May-07

                                                                                                                                                                                 Sep-07
                                                                                                                                                                                 Nov-07
                                                                                                                                    Jan-04



                                                                                                                                     Jul-04



                                                                                                                                    Jan-05



                                                                                                                                     Jul-05



                                                                                                                                                               Jan-06



                                                                                                                                                                Jul-06



                                                                                                                                                                                 Jan-07



                                                                                                                                                                                  Jul-07




                12 MONTH TARGET PRICE $34.00
                 Analyst: Mark J. Friesen, CFA                                                                               52 Week High:       $38.20    52 Week Low:      $25.43        Avg. Monthly Trading Volume
              Associate: Darren B. Engels, CA, CFA                                                                           52 Week High On:    Aug-16-06 52 Week Low On:   Mar-14-07          1,339,718 Shares
                                                                                                                             Source: Bloomberg
                                                                                                                                                                                                                                                                                       57


                                               Syncrude Areas of Interest                                                                                                                                                       Corporate Profile
                                                                                                                                                                                                                                  Canadian Oil Sands Trust is the largest owner of the
                                                                                                                                                                                                                                  Syncrude Joint Venture Oil Sands mining operation
                                                                                                                                                                                                                                  (36.74% WI) and is thought of as the natural consoli-
                                                             UTS/                                                                UTS/                                                                                             dator of smaller working interests.
                                                             Teck                                                                Teck                                                                                             Syncrude estimates that it can reach full production
                                                                                                                                                                                                                                  rates of 500,000 B/d post-2016 (~177,000 B/d net to
                                                                                                                                                                                                                                  COS.UN).
                                                                                     SHC
                                                                                                                                       UTS UTS
                                                                                                                                        VCI                                                                                     Operational Update
                                                                                                                        UTS/
                                                                                                                        Teck VCI SYN/Sinopec                                                                                      The Trust announced that Syncrude plans to take
                                                                            UTS/Teck                                                       SYN/
                                                                                                                                          Sinopec                                                                                 Coker 8-3 offline in Q2/07 for maintenance; the coker
                                                                                                                        SYN
                                VCI                                          SHC                                                                                  SU                                                              has produced at constrained rates since late last year.
                                                                                PCA/
                                                                                UTS/                                                                                                                                              Syncrude plans to remove coke residue build-up that
                                                                                                                                                          HSE
                                                                                Teck                                   SHC                                                                                                        has been causing fouling in the reactor.
                                                              CNQ                                                                         IMO
                                                                                     Syncrude
                                                                                                                                                                                                                                  As a result of the maintenance work required, prior
                                                            TOT
                                                                                      Aurora                               XOM
                                                                                                                                                                                                                                  turnarounds at the other cokers will likely be resched-
                                                                                               SHC
                                                            CNQ                               Albian                                      HSE                                                                                     uled, possibly into early 2008. However, Syncrude
                                                                                                                                                                                                                                  still plans on going ahead with modification to the
                                                                                                                                                                          SU Firebag                                              hydrogen plant steam generations system this fall,
                                                                                                      Syncrude
                                                                                                                                            IMO                                                                                   which COS.UN believes should result in all of
                                                                                                                                                                                                                                  Syncrude’s production volumes transitioning to the
                                           PCA
                                                                                                                       SU                                                                                                         higher quality Syncrude Sweet Premium synthetic
                                                                                             SU                                                                                                                                   crude in Q4/07.
                                                                                                                                                                                   ECA
                                                                                                                                          PCA                                                                                     Syncrude production volumes for Q1/07 averaged
                     Alberta                                                                                   TLM                                                                                                                296,000 B/d (109,000 B/d net to COS.UN), which was
                                                                                                                                    XOM                                                                                           higher than our earlier production estimate of 280,000
                                                            Fort McMurray                                                        VCI                                                                                              B/d (102,827 B/d net to COS.UN). Strong production
                                                                                                                                                 ECA
                                                                                                                                                                                                                                  in March of 356,000 B/d at Syncrude will not extend
                                                                                                                                                                  IMO
                                                                                                                                                                                                                                  through to Q2/07, due to Coker 8-3 being taken down
                                                                                                           VCI
                                                                                                                                IMO
                                                                                                                                             TLM                                                                                  for maintenance during the quarter.
                                                                                                                            CNQ                              IMO              NAOS                                                Production guidance for 2007 remains unchanged at
Source: FirstEnergy Capital Corp.
                                                                                                                                                                                                                                  110 MmBbls (gross), although the upper end of the
                                                                                                                                                                                                                                  guidance range has been lowered from 120 MmBbls to
                                                                                                                                                                                                                                  115 MmBbls. Guidance of 110 MmBbls assumes that
                                                                                                                                                                                                                                  no turnarounds will be performed on other cokers
                                                                                                                                                                                                                                  until 2008.
                                                                                                                                                                                                                                Financial
                                                                                                                                                                                                                                  The Trust has revised its target net debt to $1.6 billion
                                                                                                                                                                                                                                  (previously $1.2 billion), which we believe was partly
                                           Canadian Oil Sands Expected Production Profile                                                                                                                                         in response to the Government’s announcement to tax
                                                          Current - 2040E
                   180,000                                                                                                                                                                 2,500                                  Trusts beginning 2011, thereby enabling the Trust to
                   160,000                                                                                                                                                                                                        accelerate fuller payout of free cash flow in the near-
                   140,000                                                                                                                                                                 2,000                                  term.
                                                                                                                                                                                                   Capital Expenditures - $Mm




                   120,000
                                                                                                                                                                                                                                Investment Summary
  B/d Net to COS




                                                                                                                                                                                           1,500
                   100,000
                                                                                                                                                                                                                                  The Trust has demonstrated less sensitivity to the
                    80,000
                                                                                                                                                                                           1,000                                  downside because the assets are more maturely
                    60,000
                                                                                                                                                                                                                                  developed than those among the peer group. Also, by
                    40,000                                                                                                                                                                 500                                    virtue of recently completing an expansion, COS.UN
                    20,000
                                                                                                                                                                                                                                  was not negatively impacted by concerns of increasing
                        0                                                                                                                                                                  0
                                                                                                                                                                                                                                  capital costs assumptions that impacted the rest of the
                                            2007E

                                                    2009E

                                                            2011E

                                                                    2013E

                                                                             2015E

                                                                                     2017E

                                                                                              2019E

                                                                                                       2021E

                                                                                                               2023E

                                                                                                                        2025E

                                                                                                                                 2027E

                                                                                                                                         2029E

                                                                                                                                                  2031E

                                                                                                                                                          2033E

                                                                                                                                                                  2035E

                                                                                                                                                                           2037E

                                                                                                                                                                                   2039E
                             2003

                                    2005




                                       Stage 1 & 2 - Current (North Mine & Aurora)                                Stage 3 - Aurora Train 2
                                                                                                                                                                                                                                  peer group.
                                       Stage 4 - Aurora Train 3
                                       Capital Expenditures
                                                                                                                  Stage 5 - Aurora Train 4
                                                                                                                                                                                                                                  We expect COS.UN to announce a distribution in-
Source: FirstEnergy Capital Corp.                                                                                                                                                                                                 crease over the next couple of quarters.
                                                                                                                                                                                                                                  We maintain a Market Perform ranking based on an
                                                                                                                                                                                                                                  implied return of 19% to our $34.00 target price, which
                                                                                                                                                                                                                                  itself is based on the highest P/NAV in the peer group
                                                                                                                                                                                                                                  at 119%.
 58      FirstQuarterly                Integrated, Oil Sands and Large Cap E&P                                                             April 2007




 OPTI CANADA INC.                                                                                                                                                                       OPC - $21.75
                                                                                                                                                                                              (as of April 20, 2007)
Year end Dec 31,                  2005a           2006a          2007e           2008e     Quarterly Information                                                   2005a                2006a           2007e                  2008e

Production
Production, Net to OPC               N/A             N/A          5,041         25,027     Long Lake - B/d                                             Q1                0                   0              0                  35,000
Production per Share                 N/A             N/A             0.0            0.1    Production                                                  Q2                0                   0              0                  45,000
                                     N/A             N/A             N/A            N/A                                                                Q3                0                   0         15,000                  55,000
Debt Adjusted PPS                    N/A             N/A             0.0            0.0                                                                Q4                0                   0         25,000                  65,000
                                     N/A             N/A             N/A            N/A                                                               Avg.               0                   0         10,082                  50,055

Cash flow                            N/A             N/A             -$4           $294    Production - B/d                                            Q1                0                   0              0                  17,500
CFPS                                 N/A             N/A          -$0.02          $1.70    Net to OPC                                                  Q2                0                   0              0                  22,500
                                                                                                                                                       Q3                0                   0          7,500                  27,500
                                     N/A             N/A          -$0.02          $1.70
                                                                                                                                                       Q4                0                   0         12,500                  32,500
P/CF                                 N/A             N/A            N/A             12.8
                                                                                                                                                      Avg.               0                   0          5,041                  25,027
                                     N/A             N/A             N/A            12.8
                                                                                           CFPS - $/Share                                              Q1           $0.02                $0.00          ($0.02)                 $0.25
Earnings                             N/A             N/A             -$8           $150                                                                Q2           $0.05                $0.02          ($0.02)                 $0.37
EPS                                  N/A             N/A          -$0.05          $0.86                                                                Q3           $0.06                $0.02           $0.05                  $0.47
                                     N/A             N/A          -$0.05          $0.81                                                                Q4          ($0.01)              ($0.03)         ($0.04)                 $0.53
P/E                                  N/A             N/A             N/A            25.2                                                              Total         $0.06                $0.01          ($0.02)                 $1.70
                                     N/A             N/A             N/A            26.7
                                                                                           EPS - $/Share                                               Q1           $0.01               ($0.02)         ($0.02)                 $0.12
Capital Data                                                                                                                                           Q2          ($0.00)               $0.02          ($0.02)                 $0.19
Capex                               $718          $1,109           $650            $260                                                                Q3          ($0.00)              ($0.00)          $0.03                  $0.24
Capex vs. Cash Flow                  N/A             N/A            N/A          88.4%                                                                 Q4          ($0.01)              ($0.06)         ($0.07)                 $0.27
Exit Net Debt                       $182          $1,136         $1,769          $1,617                                                               Total        ($0.01)              ($0.06)         ($0.05)                 $0.81
Entry Debt/CF                        N/A             N/A            N/A              6.0
                                                                                           Note: CFPS and EPS are calculated on a diluted basis.
Market Cap.                       $3,252          $3,416         $3,756          $3,824
Enterprise Value                  $3,433          $4,552         $5,525          $5,441

Share Data
Basic shares                       155.6          172.7           172.7          175.8
Options                              7.8            0.0             0.0            0.0                                                      2007E Operating Costs $/Bbl
Pref.Conv.                           7.1            0.0             0.0            0.0
Diluted shares                     170.4          172.7           172.7          175.8
                                                                                                                                                                                                      Mine & Extract:
                                                                                                                Upgrading                                                                            Natural Gas Cost
Pricing                                                                                                        Costs / Bbl                                                                                 / Bbl
WTI                               $56.66          $66.26         $66.00          $64.00
Oil                                  N/A             N/A         $38.27          $67.59
Exchange Rate                      $0.83           $0.88          $0.88           $0.91


Year end Dec 31,                  2005e           2006a          2007e           2008e

Net Asset Value                   $33.39          $27.10

Share Price Y/E                   $19.08          $19.78         $21.75          $21.75
                                                                                                                                                                 Extraction
Valuation Data                                                                                                                                                  Costs / Bbl
DACFM                                N/A             N/A            N/A            15.1
Target DACFM                         N/A             N/A            N/A            18.2

EV/BOED                              N/A             N/A            N/A             N/A
Target EV/BOED                       N/A             N/A            N/A             N/A
                                                                                                                                                 OPTI Canada Inc. (TSX: OPC)
EBITDA                                 $7             $0            $20            $390                                                               Statistical Review: 2004 - 2007
EV/EBITDA                           504.9            N/A            N/A             13.9
                                                                                                                   $30.00                                                                                            2,000,000
P/NAV                                57%            73%
Cash Flow Netback                     N/A            N/A            N/A          $44.92                                                                                                                              1,800,000
                                                                                                                   $25.00
                                                                                                                                                                                                                     1,600,000
Pricing
                                                                                                                                                                                                                                 Daily Trading Volume
                                                                                             Daily Closing Price




WTI                               $56.66          $66.26         $66.00          $64.00                                                                                                                              1,400,000
                                                                                                                   $20.00
Oil                                  N/A             N/A         $38.27          $67.59                                                                                                                              1,200,000
Exchange Rate                      $0.83           $0.88          $0.88           $0.91
                                                                                                                   $15.00                                                                                            1,000,000
Note: 2005 Net Asset Value is 8% pre-tax based on Long Lake Stage I & resource value and                                                                                                                             800,000
based on our current commodity price outlook.                                                                      $10.00
                                                                                                                                                                                                                     600,000
Note: 2006 Net Asset Value is 8% after-tax onLong Lake stage I & resource value.
Source: FirstEnergy Capital Corp. and Company Reports                                                                                                                                                                400,000
                                                                                                                    $5.00
                                                                                                                                                                                                                     200,000

                 Opinion: OUTPERFORM                                                                                $0.00                                                                                            0
                                                                                                                            Mar-04
                                                                                                                            May-04

                                                                                                                                        Sep-04
                                                                                                                                        Nov-04

                                                                                                                                                 Mar-05
                                                                                                                                                 May-05

                                                                                                                                                              Sep-05
                                                                                                                                                              Nov-05

                                                                                                                                                              Mar-06
                                                                                                                                                              May-06

                                                                                                                                                                               Sep-06
                                                                                                                                                                                        Nov-06

                                                                                                                                                                                        Mar-07
                                                                                                                                                                                        May-07

                                                                                                                                                                                                  Sep-07
                                                                                                                                                                                                            Nov-07
                                                                                                                            Jan-04



                                                                                                                             Jul-04



                                                                                                                                                 Jan-05



                                                                                                                                                  Jul-05



                                                                                                                                                              Jan-06



                                                                                                                                                               Jul-06



                                                                                                                                                                                        Jan-07



                                                                                                                                                                                                   Jul-07




             12 MONTH TARGET PRICE $28.00
               Analyst: Mark J. Friesen, CFA                                                                         52 Week High:         $24.65      52 Week Low:       $16.09          Avg. Monthly Trading Volume
            Associate: Darren B. Engels, CA, CFA                                                                     52 Week High On:      Jun-2-06    52 Week Low On:    Oct-3-06              719,799 Shares
                                                                                                                     Source: Bloomberg
                                                                                                                                                                                                                                                                               59


                                                                                                                                                                                                                       Corporate Profile
                                                 OPTI Canada Long Lake                                                                                                                                                   OPTI holds a 50% WI in Long Lake, Kinosis, Leismer
                                                                                                                                           ECA                                                                           and Cottonwood with its partner, Nexen Inc. These
                                                                                                                 XOM
                                                                                                                                                                                                                         leases are located south of Fort McMurray in North-
                                     Fort McMurray                                                                                                                                                                       ern Alberta.
                                                                                                                                                                 Alberta
                                                                                                                 ECA
                                                                                                                                                                                                                       Corporate Developments
                                                                                                                                                                                                                         First steam into the reservoir is imminent. Steps
                                                                                         VCI                                                                                                                             involve heating the pipes and facilities and steaming
                                                                                                         CNQ
                                                                                                                                                                                                                         the reservoir on a pad-by-pad basis. It is more
                                                                                                                                                                                                                         important to undertake the process correctly, than to
                                                                                                                                                                                                                         meet a specific date and steaming should be thought
                                                                                                                                                                                                                         of as a process rather than a specific event. OPTI is
                                                                                                                                                                                                                         scheduled to release Q1 2007 results on April 26th,
                                                                             PCA                                                                                                                                         2007, at which time we expect an operational update
                                                                                                                         NXY/OPC                                                                                         on the steaming process.
                                                                                                                                                                                                                         Reservoir heating will take approximately three
                                                   NXY/OPC                                                                                                                                                               months followed by first bitumen production around
                                                                                 NAOS
                                                                                                                                                                                                                         the end of Q2/07 or early Q3/07. OPTI is guiding
                                                                         NAOS                                                                                                                                            toward year-end exit rates of 35,000 to 45,000 Bbl/d
                                                                                                                                                                                                                         gross (17,500 to 22,500 Bbl/d net) of bitumen, versus
                                                                                                                                                                                                                         our forecast of 15,000 Bbl/d net.
                                                                                             NAOS                                                                                                                        Upgrader construction is 80% complete with opera-
                                         NAOS                                                                                                                                                                            tions expected to commence before year-end. The
                                                                                                                                                                                                                         upgrader is expected to be producing at full capacity
                                                                                                                                                                                                                         of 58,000 Bbl/d of sales volumes in late 2008 or early
                                                                                                                                                                                                                         2009, which should allow for the processing of all
                                                             North
                                                            American                                                                                                                                                     forecasted SAGD volumes. There is the possibility of
                                                              Oil                                                                ECA
                                                                                                                                                                                                                         typical start related issues during the first half of next
                                                             Sands
                                                                                                                                                                                                                         year but we would expect smoother ramp up in the
                                                                                                                 NXY/OPC
                                                                                                                                                                                                                         second half of 2008.
                                                                                         PBG
                                                                                         White-                                                                                                                          At the onset of production, spare capacity of the
                                                                                         sands                                                             ECA
                                                                                                                                                                                                                         upgrader might be filled with purchased third party
                                                                                                                                                                                                                         bitumen volumes. Third party volumes would
                                                                                                                                                                                                                         improve OPTI’s cash flows. Additionally, on site
                                                                                                                                                                                                                         storage of bitumen should help with the reliability of
Source: FirstEnergy Capital Corp.
                                                                                                                                                                                                                         the upgrader should production fluctuate day-to-
                                                                                                                                                                                                                         day.
                                                                                                                                                                                                                       Financial Outlook
                                                                                                                                                                                                                         The 2007 capital program of $560 Mm will be
                                                                                                                                                                                                                         directed toward Phase 1 ($379 Mm) and Phase 2
                                  OPTI Canada's Expected Production & Capital Expenditures Profile                                                                                                                       upfront engineering and future phases activities
                                                         Current - 2040E
                 120,000                                                                                                                                                         $1,400
                                                                                                                                                                                                                         ($181 Mm). Given costs pressures in the industry, we
                                                                                                                                                                                                                         are forecasting capital spending of $430 Mm for
                 100,000
                                                                                                                                                                                 $1,200
                                                                                                                                                                                                                         Phase 1 and $220 Mm for Phase 2 and future phases.
                                                                                                                                                                                 $1,000
                                                                                                                                                                                                                       Investment Summary
                                                                                                                                                                                          Capital Expenditures ($Mm)




                  80,000
                                                                                                                                                                                                                         OPTI enjoys a relatively strong NAV of $27.10 (8%
B/d Net to OPC




                                                                                                                                                                                 $800

                  60,000                                                                                                                                                                                                 AT) because the Company is at the stage of becoming
                                                                                                                                                                                 $600
                                                                                                                                                                                                                         cash flow positive on Stage 1, and has done a good
                  40,000
                                                                                                                                                                                 $400
                                                                                                                                                                                                                         job capturing and evaluating future phases of
                                                                                                                                                                                                                         growth. OPTI’s $28.00 target price is based on a P/
                                                                                                                                                                                                                         NAV ratio of 103%.
                  20,000
                                                                                                                                                                                 $200



                      0                                                                                                                                                          $0
                                                                                                                                                                                                                         Based on a strong 32% implied return from current
                                                                                                                                                                                                                         levels, we maintain our Outperform ranking on OPTI.
                                         2007E

                                                 2009E

                                                         2011E

                                                                 2013E

                                                                         2015E

                                                                                 2017E

                                                                                         2019E

                                                                                                 2021E

                                                                                                         2023E

                                                                                                                 2025E

                                                                                                                         2027E

                                                                                                                                 2029E

                                                                                                                                         2031E

                                                                                                                                                 2033E

                                                                                                                                                         2035E

                                                                                                                                                                 2037E

                                                                                                                                                                         2039E
                           2003

                                  2005




Source: FirstEnergy Capital Corp.
 60         FirstQuarterly                    Integrated, Oil Sands and Large Cap E&P                                                              April 2007




