**Exhibit99.1**

 

 

 

**ANNUAL INFORMATION FORM**

 

 

**(Exceptas otherwise noted the information herein is given as at December 31, 2005)**

 

 

**Dated: March 24, 2006**

 

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**TABLE OF CONTENTS**

 
| ** **                                                           | **Page** |
|----------------------------------------------------------------------|----------|
| **GLOSSARY OF TECHNICAL TERMS**                                      | **1**    |
| **CURRENCY OF INFORMATION**                                          | **5**    |
| **ABBREVIATIONS**                                                    | **6**    |
| **CONVERSION**                                                       | **6**    |
| **THE CORPORATION**                                                  | **8**    |
| **GENERAL DEVELOPMENT OF THE BUSINESS**                              | **8**    |
| **DESCRIPTION OF THE BUSINESS**                                      | **12**   |
| General                                                              | 12       |
| Oil and Gas  Properties and Wells                                    | 13       |
| **STATEMENT OF RESERVES DATA AND  OTHER OIL AND GAS INFORMATION**    | **15**   |
| GENERAL                                                              | 15       |
| SELECTED  RESERVES INFORMATION                                       | 16       |
| Reserves  Data - Constant Prices and Costs                           | 16       |
| Reserves  Data – Forecast Prices and Costs                      | 20       |
| Constant  Prices Used in Estimates                                   | 22       |
| Forecast  Prices Used in Estimates                                   | 24       |
| Reserves  Reconciliation                                             | 26       |
| Future Net  Revenue Reconciliation                                   | 27       |
| Undeveloped  Reserves                                                | 28       |
| Significant  Factors or Uncertainties Affecting Reserves Data        | 28       |
| Future  Development Costs                                            | 28       |
| Oil and Gas  Properties and Wells                                    | 29       |
| Properties  With No Attributed Reserves                              | 29       |
| Expirations  and Work Commitments                                    | 29       |
| Undeveloped  Land Due to Expire                                      | 30       |
| Forward  Contracts and Future Commitments                            | 30       |
| Production  Volume by Field                                          | 30       |
| Additional  Information Concerning Abandonment and Reclamation Costs | 31       |
| Tax Horizon                                                          | 32       |
| Costs  Incurred                                                      | 32       |
| Exploration  and Development Activities                              | 32       |
| Production  Estimates                                                | 33       |
| **RISK FACTORS**                                                     | **36**   |
| Exploration,  Development and Production Risks                       | 36       |
| Substantial  Capital Requirements and Liquidity                      | 36       |
| Additional  Funding Requirements                                     | 37       |
| Issuance of  Debt                                                    | 37       |
| Prices,  Markets and Marketing of Crude Oil and Natural Gas          | 37       |
| Insurance                                                            | 37       |
| Legal  Proceedings                                                   | 38       |
| Environmental  Risks                                                 | 38       |
| Competition                                                          | 38       |
| Reserve  Replacement                                                 | 39       |
| Reliance on  Operators and Key Employees                             | 39       |

 

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| Permits and  Licenses                                            | 39      |
|------------------------------------------------------------------|---------|
| Royalties,  Incentives and Production Taxes                      | 39      |
| Land Tenure                                                      | 40      |
| Title to  Properties                                             | 40      |
| Corporate  Matters                                               | 40      |
| **DIVIDENDS**                                                    | **40**  |
| **DESCRIPTION OF CAPITAL STRUCTURE**                             | **40**  |
| Common  Shares                                                   | 41      |
| Preferred  Shares                                                | 41      |
| Shareholder  Rights Plan                                         | 41      |
| **MARKET FOR SECURITIES**                                        | **42**  |
| Trading  Price and Volume                                        | 42      |
| **DIRECTORS AND OFFICERS**                                       | **42**  |
| Names,  Occupations and Security Holders                         | 42      |
| Cease Trade  Orders, Bankruptcies, Penalties or Sanctions        | 44      |
| Conflicts  of Interest                                           | 45      |
| **LEGAL PROCEEDINGS**                                            | **45**  |
| **INTERESTS OF MANAGEMENT AND OTHERS  IN MATERIAL TRANSACTIONS** | **45**  |
| **TRANSFER AGENT AND REGISTRAR**                                 | **46**  |
| **INTERESTS OF EXPERTS**                                         | **46**  |
| **AUDIT COMMITTEE**                                              | **46**  |
| Mandate of  the Audit Committee                                  | 46      |
| Relevant  Education and Experience of Audit Committee Members    | 46      |
| Audit  Committee Oversight                                       | 47      |
| External  Auditor Fees                                           | 47      |
| Audit Fees                                                       | 47      |
| Audit-Related  Fees                                              | 47      |
| Tax Fees                                                         | 47      |
| All Other  Fees                                                  | 48      |
| **ADDITIONAL INFORMATION**                                       | **48**  |
| **APPENDIX “A”**                                       | **A-1** |
| **APPENDIX “B”**                                       | **B-1** |
| **APPENDIX “C”**                                       | **C-1** |

 

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**GLOSSARY OF TECHNICAL TERMS**

 

As used in this Annual Information Form, the following technical termsand acronyms have the respective meanings specified below.

 

(a)           “**constant prices and costs**” meansprices and costs used in an estimate that are:

 

(i)            the Corporation’s prices and costs as at the effective date of theestimation, held constant throughout the estimated lives of the properties towhich the estimate applies;

 

(ii)           if, and only to the extent that, there are fixed or presentlydeterminable future prices or costs to which the Corporation is legally boundby a contractual or other obligation to supply a physical product, includingthose for an extension period of a contract that is likely to be extended,those prices or costs rather than the prices and costs referred to in paragraph (i).

 

For the purpose of paragraph (i), the Corporation’s prices will bethe posted price for oil and the spot price for gas, after historicaladjustments for transportation, gravity and other factors.

 

(b)           “**crude oil**” or “**oil**” means a mixture that consists mainly of pentanes andheavier hydrocarbons, which may contain sulphur and other non-hydrocarboncompounds, that is recoverable at a well from an underground reservoir and thatis liquid at the conditions under which its volume is measured or estimated.  It does not include solution gas or naturalgas liquids.

 

(c)           “**development costs**” means costsincurred to obtain access to reserves and to provide facilities for extracting,treating, gathering and storing the oil and gas from the reserves.  More specifically, development costs,including applicable operating costs of support equipment and facilities andother costs of development activities, are costs incurred to:

 

(i)            gain access to and prepare well locations for drilling, includingsurveying well locations for the purpose of determining specific developmentdrilling sites, clearing ground, draining, road building, and relocating publicroads, gas lines and power lines, to the extent necessary in developing thereserves;

 

(ii)           drill and equip development wells, development type stratigraphictest wells and service wells, including the costs of platforms and of wellequipment such as casing, tubing, pumping equipment and the wellhead assembly;

 

(iii)          acquire, construct and install production facilities such as flowlines, separators, treaters, heaters, manifolds, measuring devices andproduction storage tanks, natural gas cycling and processing plants, andcentral utility and waste disposal systems; and

 

(iv)          provide improved recovery systems.

 

(d)           “**development well**” means a welldrilled inside the established limits of an oil or gas reservoir, or in closeproximity to the edge of the reservoir, to the depth of a stratigraphic horizonknown to be productive.

 

(e)           “**exploration costs**” means costsincurred in identifying areas that may warrant examination and in examiningspecific areas that are considered to have prospects that may contain oil andgas reserves, including costs of drilling exploratory wells and exploratorytype stratigraphic test wells.  Explorationcosts may be incurred both before acquiring the related property (sometimesreferred to in part as “prospecting costs”) and after acquiring theproperty.  Exploration costs, whichinclude applicable operating costs of support equipment and facilities andother costs of exploration activities, are:

 

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(i)            costs of topographical, geochemical, geological and geophysicalstudies, rights of access to properties to conduct those studies, and salariesand other expenses of geologists, geophysical crews and others conducting thosestudies (collectively sometimes referred to as “geological and geophysicalcosts”);

 

(ii)           costs of carrying and retaining unproved properties, such as delayrentals, taxes (other than income and capital taxes) on properties, legal costsfor title defence, and the maintenance of land and lease records;

 

(iii)          dry hole contributions and bottom hole contributions;

 

(iv)          costs of drilling and equipping exploratory wells; and

 

(v)           costs of drilling exploratory type stratigraphic test wells.

 

(f)            “**exploratory well**” means a wellthat is not a development well, a service well or a stratigraphic test well.

 

(g)           “**field**” means an area consisting ofa single reservoir or multiple reservoirs all grouped on or related to the sameindividual geological structural feature and/or stratigraphic condition.  There may be two or more reservoirs in afield that are separated vertically by intervening impervious strata orlaterally by local geologic barriers, or both. Reservoirs that are associated by being in overlapping or adjacentfields may be treated as a single or common operational field.  The geological terms “structural feature” and“stratigraphic condition” are intended to denote localized geological features,in contrast to broader terms such as “basin”, “trend”, “province”, “play” or “areaof interest”.

 

(h)           “**future prices and costs**” meansfuture prices and costs that are:

 

(i)            generally accepted as being a reasonable outlook of the future;

 

(ii)           if, and only to the extent that, there are fixed or presentlydeterminable future prices or costs to which the Corporation is legally boundby a contractual or other obligation to supply a physical product, includingthose for an extension period of a contract that is likely to be extended,those prices or costs rather than the prices and costs referred to in paragraph (i).