 SYNENCO ENERGY INC.                                                                                                                                                                   SYN - $12.24
                                                                                                                                                                                               (as of April 20, 2007)
Year end Dec 31,                           2007e     2008e     2009e      2010e     2011e     2012e     Management & Directors
Production                                                                                              Management
Production, Net            Boe/d                0        0          0         0     22,500    60,000
Production per Share       Boe/Share           N/A      N/A        N/A       N/A       0.15      0.40   Michael A. Supple                                      Executive Chairman & CEO
                           %                   N/A      N/A        N/A       N/A        N/A   166.7%    Todd Newton                                            President & COO
Debt Adjusted PPS          Boe/Share           N/A      N/A        N/A       N/A       0.02      0.04
                                                                                                        Idar Eikrem                                            Executive Vice President & C.F.O.
                           %                   N/A      N/A        N/A       N/A        N/A   168.2%
                                                                                                        Steven F. Gilliland                                    Executive Vice President, Operations
Cash flow                  $Mm                 N/A      N/A        N/A       N/A        -$9     $471    Denise Hendrickson Weeres                              General Counsel & Corporate Secretary
CFPS                       Basic               N/A      N/A        N/A       N/A     -$0.18    $9.39
                           Diluted             N/A      N/A        N/A       N/A     -$0.17    $8.68    Bernard Lang                                           Executive Vice President, Engineering & Design
P/CF                       Basic               N/A      N/A        N/A       N/A       N/A       1.3    Edward Oke                                             Vice President, Human Resources
                           Diluted             N/A      N/A        N/A       N/A       N/A       1.4
                                                                                                        Chris Yellowega                                        Vice President, Upstream Operations
Earnings                   $Mm                 N/A      N/A        N/A       N/A       -$50     $246    Kent Hicks                                             Vice President, Downstream Operations
EPS                        Basic               N/A      N/A        N/A       N/A     -$1.00    $4.90    Nicolaas Duursema                                      Vice President, Project Design and Development
                           Diluted             N/A      N/A        N/A       N/A     -$1.00    $4.53
P/E                        Basic               N/A      N/A        N/A       N/A        N/A      2.5
                                                                                                        Patricia McCunn-Miller                                 Executive Vice President, Corporate Responsibility
                           Diluted             N/A      N/A        N/A       N/A        N/A      2.7
                                                                                                        Directors
Capital Data                                                                                            Michael Supple                                         Dan Klemke
Capex                      $Mm                $685   $1,000     $1,600    $2,200      $80        $80    Allan Burry                                            Robert Ladd
Capex vs. Cash Flow        %                   N/A      N/A        N/A       N/A -870.4%      17.0%
Exit Net Debt              $Mm                $378   $1,449     $3,196    $5,658   $5,747     $5,586    Wayne Brunetti                                         Roderick McLennan
Entry Debt/CF              Years               N/A      N/A        N/A       N/A   -615.6        12.2   John Cordeau                                           J. Sherrold Moore
Market Cap.                $Mm                $663     $663       $663      $663     $663       $663
                                                                                                        Patrick D. Daniel                                      Terence Poole
Enterprise Value           $Mm              $1,041   $2,112     $3,860    $6,321   $6,410     $6,250

Share Data
Basic shares               Mm                 50.1      50.1      50.1       50.1      50.1      50.1
Options                    Mm                  4.1       4.1       4.1        4.1       4.1       4.1
Warrants                   Mm                  0.0       0.0       0.0        0.0       0.0       0.0
Diluted shares             Mm                 54.2      54.2      54.2       54.2      54.2      54.2
Fully diluted shares       Mm                 50.1      50.1      50.1       50.1      50.1      50.1

Pricing
WTI                        $US              $66.04   $63.99     $62.00    $60.00    $57.00    $55.00
Oil                        $C wellhd           N/A     N/A        N/A       N/A     $64.08    $61.86
Exchange Rate              US$ / CDN$        $0.88    $0.91      $0.91     $0.90     $0.90     $0.90

Source: FirstEnergy Capital Corp. and Company Reports
                                                                                                                                                   Synenco Energy Inc. (TSX: SYN)
Year end Dec 31,                           2007e     2008e     2009e      2010e     2011e     2012e                                                       Statistical Review: 2004 - 2007
                                                                                                                              $30.00                                                                             2,000,000
Share Price Y/E                             $12.24   $12.24     $12.24    $12.24    $12.24    $12.24
                                                                                                                                                                                                                 1,800,000
Valuation Data                                                                                                                $25.00
                                                                                                                                                                                                                 1,600,000
DACFM                      x                   N/A      N/A        N/A       N/A     20.84      8.65




                                                                                                                                                                                                                             Daily Trading Volume
Target DACFM               x                   N/A      N/A        N/A       N/A     24.47     10.20
                                                                                                        Daily Closing Price




                                                                                                                                                                                                                 1,400,000
                                                                                                                              $20.00
EV/BOED                    $/Boed              N/A      N/A        N/A       N/A $284,892 $104,161                                                                                                               1,200,000
Target EV/BOED             $/Boed              N/A      N/A        N/A       N/A $303,583 $111,170
                                                                                                                              $15.00                                                                             1,000,000
EBITDA                     $Mm                 N/A      -$18      -$20      -$24      $276      $728
                                                                                                                                                                                                                 800,000
EV/EBITDA                  x                   N/A       N/A       N/A       N/A       23.2       8.6
P/NAV                      %                                                                                                  $10.00
                                                                                                                                                                                                                 600,000
Cash Flow Netback          $/Boed              N/A      N/A        N/A       N/A     -$1.12   $21.43
                                                                                                                                                                                                                 400,000
Pricing                                                                                                                        $5.00
WTI                        $US              $66.04   $63.99     $62.00    $60.00    $57.00    $55.00                                                                                                             200,000
Oil                        $C wellhd           N/A     N/A        N/A       N/A     $64.08    $61.86
                                                                                                                               $0.00                                                                             0
Exchange Rate              US$ / CDN$        $0.88    $0.91      $0.91     $0.90     $0.90     $0.90
                                                                                                                                       Jan-04
                                                                                                                                       Mar-04
                                                                                                                                       May-04
                                                                                                                                        Jul-04
                                                                                                                                       Sep-04
                                                                                                                                       Nov-04
                                                                                                                                       Jan-05
                                                                                                                                       Mar-05
                                                                                                                                       May-05
                                                                                                                                        Jul-05
                                                                                                                                       Sep-05
                                                                                                                                       Nov-05
                                                                                                                                       Jan-06
                                                                                                                                       Mar-06
                                                                                                                                       May-06
                                                                                                                                        Jul-06
                                                                                                                                       Sep-06
                                                                                                                                       Nov-06
                                                                                                                                       Jan-07
                                                                                                                                       Mar-07
                                                                                                                                       May-07
                                                                                                                                        Jul-07
                                                                                                                                       Sep-07
                                                                                                                                       Nov-07




Source: FirstEnergy Capital Corp. and Company Reports
Note: 2006 Net Asset Value is $11.71/share based on an 8% after-tax calculation

                                                                                                                                52 Week High:     $28.25   52 Week Low:       $11.35        Avg. Monthly Trading Volume
                                                                                                                                52 Week High On:  Feb-6-06 52 Week Low On:    Jan-18-07           423,310 Shares
                                                                                                                                Source: Bloomberg




                    Opinion: UNDERPERFORM
                12 MONTH TARGET PRICE $12.00
                 Analyst: Mark J. Friesen, CFA
              Associate: Darren B. Engels, CA, CFA
                                                                                                                                                                                                                                                                               61



                                                             SYN Areas of Interest                                                                                                                                        Corporate Profile
                                                                                                                                                                                                                            Synenco Energy is the Managing Partner and holds a
                                                                                                                                                                                                                            60% interest in the Northern Lights Partnership. The
                                                                                                                                                                                                                            Partnership was formed with Sinopec (40% WI), which
                                                              UTS/                                                               UTS/
                                                                                                                                                                                                                            is China’s largest refiner and marketer of petroleum
                                                              Teck                                                               Teck                                                                                       products.
                                                                                                                                                                                                                            The Northern Lights Project consists of a Mining and
                                                                                                                                                                                                                            Extraction Project, located north of Fort McMurray, and
                                                                                                                                                                                                                            an Upgrader Project that is located in Sturgeon County,
                                                                                       SHC
                                                                                                                        UTS/           UTS UTS
                                                                                                                                        VCI                                                                                 northeast of Edmonton.
                                                                                                                        Teck VCI SYN/Sinopec
                                                                              UTS/Teck

                                VCI
                                                                                                                        SYN
                                                                                                                                                                     SU
                                                                                                                                                                                                                          Corporate Developments
                                                                               SHC
                                                                                  PCA/                                                                                                                                      Synenco’s 2006/2007 winter drilling campaign con-
                                                                                  UTS/
                                                                                                                       SHC                               HSE                                                                sisted of drilling 174 core holes on the Northern Lights
                                                                                  Teck
                                                               CNQ                                                                        IMO                                                                               Partnership Lease and 63 core holes on the 100% owned
                                                                                       Syncrude
                                                                                        Aurora                             XOM                                                                                              McClelland Lease. Eight core holes were also drilled on
                                                             TOT                                SHC                                                                                                                         the NLP coal lease application. We expect the Company
                                                                                                                                          HSE
                                                         CNQ                                   Albian
                                                                                                                                                                                                                            to release results in the second half of 2007. At this
                                                                                                                                                                          SU Firebag
                                                                                                                                                                                                                            time, Synenco only noted that indications of mineable
                                                                                                       Syncrude                                                                                                             bitumen meet the Company’s physical cut-off param-
                                                                                                                                               IMO                                                                          eters in the southeastern area of the McClelland Lease.
                                             PCA                                                                                                                                                                            Synenco’s upstream plans call for one large 100,000 B/
                                                                                                                       SU                                                                                                   d project to start-up in mid-2011, which will be fabri-
                                                                                           SU
                                                                                                                                          PCA                                     ECA
                                                                                                                                                                                                                            cated with super-modules that are to be constructed
                                                                                                                                                                                                                            overseas with the objective of easing demand for Alberta
                    Alberta                                                                                     TLM
                                                                                                                                   XOM
                                                                                                                                                                                                                            labour.
                                                                                                                                                                                                                            Downstream plans are expected by mid-2007, and the
                                                             Fort McMurray                                                      VCI
                                                                                                                                               ECA                                                                          Partnership continues to target simultaneous start-up of
                                                                                                                                                                                                                            the mine and upgrader. Upgrading will target 45 to 49
                                                                                                                               IMO
                                                                                                                                                                  IMO                                                       degree API SCO, and as such, we have modeled in a
                                                                                                           VCI                                 TLM
                                                                                                                                                                                                                            premium price realization to Edmonton Par.
                                                                                                                               CNQ                               IMO              NAOS
                                                                                                                                                                                                                            Synenco’s upstream capital cost estimate is $4.4 billion.
Source: FirstEnergy Capital Corp.                                                                                                                                                                                           We forecast full project capital cost of $9.4 billion,
                                                                                                                                                                                                                            versus Synenco’s updated estimate of $8.0 billion. Our
                                                                                                                                                                                                                            total capital budget estimate implies that the down-
                                                                                                                                                                                                                            stream capital cost estimate will be increased from $3.6
                                                                                                                                                                                                                            billion to $5.0 billion. Our capital cost estimate of $9.4
                                                                                                                                                                                                                            billion assumes capital intensity of $94,000 per Boe/d of
                                         SYN's Expected Production Profile & Capital Expenditure Commitments
                                                                                                                                                                                                                            SCO, which is in line with the capital intensity of other
                   250,000
                                                                   Current - 2040E
                                                                                                                                                                                    $2,500                                  projects.

                   200,000                                                                                                                                                          $2,000                                Financial Outlook
                                                                                                                                                                                             Capital Expenditures ($Mm)




                                                                                                                                                                                                                            We have calculated Synenco’s NAV to be $11.71 per
  B/d Net to DCE




                   150,000                                                                                                                                                          $1,500
                                                                                                                                                                                                                            share (8%, AT), with the understanding that Synenco’s
                                                                                                                                                                                                                            NAV drops by 41% with the consideration of taxes
                   100,000                                                                                                                                                          $1,000
                                                                                                                                                                                                                            because Synenco is unable to rebuild tax pools with
                    50,000                                                                                                                                                          $500
                                                                                                                                                                                                                            only one stage of investment, has not captured other
                                                                                                                                                                                                                            resources, and lower netbacks are more challenged with
                        0                                                                                                                                                           $0                                      taxes.
                             2005E

                                     2007E

                                             2009E

                                                     2011E

                                                              2013E

                                                                      2015E

                                                                               2017E

                                                                                       2019E

                                                                                               2021E

                                                                                                       2023E

                                                                                                               2025E

                                                                                                                       2027E

                                                                                                                               2029E

                                                                                                                                       2031E

                                                                                                                                                2033E

                                                                                                                                                         2035E

                                                                                                                                                                  2037E

                                                                                                                                                                          2039E




                                      Stage I                Stage II             Stage III             Stage IV               Stage V                  Capital Expenditures
                                                                                                                                                                                                                          Investment Summary
                                                                                                                                                                                                                            Based on our updated calculation of NAV, we are
 Source: FirstEnergy Capital Corp.

                                                                                                                                                                                                                            reducing our target price of Synenco to $12.00, which is
                                                                                                                                                                                                                            still based on a 102% P/NAV ratio. With a low implied
                                                                                                                                                                                                                            return from current stock price levels and a concern of
                                                                                                                                                                                                                            excecution risks, we maintain an Underperform rating
                                                                                                                                                                                                                            on Synenco.
 62        FirstQuarterly                  Integrated, Oil Sands and Large Cap E&P                                                               April 2007




 UTS ENERGY CORPORATION                                                                                                                                                                           UTS - $4.55
                                                                                                                                                                                                    (as of April 20, 2007)
Year end Dec 31,                               2005a         2006a         2007e         2008e         Management & Directors
Production
                                                                                                       Management
Production, Net to UTS      Boe/d                   0            0             0               0
Production per Share        Boe/Share              N/A          N/A           N/A             N/A      Dennis A. Sharp                                        Executive Chairman
                            %                      N/A          N/A           N/A             N/A      Dr. William J. F. Roach                                President & CEO
Debt Adjusted PPS           Boe/Share              N/A          N/A           N/A             N/A      Wayne I. Bobye                                         Vice President & CFO
                            %                      N/A          N/A           N/A             N/A      Howard Lutley                                          Vice President, Mining and Extraction
                                                                                                       Martin Sandell                                         Vice President, Engineering
Cash flow                   $Mm                    N/A          N/A           N/A             N/A      Dr. Daryl M. Wightman                                  Vice President, Resource Development and Business Strategy
CFPS                        Basic                  N/A          N/A           N/A             N/A
                            Diluted                N/A          N/A           N/A             N/A
P/CF                        Basic                  N/A          N/A           N/A             N/A      Directors
                            Diluted                N/A          N/A           N/A             N/A
                                                                                                       Douglas D. Baldwin                                         Dr. William J. F. Roach
Earnings                    $Mm                    N/A          N/A           N/A             N/A      D. Campbell Deacon                                         Manfred Roth
EPS                         Basic                  N/A          N/A           N/A             N/A      Bruce C. Galloway                                          Dennis A. Sharp
                            Diluted                N/A          N/A           N/A             N/A      Dr. Marc Garneau                                           John D. Watson
P/E                         Basic                  N/A          N/A           N/A             N/A      Douglas H. Mitchell
                            Diluted                N/A          N/A           N/A             N/A
                                                                                                       Company: UTS Energy Corporation
Capital Data
Capex                       $Mm                   $12           $21           $21           $24
Capex vs. Cash Flow         %                     N/A           N/A           N/A           N/A
Exit Net Debt               $Mm                  -$39           $21           $48           $80
Entry Debt/CF               Years                 N/A           N/A           N/A           N/A
Market Cap.                 $Mm                $1,746        $1,957        $1,990        $1,990
Enterprise Value            $Mm                $1,707        $1,978        $2,038        $2,070

Share Data
Basic shares                Mm                   405.0        426.0         426.0         426.0
Options                     Mm                     2.0          2.0          11.4          11.4
Warrants                    Mm                     0.0          0.0           0.0           0.0
Diluted shares              Mm                   407.0        434.0         437.4         437.4
Fully diluted shares        Mm                   414.1        437.4         437.4         437.4

Pricing
WTI                         $US                $56.66        $66.26        $66.04        $63.99
Oil                         $C wellhd             N/A          N/A            N/A          N/A
Exchange Rate               US$ / CDN$          $0.83         $0.88         $0.88         $0.91




Year end Dec 31,                               2005a         2006a         2007e         2008e                                                  UTS Energy Corporation (TSX: UTS)
                                                                                                                                                              Statistical Review: 2004 - 2007
Net Asset Value                                  $7.72        $6.77
                                                                                                                          $9.00                                                                                        25,000,000
Share Price Y/E                                  $4.29         $4.51        $4.55         $4.55
                                                                                                                          $8.00

Valuation Data                                                                                                                                                                                                         20,000,000
                                                                                                                          $7.00




                                                                                                                                                                                                                                    Daily Trading Volume
DACFM                       x                      N/A          N/A           N/A             N/A
                                                                                                    Daily Closing Price




Target DACFM                x                      N/A          N/A           N/A             N/A                         $6.00
                                                                                                                                                                                                                       15,000,000
                                                                                                                          $5.00
EV/BOED                     $/Boed                 N/A          N/A           N/A             N/A
Target EV/BOED              $/Boed                 N/A          N/A           N/A             N/A                         $4.00
                                                                                                                                                                                                                       10,000,000
                                                                                                                          $3.00
EBITDA                      $Mm                    N/A          N/A           N/A             N/A
EV/EBITDA                   x                      N/A          N/A           N/A             N/A                         $2.00                                                                                        5,000,000
P/NAV                       %                     56%
Cash Flow Netback           $/Boed                 N/A          N/A           N/A             N/A                         $1.00

                                                                                                                          $0.00                                                                                        0
Pricing
                                                                                                                                  Jan-04
                                                                                                                                  Mar-04
                                                                                                                                           May-04
                                                                                                                                            Jul-04
                                                                                                                                           Sep-04
                                                                                                                                           Nov-04
                                                                                                                                                     Jan-05
                                                                                                                                                     Mar-05
                                                                                                                                                              May-05
                                                                                                                                                               Jul-05
                                                                                                                                                                        Sep-05
                                                                                                                                                                        Nov-05
                                                                                                                                                                        Jan-06
                                                                                                                                                                        Mar-06
                                                                                                                                                                        May-06
                                                                                                                                                                         Jul-06
                                                                                                                                                                                      Sep-06
                                                                                                                                                                                               Nov-06
                                                                                                                                                                                               Jan-07
                                                                                                                                                                                               Mar-07
                                                                                                                                                                                               May-07
                                                                                                                                                                                                Jul-07
                                                                                                                                                                                               Sep-07
                                                                                                                                                                                                              Nov-07




WTI                         $US                $56.66        $66.26        $66.04        $63.99
Oil                         $C wellhd             N/A          N/A            N/A          N/A
Exchange Rate               US$ / CDN$          $0.83         $0.88         $0.88         $0.91
                                                                                                                            52 Week High:        $7.48         52 Week Low:       $3.49         Avg. Monthly Trading Volume
Note: 2005 Net Asset Value is 8% pre-tax on Fort Hills & resource value and is based on our                                 52 Week High On:     Apr-21-06 52 Week Low On:        Oct-3-06           3,586,069 Shares
                                                                                                                            Source: Bloomberg
current commodity price outlook.
Note: 2006 Net Asset Value is 8% after-tax on Fort Hills & resource value.
Source: FirstEnergy Capital Corp. and Company Reports




                       Opinion: TOP PICK
                 12 MONTH TARGET PRICE $6.50
                Analyst: Mark J. Friesen, CFA
             Associate: Darren B. Engels, CA, CFA
                                                                                                                                                                                                                                                                                 63



                                                           UTS Areas of Interest                                                                                                                                           Corporate Profile
                                                                                                                                                                                                                             UTS holds 30% on the Fort Hills leases with its part-
                                                                                                                                                                                                                             ners, Petro-Canada (55% WI) and TeckCominco or Teck
                                                                                                                                                                                                                             (15%). UTS owns Lease 14 and several other leases on
                                                              UTS/                                                            UTS/                                                                                           both sides of the Athabasca River with Teck in a 50/50
                                                              Teck                                                            Teck                                                                                           partnership.
                                                                                                                                                                                                                             The Fort Hills Lease has estimated recoverable reserves
                                                                                                                                                                                                                             of 4.7 billion barrels (gross). Lease 14 has estimated
                                                                                     SHC
                                                                                                                                                                                                                             recoverable reserves of 0.4 billion barrels (gross).
                                                                                                                      UTS/           UTS UTS
                                                                                                                                      VCI
                                                                                                                      Teck VCI SYN/Sinopec                                                                                 Operational Update
                                                                          UTS/Teck                                                          SYN/
                                                                                                                                           Sinopec
                                                                                                                                                                                                                             Fort Hills:- The partners are in the final stages of
                                                                                                                     SYN
                                   VCI                                        SHC                                                                               SU                                                           considering the scope, and therefore, costs of Stage I at
                                                                                 PCA/
                                                                                 UTS/
                                                                                                                                                                                                                             Fort Hills. Large projects have the advantage of econo-
                                                                                                                                                     HSE
                                                                                 Teck                             SHC                                                                                                        mies of scale, while smaller stages have the advantage
                                                                                                                                           IMO
                                                                  CNQ
                                                                                      Syncrude
                                                                                                                                                                                                                             of more manageable project execution. Stage I could
                                                                                       Aurora                             XOM
                                                                                                                                                                                                                             range between 100,000-170,000 B/d of bitumen produc-
                                                          TOT                                 SHC
                                                          CNQ                                Albian                                    HSE                                                                                   tion. We expect to see how the partners expect to strike
                                                                                                                                                                                                                             the appropriate balance by mid-year.
                                                                                                                                                                     SU Firebag                                              Lease 14:- Teck Cominco has acquired a 50% WI in
                                                                                                  Syncrude
                                                                                                                                           IMO
                                                                                                                                                                                                                             Lease 14. The transaction has an agreed value of
                                                                                                                                                                                                                             $1.00/Bbl of resource. Based on the best estimate of
                                          PCA
                                                                                                                  SU
                                                                                                                                                                                                                             resources on Lease 14 at this time, the transaction value
                                                                                          SU                                                                                                                                 has been set at $200 Mm for a 50% stake. Following the
                                                                                                                                           PCA                               ECA
                                                                                                                                                                                                                             completed core hole analysis of the lease, the value of
                                                                                                              TLM
                                                                                                                                                                                                                             the transaction will be adjusted either upward or
                     Alberta
                                                                                                                                  XOM                                                                                        downward accordingly within a range of $300-500
                                                           Fort McMurray                                                     VCI
                                                                                                                                                                                                                             Mm. We expect the transaction to close and any
                                                                                                                                            ECA                                                                              necessary adjustment to take place before year-end.
                                                                                                                                                                                                                             Other Exploration Leases:- Formal results from this
                                                                                                                                                              IMO
                                                                                                          VCI
                                                                                                                          IMO
                                                                                                                                           TLM                                                                               past winter’s drilling program are expected in Q3/07
                                                                                                                          CNQ                                IMO             NAOS                                            but preliminary comments have led us to estimate that
                                                                                                                                                                                                                             perhaps the greater Lease 311 area could contain 2.0-3.5
Source: FirstEnergy Capital Corp.
                                                                                                                                                                                                                             billion barrels (gross) of resource. We would not expect
                                                                                                                                                                                                                             to have a formal third party contingent resource
                                                                                                                                                                                                                             estimate for this area until the second half of 2008.
                                                                                                                                                                                                                             The partners are planning another 400 core holes next
                                                                                                                                                                                                                             winter, however, the core hole program may be in-
                                                                                                                                                                                                                             creased further to evaluate possible in-situ opportuni-
                                         UTS's Expected Production Profile & Capital Expenditure                                                                                                                             ties on its leases.
                                                     Commitments Current - 2040E
                 100,000                                                                                                                                                             $2,500
                                                                                                                                                                                                                           Financial Outlook
                  90,000
                                                                                                                                                                                                                             Following the Lease 14 transaction, UTS has no remain-
                  80,000                                                                                                                                                             $2,000
                                                                                                                                                                                                                             ing liability outstanding to Teck and the Company’s
                  70,000
                                                                                                                                                                                                                             share of the exploration and delineation program is
                                                                                                                                                                                              Capital Expenditures ($Mm)