 

(i)            “**future net revenue**” means theestimated net amount to be received with respect to the development andproduction of reserves (including synthetic oil, coal bed methane and other non-conventionalreserves) estimated using constant prices and costs or forecast prices andcosts.

 

(j)            “**gross**” means:

 

(i)            in relation to the Corporation’s interest in production or reserves,its “company gross reserves”, which are its working interest (operating or non-operating)share before deduction of royalties and without including any royalty interestsof the Corporation;

 

(ii)           in relation to wells, the total number of wells in which theCorporation has an interest; and

 

(iii)          in relation to properties, the total area of properties in which theCorporation has an interest.

 

(k)           “**natural gas**” means the lighterhydrocarbons and associated non-hydrocarbon substances occurring naturally inan underground reservoir, which under atmospheric conditions are essentiallygases but which may contain natural gas liquids.  Natural gas can exist in a reservoir eitherdissolved in crude oil (solution gas) or in a gaseous phase (associated gas ornon-associated gas).  Non-hydrocarbonsubstances may include hydrogen sulphide, carbon dioxide and nitrogen.

 

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(l)            “**natural gas liquids**” means thosehydrocarbon components that can be recovered from natural gas as liquidsincluding, but not limited to, ethane, propane, butanes, pentanes plus,condensate and small quantities of non-hydrocarbons.

 

(m)          “**net**” means:

 

(i)            in relation to the Corporation’s interest in production or reservesits working interest (operating or non-operating) share after deduction ofroyalty obligations, plus its royalty interests in production or reserves;

 

(ii)           in relation to the Corporation’s interest in wells, the number ofwells obtained by aggregating the Corporation’s working interest in each of itsgross wells; and

 

(iii)          in relation to the Corporation’s interest in a property, the totalarea in which the Corporation has an interest multiplied by the workinginterest owned by the Corporation.

 

(n)           “**non-associated gas**” means anaccumulation of natural gas in a reservoir where there is no crude oil.

 

(o)           “**operating costs**” or “**production costs**” means costs incurred to operate andmaintain wells and related equipment and facilities, including applicableoperating costs of support equipment and facilities and other costs ofoperating and maintaining those wells and related equipment and facilities.

 

(p)           “**production**” means recovering,gathering, treating, field or plant processing (for example, processing gas toextract natural gas liquids) and field storage of oil and gas.

 

(q)           “**property**” includes:

 

(i)            fee ownership or a lease, concession, agreement, permit, license orother interest representing the right to extract oil or gas subject to suchterms as may be imposed by the conveyance of that interest;

 

(ii)           royalty interests, production payments payable in oil or gas, andother non-operating interests in properties operated by others; and

 

(iii)          an agreement with a foreign government or authority under which theCorporation participates in the operation of properties or otherwise serves as “producer”of the underlying reserves (in contrast to being an independent purchaser,broker, dealer or importer).

 

A property does not include supply agreements, or contracts thatrepresent a right to purchase, rather than extract, oil or gas.

 

(r)            “**proved property**” means a propertyor part of a property to which reserves have been specifically attributed.

 

(s)           “**reservoir**” means a porous andpermeable underground formation containing a natural accumulation of producibleoil or gas that is confined by impermeable rock or water barriers and isindividual and separate from other reservoirs.

 

(t)            “**service well**” means a well drilledor completed for the purpose of supporting production in an existingfield.  Wells in this class are drilledfor the following specific purposes: gas injection (natural gas, propane,butane or flue gas), water injection, steam injection, air injection, salt-waterdisposal, water supply for injection, observation, or injection for combustion.

 

(u)           “**unproved property**” means aproperty or part of a property to which no reserves have been specificallyattributed.

 

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(v)           “**well abandonment costs**” meanscosts of abandoning a well (net of salvage value) and of disconnecting the wellfrom the surface gathering system.  Theydo not include costs of abandoning the gathering system or reclaiming thewellsite.

 

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**CURRENCY OF INFORMATION**

 

The information in this annual information form is stated as atDecember 31, 2005, unless otherwise indicated. For an explanation of the capitalized terms and expressions and certaindefined terms, please refer to the ‘Glossary of Terms’ in this annualinformation form.  Except as otherwiseindicated, all dollar amounts in this annual information form are expressed inCanadian dollars and references to $ are to Canadian dollars.

 

**FORWARD LOOKING STATEMENTS**

** **

Canadian Superior Energy Inc. (“**Canadian Superior**”or the “**Corporation**” or the “**Company**”) cautions that all statements in this document,other than statements of historical fact, including statements regardingestimates of reserves, estimates of future production as well as otherstatements about anticipated future events or results are forward lookingstatements.  Forward looking statementsoften, but not always, are identified by the use of words such as “seek”, “anticipate”,“believe”, “continue”, “plan”, “estimate”, “expect”, “target”, and “intend” andstatements that an event or result “may”, “will”, “should”, “could” or “might”occur or be achieved and other similar expressions.  Forward-looking statements in this documentinclude, but are not limited to, statements about:

 

•              Thefuture commercial success of the Corporation’s oil and natural gas exploration,development and production activities;

 

•              Thestability of world-wide oil and natural gas prices;

 

•              TheCorporation’s ability to make necessary capital expenditures for theacquisition, exploration, development and production of oil and natural gasreserves in the future;

 

•              Competitionwith and among other oil and gas companies for the acquisition, exploration,production and development of oil and natural gas properties;

 

•              TheCorporation’s oil and natural gas reserves;

 

•              TheCorporation’s ability to obtain the required licenses and permits from governmentalauthorities for its exploration, development and production activities; and

 

•              TheCorporation’s ability to successfully defend against pending or futurelitigation.

 

This annual information form contains forward-looking information onfuture production, project start-ups and future capital spending.  Actual results or estimated results coulddiffer materially due to changes in project schedules, operating performance,demand for oil and gas, commercial negotiations or other technical and economicfactors or revisions.

 

Statements contained in this annual information form relating to futureresults, events and expectations are forward-looking statements within themeaning of Section 27A of the Securities Act of 1933 and Section 21E of theSecurities Exchange Act of 1934.  Theseforward-looking statements involve known and unknown risks, uncertainties andother factors which may cause our actual results, performance or achievements,or the actual results, performance or achievements of our industry, to bematerially different from any future results, performance or achievementsexpressed or implied by such statements. All statements in this annualinformation form, or incorporated herein, other than statements of historicalfact, including statements regarding estimates of reserves, estimates of futureproduction as well as other statements about anticipated future events orresults are forward looking statements.

 

This annual information form, the documents incorporated by referenceinto this annual information form, and other reports and filings made with thesecurities regulatory authorities include forward-looking statements.  All forward-

 

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looking statements are based on the Corporation’s beliefs andassumptions based on information available at the time the assumption wasmade.  Forward-looking statements relateto, among other things, anticipated financial performance, business prospects,strategies, regulatory developments, new services, market forces, commitmentsand technological developments.  Much ofthis information also appears in the management’s discussion and analysis.  By its nature, such forward-lookinginformation is subject to various risks and uncertainties, including thosematerial risks discussed in this annual information form under “*Risk Factors*” which could cause the Corporation’s actualresults and experience to differ materially from the anticipated results orother expectations expressed.  Readersare cautioned not to place undue reliance on this forward-looking information,which is given as of the date it is expressed in this annual information formor otherwise, and the Corporation undertakes no obligation to update publiclyor revise any forward-looking information, whether as a result of newinformation, future events or otherwise.

 

**ABBREVIATIONS**

 
| **Oil and Natural Gas Liquids** | ** **                                                                         | **Natural Gas** |
|---------------------------------|------------------------------------------------------------------------------------|-----------------|
|                            |                                                                               |            |   |   |
| bbl                             | barrel                                                                             |            | mcf | thousand  cubic feet |
| bbls                            | barrels                                                                            |            | MMcf | million  cubic feet |
| Mbbls                           | thousand  barrels                                                                  |            | mcf/d | thousand  cubic feet per day |
| boe/d                           | barrels of  oil equivalent per day                                                 |            | MMcf/d | million  cubic feet per day |
| bbl/d                           | barrels of  oil per day                                                            |            | M3 | cubic metres |
| Mmbbls                          | million  barrels                                                                   |            | MMBTU | million  British Thermal Units |
| AOF                             | absolute  open flow                                                                |            | gigajoule | trillion  joules |
| API                             | American  Petroleum Institute                                                      |            | TCF | trillion  cubic feet |
| ARTC                            | Alberta  Royalty Tax Credit                                                        |            | MMscf | million  standard cubic feet |
| MSTB                            | thousands of  Stock Tank Barrels of oil  (oil volume at 60o F and 14.65 PSIA) |            | NGLS | natural gas  liquids |

 
| **Other:** | ** ** | ** **                                                                                                                                                                                             |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                   |
| boe        |       | Barrel of  oil equivalent of natural gas and crude oil on the basis of 1 Bbl of crude  oil for 6 Mcf of natural gas (this conversion factor is not based on either  energy content or current prices). |
|       |       |                                                                                                                                                                                                   |
| $M         |       | Thousands of  dollars                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                   |
| $MM        |       | Millions of  dollars                                                                                                                                                                                   |

 

**CONVERSION**

 

The following table sets forth certain standard conversions fromStandard Imperial units to the International System of units (or metric units).