                  60,000                                                                                                                                                             $1,500
B/d Net to DCE




                                                                                                                                                                                                                             essentially funded for the next few years, dramatically
                  50,000

                  40,000                                                                                                                                                             $1,000
                                                                                                                                                                                                                             reducing the concern of dilution to shareholders.
                  30,000                                                                                                                                                                                                   Investment Summary
                  20,000                                                                                                                                                             $500                                    UTS has done the best job in the peer group of creating
                  10,000                                                                                                                                                                                                     value outside of its key project, thus largely offsetting
                      0                                                                                                                                                              $0
                                                                                                                                                                                                                             the impact of shifting our valuation approach from a
                                         2008E

                                                  2010E

                                                          2012E

                                                                  2014E

                                                                          2016E

                                                                                  2018E

                                                                                          2020E

                                                                                                  2022E

                                                                                                          2024E

                                                                                                                  2026E

                                                                                                                          2028E

                                                                                                                                   2030E

                                                                                                                                             2032E

                                                                                                                                                     2034E

                                                                                                                                                             2036E

                                                                                                                                                                     2038E

                                                                                                                                                                             2040E
                           2004

                                  2006




                                                                                                                                                                                                                             pre-tax basis to an after-tax basis.
                                                 Stage I                                  Stage II                                  Capital Expenditures                                                                     We acknowledge the risk associated with assigning
Source: FirstEnergy Capital Corp.
                                                                                                                                                                                                                             value to the Lease 311 area but shareholders should
                                                                                                                                                                                                                             also be aware of the attractive upside potential pro-
                                                                                                                                                                                                                             vided within UTS at this stage.
                                                                                                                                                                                                                             We rate UTS as a Top Pick with a $6.50 target price.
64       FirstQuarterly                Integrated, Oil Sands and Large Cap E&P                                                                April 2007




WESTERN OIL SANDS INC.                                                                                                                                                                    WTO - $35.36
                                                                                                                                                                                                    (as of April 20, 2007)
Year end Dec 31,                            2005a       2006a       2007e       2008e    Quarterly Information                                                             2005a               2006a          2007e             2008e

Production
Production, Net to WTO     Boe/d            31,994      27,500     34,000      38,000    AOSP - B/d                                                       Q1              132,515             129,725       170,000           190,000
Production per Share       Boe/Share           0.1         0.1        0.1         0.1    Production                                                       Q2              163,785              77,700       170,000           190,000
                           %                 15.2%      -15.0%      23.3%       11.8%                                                                     Q3              165,170             164,180       170,000           190,000
Debt Adjusted PPS          Boe/Share           0.1         0.1        0.1         0.1                                                                     Q4              177,860             177,575       170,000           190,000
                           %                 40.5%      -14.0%      16.7%        1.6%                                                                    Avg.             159,971             137,500       170,000           190,000

Cash flow                  $Mm                $244       $228        $438        $474    Production - B/d                                                 Q1               26,503              25,945        34,000            38,000
                                                                                         Net to WTO                                                       Q2               32,757              15,540        34,000            38,000
CFPS                       Basic              $1.52      $1.42       $2.71       $2.94
                                                                                                                                                          Q3               33,034              32,836        34,000            38,000
                           Diluted            $1.49      $1.39       $2.65       $2.87
                                                                                                                                                          Q4               35,572              35,515        34,000            38,000
P/CF                       Basic               23.2       24.9        13.0        12.0
                                                                                                                                                         Avg.              31,994              27,500        34,000            38,000
                           Diluted             23.7       25.5        13.3        12.3
                                                                                         CFPS - $/Share                                                   Q1                $0.07               $0.29          $0.55               $0.78
Earnings                   $Mm                $149         $63       $246        $260                                                                     Q2                $0.42              ($0.13)         $0.72               $0.78
EPS                        Basic              $0.93      $0.61       $1.52       $1.61                                                                    Q3                $0.58               $0.67          $0.71               $0.69
                           Diluted            $0.92      $0.39       $1.49       $1.57                                                                    Q4                $0.43               $0.55          $0.67               $0.62
P/E                        Basic               38.0       57.9        23.2        22.0                                                                   Total              $1.49               $1.39          $2.65               $2.87
                           Diluted             38.4       90.7        23.8        22.5
                                                                                         EPS - $/Share                                                    Q1               ($0.01)             ($0.13)         $0.29               $0.43
Capital Data                                                                                                                                              Q2                $0.18              ($0.14)         $0.40               $0.43
Capex                      $Mm                 $69        $301       $714       $1,014                                                                    Q3                $0.49               $0.52          $0.41               $0.38
Capex vs. Cash Flow        %                28.4%       131.9%     163.1%      213.7%                                                                     Q4                $0.27               $0.17          $0.38               $0.33
Exit Net Debt              $Mm               $547         $632      $1,142      $1,928                                                                   Total              $0.92               $0.39          $1.49               $1.57
Entry Debt/CF              Years               3.1          2.4        1.4         2.4
Market Cap.                $Mm              $4,557       $5,402     $5,839      $5,839   Note: CFPS and EPS are calculated on a diluted basis.
Enterprise Value           $Mm              $5,104       $6,034     $6,982      $7,767   Source: FirstEnergy Capital Corp. and Company Reports

Share Data
Basic shares               Mm                160.5       161.4       161.4       161.4
Options                    Mm                  3.5         3.8         3.8         3.8                                                        2007E Operating Costs $/Bbl
Warrants                   Mm                  0.0         0.0         0.0         0.0
Diluted shares             Mm                164.0       165.1       165.1       165.1                                                                                                                         Upgrading:
                                                                                                                 Other Extraction                                                                           Natural Gas Cost
Fully diluted shares       Mm                164.0       165.1       165.1       165.1
                                                                                                                  Costs / Bbl                                                                                     / Bbl
Pricing
WTI                        $US              $56.66      $66.26      $66.04      $63.99
Oil                        $C wellhd        $57.22      $60.55      $63.48      $60.02
Exchange Rate              US$ / CDN$        $0.83       $0.88       $0.88       $0.91




Year end Dec 31,                            2005a       2006a       2007e       2008e

Net Asset Value                             $56.28      $42.54                                                                                                                                                  Other
                                                                                                                  Mine & Extract:                                                                         Upgrading Costs /
                                                                                                                 Natural Gas Cost                                                                               Bbl
Share Price Y/E                             $27.78      $32.71      $35.36      $35.36                                 / Bbl

Valuation Data
DACFM                      x                  22.0        23.6        14.3        14.2
Target DACFM               x                  24.6        26.4        15.8        15.6

EV/BOED                    $/Boed         $159,532    $219,404    $205,346    $204,402                                                        Western Oil Sands Inc. (TSX: WTO)
Target EV/BOED             $/Boed         $222,189    $263,181    $227,883    $224,567                                                                 Statistical Review: 2004 - 2007

EBITDA                     $Mm               $307        $265        $506        $566                            $40.00                                                                                                  3,000,000
EV/EBITDA                  x                  16.6        22.8        13.8        13.7
                                                                                                                 $35.00
Cash Flow Netback          $/Boed           $19.01      $22.76      $35.06      $32.04                                                                                                                                   2,500,000
                                                                                                                 $30.00
                                                                                                                                                                                                                                     Daily Trading Volume
                                                                                           Daily Closing Price




Source: FirstEnergy Capital Corp. and Company Reports
                                                                                                                                                                                                                         2,000,000
Note: 2005 Net Asset Value is 8% pre-tax on Muskeg River & resource value and is based                           $25.00
on our current commodity price outlook.
                                                                                                                 $20.00                                                                                                  1,500,000
Note: 2006 Net Asset Value is 8% after-tax on Muskeg River & resource value.
                                                                                                                 $15.00
                                                                                                                                                                                                                         1,000,000
                                                                                                                 $10.00
                                                                                                                                                                                                                         500,000
                                                                                                                  $5.00

                                                                                                                  $0.00                                                                                                  0
                Opinion: MARKET PERFORM
                                                                                                                          Jan-04
                                                                                                                          Mar-04
                                                                                                                                   May-04
                                                                                                                                    Jul-04
                                                                                                                                             Sep-04
                                                                                                                                             Nov-04
                                                                                                                                             Jan-05
                                                                                                                                             Mar-05
                                                                                                                                                       May-05
                                                                                                                                                        Jul-05
                                                                                                                                                                 Sep-05
                                                                                                                                                                 Nov-05
                                                                                                                                                                          Jan-06
                                                                                                                                                                          Mar-06
                                                                                                                                                                          May-06
                                                                                                                                                                           Jul-06
                                                                                                                                                                                     Sep-06
                                                                                                                                                                                              Nov-06
                                                                                                                                                                                              Jan-07
                                                                                                                                                                                              Mar-07
                                                                                                                                                                                              May-07
                                                                                                                                                                                               Jul-07
                                                                                                                                                                                              Sep-07
                                                                                                                                                                                                                Nov-07




             12 MONTH TARGET PRICE $40.00
               Analyst: Mark J. Friesen, CFA                                                                       52 Week High:              $37.44   52 Week Low:             $24.90          Avg. Monthly Trading Volume
            Associate: Darren B. Engels, CA, CFA                                                                   52 Week High On:           Apr-21-06 52 Week Low On:         Jul-13-06             645,238 Shares
                                                                                                                   Source: Bloomberg
                                                                                                                                                                                                                                                                                65



                             Western Oil Sands Area of Interest                                                                                                                                                            Corporate Profile
                                                                                                                                                                                                                             Western Oil Sands owns a 20% WI in Lease 13
                                                                                                                                                                                                                             (Muskeg River). Western’s partners include Shell
                                                                                                                                                                                                                             Canada (60%) and Chevron Canada (20%). Western
                                                            UTS/                                                            UTS/
                                                                                                                                                                                                                             holds a 20% WI in Chevron’s Ells River in-situ project.
                                                            Teck                                                            Teck
                                                                                                                                                                                                                           Operational Update
                                                                                                                                                                                                                             The AOSP Partners recently announced updated
                                                                                    SHC
                                                                                                                                                                                                                             plans for future growth that were larger than antici-
                                                                                                                    UTS/           UTS UTS
                                                                                                                                    VCI                                                                                      pated. The Partners have outlined production growth
                                                                                                                    Teck VCI SYN/Sinopec
                                                                      UTS/Teck                                                        SYN/
                                                                                                                                                                                                                             up to 770,000 B/d (154,000 B/d net to WTO), up from
                              VCI
                                                                            SHC
                                                                                                                    SYN
                                                                                                                                     Sinopec
                                                                                                                                                             SU                                                              previous plans of 500,000 B/d (100,000 B/d net to
                                                                               PCA/                                                                                                                                          WTO). Future growth contemplates five expansions -
                                                                               UTS/
                                                                                                              SHC                                HSE                                                                         Jackpine Mine (Expansions 1-3) and Pierre River Mine
                                                                               Teck
                                                            CNQ                                                                      IMO                                                                                     (Expansions 4 and 5), which is west of the Athabasca
                                                                                    Syncrude
                                                                                     Aurora                         XOM                                                                                                      river on leases 9 and 17. The longer term plans are
                                                      TOT                   SHC/WTO/Chevron                                                                                                                                  viewed positively; however, more details are needed
                                                                                                                                     HSE
                                                      CNQ                     Texaco Albian
                                                                                                                                                                                                                             before meaningful value can be attributed to the Pierre
                                                                                                                                                                 SU Firebag
                                                                                                                                                                                                                             River Mine.
                                                                                                Syncrude                                                                                                                     With approval of Expansion 1, 100,000 B/d of addi-
                                                                                                                                      IMO                                                                                    tional volumes at an estimated capital cost of $11.2
                                       PCA                                                                                                                                                                                   billion (20% net to WTO), Western was able to in-
                                                                                                              SU                                                                                                             crease its P+P reserves by 86% to 477 MmBbls. The
                                                                                     SU
                                                                                                                                     PCA                                 ECA                                                 best case estimate of contingent resources is 891
                                                                                                                                                                                                                             MmBbls. First production from the expansion is
                     Alberta                                                                                TLM
                                                                                                                             XOM
                                                                                                                                                                                                                             expected in 2010.
                                                                                                                                                                                                                             The Partners plan on drilling ~2,500 core holes to
                                                       Fort McMurray                                                        VCI
                                                                                                                                       ECA                                                                                   delineate the AOSP leases over the next five years. On
                                                                                                                                                                                                                             in-situ lands this past winter, ~20 core holes will be
                                                                                                                      IMO
                                                                                                                                                             IMO                                                             drilled on the Western operated lease and 80 to 100
                                                                                                                                      TLM
                                                                                                     VCI
                                                                                                                                                                                                                             core holes will be drilled on the Chevron operated Ells
                                                                                                                                                                       NAOS
                                                                                                                     CNQ                             IMO
                                                                                                                                                                                                                             River lease.
Source: FirstEnergy Capital Corp.                                                                                                                                                                                            In Kurdistan, the regional government has ratified the
                                                                                                                                                                                                                             necessary Exploration and Production Sharing
                                                                                                                                                                                                                             Agreement (EPSA), covering an area of ~524,000 acres.
                                                                                                                                                                                                                             The Iraqi Oil Law is expected to receive final approval
                                                                                                                                                                                                                             in May 2007; however, we would not be surprised if
                                                                                                                                                                                                                             the deadline is not met as the regional governments
                                                                                                                                                                                                                             continue to negotiate terms. We have assigned no
                                                                                                                                                                                                                             value to the Kurdistan opportunity, as we await
                                                     Western Oil Sands Expected Production Profile                                                                                                                           additional clarity of financial terms, timing and
                                                                    Current - 2040E
                   120,000                                                                                                                                                            1,200
                                                                                                                                                                                                                             impact of possible first production. The exploration
                                                                                                                                                                                                                             license held by Western is estimated to have a risk
                   100,000                                                                                                                                                            1,000
                                                                                                                                                                                                                             adjusted resource potential of 1.7 billion Boe.
                                                                                                                                                                                              Capital Expenditures - $Mm




                    80,000                                                                                                                                                            800
  B/d Net to WTO




                    60,000                                                                                                                                                            600
                                                                                                                                                                                                                           Financial Outlook
                                                                                                                                                                                                                             We calculate Western’s NAV to be $42.52 (8% AT); the
                    40,000                                                                                                                                                            400
                                                                                                                                                                                                                             consideration of taxes decreases NAV by 11%. The
                    20,000                                                                                                                                                            200                                    tax impact is relatively small as Western is already
                        0                                                                                                                                                             0
                                                                                                                                                                                                                             generating production and cash flow.
                                           2007E
                                                    2009E
                                                            2011E
                                                                    2013E
                                                                            2015E
                                                                                    2017E
                                                                                            2019E
                                                                                                    2021E
                                                                                                            2023E
                                                                                                                    2025E
                                                                                                                             2027E
                                                                                                                                     2029E
                                                                                                                                             2031E
                                                                                                                                                     2033E
                                                                                                                                                              2035E
                                                                                                                                                                      2037E
                                                                                                                                                                              2039E
                             2003
                                    2005




                                                                                                                                                                                                                           Investment Summary
                                                   Muskeg River
                                                   Muskeg River Expansion
                                                                                                                        Muskeg River Debottlenecking
                                                                                                                        Jackpine Phase I
                                                                                                                                                                                                                             We maintain our target price of $40.00 per share,
       Source: FirstEnergy Capital Corp.
                                                   Jackpine Phase II                                                    Capital Expenditures
                                                                                                                                                                                                                             which represents only 94% of our calculation of 2006
                                                                                                                                                                                                                             all-in AT NAV (8%). Based on an implied return of
                                                                                                                                                                                                                             15% from current market levels, we maintain a Market
                                                                                                                                                                                                                             Perform ranking on Western Oil Sands.
66   FirstQuarterly    Integrated, Oil Sands and Large Cap E&P   April 2007




                      THIS PAGE INTENTIONALLY LEFT BLANK.
                                                           67




 Anadarko Petroleum Corporation - APC
        Apache Corporation - APA           Corporate
Canadian Natural Resources Limited - CNQ
    Devon Energy Corporation - DVN
       EnCana Corporation - ECA
                                           Updates -
       EOG Resources, Inc. - EOG
   Newfield Exploration Company - NFX
                                           Large Cap E&P
            Nexen Inc. - NXY
     Pogo Producing Company - PPP
       Talisman Energy Inc. - TLM
 68      FirstQuarterly               Integrated, Oil Sands and Large Cap E&P                                                          April 2007



 ANADARKO PETROLEUM
 CORPORATION                                                                                                                                                        APC - US$46.22
                                                                                                                                                                                     (as of April 20, 2007)
Year end Dec 31,                            2005a        2006a      2007e      2008e    Quarterly Information                                                      2005a          2006a         2007e           2008e

Production
Oil & Liquids            B/D               198,951      236,066    226,930    221,500   Oil & - B/d                                                 Q1          213,000        191,000        241,500       221,500
Gas                      Mmcf/D              1,414        1,597      1,517      1,640   Liquids                                                     Q2          189,000        210,000        223,500       221,500
TOTAL                    BOE/D             434,572      502,170    479,830    494,833                                                               Q3          196,000        248,000        221,500       221,500
Production per Share     BOE/Share             0.3           0.4        0.4       0.4                                                               Q4          198,000        294,000        221,500       221,500
                         %                  -11.8%        18.3%      -4.6%       3.1%                                                               Avg.        198,951        236,066        226,930       221,500
Debt Adjusted PPS        BOE/Share             0.3           0.3        0.2       0.2
                         %                    1.7%       -14.4%     -26.0%       2.6%   Gas - Mmcf/d                                                Q1             1,454           1,366         1,600           1,640
                                                                                                                                                    Q2             1,434           1,091         1,390           1,640
Cash flow                $MM                 4,424        5,078      4,341     4,729                                                                Q3             1,382           1,693         1,440           1,640
CFPS                     Basic               $9.41       $11.03      $9.40    $10.24                                                                Q4             1,386           2,226         1,640           1,640
                         Diluted             $9.32       $10.96      $9.36    $10.19                                                                Avg.           1,414           1,597         1,517           1,640
P/CF                     Basic                 5.0           3.9        4.9      4.5
                         Diluted               5.1           4.0        4.9      4.5    Boe/d                                                       Q1          455,333        418,667        508,167       494,833
                                                                                                                                                    Q2          428,000        391,833        455,167       494,833
Earnings                 $MM                 2,472        2,892      1,707     1,880                                                                Q3          426,333        530,167        461,500       494,833
EPS                      Basic               $5.25       $10.21      $3.69     $4.07                                                                Q4          429,000        665,000        494,833       494,833
                         Diluted             $5.20       $10.14      $3.68     $4.05                                                                Avg.        434,572        502,170        479,830       494,833
P/E                      Basic                 9.0           4.3      12.5      11.4
                         Diluted                                      12.6      11.4    CFPS - $/Share                                               Q1            $1.87           $2.56         $1.94           $2.63
                                                                                                                                                     Q2            $1.95           $2.26         $2.23           $2.48
Capital Data                                                                                                                                         Q3            $2.12           $2.41         $2.50           $2.56
Capex                    $MM                 3,251       15,564      2,140     4,800                                                                 Q4            $3.40           $3.73         $2.69           $5.11
Capex vs. Cash Flow      %                   73.5%       306.5%      49.3%    101.5%                                                                Total          $9.32          $10.96         $9.36          $10.19
Exit Net Debt            $MM                 3,006       23,664     22,016    22,670
Entry Debt/CF            Years                 0.7           0.6        5.5      4.7    EPS - $/Share                      Q1          $1.02                                       $2.84         $0.55           $1.09
Market Cap.              $MM                22,172       20,193     21,446    21,446                                       Q2          $2.12                                       $1.43         $0.89           $0.96
                                                                                                                           Q3          $2.51                                       $3.15         $1.07           $1.02
Share Data                                                                                                                 Q4          $3.73                                       $4.13         $1.16           $2.05
Basic shares             MM                  464.0        462.0      462.0     462.0                                      Total        $5.20                                      $10.14         $3.68           $4.05
Diluted shares           MM                  468.0        464.0      464.0     464.0    Note: CFPS and EPS are calculated on a diluted basis.