 
| **To Convert From** | ** ** | **To**       | ** ** | **Multiplied By** |
|---------------------|------------|--------------|------------|-------------------|
|                |       |         |       |              |
| Mcf                 |       | Cubic metres |       | 28.174            |
| Cubic metres        |       | Cubic feet   |       | 35.494            |
| Bbls                |       | Cubic metres |       | 0.159             |
| Cubic metres        |       | Bbls oil     |       | 6.290             |
| Feet                |       | Metres       |       | 0.305             |
| Metres              |       | Feet         |       | 3.281             |
| Miles               |       | Kilometres   |       | 1.609             |

 

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| **To Convert From** | ** ** | **To**   | ** ** | **Multiplied By** |
|---------------------|------------|----------|------------|-------------------|
| Kilometres          |       | Miles    |       | 0.621             |
| Acres               |       | Hectares |       | 0.405             |
| Hectares            |       | Acres    |       | 2.471             |
| Gigajoules          |       | MMBTU    |       | 0.950             |

 

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**THE CORPORATION**

 

Canadian Superior was incorporated as 297272 Alberta Ltd. by Articlesof Incorporation under the *Business Corporations Act*(Alberta)on March 21, 1983.  Canadian Superioramended its articles:  (i) on April 27,1993, to change its name to Kapalua Gold Mines Ltd. and to remove the privatecompany restrictions in its articles; (ii) on November 16, 1993, to changeits name to “Prize Energy Inc.” and to consolidate the issued and outstandingcommon shares in the capital of the Corporation (the “**CommonShares**”) on a 1-for-5 basis; and (iii) on January 19, 1999, topermit the appointment of up to one-third additional directors between annualmeetings and to restate its articles in a consolidated form.  On August 24, 2000, a further amendmentchanged the name of the Corporation to “Canadian Superior Energy Inc.” andconsolidated its issued and outstanding Common Shares on a 1-for-2 basis.

 

Canadian Superior is a reporting issuer, or the equivalent, in theprovinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,Quebec, New Brunswick, Nova Scotia, Prince Edward Island, andNewfoundland.  The Common Shares arelisted and posted for trading on the Toronto Stock Exchange and the AmericanStock Exchange under the symbol “SNG”.

 

The Corporation’s head office is located at 3300, 400 – 3rd AvenueS.W., Calgary, Alberta, T2P 4H2 and its registered office is located at 3300,421 - 7th Avenue S.W., Calgary, Alberta, T2P 4K9.  In addition, the Corporation has an eastcoast office located at 704, 1959 Upper Water Street, Halifax, Nova Scotia, B3J3N2.

 

The Corporation has no subsidiaries which individually represent morethan 10%, nor in the aggregate represent more than 20%, of the totalconsolidated assets and total consolidated revenues of the Corporation, as atDecember 31, 2005.

 

**GENERAL DEVELOPMENT OF THE BUSINESS**

 

Canadian Superior is a crude oil and natural gas exploration andproduction company with its primary emphasis on the exploration for, andproduction of, crude oil and natural gas in western Canada, offshore NovaScotia, and offshore Trinidad and Tobago.

 

The most significant events in the development of the business ofCanadian Superior during the past three completed fiscal years are describedbelow.

 

On February 1, 2006, the Corporation completed a private placement ofUS $15 million of preferred share purchase units.

 

On January 4, 2006, the Corporation announced that at year end 2005 ithas closed, by way of private placement, total “flow-through” share financingsof 2,976,400 Common Shares at a price of $3.00 per share.

 

On November 10, 2005, the Corporation announced that they had beenadvised by the Canada-Nova Scotia Offshore Petroleum Board (“**CNSOPB**”) that the consolidation of its deepwater Mayflowerexploration licence (EL 2406) and its shallow water Mariner exploration licence(EL 2409) has been approved by the Government of Canada and the Province ofNova Scotia.  The consolidation comesinto effect upon the drilling of the next Mariner exploration well and willallow the work commitments and related work commitment deposits for these twoexploration licences (EL 2406 and EL 2409) to be combined, allowing theexisting work deposit for Mayflower, approximately $10 million, to be applieddirectly against the costs of drilling Canadian Superior’s next Mariner well.  In effect, this provides Canadian Superiorwith $10 million of additional capital to be applied to drilling the next Marinerwell.

 

On November 2, 2005, the Corporation announced the appointment ofMichael (Mike) Coolen, Halifax, Nova Scotia and Kaare (Kory) Idland, Red Deer,Alberta to the Board of Directors of the Corporation.

 

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On September 6, 2005, the Corporation and its insurers reached anagreement to settle all securities class action litigation and actions pendingin Canada against the Corporation and certain of its officers and directorsresulting from the drilling last year of the Mariner I-85 exploration welldrilled offshore Nova Scotia.  The $2.15million settlement, which is covered by the Corporation’s insurance, was beenreached with no admission of liability by any party.  See “*Legal Proceedings*”.

 

On July 21, 2005, the Corporation announced that the Government ofTrinidad and Tobago and Canadian Superior had entered into a production sharingcontract for offshore exploration and production on offshore Block 5(c),located approximately 90 km off the east coast of Trinidad in the ColumbusBasin.  The production share contractprovides Canadian Superior the right to explore on Block 5(c) which covers80,041 gross acres.

 

On July 12, 2005, the Corporation closed a private placement of $5.5million special warrants at a price of $2.00 per special warrant for grossproceeds of approximately $11.0 million.

 

On June 8, 2005, the Corporation announced that it and its insurersreached an agreement to settle all securities class action litigation andactions pending in the United States against the Corporation and certain of itsofficers and directors resulting from the drilling last year of the CanadianSuperior El Paso Mariner I-85 exploration well drilled with El Paso Corporationin offshore Nova Scotia.  The US$3.2 millionsettlement, covered by the Corporation’s insurance, was been reached with noadmission of liability by any party.  See“*Legal Proceedings*”.

 

On February 16, 2005, Canadian Superior announced that the TorontoStock Exchange completed its review of Canadian Superior Energy and determinedthat Canadian Superior met the Toronto Stock Exchange’s continued listingrequirements.

 

On February 1, 2005, the Corporation announced that its first Windfallarea exploration well had been successfully drilled.  The well drilled at 14-33-60-14 W5M (W.I.40%) was AOF’d at 1,300 mcf/d and has an estimated stabilized rate of 750mcf/d.

 

On December 30, 2004, Canadian Superior closed a private placementconsisting of 1,377,000 Common Shares issued on a “flow-through” basis at aprice of $2.50 per share, for gross proceeds of $3,442,500.

 

On December 6, 2004, the Corporation announced that the Toronto StockExchange was reviewing the Common Shares of Canadian Superior with respect tomeeting the requirements for continued listing on the Toronto Stock Exchange.

 

On November 30, 2004, Canadian Superior announced that it andGlobalSantaFe Corporation (“**GlobalSantaFe**”)entered into an agreement for GlobalSantaFe to drill Canadian Superior’s nextMariner project exploration well, offshore Nova Scotia, Canada and CanadianSuperior’s first Intrepid exploration well offshore Trinidad and Tobago,subject to regulatory and governmental approvals.  GlobalSantaFe’s harsh environment jackupdrilling rig, the Galaxy II, which had been working near Canadian Superior’sMariner Block in the Sable Island area, offshore Nova Scotia, Canada wasselected and awarded the contract to drill the next Mariner well.   Inaddition, GlobalSantaFe’s semi-submersible drilling rig, the Arctic I, whichhad been working in Venezuelan waters south of Canadian Superior’s TrinidadIntrepid Block 5(c), was selected and awarded the contract to drill CanadianSuperior’s first offshore well on its Intrepid Block 5(c) off the east coast ofTrinidad.

 

On November 12, 2004, Mr. Alex Squires joined the Board ofDirectors of Canadian Superior and on November 5, 2004, Mr. Ross A. Jonesjoined Canadian Superior as Chief Financial Officer.

 

On November 1, 2004, the Corporation announced that in addition to thefive wells that were drilled in the second quarter of 2004, nine wells weredrilled in the third quarter, with eight out of the nine being successful.  Six were successful gas wells and two weresuccessful oil wells.  One of theproducing gas wells was dually completed for

 

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conventional gas and for coal bed methane.  Of the nine wells, eight are 100% workinginterest wells that are operated by Canadian Superior.

 

On October 12, 2004, Canadian Superior Energy announced that it haddetermined to proceed with its Mariner Project offshore Nova Scotia, near SableIsland.

 

On October 6, 2004, Mr. Gregory Noval, President and ChiefExecutive Officer of Canadian Superior, reassumed the role of Chief OperatingOfficer.  Mr. Harvey R. Klingensmith,who previously served as Chief Operating Officer, resigned effective October 6,2004.

 

On September 21, 2004, the Corporation announced that that anindependent petrophysical evaluation of the Canadian Superior El Paso Mariner I-85exploration well was completed to analyze the well for hydrocarbonpotential.  In the independentassessment, 24.6 m (80.7 feet) of net pay had been assigned to the CanadianSuperior El Paso Mariner I-85 well from the well log analysis.