Pricing
WTI                      -   $US            $56.66       $66.26     $66.00    $64.00
Henry Hub                -   $US             $8.86        $6.78      $8.25     $8.50
Oil                      -   $US wellhd     $47.86       $56.67     $57.25    $55.28
Gas                      -   $US wellhd      $7.56        $6.39      $7.06     $7.30
Exchange Rate            -   US$ / CDN$       0.83         0.88       0.88      0.91




Year end Dec 31,                            2005a        2006a      2007e      2008e                                          Anadarko Petroleum Corporation (NYSE: APC)
                                                                                                                                                Statistical Review: 2004 - 2007
Net Asset Value                              $51.26      $51.25
                                                                                                                $70.00                                                                                35,000,000
Share Price Y/E                              $47.38      $43.52
                                                                                                                $60.00                                                                                30,000,000
Valuation Data
DACFM                    X                     5.4          7.7        7.8       7.5
                                                                                                                                                                                                                   Daily Trading Volume
                                                                                                                $50.00                                                                                25,000,000
                                                                                          Daily Closing Price




Target DACFM             X                                             8.1       7.7
                                                                                                                $40.00                                                                                20,000,000
EV/BOED                  $/BOED             57,936       87,335     90,578    89,153
Target EV/BOED           $/BOED                                     93,266    91,760                            $30.00                                                                                15,000,000

EBITDA                   $MM                 5,995        7,907      5,888     6,384
                                                                                                                $20.00                                                                                10,000,000
EV/EBITDA                X                     4.2           5.5        7.4      6.9
P/NAV                    X                     0.9           0.8
                                                                                                                $10.00                                                                                5,000,000
Cash flow netback        $/BOED             $24.38       $29.04     $23.11    $24.32
                                                                                                                 $0.00                                                                                0
                                                                                                                         Jan-04
                                                                                                                         Mar-04
                                                                                                                         May-04
                                                                                                                          Jul-04
                                                                                                                         Sep-04
                                                                                                                         Nov-04
                                                                                                                         Jan-05
                                                                                                                         Mar-05
                                                                                                                         May-05
                                                                                                                          Jul-05
                                                                                                                         Sep-05
                                                                                                                         Nov-05
                                                                                                                         Jan-06
                                                                                                                         Mar-06
                                                                                                                         May-06
                                                                                                                          Jul-06
                                                                                                                         Sep-06
                                                                                                                                                                             Nov-06
                                                                                                                                                                             Jan-07
                                                                                                                                                                             Mar-07
                                                                                                                                                                             May-07
                                                                                                                                                                              Jul-07
                                                                                                                                                                             Sep-07
                                                                                                                                                                             Nov-07




Source: FirstEnergy Capital Corp. and Company Reports


                                                                                                                   52 Week High:       $56.62    52 Week Low:       $38.63        Avg. Monthly Trading Volume
                                                                                                                   52 Week High On:    Apr-21-06 52 Week Low On:    Mar-5-07           5,246,584 Shares
                                                                                                                   Source: Bloomberg




                Opinion: UNDERPERFORM
            12 MONTH TARGET PRICE US$49.00
                    Analyst: Mark J. Friesen, CFA
                                                                                                                                                                               69


FD&A Costs                                                       2004a      2005a           2006a           3-Yr. Avg.   Corporate Profile
                                                                                                                           Anadarko Petroleum has a domestic operational
FD&A (Proven)                                                $13.54        $13.24           $41.14           $33.54
                                                                                                                           focus in core areas extending from the deep water
Cash Flow Netback                                            $18.13        $27.99           $26.05           $23.82
                                                                                                                           Gulf of Mexico through Texas, the Mid-Continent,
Recycle Ratio (Proven)                                            1.3        2.1             0.6               0.7
                                                                                                                           and the Rockies. Anadarko also has production on
                                                                                                                           the North Slope of Alaska with exploration licenses
Reserves
                                                                                                                           in northern Alaska.
Oil & Liquids                                                                                                              Internationally, Anadarko has production in Algeria,
Proven Reserves (MMbbls)                                         1113.0     1130.0          1264.0                         Venezuela, and China.
Production (B/d)                                             231,495       198,951        236,066                        Operational Update
Proven RLI (Years)                                                13.7       15.6            11.8              13.7        Anadarko has been actively divesting assets after
Proven Reserve Repl. %                                           -33%       124%            256%               116%        acquiring Kerr-McGee and Western Gas Resources
Natural Gas                                                                                                                last summer.
Proven Reserves (Bcf)                                            7,528      7,910           10,486                         Most recently, Anadarko reduced its interest in the
Production (Mmcf/d)                                               1741       1414            1597                          K2 project by 23.2%, and sold properties in Montana,
Proven RLI (Years)                                                12.6       15.6            12.9              13.7        Oklahoma, and Texas for pre-tax proceeds of over
Proven Reserve Repl. %                                            69%       174%            500%               254%        US$3.2 billion.
Note: Reserves are net of royalties                                                                                        The Company sold its onshore Louisiana assets,
FD&A and Netbacks in US$ and exclude changes in Future Development Costs                                                   Permian Basin assets, & Wyoming oilfield assets. In
                                                                                                                           total, these assets represented roughly 48,350 net
                                                                                                                           Boe/d production and 167.8 MmBoe reserves (net
                                                                                                                           Proven) for proceeds of US$3.0 billion. Anadarko
                                                                                                                           also sold some Gulf of Mexico interests for proceeds
                                            Cashflow Netback Peer Comparison                                               totaling US$2.25 billion, and swapped its Arctic
        $40.00
                                                                                                                           assets with Chevron for additional Gulf of Mexico
                                    APC
                                    Large Cap Average                                                                      interests.
                                                                                                                           Anadarko has announced over US$14 billion in asset
        $30.00

                                                  $29.04
                                                                                                                           sales (~$10 billion after-tax) since the Kerr-McGee
                                                                                   $28.18
                                        $25.48
                                                            $27.16                                          $27.34         acquisition proceeds are now within the targeted
                        $24.38
                                                                          $23.11
                                                                                                   $24.32
                                                                                                                           range of $13-$15 billion but more divestitures are
$/Boe




        $20.00
                                                                                                                           possible, as the Company targets net debt of around
                                                                                                                           $10 billion by year-end.
        $10.00
                                                                                                                           Anadarko believes that post acquisition and divesti-
                                                                                                                           ture, it will have grown its captured resource oppor-
                                                                                                                           tunities three-fold.
         $0.00
                                 2005                     2006                2007e                    2008e
                                                                                                                         Financial Outlook
        Source: FirstEnergy Capital Corp.
                                                                                                                           With a current D/CF ratio of 5.5x, Anadarko has by
                                                                                                                           far the most levered balance sheet in our universe.
                                                                                                                           Presuming all planned and announced asset sales
                                                                                                                           occur, this ratio could be cut in half by year-end.
                                                                                                                         Investment Summary
                    2007/2008 Current and Target DACFM Peer Comparison                                                     Potential upside to Anadarko’s share price will be
        10.0
                                                                                                                           driven by: integration of the acquired assets, debt
                         APC                                                                                               reduction through asset dispositions, exploration
                         Large Cap Average
                                                                                                                           success in the Gulf of Mexico and the growth of the
          8.0
                           7.8
                                                    8.1
                                                                                                     7.7
                                                                                                                           Company’s core development areas (i.e. Powder
                                                                           7.5
                                                                                                                           River Basin).
                                                                 6.7
          6.0                                                                                                6.4           We do not expect the stock to show relative strength
DACFM




                                         5.9                                        5.7
                                                                                                                           until the balance sheet is repaired, the possible equity
          4.0                                                                                                              overhang has been addressed, and certainty can be
                                                                                                                           modeled into per share numbers.
          2.0
                                                                                                                           We rank Anadarko as Underperform. Our 12 month
                                                                                                                           target price of US$49.00 is based on a 8.1x 2007e
                                                                                                                           DACFM.
          0.0
                          07e DACFM                2007 Target             08e DACFM               2008 Target
    Source: FirstEnergy Capital Corp.
70      FirstQuarterly           Integrated, Oil Sands and Large Cap E&P                                                    April 2007




 APACHE CORPORATION                                                                                                                                       APA - US$75.08
                                                                                                                                                                           (as of April 20, 2007)
Year end Dec 31,                       2005a    2006a     2007e     2008e     Quarterly Information                                                        2005a          2006a        2007e          2008e

Production
Oil & Liquids          Bbl/d          243,858 236,287 259,862 274,261         Oil & Liquids - Bbl/d                                            Q1        252,066        230,191      252,250         271,500
Gas                    Mmcf/d           1,264   1,589   1,738   1,799                                                                          Q2        253,510        240,122      257,000         273,000
Total                  Boe/d          454,495 501,131 549,588 574,114                                                                          Q3        243,021        246,192      267,000         279,500
Production per Share   Boe/Share          0.5      0.5     0.6     0.6                                                                         Q4        227,118        246,192      267,000         279,500
                       %                -0.1%   10.5%    9.8%    4.5%                                                                         Avg.       243,858        236,287      259,862         274,261
Debt Adjusted PPS      Boe/Share          0.4      0.5    0.5      0.5
                       %                 2.0%    6.5%    5.0%    8.6%         Gas - Mmcf/d                                                     Q1           1,259          1,359        1,722          1,772
                                                                                                                                               Q2           1,297          1,565        1,732          1,782
Cash flow              $Mm             4,744     4,834     5,746     5,938                                                                     Q3           1,265          1,707        1,742          1,797
CFPS                   Basic          $14.42    $14.65    $17.38    $17.95                                                                     Q4           1,235          1,721        1,757          1,777
                                                                                                                                              Avg.          1,264          1,589        1,738          1,799
                       Diluted        $14.20    $14.50    $17.26    $17.84
P/CF                   Basic             4.8        4.5      4.3        4.2
                       Diluted           4.8        4.6       4.3       4.2   Total Production - Boe/d                                         Q1        461,942        456,686      539,250         566,833
                                                                                                                                               Q2        469,617        500,888      545,667         570,000
Earnings               $Mm              2,624    2,552     2,781     2,838                                                                     Q3        453,845        530,647      557,333         579,000
EPS                    Basic            $7.96    $7.72     $8.39     $8.56                                                                     Q4        432,903        532,974      559,833         575,667
                                                                                                                                              Avg.       454,495        501,131      549,588         574,114
                       Diluted          $7.84    $7.64     $8.34     $8.51
P/E                    Basic              8.6       8.6      8.9        8.8
                                                                              CFPS - $/Share                                                   Q1          $3.06          $3.66         $3.53          $4.46
                       Diluted            8.7       8.7      9.0        8.8
                                                                                                                                               Q2          $3.32          $3.80         $4.27          $4.37
                                                                                                                                               Q3          $3.78          $3.41         $4.74          $4.45
Capital Data
                                                                                                                                               Q4          $4.04          $3.63         $4.72          $8.82
Capex                  $Mm             3,732     5,581     4,650     3,800
                                                                                                                                              Total       $14.20         $14.50        $17.27         $17.73
Capex vs. Cash Flow    %               78.7%    115.5%     80.9%     64.0%
Exit Net Debt          $Mm             2,216     4,580     4,467     3,327
                                                                              EPS - $/Share                      Q1          $1.67                                         $1.97        $1.50          $2.15
Entry Debt/CF          Years             0.5        0.5       0.8       0.8
                                                                                                                 Q2          $1.76                                         $2.17        $2.06          $2.07
Market Cap.            $Mm            22,907    22,140    24,993    24,993
                                                                                                                 Q3          $2.05                                         $1.94        $2.41          $2.12
                                                                                                                 Q4          $2.35                                         $1.56        $2.37          $4.22
Share Data
                                                                                                                Total        $7.84                                         $7.64        $8.34          $8.43
Basic shares           Mm               329.9    330.7     330.7     330.7
                                                                              Note: CFPS and EPS are calculated on a diluted basis.
Diluted shares         Mm               334.3    332.9     332.9     332.9


Pricing
WTI                    - $US          $56.66    $66.26    $66.00    $64.00
Henry Hub              - $US           $8.86     $6.78     $8.25     $8.50                                                  Apache Corporation (NYSE: APA)
Oil                    - $C wellhd     51.06     58.87     59.18     57.08                                                           Statistical Review: 2004 - 2007
Gas                    - $C wellhd      6.35      5.22      5.96      6.15
Exchange Rate          - US$ / CDN$     0.83      0.88      0.88      0.91                           $100.00                                                                               30,000,000

                                                                                                      $90.00
                                                                                                                                                                                           25,000,000
                                                                                                      $80.00
Year end Dec 31,                       2005a    2006a     2007e     2008e



                                                                                                                                                                                                        Daily Trading Volume
                                                                               Daily Closing Price




                                                                                                      $70.00
                                                                                                                                                                                           20,000,000
Net Asset Value                        $63.33   $58.81                                                $60.00

                                                                                                      $50.00                                                                               15,000,000
Share Price Y/E                        $68.52   $66.51
                                                                                                      $40.00
                                                                                                                                                                                           10,000,000
Valuation Data                                                                                        $30.00
DACFM                  x                  5.2      5.4       5.0       4.7                            $20.00
                                                                                                                                                                                           5,000,000
Target DACFM           x                                     5.6       5.3
                                                                                                      $10.00

EV/BOED                $/Boed         55,277    53,320    53,604    49,328                             $0.00                                                                               0
                                                                                                               Jan-04
                                                                                                               Mar-04
                                                                                                               May-04
                                                                                                                Jul-04
                                                                                                               Sep-04
                                                                                                               Nov-04
                                                                                                               Jan-05
                                                                                                               Mar-05
                                                                                                               May-05
                                                                                                                Jul-05
                                                                                                               Sep-05
                                                                                                               Nov-05
                                                                                                               Jan-06
                                                                                                               Mar-06
                                                                                                               May-06
                                                                                                                Jul-06
                                                                                                               Sep-06
                                                                                                               Nov-06
                                                                                                               Jan-07
                                                                                                               Mar-07
                                                                                                               May-07
                                                                                                                Jul-07
                                                                                                               Sep-07
                                                                                                               Nov-07




Target EV/BOED         $/Boed                             60,218    55,660

EBITDA                 $Mm             6,229     6,400     7,463     7,709
                                                                                                        52 Week High:       $75.22    52 Week Low:       $57.23        Avg. Monthly Trading Volume
EV/EBITDA              x                 4.0        4.2       3.9       3.7                             52 Week High On:    Apr-21-06 52 Week Low On:    Jun-13-06          3,231,308 Shares
P/NAV                  x                 1.1        1.1                                                 Source: Bloomberg
Cash Flow Netback      $/Boed         $24.67    $23.43    $24.70    $24.42




               Opinion: MARKET PERFORM
           12 MONTH TARGET PRICE US$86.00
                  Analyst: Mark J. Friesen, CFA
                                                                                                                                                                                  71


FD&A Costs                                                         2004a            2005a       2006a         3-Yr. Avg.      Corporate Profile
                                                                                                                                Apache’s core operations are in the U.S., Canada,
FD&A (Proven)                                                      $8.08       $10.90        $15.16              $11.21         Australia, Egypt, and the UK North Sea.
Cash Flow Netback                                                 $20.88       $28.60        $27.71              $25.81         The Company’s production is split roughly 50:50
Recycle Ratio (Proven)                                                  2.6           2.6         1.8                  2.3      between liquids and natural gas, with almost half of
                                                                                                                                production coming from outside North America.
Reserves
                                                                                                                              Operational Update
Oil & Liquids                                                                                                                   U.S.: ~37% of company production. Apache closed a
Proven Reserves (MMbbls)                                            932.0           975.9    1061.0                             $1 billion acquisition of 12,000 Boe/d of Permian
Production (B/d)                                                  242,380 243,858 236,287                                       assets on March 29th.
Proven RLI (Years)                                                   10.1            11.8        11.8                  11.2     Canada: Apache holds 6.4 million acres in Canada,
Proven Reserve Repl. %                                              199%            149%        199%                  182%      where it expects to increase production in 2007 from
Natural Gas                                                                                                                     90 MBoe/d last year, while at the same time drilling
Proven Reserves (Bcf)                                              6027.9       6848.0       7512.9
                                                                                                                                50% less wells on reduced Capex. First oil from the
Production (Mmcf/d)                                                 1,235           1,264       1,589
                                                                                                                                Midale CO2 flood is expected in 2007.
Proven RLI (Years)                                                   13.3            15.2        12.0                  13.5
                                                                                                                                Australia: ~9% of company production, six well
Proven Reserve Repl. %                                              355%            278%        215%                  277%
                                                                                                                                exploration program in the Exmouth basin to begin in
                                                                                                                                Q2, while Van Gogh and Reindeer fields should add
Note: Reserves are net of royatlies                                                                                             over 28,000 Boe/d in 2008-2009. Recently an-
      FD&A and Netbacks in US$ and exclude changes in Future Development Costs
                                                                                                                                nounced an 85 Mmcf/d discovery well offshore
                                                                                                                                NorthWest shelf.
                                                                                                                                North Sea: Forties field produced almost 60 MBoe/d
                                                                                                                                in 2006. This year, exploitation continues with 16
                                                                                                                                wells planned and also water injection rates should
                                           Cashflow Netback Peer Comparison                                                     be doubled.
          $40.00
                                                                                                                                Egypt: 19% of total production last year, Apache has
                                APA                                                                                             had numerous exploration successes here in recent
                                Large Cap Average
                                                                                                                                months. With plans for 42 exploration wells and 232
          $30.00                                                                                                                development wells in 2007, Apache remains a
                                                               $27.16
                                                                                       $28.18                 $27.34            dominant player in the country. We expect produc-
                               $24.67 $25.48
                                                      $23.43
                                                                              $24.70                $24.42                      tion to remain fairly flat here until gas processing
  $/Boe




          $20.00
                                                                                                                                capacity on the Khalda concession expands from 510
                                                                                                                                Mmcf/d to 710 Mmcf/d (at a cost of $375 Mm) by the
          $10.00
                                                                                                                                end of 2008.
                                                                                                                                Argentina: A new core area for Apache after it
                                                                                                                                acquired 109 MmBoe of reserves last year. Plans for
              $0.00                                                                                                             this year are to shoot 3-D seismic over 1,800 km2 on
                                      2005                 2006                     2007e                 2008e
                Source: FirstEnergy Capital Corp.                                                                               the highly prospective Tierra del Fuego field in the
                                                                                                                                second half, and drill 120 wells in the country.
                                                                                                                              Financial Outlook
                                                                                                                                The Company has just over 10% of its output hedged
                                                                                                                                for the duration of 2007.
                   2007/2008 Current and Target DACFM Peer Comparison                                                           We see the balance sheet remaining healthy, at 0.9x
        8.0
                                                                                                                                Net Debt/2007e Cash Flow post-Permian acquisition.
                         APA                                                                                                    Apache is expected to report Q1/07 results on April
                         Large Cap Average                                                                                      26th.
                                                            6.7
                                                                                                                6.4
        6.0
                                     5.9
                                                                                       5.7
                                                                                                                              Investment Summary
                                                    5.6

                        5.0
                                                                                                        5.3                     For 2007 we expect Apache will continue to balance
                                                                                                                                drilling and acquisitions, using the Company’s
DACFM




                                                                              4.7
        4.0
                                                                                                                                balance sheet to develop and grow production. Major
                                                                                                                                developments at Qasr, John Brookes, ExxonMobil
        2.0                                                                                                                     acreage in Canada and the Forties Field provide a
                                                                                                                                healthy drilling inventory for into the foreseeable
                                                                                                                                future.
        0.0
                        07e DACFM                   2007 Target               08e DACFM                 2008 Target             We rate Apache as a Market Perform with a US$86.00
          Source: FirstEnergy Capital Corp.
                                                                                                                                target price based on a 5.6x 2007e DACFM.
72       FirstQuarterly                 Integrated, Oil Sands and Large Cap E&P                                                         April 2007



 CANADIAN NATURAL
 RESOURCES LIMITED                                                                                                                                                                CNQ - $66.35
                                                                                                                                                                                       (as of April 20, 2007)
Year end Dec 31,                              2005a        2006a      2007e     2008e    Quarterly Information                                                      2005a          2006a          2007e           2008e

Production
Oil & Liquids              Bbl/d            313,168       331,998    347,117   418,572   Oil & Liquids - Bbl/d                                      Q1           287,803          323,662       322,898          386,726
Gas                        Mmcf/d             1,439         1,492      1,653     1,711                                                              Q2           289,064          338,852       338,046          392,003
Total                      Boe/d            552,938       580,723    622,582   703,687                                                              Q3           334,724          321,665       353,237          414,818
Production per Share       Boe/Share            0.4           0.4        0.4       0.5                                                              Q4           340,268          343,705       373,664          480,105
                           %                  10.4%          1.8%       7.3%     13.0%                                                             Avg.          313,168          331,998       347,117          418,572
Debt Adjusted PPS          Boe/Share             0.3           0.3       0.3       0.4
                                                                                         Gas - Mmcf/d                                               Q1              1,455           1,436          1,711           1,699
                           %                  21.5%         -1.9%      -3.3%     15.7%
                                                                                                                                                    Q2              1,454           1,475          1,641           1,709
                                                                                                                                                    Q3              1,423           1,437          1,614           1,696
Cash flow                  $Mm                 4,979        4,892     7,125     7,430
                                                                                                                                                    Q4              1,423           1,620          1,647           1,738
CFPS                       Basic               $9.28        $9.10    $13.25    $13.82
                                                                                                                                                   Avg.             1,439           1,492          1,653           1,711
                           Diluted             $9.27        $8.83    $12.87    $13.42
P/CF                       Basic                  6.2          7.3      5.0       4.8    Total Production - Boe/d                                   Q1           530,303          562,995       608,026          669,960
                           Diluted                6.2          7.5      5.2       4.9                                                               Q2           531,397          584,685       611,547          676,897
                                                                                                                                                    Q3           571,891          561,165       622,203          697,450
Earnings                   $Mm                 1,070        2,555     2,812     3,062                                                               Q4           577,435          613,705       648,114          769,783
EPS                        Basic               $1.96        $4.75     $5.23     $5.69                                                              Avg.          552,938          580,723       622,582          703,687
                           Diluted             $1.96        $4.62     $5.08     $5.53
P/E                        Basic                33.9         14.0      12.7      11.7    CFPS - $/Share                                             Q1              $1.86           $1.84         $2.78            $3.11
                           Diluted              33.9         14.4      13.1      12.0                                                               Q2              $2.04           $2.30         $3.22            $3.28
                                                                                                                                                    Q3              $2.58           $2.37         $3.45            $3.35
Capital Data                                                                                                                                        Q4              $2.78           $2.31         $3.41            $3.67
Capex                      $Mm                 4,932       12,025     6,450     5,921                                                              Total            $9.27           $8.83        $12.87           $13.42
Capex vs. Cash Flow        %                   99.1%       245.8%     90.5%     79.7%
Exit Net Debt              $Mm                 5,537       11,870    10,897     9,309    EPS - $/Share                                              Q1              ($0.79)         $0.19          $0.94           $1.16
                                                                                                                                                    Q2               $0.41          $1.85          $1.30           $1.25
Entry Debt/CF              Years                  0.8          1.1      1.7       1.5
                                                                                                                                                    Q3               $0.28          $2.02          $1.42           $1.50
Market Cap.                $Mm                32,192       34,408    36,764    36,764
                                                                                                                                                    Q4               $2.06          $0.57          $1.42           $1.62
                                                                                                                                                   Total             $1.96          $4.62          $5.08           $5.53
Share Data
Basic shares               Mm                  536.3        537.9     537.9     537.9    Note: CFPS and EPS are calculated on a diluted basis.
Options                    Mm                   21.1         15.7      16.2      16.2
Warrants                   Mm                    0.0          0.0       0.0       0.0
Diluted shares             Mm                  557.4        553.6     554.1     554.1
Fully diluted shares       Mm                  566.9        572.3     572.3     572.3

Pricing
WTI                        -   $US             56.65        66.23     66.00     64.00
Oil                        -   $C wellhd       47.10        53.01     55.82     51.89
Gas                        -   $C wellhd        8.62         6.74      8.40      8.71
Exchange Rate              -   US$ / CDN$       0.83         0.88      0.88      0.91
                                                                                                                             Canadian Natural Resources Limited (TSX: CNQ)
                                                                                                                                                 Statistical Review: 2004 - 2007

                                                                                                                 $80.00                                                                                20,000,000
Year end Dec 31,                              2005a        2006a      2007e     2008e
                                                                                                                                                                                                       18,000,000
                                                                                                                 $70.00
Net Asset Value                               $59.44       $60.28                                                                                                                                      16,000,000
                                                                                                                 $60.00
                                                                                                                                                                                                                    Daily Trading Volume


                                                                                                                                                                                                       14,000,000
                                                                                           Daily Closing Price




Share Price Y/E                               $57.75       $62.15     $66.35    $66.35                           $50.00                                                                                12,000,000

Valuation Data                                                                                                   $40.00                                                                                10,000,000
DACFM                      x                     7.1          9.1       6.1       5.7                                                                                                                  8,000,000
                                                                                                                 $30.00
Target DACFM               x                                            7.5       7.1
                                                                                                                                                                                                       6,000,000
                                                                                                                 $20.00
EV/BOED                    $/Boed             68,234       79,689    76,554    65,474                                                                                                                  4,000,000

Target EV/BOED             $/Boed             97,218      102,903    94,488    81,340                            $10.00                                                                                2,000,000

                                                                                                                  $0.00                                                                                0
EBITDA                     $Mm                 6,948        7,373     8,262     8,861
                                                                                                                          Mar-04
                                                                                                                          May-04




                                                                                                                          Mar-05
                                                                                                                          May-05




                                                                                                                          Mar-06
                                                                                                                          May-06




                                                                                                                          Mar-07
                                                                                                                          May-07
                                                                                                                          Jan-04



                                                                                                                           Jul-04
                                                                                                                          Sep-04
                                                                                                                          Nov-04
                                                                                                                          Jan-05



                                                                                                                           Jul-05
                                                                                                                          Sep-05
                                                                                                                          Nov-05
                                                                                                                          Jan-06



                                                                                                                           Jul-06
                                                                                                                          Sep-06
                                                                                                                          Nov-06
                                                                                                                          Jan-07



                                                                                                                           Jul-07
                                                                                                                          Sep-07
                                                                                                                          Nov-07




EV/EBITDA                  x                      5.4          6.3      5.8       5.2
P/NAV                      x                      1.0          1.0
Cash Flow Netback          $/Boed             $31.03       $30.52    $32.40    $30.49                               52 Week High:       $71.95    52 Week Low:         $46.97      Avg. Monthly Trading Volume
                                                                                                                    52 Week High On:    Apr-21-06 52 Week Low On:      Oct-3-06         1,316,346 Shares
Note: Net asset value is 10% after-tax on P+P reserves.                                                             Source: Bloomberg




                     Opinion: TOP PICK
               12 MONTH TARGET PRICE $86.50
           Analyst: Martin P. Molyneaux, CMA, CFA
                                                                                                                                                                       73


FD&A Costs                                             2004a      2005a            2006a           3-Yr. Avg.   Corporate Profile
                                                                                                                  Canadian Natural Resources Limited is a senior
FD&A (Proven)                                           $8.32     $11.18          $14.29             $11.76
                                                                                                                  Canadian oil and gas producer with a current market
Cash Flow Netback                                      $17.68     $23.63          $23.33             $21.67
                                                                                                                  capitalization of $35.5 billion. The Company is
Recycle Ratio (Proven)                                   2.1        2.1             1.6                  1.8
                                                                                                                  Canada’s second largest producer of natural gas and
Reserves                                                                                                          crude oil.
Oil & Liquids
                                                                                                                  CNQ has operations throughout Western Canada.
Proven Reserves (MMbbls)                                1,066      1,118           1,316
                                                                                                                  Properties of particular note include the Primrose
Production (B/d)                                       282,489    313,168         331,998
                                                                                                                  and Pelican heavy oil projects in Alberta, along with
Proven RLI (Years)                                       10.8       9.8             11.5              10.7
                                                                                                                  the Horizon Oil Sands Project. The Company also
Proven Reserve Repl. %                                  282%       150%            280%              237%         has significant North Sea and west coast of Africa oil
Natural Gas                                                                                                       activities.
Proven Reserves (Bcf)                                   2,690      2,842           3,798
                                                                                                                Operational Update
Production (Mmcf/d)                                     1,388      1,439           1,492
                                                                                                                  Horizon: CNQ’s progress on Horizon Phase I
Proven RLI (Years)                                       6.6        6.9             7.1                  6.9
                                                                                                                  remains on budget and ahead of schedule (65%
Proven Reserve Repl. %                                  134%       136%            317%              199%
                                                                                                                  complete), targeting 90% completion by the end of
Note: Above figures exclude oil sands (Horizon)
      Reserves are net of royatlies
                                                                                                                  2007. CNQ has ordered long lead time items for
          FD&A and Netbacks converted to US$ and exclude changes in Future Development Costs                      Phases 2 and 3, with an onstream date of 2011. Pre-
                                                                                                                  tax cash flows on an annualized basis of around $1.8
                                                                                                                  billion ($3.25/share) are now less than 18 months
                                                                                                                  away. Clearly the biggest question is what will
                                                                                                                  Phases 2 and 3 cost?
                                                                                                                  Conventional: For 2007, CNQ plans on drilling only
                                                                                                                  423 natural gas wells (down 42%) and 666 oil wells
                                  Cashflow Netback Peer Comparison
                                                                                                                  (up 8%) for a total of 1,089 wells. North American
        $50.00                                                                                                    gas expenditures should fall from ~$1.9 billion to
                         CNQ
                         Large Cap Average
                                                                                                                  $1.1 billion in 2007. We expect a much more sub-
        $40.00                                                                                                    stantial natural gas program for 2008 as the Com-
                                                                                                                  pany pursues over 10 Tcf of reserve potential.
        $30.00
                      $31.03
                                                                 $32.40                                           Heavy Oil: Primrose East will see a lot of activity
                                              $30.52                                   $30.49
                                                                                                                  with volumes coming onstream in 2008. Production
$/Boe




                                                       $27.16             $28.18                  $27.34
                                 $25.48
        $20.00                                                                                                    at current prices generates recycle ratios well over 4
                                                                                                                  times. Clearly very material reserve adds at Pelican
        $10.00
                                                                                                                  and Primrose in 2006 added a lot of value and will
                                                                                                                  mean sizable production increases in the future. Do
         $0.00
                                                                                                                  not underestimate CNQ’s EOR potential. CNQ is
                              2005                2006              2007e                    2008e                deferring any further work on the stand-alone
         Source: FirstEnergy Capital Corp.
                                                                                                                  upgrader project until various issues can be clarified.
                                                                                                                  International: North Sea volumes will face chal-
                                                                                                                  lenges from turnarounds at Ninian South and
                                                                                                                  Murchison, though volume additions at Lyell are
                                                                                                                  expected late in 2007. In Gabon, the Olowi field
                                                                                                                  should come onstream in 2009 at 20,000 B/d.
                2007/2008 Current and Target DACFM Peer Comparison
         12.0                                                                                                   Financial Outlook
                     CNQ
                     Large Cap Average
                                                                                                                  Capital discipline is the key in the $6.4 billion ($3.1
         10.0                                                                                                     billion Horizon) 2007 Capex. CNQ has hedged
                                                                                                                  major portions of its 2007 oil and gas volumes at
          8.0
                                                                                                                  attractive prices.
                                               7.5
 DACFM




                                                                                            7.1
          6.0
                        6.1
                                                       6.7                                         6.4          Investment Summary
                                  5.9                              5.7      5.7                                   The CNQ portfolio has never looked better. We
          4.0
                                                                                                                  continue to find the story and valuation very compel-
                                                                                                                  ling. CNQ shares are trading at 5.7 times 2008e
          2.0
                                                                                                                  DACFM, not to mention under 12 times P/E. Our
          0.0                                                                                                     new 12 month target of $86.50 is based a 5.9 times
                      07e DACFM               2007 Target         08e DACFM                2008 Target            2009e DACFM. With an anticipated 12 month
          Source: FirstEnergy Capital Corp.
                                                                                                                  return of 30%, we continue to carry a Top Pick
                                                                                                                  ranking.
 74     FirstQuarterly               Integrated, Oil Sands and Large Cap E&P                                                        April 2007




 DEVON ENERGY CORPORATION                                                                                                                                         DVN - US$73.55
                                                                                                                                                                                       (as of April 20, 2007)
Year end Dec 31,                         2005a     2006a     2007e     2008e     Quarterly Information                                                           2005a          2006a               2007e        2008e
Production
Oil & Liquids            B/D            241,606 218,271 217,975 256,795          Oil & - B/d                                                       Q1           264,500       213,700             204,500      247,000
Gas                      Mmcf/D           2,266   2,232   2,280   2,400          Liquids                                                           Q2           258,100       210,500             208,000      250,000
Total                    BOE/D          619,231 590,246 598,000 656,816                                                                            Q3           224,800       231,200             240,000      270,000
Production per Share     BOE/Share           0.5     0.5     0.5     0.6                                                                           Q4           219,700       231,200             240,000      270,000
                         %                -4.0%   -0.3%    2.5%   11.9%                                                                           Avg.          241,606       218,271             217,975      256,795
Debt Adjusted PPS        BOE/Share           0.4     0.4     0.4     0.5
                         %                11.4%   -1.6%    1.6%   13.1%          Gas - Mmcf/d                                                      Q1             2,375          2,125               2,260        2,365
                                                                                                                                                   Q2             2,295          2,206               2,265        2,390
Cash flow                $MM              5,695     6,078     6,518     7,023                                                                      Q3             2,237          2,305               2,290        2,410
CFPS                     Basic           $12.43    $13.77    $14.98    $16.45                                                                      Q4             2,158          2,288               2,305        2,378
                         Diluted         $12.17    $13.58    $14.74    $16.18                                                                     Avg.            2,266          2,232               2,280        2,400
P/CF                     Basic               5.0       4.9       4.9       4.5
                         Diluted             5.1       4.9       5.0       4.5
                                                                                 Boe/d                                                             Q1           660,350       567,917             581,167      641,167
                                                                                                                                                   Q2           640,617       578,233             585,500      648,333
Earnings                 $MM              2,930     2,823     3,447     3,633
                                                                                                                                                   Q3           597,667       615,433             621,667      671,667
EPS                      Basic            $6.38     $6.42     $8.26     $8.51
                                                                                                                                                   Q4           579,417       612,483             624,167      666,250
                         Diluted          $6.26     $6.34     $8.13     $8.37
                                                                                                                                                  Avg.          619,231       590,246             598,000      656,816
P/E                      Basic              9.8      10.4        8.9       8.6
                         Diluted           10.0      10.6        9.0       8.8
                                                                                 CFPS - $/Share                                                    Q1             $2.16         $3.32                $2.85        $4.10
Capital Data                                                                                                                                       Q2             $2.73         $3.44                $3.52        $3.88
Capex                    $MM              1,939     7,511     5,600     6,000                                                                      Q3             $3.53         $3.45                $4.09        $4.09
Capex vs. Cash Flow      %                34.0%    123.6%     85.9%     85.4%                                                                      Q4             $3.86         $3.37                $4.30        $7.98
Exit Net Debt            $MM              3,940     6,274     5,935     5,656                                                                     Total          $12.17        $13.58               $14.74       $16.18
Entry Debt/CF            Years               1.0       0.6       0.0       0.8
Market Cap.              $MM             28,206    30,052    31,928    31,928    EPS - $/Share                                                     Q1             $1.14          $1.56               $1.44        $2.19
                                                                                                                                                   Q2             $1.38          $1.92               $1.95        $1.97
Share Data                                                                                                                                         Q3             $1.63          $1.57               $2.34        $2.12
Basic shares             MM               439.0     443.0     427.0     427.0                                                                      Q4             $2.14          $1.29               $2.42        $4.16
Diluted shares           MM               451.0     448.0     434.1     434.1                                                                     Total           $6.26          $6.34               $8.13        $8.37

Pricing                                                                          Note: CFPS and EPS are calculated on a diluted basis.
WTI                      - $US           $56.66    $66.26    $66.00    $64.00
Henry Hub                - $US            $8.86     $6.78     $8.25     $8.50
Oil                      - $US wellhd    $43.24    $50.60    $49.60    $46.86
Gas                      - $US wellhd     $7.36     $6.09     $7.52     $7.75
Exchange Rate            - US$ / CDN$      0.83      0.88      0.88      0.91



Year end Dec 31,                         2005a     2006a     2007e     2008e
                                                                                                                             Devon Energy Corporation (NYSE: DVN)
Net Asset Value                           $52.54   $52.51                                                                                    Statistical Review: 2004 - 2007


Share Price Y/E                                                                                         $90.00                                                                                            35,000,000
                                          $62.54   $67.08
                                                                                                        $80.00
                                                                                                                                                                                                          30,000,000
Valuation Data
DACFM                    X                  6.2       5.6       5.5       5.1                           $70.00
                                                                                                                                                                                                                       Daily Trading Volume

                                                                                                                                                                                                          25,000,000
Target DACFM             X                                      6.4       6.0
                                                                                  Daily Closing Price




                                                                                                        $60.00

                                                                                                        $50.00                                                                                            20,000,000
EV/BOED                  $/BOED          51,913    61,544    63,315    57,221
Target EV/BOED           $/BOED                              74,531    67,432                           $40.00                                                                                            15,000,000

                                                                                                        $30.00
EBITDA                   $MM              9,648     9,259    10,137    10,673                                                                                                                             10,000,000
EV/EBITDA                X                  3.3        3.9       3.7       3.5                          $20.00
P/NAV                    X                   1.2       1.3                                                                                                                                                5,000,000
                                                                                                        $10.00
Cash flow netback        $/BOED          $25.89    $28.01    $29.86    $29.21
                                                                                                         $0.00                                                                                            0
                                                                                                                 Jan-04
                                                                                                                 Mar-04
                                                                                                                 May-04
                                                                                                                           Jul-04
                                                                                                                          Sep-04
                                                                                                                                    Nov-04
                                                                                                                                    Jan-05
                                                                                                                                    Mar-05
                                                                                                                                    May-05
                                                                                                                                     Jul-05
                                                                                                                                                  Sep-05
                                                                                                                                                  Nov-05
                                                                                                                                                  Jan-06
                                                                                                                                                  Mar-06
                                                                                                                                                  May-06
                                                                                                                                                                   Jul-06
                                                                                                                                                                  Sep-06
                                                                                                                                                                  Nov-06
                                                                                                                                                                              Jan-07
                                                                                                                                                                              Mar-07
                                                                                                                                                                                       May-07
                                                                                                                                                                                        Jul-07
                                                                                                                                                                                                 Sep-07
                                                                                                                                                                                                 Nov-07




                                                                                                           52 Week High:            $75.10    52 Week Low:        $49.10       Avg. Monthly Trading Volume
                                                                                                           52 Week High On:         Apr-13-07 52 Week Low On:     Jun-13-06         4,296,418 Shares
                                                                                                           Source: Bloomberg




                 Opinion: OUTPERFORM
            12 MONTH TARGET PRICE US$89.00
                    Analyst: Mark J. Friesen, CFA
                                                                                                                                                                      75


FD&A Costs                                           2004a      2005a          2006a              3-Yr. Avg.   Corporate Profile
FD&A (Proven)                                        $11.97     $7.65          $15.76              $12.71
                                                                                                                 Devon’s geographic footprint includes Brazil,
Cash Flow Netback                                    $19.65     $25.22         $28.42              $24.19
                                                                                                                 Azerbaijan, China, and West Africa, but North
Recycle Ratio (Proven)                                1.6         3.3             1.8                1.9         America still accounts for almost 90% of its produc-
                                                                                                                 tion. Roughly two-thirds of production is natural
Reserves                                                                                                         gas.