 

On September 15, 2004, the Corporation announced that Canadian Superioracquired El Paso Corporation’s (“**El Paso**”)offshore Nova Scotia exploration and production assets.  The acquisition was undertaken by negotiationbetween Canadian Superior and El Paso and was facilitated by El Paso’s decisionto exit the exploration and production in Western Canada and Offshore NovaScotia.  The acquisition includes El Paso’sinterests in the Marquis Blocks (EL 2401 & 2402), and in the Mariner Block(EL 2409) offshore Nova Scotia and in the Mariner I-85 well.  All of El Paso’s seismic data, sharedgeophysical, geotechnical and environmental data, Marquis L-35/L-35A well data,Mariner I-85 well data and related inventory and extensive tax pools wereacquired.

 

On August 30, 2004, the Corporation announced that its offshorewellsite survey work, initiated earlier in August 2004, was successfullycompleted at two new proposed future Mariner Project drilling locations.  The field work was completed on August 29, 2004on the offshore Mariner Block (EL 2409) located in shallow water approximately275 kilometres (170 miles) southeast of Halifax, Nova Scotia, Canada.

 

On August 24, 2004, the Corporation announced that it received thenecessary geophysical and geological work authorization approval from the CNSOPBto commence additional wellsite survey activities on its Mariner block (EL2409) located offshore, approximately 275 kilometres (170 miles) southeast ofHalifax, Nova Scotia, Canada.

 

On June 9, 2004, the Corporation announced that it retained the lawfirms of Morrison & Foerster LLP of New York, NY and Borden Ladner GervaisLLP of Calgary, Alberta to represent the Corporation with respect to a numberof class action proceedings against the Corporation.

 

On May 27, 2004, the Corporation’s President & Chief ExecutiveOffice, Mr. Gregory Noval, commenced an action against the National Post,its owners and certain of its reporters for $75 million for damages relating toalleged misleading reporting on Canadian Superior’s Mariner well and certain classaction lawsuits.

 

On May 11, 2004, the Corporation announced that it had been informed bythe Trinidad and Tobago Ministry of Energy and Energy Industries that its bidfor Block 5(c) in the 2003/2004 Competitive Bid Round was successful.  Block 5(c) is an 80,041 acre ContinentalShelf block with water depths in excess of 150 meters (500 feet).

 

On March 30, 2004, the Corporation announced that it had extended theexpiry date of its Common Share purchase warrants, issued in December 2003 andJanuary 2004, from March 31, 2004 to December 31, 2004.  The extension did not apply to any Common Sharepurchase warrants held by officers, director and securityholders holding inexcess of 10% of the issued and outstanding securities of the Corporation orany of their respective associates or affiliates.

 

On March 17, 2004, the Corporation announced that it had been madeaware of announcements by a number of United States law firms indicating thatthey planned to commence a class action lawsuit against the Corporation and a number

 

10

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of its senior officers with respect to events surrounding the CanadianSuperior El Paso Mariner I-85 exploration well, offshore Nova Scotia.  See “*Legal Proceedings*”.

 

On March 11, 2004, the Corporation announced that although the MarinerI-85 exploration well had encountered gas pay in multiple zones as targeted,the Corporation had reluctantly agreed with El Paso, the operator of the testwell, not to proceed with any further testing or completion operations on thetest well at the time, to maintain the well within the original budget.

 

In December 2003 and January 2004, Canadian Superior closed the privateplacement of 7,400,180 special warrants at a price of $3.00 per special warrantand 142,857 flow-through special warrants at a price of $3.50 per flow-throughspecial warrant for total gross proceeds of $22,700,540.

 

In November and December 2003, Canadian Superior closed the privateplacement of 4,998,463 Common Shares issued on a “flow-through” basis at aprice of $3.25 per flow-through Common Share, for total gross proceeds of$16,245,005.

 

On November 20, 2003, Canadian Superior announced that drilling hadcommenced on the Mariner I-85 exploration well and that El Paso Oil & GasCanada, Inc., an indirect subsidiary of El Paso Corporation, was participatingin the drilling by paying 2/3 of the costs to earn a 50% interest in theMariner block.

 

On November 17, 2003, Canadian Superior announced that the CNSOPB hadapproved the drilling program authorization application for the CanadianSuperior El Paso Mariner I-85 exploration well.

 

On November 13, 2003, Canadian Superior announced that it hadsuccessfully acquired two major exploration licences from the CNSOPB totalling370,881 acres for work expenditure bids totalling $14,107,000.

 

On April 16, 2003, Canadian Superior announced that a Canadiansubsidiary of El Paso had formally elected to farm-in and participate in thedrilling and development of the Corporation’s Mariner block.

 

On April 15, 2003, Canadian Superior announced two new natural gasdiscoveries located on the Corporation’s East Ladyfern natural gas property.

 

On March 21, 2003, Canadian Superior announced that it had successfullycompleted the acquisition of El Paso’s Drumheller, Alberta area oil and gasassets production facilities, gas plants and undeveloped lands located incentral Alberta, for approximately $53.5 million, net of purchase priceadjustments.

 

On March 13, 2003, Canadian Superior closed a best efforts financingand issued 9,040,333 units, each unit consisting of one Common Share and onehalf of one Common Share purchase warrant, at a price of $1.50 per unit, fortotal gross proceeds of $13,560,500.

 

On February 25, 2003, Canadian Superior closed a bought deal financingand issued 13,400,000 Common Shares at $1.60 per Common Share for total grossproceeds of $21,440,000.

 

On January 22, 2003, Canadian Superior announced that the CNSOPB hadcompleted its review and had issued its environmental approval of theCorporation’s “Environmental Assessment for Exploration Drilling in License EL2409”.

 

On January 13, 2003, Canada Superior announced it had entered into anagreement with the Canadian division of El Paso to acquire their Drumhellerarea oil and gas assets, production facilities, gas plants and undevelopedlands, effective October 1, 2002, for approximately $59.0 million, net ofpurchase price adjustments.

 

11

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**DESCRIPTION OF THE BUSINESS**

 

**General**

** **

*Competition*

* *

The oil and gas industry in Canada and Trinidad and Tobago is highlycompetitive in all aspects, including the exploration for, and the developmentof, new sources of supply, the acquisition of oil and gas interests and themarketing of, crude oil, natural gas and natural gas liquids.  The Corporation competes with other companiesin this sector for the exploration and development of oil and gas reserves.

 

The Corporation actively competes for reserve acquisitions, explorationleases, licences and concessions and skilled industry personnel with asubstantial number of other oil and gas companies.  The Corporation’s competitors include majorintegrated oil and natural gas companies and numerous other independent oil andnatural gas companies and individual producers and operators, many of which ofwhich possess significantly greater financial resources than the Corporation.

 

*CyclicalNature of Business*

* *

The Corporation’s business is generally not cyclical, however, itsrevenue from the sale of natural gas is highly seasonal, with demand fornatural gas rising during cold winder months and hot summer months.

 

*SpecializedSkill and Knowledge*

* *

The Corporation believes its success is largely dependant on theperformance of its management and key employees, many of whom have specializedknowledge and skills relating to conventional and offshore oil and gasoperations.  The Corporation believesthat they have adequate personnel with the specialized skills required tosuccessfully carry out its operations.

 

*ForeignOperations*

* *

The Corporation currently has no production or revenue from foreignoperations.

 

*EnvironmentalProtection*

* *

All aspects of the oil and gas industry present potential environmentalrisks and are, accordingly, subject to a variety of Canadian federal, provincialand municipal environmental regulations. These regulatory regimes are laws of general application that apply toCanadian Superior in the same manner as they apply to other participants in theenergy industry.

 

All phases of the oil and natural gas business present environmentalrisks and hazards and are subject to environmental regulation pursuant to avariety of international conventions and provincial and municipal laws andregulations.  Environmental legislationprovides for, among other things, restrictions and prohibitions on spills,releases or emissions of various substances produced in association with oiland gas operations.  The legislation alsorequires that wells and facility sites be operated, maintained, abandoned andreclaimed to the satisfaction of applicable regulatory authorities.  Compliance with such legislation can requiresignificant expenditures and a breach may result in the imposition of fines andpenalties, some of which may be material. Environmental legislation is evolving in a manner expected to result instricter standards and enforcement, larger fines and liability and potentiallyincreased capital expenditures and operating costs.  The discharge of oil, natural gas or otherpollutants into the air, soil or water may give rise to liabilities to thirdparties and may require the Corporation to incur costs to remedy suchdischarge.  No assurance can be giventhat environmental laws will not result in a curtailment of production or a materialincrease in

 

12

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the costs of production, development or exploration activities orotherwise adversely affect the Corporation’s financial condition, capitalexpenditures, results of operations, competitive position or prospects.

 

The Corporation conducts its operations in Canada in a mannerconsistent with environmental regulations as stipulated in provincial andfederal legislation.  The Corporation iscommitted to meeting its responsibilities to protect the environment whereverit operates and anticipates making expenditures of both a capital and expensenature to ensure full compliance with laws relating to protection of theenvironment.  The Corporation anticipatesspending sufficient funds on environmental expenditures in 2006 and in futureyears in order to comply in all material respects with all environmentalrequirements related to its field operations. The Corporation does not anticipate that such expenditures, as apercentage of cash flow, will be greater than those expected, on average, byother industry operators.  TheCorporation will maintain insurance coverage where available, and financiallydesirable, in light of risk versus cost factors.

 

*HumanResources*

* *

The Corporation has a total of 39 full-time staff, including 5 staffmembers in the Halifax office and 7 staff members in the Drumheller, Albertafield office and 2 staff members in the Trinidad and Tobago field office.

 

**Oil andGas Properties and Wells**

** **

Canadian Superior’s principal properties can be divided into threedistinct groups:

 

2.             Trinidad and Tobago;

 

3.             East Coast, Offshore Nova Scotia, Canada; and

 

4.             Western Canadian Holdings

 

Trinidad and Tobago

 

In 2005, the Corporation continued to make steady progress in preparingfor exploration and development on its offshore Trinidad and Tobagoholdings.  The Corporation was awardedthe right to explore on Block 5(c), which the Corporation has named “Intrepid”,in the Government of Trinidad and Tobago Ministry of Energy and EnergyIndustries’ 2003/2004 Offshore Competitive Bid Round in May 2004.  The Corporation’s Intrepid Block 5(c) covers80,041 gross acres.  The Corporation hasobtained detailed 3D seismic data of the Intrepid Block from the Government ofTrinidad and Tobago and is interpreting that data to confirm drilling locations.

 

On July 20, 2005, the Corporation signed a production sharing contractwith the Government of Trinidad and Tobago for Block 5(c), which providesCanadian Superior the right to explore on Block 5(c) which covers 80,041 grossacres.

 

The Corporation submitted its “Application for a Certificate ofEnvironmental Clearance” to the Trinidad and Tobago Environmental ManagementAuthority (“**EMA**”) for explorations drilling onBlock 5(c) within the East Coast Marine Area. Canadian Superior has conducted two “Public Consultation Meetings” inMayaro, on December 17, 2005 and on February 13, 2006, to discuss the proposedproject with affected stakeholders.  AnEnvironmental Baseline Survey was conducted in Block 5 (c).

 

East Coast, Offshore Nova Scotia, Canada

 

Canadian Superior’s holdings offshore Nova Scotia consist of 100%interests in six exploration licences totalling 1,293,946 acres.  Canadian Superior is involved in the threemain play types in the basin.

 

13

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In 2005, the Corporation was advised by the CNSOPB that theconsolidation of its deepwater “Mayflower” exploration licence (EL 2406) andthe shallower water Mariner exploration licence (EL 2409) had been approved bythe Government of Canada and the Province of Nova Scotia. This consolidationwill come into effect upon the drilling of the next Mariner exploration welland will allow the work commitments and related work commitment deposits forthese two exploration licences (EL 2406 and EL 2409) to be combined, allowingthe existing work deposit for the Corporation’s deepwater Mayflower Project,approximately $10 million, to be applied directly against the costs of drillingCanadian Superior’s next Mariner well; in effect, this provides Canadian Superiorwith $10 million of additional capital to be applied to drilling the nextMariner well.

 

The Mariner Project lands are located approximately nine kilometresnortheast of Sable Island, offshore Nova Scotia.  The first exploration well, Mariner I-85, wasdrilled on this block in 2003/2004 (November 2003 to March 2004). Furthermore,upon consolidation, the exploration term for Canadian Superior’s 100% deepwater“Mayflower” license (EL 2406) will be extended for 2 additional years, from thecurrent expiry date of December 31, 2006 to December 31, 2008; and, thereafter,50 % of the licence area will be extended for an additional 2 years to December31, 2010. Canadian Superior’s Mayflower deepwater project exploration licencecovers approximately 712,000 acres.

 

In addition to Canadian Superior’s Mariner exploration projecttargeting Cretaceous and Jurassic gas bearing sands, we continue to monitordrilling activities near the Corporation’s Abenaki Reef Marquis 100% prospects.The Corporation’s Marquis Project lands encompass two exploration licences withapproximately 111,000 contiguous acres located in shallow water depths.

 

*Western Canada Holdings*

* *

All of Canadian Superior’s current production is located in WesternCanada where the Corporation has interests in several key areas includingDrumheller, Windfall, Boundary Lake, East Ladyfern, Giroux Lake and Teepee.

 

During 2005, the Corporation drilled or participated in 67 gross (28.22net) wells which included 17 gross (14.42 net) operated wells and 50 gross (13.8net ) non – operated wells.  The Corporationcompleted or tied in 63 wells for a success rate of 94%.

 

The Corporation maintained its extensive land holdings in WesternCanada. At December 31, 2005, the Corporation held 275,710 gross acres (193,576net acres) of land at an average working interest of 70%.

 

*DrumhellerArea*

 

The Drumheller Area accounts for approximately 90% of Canadian Superior’sproduction and consists of both conventional and non-conventional (coal bed methane)play types.  In 2005, 64 gross (26 net)wells were drilled in the Drumheller area consisting of 18 gross (13.2 net)conventional wells and 46 gross (12.8 net) Horseshoe Canyon coal bed methane.  The Corporation acquired or purchased five 3-Dseismic programs, which are critical in continuing the success that CanadianSuperior has achieved in 2005.

 

*ConventionalPlays*

* *

The Drumheller area offers a multitude of opportunities that includeboth oil and gas play types and are contained in four distinct stratagtraphiczones.

 

The shallow targets include the Belly River and the Edmonton Groups andrange in depth from 300-700 meters (980 – 2300 feet).  Well production in these zones range from 50 –750 mcf/d with associated reserve size of .1 -2 Bcf.

 

14

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*CoalBed Methane*

 

Canadian Superior’s current activities in coal bed methane are centeredon the Horseshoe Canyon in which the Corporation drilled or participated in 46wells during 2005.  All of these wellshave been successful and the Company will continue to develop these assets into 2006.  Canadian Superior holds 157gross (81 net) sections of Horseshoe Canyon rights.  The Horseshoe Canyon Coal depths range from200 – 400 meters (650 – 1300 feet) and are typically found in 8 – 10 coal seamswith thicknesses averaging from .75 – 1.5 meters ( 2.5 – 5 feet).  These coals contain dry gas and producelittle or no water.

 

The Corporation has 42 gross (41 net) sections of land in the Mannvillecoal bed methane fairway.  The Corporation’stotal acreage for coal bed methane is 185 gross (108 net) sections of which 14gross (13.4 net) sections have both Horseshoe Canyon and Mannville coal bedmethane potential.

 

*BoundaryLake/Teepee*

 

The Boundary Lake / Teepee area is a high reward medium risk area andwas a major focus area for Canadian Superior in 2005.  At the end of 2005, this property representeda minor portion of the Corporation’s total production, but renewed emphasis hasbeen placed on this year round access area. The Corporation purchased additional lands, 2D and 3D seismic data.  The Corporation also has several follow-uplocations based on the success of the initial drilling. The area has multi-zonepotential with typical well reserves in the range of 2 – 5 BCF and associatedproduction of 1 – 4 mmcf/d.

 

*Windfall/PineCreek/Giroux Lake*

 

Canadian Superior drilled or participated in two wells in the Windfallarea in 2005.  Both these wells weresuccessful and have been tied in.  Bothwells are producing between 750 – 1000 mcf/d.

 

*EastLadyfern*

 

In 2005, the Corporation followed up its Slave Point play in the EastLadyfern area with addition 2D seismic and the drilling of the 1-26-91-11W6well.  This well was drilled in lateJanuary 2005 due to delayed freeze-up and rig availability.  The well was logged, cased and rig releasedin early March 2005.  Due to earlybreak-up, no testing could be done at that time.  The logs over the Slave Point showed gas overwater and do not justify further testing.

 

*SouthCentral W5*

 

Canadian Superior continues to grow its operation base in WesternCanada and is expanding its focus in the south central W5 area of Alberta.  This area represents a good blend of mediumreward, low risk opportunities and provides year round access.  This multi-zone potential area includes bothoil and gas production from the Cretaceous, Jurassic, Mississippian, andDevonian periods.  Well reserves aresimilar to that of the Boundary Lake/Teepee area and range from 2 – 5 Bcf withassociated production of 1 – 4 mmcf/d. The Corporation is focusing its efforts in this area towards strategicland acquisitions and seismic purchases.

 

**STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION**

 

**GENERAL**

** **

The reserve disclosure presented below conforms with the requirementsof National Instrument 51-101, *Standards of Disclosurefor Oil and Gas Activities* (“**NI 51-101**”).  Additional information not required by NI 51-101has been presented to provide continuity and additional information whichmanagement of the Corporation believes is important to the readers of thisinformation.  Boe may be misleading,particularly if used in isolation.  A boe

 

15

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conversion ratio of 6 mcf:1 bbl is based on an energy equivalencyconversion method primarily applicable at the burner tip and does not representa value equivalency at the wellhead.

 

All of the Corporation’s reserves are in Canada, more specifically inthe provinces of British Columbia, Alberta and Saskatchewan.

 

**SELECTEDRESERVES INFORMATION**

** **

The following tables set forth certain information relating to the oiland natural gas reserves of the Corporation’s properties and the present valueof the estimated future net cash flow associated with such reserves as atDecember 31, 2005.  The information setforth below is derived from the report, with a preparation date of March 6,2006, prepared by GLJ Petroleum Consultants Ltd. (“**GLJ**”)evaluating the Corporation’s proved and proved plus probable reserves (the “**GLJ Report**”).  Theeffective date of the GLJ Report is December 31, 2005.  The GLJ Report has been prepared inaccordance with the standards contained in the COGE Handbook and the reservesdefinitions contained in NI 51-101 and the COGE Handbook.  **All evaluations andreviews of future net cash flow are stated prior to any provision for interestcosts or general and administrative costs and after the deduction of estimatedfuture capital expenditures for wells to which reserves have beenassigned.  It should not be assumed thatthe estimated future net cash flow shown below is representative of the fairmarket value of the Corporation’s properties. There is no assurance that such price and cost assumptions will beattained and variances could be material. The recovery and reserve estimates of crude oil, NGLs and natural gasreserves provided herein are estimates only and there is no guarantee that theestimated reserves will be recovered. Actual crude oil, NGLs and natural gas reserves may be greater or lessthan the estimates provided herein.**

 

The Corporation has a Reserves Committee consisting of the entire Boardof Directors which reviews the qualifications and appointment of theindependent qualified reserves evaluators. The Reserves Committee also reviews the procedures for providinginformation to the evaluators.  Allbooked reserves are based upon annual evaluation and review by the independentqualified reserves evaluators.