Oil & Liquids
                                                                                                               Operational Update
Proven Reserves (MMbbls)                              828.0      895.0            983.0
                                                                                                                 Barnett Shale: Production exited 2006 > 720 Mmcf/
Production (B/d)                                    279,265     241,606        218,271                           d net to Devon and the Company is targeting exit
Proven RLI (Years)                                        8.4    11.2             11.6               10.4        rates of >800 Mmcf/d this year and exit rates of 1
Natural Gas                                                                                                      Bcf/d by the end of 2009.
Proven Reserves (Bcf)                                 7,494      7,296            8,356                          Deepwater Gulf of Mexico: Devon expects to spud
Production (Mmcf/d)                                   2432       2266             2232                           Jack #3 in Q3, St. Malo in Q4 and a well at Kaskida.
Proven RLI (Years)                                        8.5     9.3             10.0                9.3        Merganser should come online mid-2007 with peak
Proven Reserve Repl. %                               120%        76%           230%                 141%         production 50 KBoe/d net Devon.
Note: Reserves are net of royatlies                                                                              International: Devon announced the sale of its
      FD&A and Netbacks in US$ and exclude changes in Future Development Costs
                                                                                                                 Egyptian assets for US$375 Mm (~US$300 Mm AT).
                                                                                                                 These assets represented less than 1% of revenue and
                                                                                                                 less than 0.5% of production and booked reserves.
                                                                                                                 Bids on Devon’s other West African assets are due
                                                                                                                 early July. The West African assets represent less
                                                                                                                 than 3% of Devon’s production and less than 4% of
                                                                                                                 Devon’s booked reserves. Production from Polvo,
                                                                                                                 offshore Brazil, is expected mid-year (peak rate 26
                                                                                                                 KBbl/d net).
                                 Cashflow Netback Peer Comparison                                                Canada: Devon’s natural gas production has been
        $40.00                                                                                                   declining as a result of reduced capital spending in
                       DVN                                                                                       Canada. Devon will increase spending in Canada
                       Large Cap Average
                                                                                                                 when the economics of the basin improve, possibly in
        $30.00
                                                                $29.86
                                                                                                                 late 2007. Devon expects first steam to begin in 2007
                                                                                         $29.21
                                             $28.01 $27.16               $28.18                   $27.34         on the first phase of the Jackfish SAGD Oil Sands
                      $25.89 $25.48
                                                                                                                 project.
$/Boe




        $20.00
                                                                                                                 FD&A performance does not yet reflect material
                                                                                                                 bookings in the deepwater Gulf of Mexico. Devon
        $10.00                                                                                                   replaced 200% of its productio organically (230% all-
                                                                                                                 in including revisions) by achieving impressive drill
                                                                                                                 bit success during the year (98% up from 97% in
         $0.00                                                                                                   2005). We calculate a one-year recycle ratio of 1.8x
                            2005                   2006            2007e                    2008e
        Source: FirstEnergy Capital Corp.                                                                        for Devon based on all-in FD&A costs of US$15.76/
                                                                                                                 Boe (Proven, net).
                                                                                                               Financial Outlook
                                                                                                                 We expect Devon’s available cash flow to more than
               2007/2008 Current and Target DACFM Peer Comparison                                                fully fund its planned 2007 capital program. Devon
        8.0                                                                                                      is in a good position to consider re-initiating its share
                   DVN
                   Large Cap Average
                                                                                                                 repurchase program.
                                                    6.7
                                                                                                                 Proceeds from the divestitures of the Company’s
        6.0
                              5.9
                                             6.4
                                                                                          6.0
                                                                                                   6.4
                                                                                                                 African assets will be used to repay commercial
                     5.5
                                                                         5.7
                                                                                                                 paper. Devon’s debt, which is already at attractively
                                                                5.1
                                                                                                                 low levels, measures at 1.0x D/CF.
DACFM




        4.0
                                                                                                                 Devon remains unhedged for 2007 and 2008.
                                                                                                               Investment Summary
        2.0
                                                                                                                 Our current estimates now reflect growth of 1% from
                                                                                                                 2006 into 2007, however the ‘same store’ growth rate
        0.0
                                                                                                                 would be 10% if 2006 results were adjusted for the
                   07e DACFM                2007 Target         08e DACFM                2008 Target             planned divestitures.
        Source: FirstEnergy Capital Corp.
                                                                                                                 We maintain an Outperform rating and a target price
                                                                                                                 of US$89.00 based on a 6.4x 2007e DACFM.
76         FirstQuarterly                   Integrated, Oil Sands and Large Cap E&P                                                            April 2007




ENCANA CORPORATION                                                                                                                                                         ECA - US$53.47
                                                                                                                                                                                                 (as of April 20, 2007)
Year end Dec 31,                                  2005a        2006a       2007e      2008e    Quarterly Information                                                   2005a                2006a         2007e              2008e
                                                 Ecuador      Ecuador     Ecuador                                                                                    Ecuador               Ecuador       Ecuador            Ecuador
Production                                      Removed      Removed     Removed                                                                                    Removed               Removed       Removed            Removed
Oil & Liquids              Bbl/d                 156,000      154,704    138,614    157,186    Oil & Liquids - Bbl/d                                     Q1          157,184               162,791       132,875            154,856
Gas                        Mmcf/d                  3,227        3,367       3,460     3,620                                                              Q2          157,108               153,470       134,875            154,856
Total                      Boe/d                 693,830      715,938    715,335    760,565                                                              Q3          150,457               152,154       140,012            154,243
Production per Share       Boe/Share                  0.3          0.3        0.3        0.4                                                             Q4          159,289               152,154       146,481            164,712
                           %                       -3.8%        10.0%        7.0%     10.8%                                                             Avg.         156,000               154,704       138,614            157,186
Debt Adjusted PPS          Boe/Share                  0.2          0.3        0.3        0.4
                           %                        4.7%        14.4%       23.0%     10.8%    Gas - Mmcf/d                                              Q1              3,146              3,343          3,420             3,586
                                                                                                                                                         Q2              3,212              3,361          3,420             3,586
Cash flow                  $Mm                     7,718        7,146      8,497      8,472                                                              Q3              3,222              3,359          3,490             3,642
CFPS                       Basic                   $8.95        $9.02     $11.28     $11.73                                                              Q4              3,326              3,406          3,510             3,665
                           Diluted                 $8.84        $8.72     $11.11     $11.55                                                             Avg.             3,227              3,367          3,460             3,620
P/CF                       Basic                      5.1          5.9       4.7         4.6
                           Diluted                    5.1          6.1       4.8         4.6   Total Production - Boe/d                                 Q1           681,517              719,958       702,875            752,590
                                                                                                                                                         Q2          692,441              713,637       704,875            752,590
Earnings                   $Mm                     3,501        5,641      4,286      4,748                                                              Q3          687,457              711,987       721,679            761,310
EPS                        Basic                   $4.06        $6.85      $5.69      $6.57                                                              Q4          713,622              719,821       731,481            775,512
                           Diluted                 $4.01        $6.89      $5.60      $6.47                                                             Avg.         693,830              715,938       715,335            760,565
P/E                        Basic                    11.1           7.8       9.4         8.1
                           Diluted                  11.3          7.8        9.5         8.3   CFPS - $/Share                                            Q1              $1.63              $1.96          $2.20             $2.85
                                                                                                                                                         Q2              $1.81              $2.15          $2.65             $2.70
Capital Data                                                                                                                                             Q3              $2.42              $2.32          $3.06             $2.92
Capex                      $Mm                     2,419       3,583       5,600      5,600                                                              Q4              $2.90              $2.17          $3.16             $3.01
Capex vs. Cash Flow        %                       31.3%       50.1%       65.9%      66.1%                                                             Total            $8.84              $8.72         $11.11            $11.55
Exit Net Debt              $Mm                     7,767       6,555       6,767      6,519
Entry Debt/CF              Years                      0.9         1.1        0.8         0.8   EPS - $/Share                                             Q1            ($0.03)              $1.70          $1.00             $1.61
Market Cap.                $Mm                    39,199      36,383      40,353     38,570                                                              Q2             $1.04               $2.55          $1.31             $1.44
                                                                                                                                                         Q3             $0.27               $1.66          $1.60             $1.62
Share Data
                                                                                                                                                         Q4             $2.73               $0.81          $1.67             $1.76
Basic shares               Mm                      854.9        780.0      743.0      709.6                                                             Total           $4.01               $6.89          $5.60             $6.47
Options                    Mm                       12.0         11.8       11.7       11.7
Warrants                   Mm                        0.0          0.0        0.0        0.0
                                                                                               Note: CFPS and EPS are calculated on a diluted basis.
Diluted shares             Mm                      866.9        791.8      754.7      721.3
Fully Diluted shares       Mm                      873.5        819.3      764.9      733.8

Pricing
WTI                        -   $US                 56.65       66.23       66.00      66.00
Oil                        -   $C wellhd          $29.23      $43.15      $45.63     $43.63
Gas                        -   $C wellhd           $6.46       $6.65       $7.73      $8.00
Exchange Rate              -   US$ / CDN$           0.83        0.88        0.88       0.91



Year end Dec 31,                                  2005a        2006a       2007e      2008e
                                                                                                                                               EnCana Corporation (NYSE: ECA)
Net Asset Value                                    $39.27      $45.02                                                                                     Statistical Review: 2004 - 2007

Share Price Y/E                                    $45.22      $45.95      $53.47     $53.47
                                                                                                                        $80.00                                                                                   25,000,000
Valuation Data
                                                                                                                        $70.00
DACFM                      x                          5.7         7.4         5.3        5.1
                                                                                                                                                                                                                 20,000,000
Target DACFM               x                                                  6.0        5.9                            $60.00           Sept. 3, 2004
                                                                                                                                                                                                                              Daily Trading Volume
                                                                                                  Daily Closing Price




                                                                                                                                    Change to $US Reporting
EV/BOED                    $/Boed                 67,691      59,975      65,871     59,284                             $50.00
                                                                                                                                                                                                                 15,000,000
Target EV/BOED             $/Boed                 89,280      78,279      75,398     67,848
                                                                                                                        $40.00
EBITDA                     $Mm                   7,505.6      8,624.1     9,909.2   10,611.9
                                                                                                                        $30.00
                                                                                                                                                                                                                 10,000,000
EV/EBITDA                  x                         6.3          5.0         4.8        4.2
P/NAV                      x                         1.2          1.0
Cash Flow Netback          $/Boed                 $19.97       $26.66     $31.81     $30.03                             $20.00
                                                                                                                                                                                                                 5,000,000
Pricing                                                                                                                 $10.00

WTI                        -   $US               56.65       60.17        60.17      60.17
                                                                                                                         $0.00                                                                                   0
Oil                        -   $C wellhd        $29.23       $43.15      $45.63     $43.63
                                                                                                                                 Mar-04
                                                                                                                                 May-04




                                                                                                                                 Mar-05
                                                                                                                                 May-05




                                                                                                                                 Mar-06
                                                                                                                                 May-06




                                                                                                                                 Mar-07
                                                                                                                                 May-07
                                                                                                                                 Jan-04



                                                                                                                                  Jul-04

                                                                                                                                 Nov-04
                                                                                                                                 Jan-05



                                                                                                                                  Jul-05
                                                                                                                                 Sep-05
                                                                                                                                 Nov-05
                                                                                                                                 Jan-06



                                                                                                                                  Jul-06
                                                                                                                                 Sep-06
                                                                                                                                 Nov-06
                                                                                                                                 Jan-07


                                                                                                                                  Jul-07

                                                                                                                                 Nov-07
                                                                                                                                 Sep-04




                                                                                                                                 Sep-07




Gas                        -   $C wellhd        $6.46        $6.65        $7.73     $8.00
Exchange Rate              -   US$ / CDN$         0.83        0.88        0.88        0.91

Note: Net asset value is 10% after-tax on Proven reserves.                                                                 52 Week High:       $61.85     52 Week Low:           $49.09      Avg. Monthly Trading Volume
                                                                                                                           52 Week High On:    Aug-22-06 52 Week Low On:         Oct-3-06         2,024,647 Shares
                                                                                                                           Source: Bloomberg




                Opinion: MARKET PERFORM
            12 MONTH TARGET PRICE US$62.50
            Analyst: Martin P. Molyneaux, CMA, CFA
                                                                                                                                                                          77


FD&A Costs                                                       2004a          2005a     2006a     3-Yr. Avg.      Corporate Profile
                                                                                                                      EnCana is North America’s largest independent
FD&A (Proven)                                                     $8.90          $8.04    $11.39           $9.06
                                                                                                                      natural gas producer. Having divested several proper-
Cash Flow Netback                                                $17.54         $26.46    $27.81          $23.86
Recycle Ratio (Proven)                                              2.0            3.3       2.4             2.6
                                                                                                                      ties in recent years, all reserves and production in 2006
                                                                                                                      are onshore North America. EnCana also has explora-
Reserves                                                                                                              tion acreage internationally and offshore East Coast
                                                                                                                      Canada.
Oil & Liquids
                                                                                                                      The Company has nine key natural gas resource plays,
Proven Reserves (MMbbls)                                            501            463       334
                                                                                                                      accounting for 2/3rds of natural gas production in
Production (B/d)                                                    228            195       126
                                                                                                                      2006. Heavy oil resource plays include Foster Creek
Proven RLI (Years)                                                   6.6            6.7       8.7             7.3
                                                                                                                      and Christina Lake. 2007 marks a transition year for
Proven Reserve Repl. %                                           -102%            47%     -181%             -68%
Natural Gas
                                                                                                                      the Company as it pursues higher returns and slower
Proven Reserves (Bcf)                                            10,460         11,784    12,418
                                                                                                                      growth in its upstream business, while beginning its
Production (Mmcf/d)                                               2,998          3,227     3,367
                                                                                                                      downstream partnership with ConocoPhillips.
Proven RLI (Years)                                                   9.3            9.7     10.0              9.7   Operational Update
Proven Reserve Repl. %                                            286%           213%      152%            214%       Production Guidance: Natural gas volumes for 2007
Note: Above figures exclude oil sands (i.e. Foster Creek, Christina Lake in-situ)
                                                                                                                      are being guided to 3,460 Mmcf/d or 3% growth.
      Reserves are net of royatlies                                                                                   Canadian gas volumes are expected to grow by only
      FD&A costs are in US$ and exclude changes in Future Development Costs
                                                                                                                      1% to 2,210 Mmcf/d, while the U.S. grows by 6% to
                                                                                                                      1,250 Mmcf/d.
                                                                                                                      Canada: Overall gas production growth being guided
                                                                                                                      to 1% for 2007 including 14% growth from gas resource
                                                                                                                      plays, implying a 16% decline in production else-
                                                                                                                      where. Plans are for overall drilling activity to increase
                                        Cashflow Netback Peer Comparison                                              in 2007, led by more wells for CBM and Shallow Gas
         $40.00                                                                                                       resource plays.
                            $38.18
                                                                                          ECA
                                                                                          Large Cap Average
                                                                                                                      United States: Infrastructure expansion remains one
                                                                                                                      of EnCana’s U.S. key challenges, with 2006 seeing
         $30.00                                                      $31.81
                                                                                            $30.03                    operational challenges. We expect this segment to
                                       $25.48
                                                  $26.66$27.16
                                                                                 $28.18           $27.34              improve in 2007 as more fit-for-purpose rigs are
                                                                                                                      utilized.
 $/Boe




         $20.00
                                                                                                                      Oil Sands: EnCana’s SAGD operations continue to
                                                                                                                      gather momentum. Production on a 100% basis from
         $10.00                                                                                                       Foster Creek/Christina Lake is expected to increase
                                                                                                                      45% in 2007. Keep in mind that half of these two assets
           $0.00
                                                                                                                      are now owned by ConocoPhillips as part of the
                                   2005               2006                 2007e               2008e                  exchange for refining interests.
           Source: FirstEnergy Capital Corp.                                                                          Downstream Operations: ECA estimates this segment
                                                                                                                      will cash flow $600 million pre-tax ($8.85 Gulf of
                                                                                                                      Mexico crack spread) in 2007 with Oil Sands partner-
                                                                                                                      ship Capex ~$700 million (including Foster/Christina
                                                                                                                      spending). This operation should amount to around
                    2007/2008 Current and Target DACFM Peer Comparison                                                300,000 B/d of refining capacity in 2009 net to ECA.
            10.0
                           ECA
                                                                                                                    Financial Outlook
                           Large Cap Average                                                                          With 2007e net capital spending of $5.6 billion, and
              8.0                                                                                                     our estimated cash flow of $8.5 billion, we are project-
                                                                                                                      ing net debt of $6.8 billion by year-end, even assuming
              6.0
                                                          6.7
                                                                                                    6.4               40 million shares of buybacks in 2007.
                                                    6.0
   DACFM




                               5.3
                                        5.9                                       5.7         5.9
                                                                                                                      EnCana has fixed price contracts on almost half of
                                                                          5.1
              4.0
                                                                                                                      2007e gas production at average prices above $8.50 per
                                                                                                                      Mcf, with substantial basis hedging in place.
              2.0                                                                                                   Investment Summary
                                                                                                                      Our 12 month target price of US$62.50 reflects a 5.9x
              0.0
                                                                                                                      2008e DACFM and implies an anticipated return of
                            07e DACFM             2007 Target        08e DACFM              2008 Target               17% from current levels and a Market Perform rating.
              Source: FirstEnergy Capital Corp.
 78      FirstQuarterly              Integrated, Oil Sands and Large Cap E&P                                                       April 2007




EOG RESOURCES, INC.                                                                                                                                             EOG - US$73.98
                                                                                                                                                                                 (as of April 20, 2007)
Year end Dec 31,                             2005a      2006a     2007e     2008e     Quarterly Information                                                    2005a         2006a         2007e           2008e
Production
Oil & Liquids            B/D                 36,120  37,404  36,802  36,625           Oil & - B/d                                                Q1            36,300        37,200        36,425          36,625
Gas                      Mmcf/D               1,216   1,337   1,455   1,582           Liquids                                                    Q2            37,600        36,400        36,675          36,625
Total                    BOE/D              238,851 260,204 279,359 300,365
                                                                                                                                                 Q3            34,300        38,800        37,175          36,625
Production per Share     BOE/Share               0.4     0.4    0.4      0.4
                                                                                                                                                 Q4            36,300        38,800        37,175          36,625
                         %                    13.2%    8.0%    7.2%    7.5%
                                                                                                                                                Avg.           36,120        37,404        36,802          36,625
Debt Adjusted PPS        BOE/Share               0.3     0.4    0.4      0.4
                         %                    22.3%   10.4%    3.0%    3.3%
                                                                                      Gas - Mmcf/d                                               Q1             1,163         1,304         1,403           1,532
Cash flow                $MM                  2,382      2,624     3,034     3,076                                                               Q2             1,182         1,291         1,436           1,563
CFPS                     Basic                $9.97     $10.85    $12.51    $12.68                                                               Q3             1,207         1,344         1,479           1,604
                         Diluted              $9.76     $10.66    $12.31    $12.48                                                               Q4             1,312         1,407         1,502           1,548
P/CF                     Basic                  7.4        5.8       5.9        5.8                                                             Avg.            1,216         1,337         1,455           1,582
                         Diluted                 7.5        5.9      6.0        5.9
                                                                                      Boe/d                                                      Q1         230,133 254,533 270,258 291,958
Earnings                 $MM                  1,260      1,300     1,231     1,355                                                               Q2         234,600 251,567 276,008 297,125
EPS                      Basic                $5.24      $5.33     $5.06     $5.57                                                               Q3         235,467 262,800 283,675 303,958
                         Diluted              $5.13      $5.24     $4.98     $5.48                                                               Q4         254,967 273,300 287,508 294,542
P/E                      Basic                 14.0       11.7      14.6      13.3                                                              Avg.       238,851 260,204 279,359 300,365
                         Diluted               14.3       11.9      14.9      13.5

Capital Data                                                                          CFPS - $/Share                                             Q1             $1.84         $2.74         $2.58           $3.13
Capex                    $MM                  1,654      2,799     3,400     3,600                                                               Q2             $2.17         $2.39         $2.94           $2.90
Capex vs. Cash Flow      %                    69.4%     106.7%    112.1%    117.0%                                                               Q3             $2.56         $2.62         $3.32           $3.17
Exit Net Debt            $MM                    468        638     1,497     2,372                                                               Q4             $3.15         $2.86         $3.47           $6.02
Entry Debt/CF            Years                   0.5        0.2      0.2        0.5                                                             Total           $9.76        $10.66        $12.31          $12.48
Market Cap.              $MM                 18,012     15,392    18,234    18,234
                                                                                      EPS - $/Share                                              Q1             $0.83         $1.73         $0.81           $1.41
Share Data                                                                                                                                       Q2             $1.02         $1.34         $1.18           $1.21
Basic shares             MM                   240.4      242.5     242.5     242.5                                                               Q3             $1.40         $1.21         $1.45           $1.40
Diluted shares           MM                   245.5      246.5     246.5     246.5                                                               Q4             $1.88         $0.96         $1.54           $2.62
                                                                                                                                                Total           $5.13         $5.24         $4.98           $5.48
Pricing
WTI                      - $US               $56.66     $66.26    $66.00    $64.00    Note: CFPS and EPS are calculated on a diluted basis.
Henry Hub                - $US                $8.86      $6.78     $8.25     $8.50
Oil                      - $US wellhd        $50.85     $57.17    $56.77    $54.72
Gas                      - $US wellhd         $6.56      $5.28     $6.50     $6.75
Exchange Rate            - US$ / CDN$          0.83       0.88      0.88      0.91


Year end Dec 31,                             2005a      2006a     2007e     2008e

Net Asset Value                               $50.02     $46.11
                                                                                                                                   EOG Resources, Inc. (NYSE: EOG)
                                                                                                                                           Statistical Review: 2004 - 2007
Share Price Y/E                               $73.37     $62.45
                                                                                                             $110.00                                                                            45,000,000
Valuation Data
                                                                                                             $100.00                                                                            40,000,000
DACFM                    X                       7.6        6.0       6.4       6.5
Target DACFM             X                                            7.8       7.9                           $90.00                                                                            35,000,000
                                                                                                                                                                                                             Daily Trading Volume
                                                                                       Daily Closing Price




                                                                                                              $80.00
EV/BOED                  $/BOED              77,371     61,609    70,631    68,603                                                                                                              30,000,000
                                                                                                              $70.00
Target EV/BOED           $/BOED                                   85,647    82,570                                                                                                              25,000,000
                                                                                                              $60.00
EBITDA                   $MM                 3,094.3    3,383.8   3,613.7   3,873.9                                                                                                             20,000,000
                                                                                                              $50.00
EV/EBITDA                X                       6.0        4.7       5.5       5.3                                                                                                             15,000,000
P/NAV                    X                       1.5        1.4                                               $40.00
Cash flow netback        $/BOED              $25.12     $25.91    $25.33    $25.06                            $30.00                                                                            10,000,000

                                                                                                              $20.00                                                                            5,000,000
Source: FirstEnergy Capital Corp. and Company Reports
                                                                                                              $10.00                                                                            0
                                                                                                                       Jan-04
                                                                                                                       Mar-04
                                                                                                                       May-04
                                                                                                                        Jul-04
                                                                                                                       Sep-04
                                                                                                                       Nov-04
                                                                                                                       Jan-05
                                                                                                                       Mar-05
                                                                                                                       May-05
                                                                                                                        Jul-05
                                                                                                                       Sep-05
                                                                                                                       Nov-05
                                                                                                                       Jan-06
                                                                                                                       Mar-06
                                                                                                                       May-06
                                                                                                                        Jul-06
                                                                                                                       Sep-06
                                                                                                                       Nov-06
                                                                                                                       Jan-07
                                                                                                                       Mar-07
                                                                                                                       May-07
                                                                                                                        Jul-07
                                                                                                                       Sep-07
                                                                                                                       Nov-07




                                                                                                               52 Week High:       $77.38    52 Week Low:       $57.36       Avg. Monthly Trading Volume
                                                                                                               52 Week High On:    Apr-21-06 52 Week Low On:    Jun-13-06         2,386,487 Shares
                                                                                                               Source: Bloomberg




                 Opinion: OUTPERFORM
            12 MONTH TARGET PRICE US$91.00
                    Analyst: Mark J. Friesen, CFA
                                                                                                                                                                       79


FD&A Costs                                              2004a      2005a           2006a            3-Yr. Avg.
                                                                                                                 Corporate Profile
FD&A (Proven)                                           $10.23     $10.07          $15.10            $12.00
                                                                                                                   EOG Resources is a North American natural gas
Cash Flow Netback                                       $20.79     $27.03          $27.35            $25.32
                                                                                                                   producer, with core areas in Texas, the U.S. Rockies,
Recycle Ratio (Proven)                                    2.0       2.7              1.8               2.1         Western Canada, and the North Sea offshore Trinidad.
                                                                                                                   Production is approximately 85% weighted towards
Reserves                                                                                                           natural gas, and ~80% North American.