 

In accordance with the requirements of NI 51-101, the *Report on Reserves Data by Independent Qualified Reserves Evaluator*in Form 51-101F2 and the *Report of Management andDirectors on Oil and Gas Disclosure* in Form 51-101F3 areattached as Appendices ”A” and “B” hereto, respectively.

 

**ReservesData - Constant Prices and Costs**

** **

The following table sets forth a summary of reserves and values of theCorporation using constant pricing and costs:

 

16

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**Summary of Reserves and Values**

 
| ** **                                  | ** ** | ** **    | ** ** | ** **        | ** ** | ** **      | ** ** | ** ** | ** ** | ** **   | ** ** | **Total**    | ** ** |
|---------------------------------------------|------------|---------------|------------|-------------------|------------|-----------------|------------|------------|------------|--------------|------------|--------------|------------|
| ** **                                  | ** ** | ** **    | ** ** | **Proved**        | ** ** | ** **      | ** ** | ** ** | ** ** | ** **   | ** ** | **Proved**   | ** ** |
| ** **                                  | ** ** | **Proved**    | ** ** | **Developed**     | ** ** | **Proved**      | ** ** | **Total**  | ** ** | **Total**    | ** ** | **Plus**     | ** ** |
| ** **                                  | ** ** | **Producing** | ** ** | **Non-producing** | ** ** | **Undeveloped** | ** ** | **Proved** | ** ** | **Probable** | ** ** | **Probable** | ** ** |
|                                        |       |          |       |              |       |            |       |       |       |         |       |         |       |
| **MARKETABLE RESERVES**                     |       |          |       |              |       |            |       |       |       |         |       |         |       |
| **Light/Medium  Oil (Mbbl)**                |       |          |       |              |       |            |       |       |       |         |       |         |       |
| Total  Company Interest                     |       | 772           |       | 10                |       | 0               |       | 782        |       | 708          |       | 1,489        |       |
| Working  Interest                           |       | 772           |       | 10                |       | 0               |       | 782        |       | 708          |       | 1,489        |       |
| Net  After Royalty                          |       | 711           |       | 10                |       | 0               |       | 721        |       | 628          |       | 1,349        |       |
| **Gas (MMcf)**                              |       |          |       |              |       |            |       |       |       |         |       |         |       |
| Total  Company Interest                     |       | 18,409        |       | 2,123             |       | 2,559           |       | 23,091     |       | 11,007       |       | 34,098       |       |
| Working  Interest                           |       | 18,244        |       | 2,123             |       | 2,538           |       | 22,905     |       | 10,935       |       | 33,840       |       |
| Net  After Royalty                          |       | 15,095        |       | 1,717             |       | 2,248           |       | 19,060     |       | 9,006        |       | 28,066       |       |
| **Natural Gas  Liquids (Mbbl)**             |       |          |       |              |       |            |       |       |       |         |       |         |       |
| Total  Company Interest                     |       | 164           |       | 3                 |       | 2               |       | 169        |       | 85           |       | 254          |       |
| Working  Interest                           |       | 162           |       | 3                 |       | 2               |       | 167        |       | 85           |       | 252          |       |
| Net  After Royalty                          |       | 111           |       | 2                 |       | 1               |       | 114        |       | 57           |       | 171          |       |
| **Oil  Equivalent (Mbbl)**                  |       |          |       |              |       |            |       |       |       |         |       |         |       |
| Total  Company Interest                     |       | 4,004         |       | 367               |       | 429             |       | 4,799      |       | 2,627        |       | 7,427        |       |
| Working  Interest                           |       | 3,975         |       | 367               |       | 425             |       | 4,766      |       | 2,615        |       | 7,381        |       |
| Net  After Royalty                          |       | 3,338         |       | 298               |       | 376             |       | 4,012      |       | 2,186        |       | 6,198        |       |
|                                        |       |          |       |              |       |            |       |       |       |         |       |         |       |
| **BEFORE TAX PRESENT VALUE (M$)**           |       |          |       |              |       |            |       |       |       |         |       |         |       |
| 0%                                          |       | 151,992       |       | 12,304            |       | 14,045          |       | 178,340    |       | 91,356       |       | 269,696      |       |
| 5%                                          |       | 127,591       |       | 10,291            |       | 10,761          |       | 148,643    |       | 62,285       |       | 210,928      |       |
| 8%                                          |       | 117,026       |       | 9,337             |       | 9,301           |       | 135,664    |       | 51,218       |       | 186,881      |       |
| 10%                                         |       | 111,095       |       | 8,782             |       | 8,483           |       | 128,360    |       | 45,446       |       | 173,807      |       |
| 12%                                         |       | 105,859       |       | 8,283             |       | 7,765           |       | 121,907    |       | 40,625       |       | 162,532      |       |
| 15%                                         |       | 99,049        |       | 7,621             |       | 6,844           |       | 113,515    |       | 34,751       |       | 148,266      |       |
| 20%                                         |       | 89,802        |       | 6,708             |       | 5,629           |       | 102,140    |       | 27,513       |       | 129,652      |       |
|                                        |       |          |       |              |       |            |       |       |       |         |       |         |       |
| **FIRST 6 YEARS BEFORE TAX CASH FLOW (M$)** |       |          |       |              |       |            |       |       |       |         |       |         |       |
| 2006                                        |       | 38,102        |       | 860               |       | 439             |       | 39,400     |       | 1,891        |       | 41,291       |       |
| 2007                                        |       | 26,913        |       | 2,402             |       | -1,323          |       | 27,92      |       | -269         |       | 27,723       |       |
| 2008                                        |       | 19,801        |       | 2,542             |       | 3,591           |       | 25,933     |       | 8,742        |       | 34,675       |       |
| 2009                                        |       | 14,920        |       | 1,806             |       | 2,689           |       | 19,414     |       | 8,767        |       | 28,181       |       |
| 2010                                        |       | 11,605        |       | 1,354             |       | 2,062           |       | 15,021     |       | 8,000        |       | 23,021       |       |
| 2011                                        |       | 9,077         |       | 988               |       | 1,584           |       | 11,649     |       | 8,224        |       | 19,873       |       |

 

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The following table sets forth the total future netrevenue of Canadian Superior, undiscounted: 

 

**TotalFuture Net Revenue (Undiscounted)**

 
| ** **                      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **     | ** ** | ** **      | ** ** | ** **      | ** ** | **Future Net** | ** ** | ** **     | ** ** | **Future Net** | ** ** |
|---------------------------------|------------|----------------|------------|----------------|------------|----------------|------------|-----------------|------------|-----------------|------------|---------------------|------------|----------------|------------|---------------------|------------|
| ** **                      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **     | ** ** | ** **      | ** ** | ** **      | ** ** | **Revenue**         | ** ** | ** **     | ** ** | **Revenue**         | ** ** |
| ** **                      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **     | ** ** | **Capital**     | ** ** | ** **      | ** ** | **Before**          | ** ** | ** **     | ** ** | **After**           | ** ** |
| ** **                      | ** ** | ** **     | ** ** | ** **     | ** ** | **Operating**  | ** ** | **Development** | ** ** | **Abandonment** | ** ** | **Income**          | ** ** | **Income**     | ** ** | **Income**          | ** ** |
| **Entity Description**     | ** ** | **Revenue**    | ** ** | **Royalties**  | ** ** | **Costs**      | ** ** | **Costs**       | ** ** | **Costs**       | ** ** | **Taxes**           | ** ** | **Tax**        | ** ** | **Taxes**           | ** ** |
| ** **                      | ** ** | **(M$ )** | ** ** | **(M$ )** | ** ** | **(M$ )** | ** ** | **(M$ )**  | ** ** | **(M$ )**  | ** ** | **(M$ )**      | ** ** | **(M$ )** | ** ** | **(M$ )**      | ** ** |
|                            |       |           |       |           |       |           |       |            |       |            |       |                |       |           |       |                |       |
| Proved  Producing               |       | 237,182        |       | 34,703         |       | 46,841         |       | 149             |       | 3,498           |       | 151,992             |       | 13,688         |       | 138,304             |       |
|                            |       |           |       |           |       |           |       |            |       |            |       |                |       |           |       |                |       |
| Proved  Developed Non-producing |       | 21,075         |       | 2,530          |       | 3,272          |       | 2,589           |       | 382             |       | 12,304              |       | 4,128          |       | 8,176               |       |
|                            |       |           |       |           |       |           |       |            |       |            |       |                |       |           |       |                |       |
| Proved  Undeveloped             |       | 25,443         |       | 2,204          |       | 3,616          |       | 5,220           |       | 358             |       | 14,045              |       | 4,445          |       | 9,600               |       |
|                            |       |           |       |           |       |           |       |            |       |            |       |                |       |           |       |                |       |
| **Total  Proved**               | ** ** | **283,700**    | ** ** | **39,436**     | ** ** | **53,729**     | ** ** | **7,957**       | ** ** | **4,238**       | ** ** | **178,340**         | ** ** | **22,261**     | ** ** | **156,079**         | ** ** |
| ** **                      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **     | ** ** | ** **      | ** ** | ** **      | ** ** | ** **          | ** ** | ** **     | ** ** | ** **          | ** ** |
| **Total  Probable**             | ** ** | **154,815**    | ** ** | **22,639**     | ** ** | **32,241**     | ** ** | **8,038**       | ** ** | **541**         | ** ** | **91,356**          | ** ** | **28,227**     | ** ** | **63,128**          | ** ** |
| ** **                      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **     | ** ** | ** **      | ** ** | ** **      | ** ** | ** **          | ** ** | ** **     | ** ** | ** **          | ** ** |
| **Total  Proved Plus Probable** | ** ** | **438,516**    | ** ** | **62,076**     | ** ** | **85,970**     | ** ** | **15,995**      | ** ** | **4,779**       | ** ** | **269,696**         | ** ** | **50,488**     | ** ** | **219,208**         | ** ** |

 

18

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The following table represents a summary ofoil and gas reserves and the net present values of future net revenue:

 

**RESERVESSUMMARY**

 
| ** **                  | ** ** | **Light and Medium  Oil** | ** ** | **Heavy Oil**     | ** ** | **Natural Gas**     | ** ** | **Natural Gas Liquids** | ** ** | **Total Oil Equivalent** | ** ** |
|-----------------------------|------------|-------------------------------------|------------|------------------------|------------|--------------------------|------------|-----------------------------------|------------|------------------------------------|------------|
| **Reserves Category**  | ** ** | **Company  Gross  Mbbl**            | ** ** | **Company  Net  Mbbl** | ** ** | **Company  Gross  Mbbl** | ** ** | **Company  Net  Mbbl**            | ** ** | **Company  Gross  MMcf**           | ** ** | **Company  Net  MMcf** | ** ** | **Company  Gross  Mbbl** | ** ** | **Company  Net  Mbbl** | ** ** | **Company  Gross  Mbbl** | ** ** | **Company  Net  Mbbl** | ** ** |
|                        |       |                                |       |                   |       |                     |       |                              |       |                               |       |   |   |   |   |   |   |   |   |   |   |
| ***PROVED***                |       |                                |       |                   |       |                     |       |                              |       |                               |       |   |   |   |   |   |   |   |   |   |   |
| Producing                   |       | 772                                 |       | 711                    |       | 0                        |       | 0                                 |       | 18,244                             |       | 15,095 |   | 162 |   | 111 |   | 3,975 |   | 3,338 |   |
| Developed  Nonproducing     |       | 10                                  |       | 10                     |       | 0                        |       | 0                                 |       | 2,123                              |       | 1,717 |   | 3 |   | 2 |   | 367 |   | 298 |   |
| Undeveloped                 |       | 0                                   |       | 0                      |       | 0                        |       | 0                                 |       | 2,538                              |       | 2,248 |   | 2 |   | 1 |   | 425 |   | 376 |   |
|                        |       |                                |       |                   |       |                     |       |                              |       |                               |       |   |   |   |   |   |   |   |   |   |   |
| TOTAL  PROVED               |       | 782                                 |       | 721                    |       | 0                        |       | 0                                 |       | 22,905                             |       | 19,060 |   | 167 |   | 114 |   | 4,766 |   | 4,012 |   |
|                        |       |                                |       |                   |       |                     |       |                              |       |                               |       |   |   |   |   |   |   |   |   |   |   |
| ***TOTAL PROBABLE***        |       | 708                                 |       | 628                    |       | 0                        |       | 0                                 |       | 10,935                             |       | 9,006 |   | 85 |   | 57 |   | 2,615 |   | 2,186 |   |
|                        |       |                                |       |                   |       |                     |       |                              |       |                               |       |   |   |   |   |   |   |   |   |   |   |
| TOTAL  PROVED PLUS PROBABLE |       | 1,489                               |       | 1,349                  |       | 0                        |       | 0                                 |       | 33,840                             |       | 28,066 |   | 252 |   | 171 |   | 7,381 |   | 6,198 |   |

 

**NETPRESENT VALUE SUMMARY**

 
| ** **                  | ** ** | **Net Present Values of Future Net Revenue  Before Income Taxes Discounted At (%/year)** | ** ** |
|-----------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Reserves Category**  | ** ** | **0%**                                                                                                                                          | ** ** | **5%** | ** ** | **10%** | ** ** | **15%** | ** ** | **20%** | ** ** |
| ** **                  | ** ** | **M$**                                                                                                                                          | ** ** | **M$** | ** ** | **M$** | ** ** | **M$** | ** ** | **M$** | ** ** |
|                        |       |                                                                                                                                            |       |   |   |   |   |   |   |   |   |
| PROVED                      |       |                                                                                                                                            |       |   |   |   |   |   |   |   |   |
| Producing                   |       | 151,992                                                                                                                                         |       | 127,591 |   | 111,095 |   | 99,049 |   | 89,802 |   |
| Developed  Nonproducing     |       | 12,304                                                                                                                                          |       | 10,291 |   | 8,782 |   | 7,621 |   | 6,708 |   |
| Undeveloped                 |       | 14,045                                                                                                                                          |       | 10,761 |   | 8,483 |   | 6,844 |   | 5,629 |   |
|                        |       |                                                                                                                                            |       |   |   |   |   |   |   |   |   |
| TOTAL  PROVED               |       | 178,340                                                                                                                                         |       | 148,643 |   | 128,360 |   | 113,515 |   | 102,140 |   |
|                        |       |                                                                                                                                            |       |   |   |   |   |   |   |   |   |
| TOTAL  PROBABLE             |       | 91,356                                                                                                                                          |       | 62,285 |   | 45,446 |   | 34,751 |   | 27,513 |   |
|                        |       |                                                                                                                                            |       |   |   |   |   |   |   |   |   |
| TOTAL  PROVED PLUS PROBABLE |       | 269,696                                                                                                                                         |       | 210,928 |   | 173,807 |   | 148,266 |   | 129,652 |   |

 

 
| ** **                  | ** ** | **Net Present Values of Future Net Revenue  After Income Taxes Discounted At (%/year)** | ** ** |
|-----------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Reserves Category**  | ** ** | **0%**                                                                                                                                         | ** ** | **5%** | ** ** | **10%** | ** ** | **15%** | ** ** | **20%** | ** ** |
|                        |       | **M$**                                                                                                                                         |       | **M$** |   | **M$** |   | **M$** |   | **M$** |   |
|                        |       |                                                                                                                                           |       |   |   |   |   |   |   |   |   |
| PROVED                      |       |                                                                                                                                           |       |   |   |   |   |   |   |   |   |
| Producing                   |       | 138,304                                                                                                                                        |       | 115,700 |   | 100,629 |   | 89,732 |   | 81,429 |   |
| Developed  Nonproducing     |       | 8,176                                                                                                                                          |       | 6,733 |   | 5,658 |   | 4,837 |   | 4,195 |   |
| Undeveloped                 |       | 9,600                                                                                                                                          |       | 7,098 |   | 5,395 |   | 4,192 |   | 3,315 |   |
|                        |       |                                                                                                                                           |       |   |   |   |   |   |   |   |   |
| TOTAL  PROVED               |       | 156,079                                                                                                                                        |       | 129,530 |   | 111,682 |   | 98,762 |   | 88,939 |   |
|                        |       |                                                                                                                                           |       |   |   |   |   |   |   |   |   |
| TOTAL  PROBABLE             |       | 63,128                                                                                                                                         |       | 41,964 |   | 30,058 |   | 22,626 |   | 17,652 |   |
|                        |       |                                                                                                                                           |       |   |   |   |   |   |   |   |   |
| TOTAL  PROVED PLUS PROBABLE |       | 219,208                                                                                                                                        |       | 171,495 |   | 141,740 |   | 121,387 |   | 106,591 |   |

 

19

----

 

**Reserves Data – Forecast Prices and Costs**

 

The following table sets forth a summary of reservesand values and the net present value of future net revenue of the Corporation,forecast based:

 