Oil & Liquids
                                                                                                                 Operational Update
Proven Reserves (MMbbls)                                  100.0    106.2           117.8
                                                                                                                   We are estimating Q1/07 production rates of 36,425
Production (B/d)                                        32,958     36,120          37,404                          B/d of oil and liquids and 1,403 Mmcf/d of natural
Proven RLI (Years)                                         7.6       8.0             8.3                8.0        gas. We expect EPS of $0.81 and CFPS of $2.58.
Proven Reserve Repl. %                                  139%       147%            185%                158%        Q4 production of 1,640 Mmcfe/d (85.8% natural gas)
Natural Gas                                                                                                        was ~1% higher than our estimate of 1,624 Mmcfe/d
Proven Reserves (Bcf)                                     5,047    5,557           6,095                           (86.5% natural gas). EPS of $0.96 and CFPS of $2.86
Production (Mmcf/d)                                       1036      1216            1337                           were in line with or higher than our estimates of $0.97
Proven RLI (Years)                                        12.1      11.6            11.9               11.9        and $2.45, respectively. CFPS was higher than our
Proven Reserve Repl. %                                  204%       214%            209%                209%        estimate due to an unexpected Q4 tax adjustment
Note: Reserves are net of royatlies                                                                                resulting in a cash tax credit.
      FD&A and Netbacks in US$ and exclude changes in Future Development Costs
                                                                                                                   Management continues to reiterate expected annual
                                                                                                                   organic growth rates in the 9%-10% range between
                                                                                                                   2007 to 2010. We conservatively assume ~7.5%
                                                                                                                   growth into 2007 followed by ~7.5% growth again into
                                                                                                                   2008.
                                   Cashflow Netback Peer Comparison                                                Barnett Shale: Johnson County is expected to be the
           $40.00                                                                                                  production growth driver in the near-term. Reserve
                            EOG
                            Large Cap Average
                                                                                                                   potential estimates are 1.9-2.5 Net Tcfe for Johnson
                                                                                                                   County, 1.0-1.7 Net Tcfe (ex. Downspacing potential)
           $30.00
                                                                                                                   for the Southern Extension Counties and 1.6-2.5 Net
                                                                            $28.18
                                                 $25.91
                                                          $27.16                                    $27.34         Tcfe for the Western Extension Counties. Total Barnett
                          $25.12 $25.48                            $25.33                  $25.06
                                                                                                                   acreage is now > 610,000 acres. In total, EOG esti-
   $/Boe




           $20.00
                                                                                                                   mates 4,300+ potential drilling locations on the play.
                                                                                                                   2006 all-in FD&A costs (including revisions and
           $10.00                                                                                                  dispositions) were in line with our expectations at
                                                                                                                   US$2.52/Mcfe (Proven, Net), or US$15.10/Boe
                                                                                                                   (Proven, Net). EOG replaced 209% of production.
            $0.00
                                2005                   2006               2007e                2008e
                                                                                                                   Organic-only results were actually stronger, posting
            Source: FirstEnergy Capital Corp.                                                                      F&D costs of US$2.36/Mcfe (Proven, Net), or
                                                                                                                   US$14.16/Boe (Proven, Net). The Company’s total all-
                                                                                                                   in recycle ratio was 1.8x.
                                                                                                                 Financial Outlook
                                                                                                                   For shareholders of record on April 16th, on April 30th,
                                                                                                                   EOG will pay an increased dividend of $0.09/quarter.
                                                                                                                   The previous four quarters the dividend rate was
                 2007/2008 Current and Target DACFM Peer Comparison
                                                                                                                   $0.06/quarter, which was up from $0.04/quarter for
         10.0                                                                                                      the four quarters prior to that.
                       EOG
                       Large Cap Average                                                                           The Company has roughly 8% of its natural gas
           8.0                                                                                                     production volumes hedged for the rest of 2007. EOG
                                                 7.8                                         7.9
                                                                                                                   is currently unhedged for 2008.
           6.0                                          6.7         6.5                              6.4
                        6.4
                                                                                                                 Investment Summary
 DACFM




                                  5.9                                        5.7
                                                                                                                   Improving natural gas prices should benefit EOG more
           4.0
                                                                                                                   than other Large Cap names because of the
                                                                                                                   Company’s 86% weighting toward natural gas
           2.0
                                                                                                                   production and unhedged production base.
                                                                                                                   We rate EOG as an Outperform with a US$91.00 target
           0.0
                      07e DACFM                 2007 Target        08e DACFM                2008 Target
                                                                                                                   price. The valuation is based on an average 2007e
            Source: FirstEnergy Capital Corp.                                                                      target DACF multiple of 6.8x plus US$12.00 per share
                                                                                                                   in value for the Barnett Shale play.
 80     FirstQuarterly               Integrated, Oil Sands and Large Cap E&P                                                       April 2007



NEWFIELD EXPLORATION
COMPANY                                                                                                                                                                     NFX - US$43.05
                                                                                                                                                                                                 (as of April 20, 2007)
Year end Dec 31,                           2005a        2006a     2007e     2008e     Quarterly Information                                                                  2005a              2006a 2007e 2008e

Production
Oil & Liquids            B/D               23,287  20,087  25,518  27,500             Oil & - B/d                                                           Q1               25,555             17,778       22,500        27,500
Gas                      Mmcf/D               523     545     614     660             Liquids                                                               Q2               25,275             18,846       25,000        27,500
BOE                      BOE/D            110,533 110,861 127,858 137,500                                                                                   Q3               22,826             23,007       27,500        27,500
Production per Share     BOE/Share             0.3     0.3     0.4     0.4                                                                                  Q4               19,565             23,007       27,500        27,500
                         %                  -7.7%   -0.6%   14.4%    7.5%                                                                                  Avg.              23,287             20,087       25,518        27,500
Debt Adjusted PPS        BOE/Share             0.3     0.3     0.3     0.3
                         %                  -0.8%   -2.7%    7.6%    5.3%             Gas - Mmcf/d                                                          Q1                       570            493            565         660
                                                                                                                                                            Q2                       587            527            605         660
Cash flow                $MM                1,217        1,324     1,607     1,706                                                                          Q3                       509            557            630         660
CFPS                     Basic              $9.71       $10.47    $12.65    $13.43                                                                          Q4                       429            600            655         660
                         Diluted            $9.52       $10.26    $12.36    $13.12                                                                         Avg.                      523            545            614         660
P/CF                     Basic                 5.2          4.4       3.4       3.2
                         Diluted               5.3          4.5       3.4       3.2
                                                                                      Boe/d                                                                 Q1              120,622             99,995       116,667       137,500
Earnings                 $MM                                                                                                                                Q2              123,141            106,758       125,833       137,500
                                              348          591       551      559
EPS                      Basic              $2.78        $4.67     $4.34     $4.40
                                                                                                                                                            Q3              107,609            115,757       132,500       137,500
                         Diluted            $2.72        $4.58     $4.24     $4.30                                                                          Q4               91,115            123,007       136,667       137,500
P/E                      Basic               18.0           9.8       9.8      9.7                                                                         Avg.             110,533           110,861        127,858       137,500
                         Diluted             18.4         10.0      10.0       9.9
                                                                                      CFPS - $/Share                                                        Q1                 $2.45             $2.75        $2.66         $3.40
Capital Data                                                                                                                                                Q2                 $2.58             $2.31        $2.87         $3.08
Capex                    $MM                1,036        1,683     1,800     1,900                                                                          Q3                 $2.30             $2.84        $3.35         $3.28
Capex vs. Cash Flow      %                  85.1%       127.1%    112.0%    111.4%                                                                          Q4                 $2.18             $2.37        $3.49         $6.48
Exit Net Debt            $MM                1,067        1,320     1,513     1,707                                                                         Total               $9.52            $10.26       $12.36        $13.12
Entry Debt/CF            Years                 0.9          0.8       0.8       0.9
Market Cap.              $MM                6,459        5,974     5,532     5,532    EPS - $/Share                                                         Q1                 $0.47             $1.17         $0.86        $1.16
                                                                                                                                                            Q2                 $0.82             $0.73         $0.93        $0.94
Share Data                                                                                                                                                  Q3                 $0.00             $2.06         $1.19        $1.07
Basic shares             MM                 126.0        127.0     127.0     127.0                                                                          Q4                 $1.43             $0.64         $1.25        $2.10
Diluted shares           MM                 129.0        130.0     130.0     130.0                                                                         Total               $2.72             $4.58         $4.24        $4.30

Pricing                                                                               Note: CFPS and EPS are calculated on a diluted basis.
WTI                      - $US             $56.66       $66.26    $66.00    $64.00
Henry Hub                - $US              $8.86        $6.78     $8.25     $8.50
Oil                      - $C wellhd       $51.63       $61.58    $60.55    $58.36
Gas                      - $C wellhd        $8.45        $5.62     $7.44     $7.63
Exchange Rate            - US$ / CDN$        0.83         0.88      0.88      0.91

                                                                                                                            Newfield Exploration Company (NYSE: NFX)
                                                                                                                                           Statistical Review: 2004 - 2007
Year end Dec 31,                           2005a        2006a     2007e     2008e
                                                                                                             $70.00                                                                                                8,000,000
Net Asset Value                             $30.56      $27.14
                                                                                                             $60.00                                                                                                7,000,000

Share Price Y/E                             $50.07      $45.95                                                                                                                                                     6,000,000

                                                                                                                                                                                                                               Daily Trading Volume
                                                                                                             $50.00
                                                                                       Daily Closing Price




Valuation Data                                                                                                                                                                                                     5,000,000
                                                                                                             $40.00
DACFM                    X                    6.1          5.3        4.2       4.2
                                                                                                                                                                                                                   4,000,000
Target DACFM             X                                            5.1       5.0
                                                                                                             $30.00
                                                                                                                                                                                                                   3,000,000
EV/BOED                  $/BOED            68,089       65,792    55,098    52,644                           $20.00
Target EV/BOED           $/BOED                                   65,723    62,524                                                                                                                                 2,000,000

                                                                                                             $10.00                                                                                                1,000,000
EBITDA                   $MM              1,139.2    1,639.8      1,763.6   1,869.0
EV/EBITDA                X                    6.6        4.4          4.0       3.9                           $0.00                                                                                                0
P/NAV                    X                    1.6        1.7
                                                                                                                      Mar-04
                                                                                                                      May-04

                                                                                                                                  Sep-04
                                                                                                                                  Nov-04

                                                                                                                                  Mar-05
                                                                                                                                  May-05


                                                                                                                                                       Sep-05
                                                                                                                                                       Nov-05

                                                                                                                                                                Mar-06
                                                                                                                                                                         May-06

                                                                                                                                                                                   Sep-06
                                                                                                                                                                                            Nov-06

                                                                                                                                                                                            Mar-07
                                                                                                                                                                                            May-07

                                                                                                                                                                                                          Sep-07
                                                                                                                                                                                                          Nov-07
                                                                                                                      Jan-04



                                                                                                                       Jul-04



                                                                                                                                  Jan-05



                                                                                                                                              Jul-05



                                                                                                                                                                Jan-06



                                                                                                                                                                          Jul-06



                                                                                                                                                                                            Jan-07



                                                                                                                                                                                             Jul-07




Cash flow netback        $/BOED           $29.60     $20.56       $28.89    $28.69

                                                                                                               52 Week High:       $49.96    52 Week Low:                  $36.25            Avg. Monthly Trading Volume
                                                                                                               52 Week High On:    May-10-06 52 Week Low On:               Oct-3-06               1,241,632 Shares
Source: FirstEnergy Capital Corp. and Company Reports                                                          Source: Bloomberg




               Opinion: MARKET PERFORM
           12 MONTH TARGET PRICE US$53.00
                  Analyst: Mark J. Friesen, CFA
                                                                                                                                                                           81


FD&A Costs                                                     2004a      2005a         2006a           3-Yr. Avg.   Corporate Profile
FD&A (Proven)                                                 $15.43     $14.99         $21.95           $17.30
                                                                                                                       Newfield’s asset base is diversified across the Gulf of
Cash Flow Netback                                             $23.75     $30.22         $32.61           $28.86
                                                                                                                       Mexico, onshore Gulf Coast, the Uinta Basin of the
Recycle Ratio (Proven)                                          1.5        2.0           1.5                 1.7       Rocky Mountains and the Anadarko and Arkona
                                                                                                                       Basins. Internationally, Newfield has operations
Reserves                                                                                                               offshore Malaysia, in the UK North Sea, in the Bohai
                                                                                                                       Bay of China and offshore Brazil.
Oil & Liquids
Proven Reserves (MMbbls)                                        90.5      101.6         114.3
                                                                                                                     Operational Update
Production (B/d)                                               20,431    23,287         20,087
                                                                                                                       We are looking for Q1/07 production rates of 22,500
Proven RLI (Years)                                               8.8       14.2          13.6                12.2
Proven Reserve Repl. %                                         793%       214%          241%                 391%
                                                                                                                       B/d of oil and liquids, and 565 Mmcf/d of natural
Natural Gas
                                                                                                                       gas. We expect EPS of US$0.86 and CFPS of US$2.66
Proven Reserves (Bcf)                                          1,241      1,391         1,586                          versus consensus estimates of US$0.91 and US$2.61
Production (Mmcf/d)                                             542        523           545                           respectively.
Proven RLI (Years)                                               5.8       8.9            7.2                7.3       Weather-related delays at Grove and Wrigley in the
Proven Reserve Repl. %                                         176%       182%          203%                 187%      North Sea and Abu offshore Malaysia have pushed
Note: Reserves are net of royatlies
                                                                                                                       start-up dates out from December 2006 into Q2/07.
      FD&A and Netbacks in US$ and exclude changes in Future Development Costs                                         Several projects in the Gulf of Mexico have also
                                                                                                                       experienced weather-related delays.
                                                                                                                       Woodford Shale (Arkoma Basin): Newfield holds ~
                                                                                                                       125,000 net acres in the play. The Company plans to
                                                                                                                       drill 155 to 200 wells here in 2007, up from ~ 75 in
                                                                                                                       2006, and plans to grow net production from 25
                                                                                                                       Mmcfe/d in 2006 to 60–80 Mmcfe/d by 2007.
                                     Cashflow Netback Peer Comparison
                                                                                                                       For 2007, look for news on several Gulf of Mexico
        $40.00
                           NFX                                                                                         drilling prospects, including PowerPlay (NFX 35%),
                           Large Cap Average                                                                           as well as further onshore development drilling in
        $30.00                                                                                                         South Texas, the Rockies, and the Woodford Shale.
                          $29.60                                        $28.89 $28.18       $28.69                     During 2006, the Company replaced 203% of its
                                                              $27.16                                  $27.34
                                     $25.48                                                                            production but based on its all-in FD&A costs of
$/Boe




        $20.00
                                                     $20.56                                                            US$21.95/Boe (Proven, Net), Newfield achieved a
                                                                                                                       recycle ratio of ~1.5x. The Company’s organic F&D
                                                                                                                       costs was US$20.74. Newfield achieved 94.4%
        $10.00
                                                                                                                       drilling success during the year.
                                                                                                                       Q4 production of 123,007 Boe/d matched our expec-
          $0.00                                                                                                        tation of 123,000 Boe/d; however, CFPS was below
                                 2005                   2006               2007e                 2008e                 our estimate primarily due to much higher than
          Source: FirstEnergy Capital Corp.
                                                                                                                       expected operating costs. Operating costs were
                                                                                                                       reported at US$10.80/Boe versus our estimate of
                                                                                                                       US$6.91/Boe, reflecting US$50 Mm of hurricane
                                                                                                                       related repair expense.

                  2007/2008 Current and Target DACFM Peer Comparison                                                 Financial Outlook
                                                                                                                       The Company has roughly half of its 2007 oil and
                8.0
                             NFX                                                                                       liquids production and more than two-thirds of its
                             Large Cap Average                                                                         natural gas production hedged for 2007.
                6.0
                                                               6.7
                                                                                                       6.4             Based on our commodity price outlook, we expect
                                       5.9
                                                                                  5.7                                  Newfield to fall about $200 Mm short of its self
                                                      5.1                                       5.0                    funding planned 2007 capital program.
        DACFM




                4.0          4.2                                         4.2                                           Newfield maintains a strong balance sheet, with exit
                                                                                                                       2006 debt to 2007e cash flow of 0.8x.
                2.0
                                                                                                                     Investment Summary
                                                                                                                       We rate Newfield as a Market Perform with a price
                0.0
                                                                                                                       target of US$53.00, based on a 2007e DACF of 5.1x.
                           07e DACFM                 2007 Target        08e DACFM              2008 Target
                 Source: FirstEnergy Capital Corp.
82      FirstQuarterly               Integrated, Oil Sands and Large Cap E&P                                                        April 2007




NEXEN INC.                                                                                                                                                                    NXY - $69.06
                                                                                                                                                                                  (as of April 20, 2007)
Year end Dec 31,                           2005a      2006a     2007e      2008e     Quarterly Information                                                   2005a            2006a         2007e             2008e

Production
Oil & Liquids           Bbl/d             197,850 171,875 236,736 262,577            Oil & Liquids - Bbl/d                                    Q1          209,700          180,200         219,776           258,774
                                                                                                                                              Q2          205,100          174,800         228,155           262,387
Gas                     Mmcf/d                264     239     310     370
                                                                                                                                              Q3          190,400          166,400         248,620           263,773
Total                   Boe/d             241,850 211,750 288,403 324,244                                                                     Q4          186,200          166,100         250,393           265,375
Production per Share    Boe/Share             0.3      0.3    0.4      0.4                                                                   Avg.         197,850          171,875         236,736           262,577
                        %                   -5.2%  -13.6%   36.1%   12.5%
Debt Adjusted PPS       Boe/Share             0.3      0.2    0.3      0.4           Gas - Mmcf/d                                             Q1                299             249            260              370
                        %                   -3.7%   -9.4%   34.3%   15.5%                                                                     Q2                276             243            310              370
                                                                                                                                              Q3                248             222            320              370
Cash flow               $Mm                                                                                                                   Q4                233             243            350              370
                                            2,471      2,712     3,519     3,923
                                                                                                                                             Avg.               264             239            310              370
CFPS                    Basic               $9.23     $10.18    $13.41    $14.95
                        Diluted             $9.04     $10.08    $13.07    $14.58     Total Production - Boe/d                                 Q1          259,533          221,700         263,109           320,440
P/CF                    Basic                 6.0         6.8      5.2        4.6                                                             Q2          251,100          215,300         279,822           324,054
                        Diluted               6.1         6.8      5.3        4.7                                                             Q3          231,733          203,400         301,953           325,439
                                                                                                                                              Q4          225,033          206,600         308,727           327,042
Earnings                $Mm                 1,152       603      1,401     1,548                                                             Avg.         241,850          211,750         288,403           324,244
EPS                     Basic               $4.42      $2.29     $5.34     $5.90
                                                                                     CFPS - $/Share                                           Q1             $1.97             $2.58         $2.17             $3.51
                        Diluted             $4.34      $2.24     $5.20     $5.75
                                                                                                                                              Q2             $2.36             $2.79         $3.01             $3.66
P/E                     Basic                12.5       30.2      12.9      11.7                                                              Q3             $1.83             $2.21         $4.06             $3.73
                        Diluted              12.8       30.8      13.3      12.0                                                              Q4             $2.88             $2.50         $3.83             $3.68
                                                                                                                                             Total           $9.04            $10.08        $13.07            $14.58
Capital Data
Capex                   $Mm                 2,617      3,338     2,900     2,694     EPS - $/Share                                            Q1             $0.14            ($0.30)        $0.61             $1.37
Capex vs. Cash Flow     %                  105.9%     123.1%     82.4%     68.7%                                                              Q2             $0.76             $1.52         $1.20             $1.45
                                                                                                                                              Q3             $2.30             $0.72         $1.79             $1.49
Exit Net Debt           $Mm                 3,641      4,197     4,113     3,408
                                                                                                                                              Q4             $1.12             $0.29         $1.61             $1.44
Entry Debt/CF           Years                 1.7         1.3      1.2        1.0                                                            Total           $4.34             $2.24         $5.20             $5.75
Market Cap.             $Mm                14,805     17,251    18,582    18,582
                                                                                     Note: CFPS and EPS are calculated on a diluted basis.
Share Data
Basic shares            Mm                  261.1      262.5     262.5     262.5
Options                 Mm                    6.0        6.8       6.7       6.6
Warrants                Mm                    0.0        0.0       0.0       0.0
Diluted shares          Mm                  267.1      268.7     269.1     269.1
Fully Diluted shares    Mm                  273.4      276.1     276.1     276.1

Pricing
WTI                     -   $US             56.65      66.23     66.00     64.00
Oil                     -   $C wellhd       40.48      67.14     66.28     62.86
                                                                                                                                             Nexen Inc. (TSX: NXY)
Gas                     -   $C wellhd        8.82       7.19      8.63      8.93                                                             Statistical Review: 2004 - 2007
Exchange Rate           -   US$ / CDN$       0.83       0.88      0.88      0.91
                                                                                                             $80.00                                                                                12,000,000

                                                                                                             $70.00
                                                                                                                                                                                                   10,000,000
Year end Dec 31,                           2005a      2006a     2007e      2008e
                                                                                                             $60.00



                                                                                                                                                                                                                Daily Trading Volume
                                                                                       Daily Closing Price




                                                                                                                                                                                                   8,000,000
Net Asset Value                             $57.98    $54.06                                                 $50.00


Share Price Y/E                             $55.42    $64.20     $69.06    $69.06                            $40.00                                                                                6,000,000

                                                                                                             $30.00
Valuation Data                                                                                                                                                                                     4,000,000
DACFM                   x                      7.2       7.8        6.2       5.2                            $20.00
Target DACFM            x                                           7.7       6.5                                                                                                                  2,000,000
                                                                                                             $10.00

EV/BOED                 $/Boed             76,270    101,287    78,693    67,820                              $0.00                                                                                0
Target EV/BOED          $/Boed                                  97,297    84,367
                                                                                                                      Mar-04
                                                                                                                      May-04




                                                                                                                      Mar-05
                                                                                                                      May-05




                                                                                                                      Mar-06
                                                                                                                      May-06




                                                                                                                      Mar-07
                                                                                                                      May-07
                                                                                                                      Jan-04



                                                                                                                       Jul-04
                                                                                                                      Sep-04
                                                                                                                      Nov-04
                                                                                                                      Jan-05



                                                                                                                       Jul-05
                                                                                                                      Sep-05
                                                                                                                      Nov-05
                                                                                                                      Jan-06


                                                                                                                       Jul-06
                                                                                                                      Sep-06
                                                                                                                      Nov-06
                                                                                                                      Jan-07


                                                                                                                       Jul-07
                                                                                                                      Sep-07
                                                                                                                      Nov-07




EBITDA                  $Mm               2,143.0    2,472.9    3,838.6   4,384.4
EV/EBITDA               x                     8.6        8.7        5.9       5.0                               52 Week High:       $74.77    52 Week Low:        $51.76       Avg. Monthly Trading Volume
P/NAV                   x                     1.0        1.2                                                    52 Week High On:    Jan-24-07 52 Week Low On:     Jun-13-06          911,192 Shares
Cash Flow Netback       $/Boed            $21.07      $27.46    $32.26    $32.70                                Source: Bloomberg




Note: Net asset value is 10% after-tax on P+P reserves for conventional E&P,and 8%
pre-tax for Oil Sands


                Opinion: OUTPERFORM
            12 MONTH TARGET PRICE $89.00
         Analyst: Martin P. Molyneaux, CMA, CFA
                                                                                                                                                                         83


FD&A Costs                                                   2004a       2005a          2006a        3-Yr. Avg.     Corporate Profile
                                                                                                                      Nexen has oil and gas operations primarily located
FD&A (Proven)                                            $24.78         N/A             $25.00           $28.13
                                                                                                                      in Canada, Yemen, the North Sea, the GoM, Colom-
Cash Flow Netback                                        $21.62         N/A             $35.59           $28.40
                                                                                                                      bia, and West Africa.
Recycle Ratio (Proven)                                         0.9      N/A                1.4                1.0     Nexen is also the most oil-levered (82%) among our
                                                                                                                      Large Cap universe, with Oil Sands interests in the
Reserves
                                                                                                                      Long Lake Project (50% WI) and Syncrude (7.23%
Oil & Liquids                                                                                                         WI).
Proven Reserves (MMbbls)                                       351             304         330                      Operational Update
Production (mB/d)                                            117.5          123.3        104.1                        North Sea: Buzzard (43.2% WI) began to ramp up
Proven RLI (Years)                                              7.3            6.9         8.5                7.6     production volumes in early January and will
Proven Reserve Repl. %                                        253%             -4%       168%               136%      generate outstanding returns. Peak volumes will be
Natural Gas                                                                                                           around 85,000 Boe/d net to Nexen and should be
Proven Reserves (Bcf)                                          600             532         532                        achieved in H1 2007. This project will see Nexen
Production (Mmcf/d)                                           296            264          239                         generate an impressive volume growth profile for
Proven RLI (Years)                                              7.7            8.8         7.1                7.9     2007. Golden Eagle (34% WI) is a near exploration
Proven Reserve Repl. %                                        31%            16%         100%                 47%
                                                                                                                      success.
                                                                                                                      Yemen: Nexen continues to optimize its production
Notes: Above figures exclude oil sands (i.e. Syncrude, Long Lake)                                                     from this area with expectations that the various
             Reserves are net of royatlies                                                                            fields will be fully depleted when the production
             FD&A costs are in US$ and exclude changes in Future Development Costs
                                                                                                                      contract expires in 2011. Clearly, the game here is
                                                                                                                      maximizing returns, while managing something like
                                                                                                                      a 20% decline curve post Capex.
                                                                                                                      Gulf of Mexico: The Knotty Head (25% WI) discovery
                                                                                                                      currently carries a resource potential estimate of 200-
                                                                                                                      500 MmBoe. Finding a rig for delineation drilling is
                                   Cashflow Netback Peer Comparison
                                                                                                                      the challenge to help define a development plan and
         $40.00
                                                                                         NXY                          seek sanctioning. Nexen continues to have a lot
                                                                                         Large Cap Average
                                                                                                                      going on in the GoM with 10 wells planned.
         $30.00                                                       $32.26                $32.70                    West Africa: Non OPL 222 Nexen and its partners
                                                                               $28.18
                                                                                                                      have received initial approval for the Usan Field (20%
                                                $27.46 $27.16                                        $27.34
                                    $25.48                                                                            WI) development plan including a FPSO, along with
                                                                                                                      35 wells targeting peak volumes of ~160,000 B/d
 $/Boe




         $20.00          $21.07
                                                                                                                      (gross). We expect this field to come onstream around
                                                                                                                      2010.
         $10.00                                                                                                       Long Lake: The Nexen/OPTI partnership has now
                                                                                                                      started steaming Phase I, with the upgrader expected
                                                                                                                      to come on line in Q4 2007. Further resource defini-
          $0.00
                                2005                  2006                  2007e                2008e
                                                                                                                      tion will enable the hub and spoke plan to grow Oil
           Source: FirstEnergy Capital Corp.                                                                          Sands volumes to 120,000 B/d (net) over the next 10
                                                                                                                      years and to add over 100 million barrels of reserves
                                                                                                                      annually.
                                                                                                                      CBM: NXY now has over 700 net sections and
                2007/2008 Current and Target DACFM Peer Comparison
                                                                                                                      remains on target to add 150 Mmcf/d in 2011.
         10.0
                        NXY                                                                                         Financial Outlook
                        Large Cap Average
                                                                                                                      With a 2007 Capex program of $2.9 billion, we expect
          8.0
                                                                                                                      Nexen’s net debt to exit the year at $3.9 billion.
                                                7.7
          6.0
                       6.2
                                                       6.7                                     6.5    6.4           Investment Summary
DACFM




                                  5.9                                          5.7                                    We continue to believe that Nexen has a strong focus
                                                                      5.2
          4.0                                                                                                         on ROCE, and an active and high quality exploration
                                                                                                                      and development program.
          2.0
                                                                                                                      Our 12 month target price of $89.00 is predicated on a
                                                                                                                      6.5x 2008e and 6.0x 2009e (first full year of Long
          0.0
                                                                                                                      Lake) DACFM along with roughly $85,600 per Boe/d.
                      07e DACFM                2007 Target            08e DACFM             2008 Target               With an expected 12 month return of 29% we rank
          Source: FirstEnergy Capital Corp.
                                                                                                                      Nexen as an Outperform.
84      FirstQuarterly             Integrated, Oil Sands and Large Cap E&P                                                      April 2007




 POGO PRODUCING COMPANY                                                                                                                                                     PPP - US$50.02
                                                                                                                                                                                                   (as of April 20, 2007)
Year end Dec 31,                          2005a     2006a      2007e     2008e     Quarterly Information                                                   2005a                      2006a              2007e              2008e

Production
Oil & Liquids            B/D              34,765 36,924 34,745           34,250    Oil & - B/d                                      Q1                    50,387                     39,561             35,500              34,250
Gas                      Mmcf/D              269    280    285              280    Liquids                                          Q2                    30,450                     37,292             35,000              34,250
Total                    BOE/D            79,591 83,517 82,322           80,917                                                     Q3                    22,831                     35,647             34,000              34,250
Production per Share     BOE/Share            0.5    0.5    0.5              0.5                                                    Q4                    35,685                     35,647             34,000              34,250
                         %                -20.5% 10.1%   -1.9%            -1.7%                                                    Avg.                   34,765                     36,924             34,745              34,250
Debt Adjusted PPS        BOE/Share            0.4    0.3    0.2              0.2
                         %                -30.3% -25.2% -18.1%            -4.6%    Gas - Mmcf/d                                     Q1                           335                         282            290                280
                                                                                                                                    Q2                           255                         270            290                280
Cash flow                $MM                845        728        806      782                                                      Q3                           222                         274            282                280
CFPS                     Basic            $14.00    $12.66     $13.96    $13.55                                                     Q4                           265                         292            280                280
                         Diluted          $13.88    $12.55     $13.82    $13.41                                                    Avg.                          269                         280            285                280
P/CF                     Basic               3.6       3.8         3.6      3.7
                         Diluted             3.6        3.9        3.6      3.7    Boe/d                                            Q1                   106,233                     86,595             83,833              80,917
                                                                                                                                    Q2                    72,868                     82,283             83,333              80,917
Earnings                 $MM                310        446         88        40                                                     Q3                    59,907                     81,266             81,000              80,917
EPS                      Basic            $12.44     $7.74      $1.52     $0.70                                                     Q4                    79,862                     84,368             80,667              80,917
                         Diluted          $12.33     $7.68      $1.50     $0.69                                                    Avg.                   79,591                     83,517             82,322              80,917
P/E                      Basic               4.0        6.3      33.0      71.7
                         Diluted             4.0       6.3       33.3      72.4    CFPS - $/Share                                   Q1                     $3.45                      $3.32              $2.80               $3.46
                                                                                                                                    Q2                     $3.15                      $1.24              $3.49               $3.25
Capital Data
                                                                                                                                    Q3                     $2.96                      $3.81              $3.82               $3.38
Capex                    $MM               1,377  1,238           740       800                                                     Q4                     $4.34                      $3.13              $3.71               $6.72
Capex vs. Cash Flow      %                163.0% 170.1%         91.9%    102.4%                                                    Total                  $13.88                     $12.55             $13.82              $13.41
Exit Net Debt            $MM                 991  3,445         3,563     3,820
Entry Debt/CF            Years                0.7    1.4           4.3       4.6
                                                                                   EPS - $/Share                                    Q1                     $0.93                       $1.16             ($0.17)             $0.33
Market Cap.              $MM               2,915  2,822         2,916     2,916
                                                                                                                                    Q2                     $1.70                       $6.25              $0.39              $0.11
                                                                                                                                    Q3                     $7.89                       $0.58              $0.68              $0.17
Share Data
                                                                                                                                    Q4                     $1.96                      ($0.29)             $0.60              $0.44
Basic shares             MM                 58.0        57.7     57.7      57.7
                                                                                                                                   Total                  $12.33                       $7.68              $1.50              $0.69
Diluted shares           MM                 58.5        58.3     58.3      58.3
                                                                                   Note: CFPS and EPS are calculated on a diluted basis.
Pricing
WTI                      -   $US          $56.66    $66.26     $66.00    $64.00
Henry Hub                -   $US           $8.86     $6.78      $8.25     $8.50
Oil                      -   $US wellhd   $48.13    $54.46     $54.32    $52.25
Gas                      -   $US wellhd    $7.51     $6.29      $7.69     $7.93
Exchange Rate            -   US$ / CDN$     0.83      0.88       0.88      0.91                                                Pogo Producing Company (NYSE: PPP)
                                                                                                                                            Statistical Review: 2004 - 2007

                                                                                                          $75.00                                                                                                   5,000,000
Year end Dec 31,                          2005a     2006a      2007e     2008e
                                                                                                          $70.00                                                                                                   4,500,000
                                                                                                          $65.00
Net Asset Value                                                                                                                                                                                                    4,000,000
                                           $38.80   $38.30                                                $60.00


                                                                                                                                                                                                                               Daily Trading Volume
                                                                                    Daily Closing Price




                                                                                                          $55.00                                                                                                   3,500,000

Share Price Y/E                            $49.81   $48.44                                                $50.00                                                                                                   3,000,000
                                                                                                          $45.00
                                                                                                                                                                                                                   2,500,000
                                                                                                          $40.00
Valuation Data                                                                                                                                                                                                     2,000,000
                                                                                                          $35.00
DACFM                    X                   4.4         7.9      7.1       7.6                           $30.00                                                                                                   1,500,000
Target DACFM             X                                        7.3       7.8                           $25.00
                                                                                                                                                                                                                   1,000,000
                                                                                                          $20.00
                                                                                                                                                                                                                   500,000
EV/BOED                  $/BOED           49,072    75,031     78,700    83,248                           $15.00

Target EV/BOED           $/BOED                                80,811    85,395                           $10.00                                                                                                   0
                                                                                                                   Mar-04
                                                                                                                   May-04

                                                                                                                               Sep-04
                                                                                                                               Nov-04

                                                                                                                               Mar-05
                                                                                                                               May-05


                                                                                                                                                        Sep-05
                                                                                                                                                        Nov-05

                                                                                                                                                                 Mar-06
                                                                                                                                                                          May-06

                                                                                                                                                                                    Sep-06
                                                                                                                                                                                             Nov-06

                                                                                                                                                                                             Mar-07
                                                                                                                                                                                             May-07

                                                                                                                                                                                                          Sep-07
                                                                                                                                                                                                          Nov-07
                                                                                                                   Jan-04



                                                                                                                    Jul-04



                                                                                                                               Jan-05



                                                                                                                                               Jul-05



                                                                                                                                                                 Jan-06



                                                                                                                                                                           Jul-06



                                                                                                                                                                                             Jan-07



                                                                                                                                                                                              Jul-07




EBITDA                   $MM              1,055.2 1,287.8 1,002.0         962.1
EV/EBITDA                X                    3.7     4.9     6.5           7.0                             52 Week High:        $54.00      52 Week Low:                   $38.71            Avg. Monthly Trading Volume
                                                                                                            52 Week High On:     Dec-5-06    52 Week Low On:                Sep-20-06               725,448 Shares
P/NAV                    X                    1.3     1.3
                                                                                                            Source: Bloomberg
Cash flow netback        $/BOED           $25.91 $33.85 $24.61           $24.49



Source: FirstEnergy Capital Corp. and Company Reports


               Opinion: UNDERPERFORM
           12 MONTH TARGET PRICE US$53.00
                  Analyst: Mark J. Friesen, CFA
                                                                                                                                                                        85


FD&A Costs                                                 2004a      2005a           2006a          3-Yr. Avg.   Corporate Profile
                                                                                                                    Pogo Producing has operations in the Gulf of Mexico
FD&A (Proven)                                        $21.10        $32.24         $26.63             $27.23
                                                                                                                    and onshore, including the Gulf Coast and the
Cash Flow Netback                                    $19.13        $32.39         $22.83             $23.94
                                                                                                                    Rockies. Pogo also wholly owns Northrock Resources
Recycle Ratio (Proven)                                  0.9          1.0             0.9               0.9
                                                                                                                    in Canada. Internationally, Pogo holds a non-produc-
Reserves
                                                                                                                    ing exploration license offshore New Zealand and
                                                                                                                    offshore Vietnam.
Oil & Liquids
                                                                                                                  Operational Update
Proven Reserves (MMbbls)                               116.4        144.0            163.3
                                                                                                                    Shareholder Activism: In December, Third Point LLC
Production (B/d)                                     51,620        34,765         36,924
                                                                                                                    (a significant shareholder) asked Pogo’s Board of
Proven RLI (Years)                                      7.9          11.1            12.6              10.5
Proven Reserve Repl. %                                 108%         353%             243%              212%
                                                                                                                    Directors to initiate the sale of the Company’s assets,
Natural Gas
                                                                                                                    citing consistent underperformance of the shares and
Proven Reserves (Bcf)                                  1,080        1,178            1,233
                                                                                                                    poor due diligence on its 2005 acquisition of
Production (Mmcf/d)                                     324          269             280
                                                                                                                    NorthRock Resources. Pogo has agreed to expand its
Proven RLI (Years)                                      9.3          12.2            11.6              11.0         Board of Directors from 8 to 10 seats, allowing a
Proven Reserve Repl. %                                 157%         208%          154%                 171%         representative from Third Point LLC to join the Board.
                                                                                                                    In exchange, Third Point has agreed not to solicit
Note: Reserves are net of royatlies
      FD&A and Netbacks in US$ and exclude changes in Future Development Costs                                      proxies in connection with Pogo’s 2007 AGM.
                                                                                                                    International: The first of two wells at the Taranaki
                                                                                                                    Basin offshore New Zealand should commence
                                                                                                                    drilling during Q3/07, while seismic acquisition is
                                                                                                                    planned for the East Coast Basin. In Vietnam, 3-D
                                                                                                                    seismic acquisition is planned, with drilling to follow
                                 Cashflow Netback Peer Comparison
                                                                                                                    in 2008.
        $40.00
                        PPP
                                                                                                                    FD&A results were reported at $26.63/Boe (Proven,
                        Large Cap Average                                                                           Net), resulting in a sub-economic recycle ratio of 0.9x
                                              $33.85                                                                on the year. Drill bit only F&D costs were reported at
        $30.00
                                                                                                                    US$26.20/Boe (Proven, Net). Pogo’s drilling success
                                                                            $28.18
                       $25.91 $25.48
                                                       $27.16
                                                                   $24.61
                                                                                                    $27.34
                                                                                                                    rate dropped to 89% from 91% last year.
                                                                                           $24.49
$/Boe




        $20.00                                                                                                    Financial Outlook
                                                                                                                    Due to acquisitions, Pogo’s financial leverage is high
        $10.00
                                                                                                                    at 4.3 2006e exit net debt to 2007e cash flow. Planned
                                                                                                                    asset divestitures of US$700-$800 Mm would lower
                                                                                                                    this ratio but also dilute CFPS by 5% to 10%.
         $0.00                                                                                                      Pogo has approximately half of its 2007 oil and
                             2005
         Source: FirstEnergy Capital Corp.
                                                    2006              2007e                    2008e                liquids production and approximately one-third of its
                                                                                                                    natural gas production hedged at reasonably attrac-
                                                                                                                    tive prices.
                                                                                                                  Investment Summary
                                                                                                                    The Company previously announced that it has hired
               2007/2008 Current and Target DACFM Peer Comparison
                                                                                                                    advisors and is formally reviewing its strategic
                                                                                                                    alternatives, including the possible sale of the Com-
        10.0
                    PPP                                                                                             pany. We believe that this outcome has been in the
                    Large Cap Average                                                                               market since December 1st, when Third Point initiated
         8.0                                                                                                        shareholder activism on the stock and called for
                                                                   7.6                       7.8
                      7.1                     7.3                                                                   Management to begin strategic alternative actions.
                                                       6.7
         6.0                                                                                         6.4            Our US$53.00 target price reflects the potential of a
DACFM




                                5.9                                         5.7
                                                                                                                    corporate sale. Our Underperform rating is not only
         4.0                                                                                                        based on the remaining low implied return from the
                                                                                                                    current stock price, but the highly levered balance
         2.0                                                                                                        sheet, the escalating cost structure (especially on a Boe
                                                                                                                    basis), the diminishing growth from the Company and
         0.0                                                                                                        the already high valuation of the stock, which we
                     07e DACFM               2007 Target           08e DACFM               2008 Target              believe already reflects the potential of a takeover.
         Source: FirstEnergy Capital Corp.
 86        FirstQuarterly                 Integrated, Oil Sands and Large Cap E&P                                                        April 2007




 TALISMAN ENERGY INC.                                                                                                                                                             TLM - $21.66
                                                                                                                                                                                        (as of April 20, 2007)
Year end Dec 31,                               2005a       2006a      2007e      2008e     Quarterly Information                                                  2005a             2006a          2007e           2008e

Production
Oil & Liquids           Bbl/d                249,848      261,810    246,375    307,750    Oil & Liquids - Bbl/d                                   Q1            235,492          299,977        239,000          277,500
Gas                     Mmcf/d                 1,319        1,342      1,431      1,635                                                            Q2            228,977          252,411        247,500          299,500
Total                   Boe/d                469,640      485,393    484,917    580,250                                                            Q3            242,884          236,344        246,000          314,500
Production per Share    Boe/Share                 0.2          0.2        0.2        0.2                                                           Q4            292,039          258,508        253,000          339,500
                        %                      12.1%         5.2%       2.0%      19.7%                                                           Avg.           249,848          261,810        246,375          307,750
Debt Adjusted PPS       Boe/Share                 0.1          0.1        0.1        0.2
                        %                      18.2%        -2.3%       2.6%      21.6%    Gas - Mmcf/d                                            Q1                1,332          1,338           1,360           1,610
                                                                                                                                                   Q2                1,292          1,321           1,390           1,635
Cash flow               $Mm                    4,632        4,716      5,109      5,645                                                            Q3                1,307          1,343           1,465           1,635
CFPS                    Basic                 $11.14        $4.32      $4.88      $5.39                                                            Q4                1,344          1,364           1,510           1,660
                        Diluted                $4.14        $4.18      $4.71      $5.21                                                           Avg.               1,319          1,342           1,431           1,635
P/CF                    Basic                     1.8          4.6        4.4        4.0
                        Diluted                   4.9          4.7        4.6        4.2   Total Production - Boe/d                                Q1            457,492          522,977        465,667