**Summaryof Reserves and Values**

 
| ** **                        | ** ** | ** **    | ** ** | ** ** | ** ** | **Total**    | ** ** |
|-----------------------------------|------------|---------------|------------|------------|------------|--------------|------------|
| ** **                        | ** ** | ** **    | ** ** | ** ** | ** ** | **Proved**   | ** ** |
| ** **                        | ** ** | **Proved**    | ** ** | **Total**  | ** ** | **Plus**     | ** ** |
| ** **                        | ** ** | **Producing** | ** ** | **Proved** | ** ** | **Probable** | ** ** |
|                              |       |          |       |       |       |         |       |
| **MARKETABLE RESERVES**           |       |          |       |       |       |         |       |
| **Light/Medium  Oil (Mbbl)**      |       |          |       |       |       |         |       |
| Total  Company Interest           |       | 755           |       | 765        |       | 1,439        |       |
| Working  Interest                 |       | 755           |       | 765        |       | 1,439        |       |
| Net  After Royalty                |       | 695           |       | 705        |       | 1,304        |       |
| **Gas (MMcf)**                    |       |          |       |       |       |         |       |
| Total  Company Interest           |       | 18,163        |       | 22,843     |       | 33,685       |       |
| Working  Interest                 |       | 18,008        |       | 22,666     |       | 33,438       |       |
| Net  After Royalty                |       | 14,881        |       | 18,844     |       | 27,711       |       |
| **Natural Gas  Liquids (Mbbl)**   |       |          |       |       |       |         |       |
| Total  Company Interest           |       | 162           |       | 167        |       | 250          |       |
| Working  Interest                 |       | 160           |       | 165        |       | 248          |       |
| Net  After Royalty                |       | 109           |       | 113        |       | 169          |       |
| **Oil  Equivalent (Mbbl)**        |       |          |       |       |       |         |       |
| Total  Company Interest           |       | 3,944         |       | 4,738      |       | 7,303        |       |
| Working  Interest                 |       | 3,916         |       | 4,707      |       | 7,260        |       |
| Net  After Royalty                |       | 3,285         |       | 3,959      |       | 6,091        |       |
|                              |       |          |       |       |       |         |       |
| **BEFORE TAX PRESENT VALUE (M$)** |       |          |       |       |       |         |       |
| 0%                                |       | 120,804       |       | 139,031    |       | 198,631      |       |
| 5%                                |       | 105,189       |       | 120,101    |       | 161,785      |       |
| 8%                                |       | 98,227        |       | 111,594    |       | 146,300      |       |
| 10%                               |       | 94,250        |       | 106,727    |       | 137,751      |       |
| 12%                               |       | 90,691        |       | 102,372    |       | 130,296      |       |
| 15%                               |       | 85,987        |       | 96,625     |       | 120,736      |       |
| 20%                               |       | 79,447        |       | 88,661     |       | 108,019      |       |
|                              |       |          |       |       |       |         |       |
| **AFTER TAX PRESENT VALUE (M$)**  |       |          |       |       |       |         |       |
| 0%                                |       | 113,289       |       | 126,423    |       | 170,856      |       |
| 5%                                |       | 98,231        |       | 108,542    |       | 138,419      |       |
| 8%                                |       | 91,565        |       | 100,587    |       | 124,960      |       |
| 10%                               |       | 87,772        |       | 96,060     |       | 117,574      |       |
| 12%                               |       | 84,388        |       | 92,026     |       | 111,156      |       |
| 15%                               |       | 79,929        |       | 86,724     |       | 102,959      |       |
| 20%                               |       | 73,758        |       | 79,424     |       | 92,108       |       |

 

20

----

 

The following table sets forth thediscounted future net revenue of the Corporation’s oil and gas reserves byproduction group:

 

**Summary Of Oil and Gas Reserves and NetPresent Values of Future Net Revenue**

 

**RESERVESSUMMARY**

 
| ** **                  | ** ** | **Light and Medium  Oil** | ** ** | **Heavy Oil**     | ** ** | **Natural Gas**     | ** ** | **Natural Gas Liquids** | ** ** | **Total Oil Equivalent** | ** ** |
|-----------------------------|------------|-------------------------------------|------------|------------------------|------------|--------------------------|------------|-----------------------------------|------------|------------------------------------|------------|
| **Reserves Category**  | ** ** | **Company  Gross  Mbbl**            | ** ** | **Company  Net  Mbbl** | ** ** | **Company  Gross  Mbbl** | ** ** | **Company  Net  Mbbl**            | ** ** | **Company  Gross  MMcf**           | ** ** | **Company  Net  MMcf** | ** ** | **Company  Gross  Mbbl** | ** ** | **Company  Net  Mbbl** | ** ** | **Company  Gross  Mbbl** | ** ** | **Company  Net  Mbbl** | ** ** |
|                        |       |                                |       |                   |       |                     |       |                              |       |                               |       |   |   |   |   |   |   |   |   |   |   |
| PROVED                      |       |                                |       |                   |       |                     |       |                              |       |                               |       |   |   |   |   |   |   |   |   |   |   |
| Producing                   |       | 755                                 |       | 695                    |       | 0                        |       | 0                                 |       | 18,008                             |       | 14,881 |   | 160 |   | 109 |   | 3,916 |   | 3,285 |   |
| Developed  Nonproducing     |       | 10                                  |       | 10                     |       | 0                        |       | 0                                 |       | 2,121                              |       | 1,716 |   | 3 |   | 2 |   | 366 |   | 298 |   |
| Undeveloped                 |       | 0                                   |       | 0                      |       | 0                        |       | 0                                 |       | 2,537                              |       | 2,247 |   | 2 |   | 1 |   | 425 |   | 376 |   |
|                        |       |                                |       |                   |       |                     |       |                              |       |                               |       |   |   |   |   |   |   |   |   |   |   |
| TOTAL  PROVED               |       | 765                                 |       | 705                    |       | 0                        |       | 0                                 |       | 22,666                             |       | 18,844 |   | 165 |   | 113 |   | 4,707 |   | 3,959 |   |
|                        |       |                                |       |                   |       |                     |       |                              |       |                               |       |   |   |   |   |   |   |   |   |   |   |
| TOTAL  PROBABLE             |       | 675                                 |       | 599                    |       | 0                        |       | 0                                 |       | 10,772                             |       | 8,867 |   | 83 |   | 56 |   | 2553 |   | 2,132 |   |
|                        |       |                                |       |                   |       | 0                        |       | 0                                 |       |                               |       |   |   |   |   |   |   |   |   |   |   |
| TOTAL  PROVED PLUS PROBABLE |       | 1,439                               |       | 1,304                  |       | 0                        |       | 0                                 |       | 33,438                             |       | 27,711 |   | 248 |   | 169 |   | 7,260 |   | 6,091 |   |

 

**NETPRESENT VALUE SUMMARY**

 
| ** **                  | ** ** | **Net Present Values of Future Net Revenue  Before Income Taxes Discounted At (%/year)** | ** ** |
|-----------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Reserves Category**  | ** ** | **0%**                                                                                                                                          | ** ** | **5%** | ** ** | **10%** | ** ** | **15%** | ** ** | **20%** | ** ** |
| ** **                  | ** ** | **M$**                                                                                                                                          | ** ** | **M$** | ** ** | **M$** | ** ** | **M$** | ** ** | **M$** | ** ** |
| PROVED                      |       |                                                                                                                                            |       |   |   |   |   |   |   |   |   |
| Producing                   |       | 120,804                                                                                                                                         |       | 105,189 |   | 94,250 |   | 85,987 |   | 79,447 |   |
| Developed  Nonproducing     |       | 9,293                                                                                                                                           |       | 7,983 |   | 6,972 |   | 6,175 |   | 5,534 |   |
| Undeveloped                 |       | 8,934                                                                                                                                           |       | 6,929 |   | 5,505 |   | 4,463 |   | 3,680 |   |
|                        |       |                                                                                                                                            |       |   |   |   |   |   |   |   |   |
| TOTAL  PROVED               |       | 139,031                                                                                                                                         |       | 120,101 |   | 106,727 |   | 96,625 |   | 88,661 |   |
|                        |       |                                                                                                                                            |       |   |   |   |   |   |   |   |   |
| TOTAL  PROBABLE             |       | 59,601                                                                                                                                          |       | 41,684 |   | 31,024 |   | 24,111 |   | 19,358 |   |
|                        |       |                                                                                                                                            |       |   |   |   |   |   |   |   |   |
| TOTAL  PROVED PLUS PROBABLE |       | 198,631                                                                                                                                         |       | 161,785 |   | 137,751 |   | 120,736 |   | 108,019 |   |

 
| ** **                  | ** ** | **Net Present Values of Future Net Revenue  After Income Taxes Discounted At (%/year)** | ** ** |
|-----------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Reserves Category**  | ** ** | **0%**                                                                                                                                         | ** ** | **5%** | ** ** | **10%** | ** ** | **15%** | ** ** | **20%** | ** ** |
| ** **                  | ** ** | **M$**                                                                                                                                         | ** ** | **M$** | ** ** | **M$** | ** ** | **M$** | ** ** | **M$** | ** ** |
| PROVED                      |       |                                                                                                                                           |       |   |   |   |   |   |   |   |   |
| Producing                   |       | 113,289                                                                                                                                        |       | 98,231 |   | 87,772 |   | 79,929 |   | 73,758 |   |
| Developed  Nonproducing     |       | 6,536                                                                                                                                          |       | 5,460 |   | 4,647 |   | 4,018 |   | 3,522 |   |
| Undeveloped                 |       | 6,597                                                                                                                                          |       | 4,851 |   | 3,641 |   | 2,776 |   | 2,144 |   |
|                        |       |                                                                                                                                           |       |   |   |   |   |   |   |   |   |
| TOTAL  PROVED               |       | 126,423                                                                                                                                        |       | 108,542 |   | 96,060 |   | 86,724 |   | 79,424 |   |
|                        |       |                                                                                                                                           |       |   |   |   |   |   |   |   |   |
| TOTAL  PROBABLE             |       | 44,433                                                                                                                                         |       | 29,876 |   | 21,513 |   | 16,235 |   | 12,685 |   |
|                        |       |                                                                                                                                           |       |   |   |   |   |   |   |   |   |
| TOTAL  PROVED PLUS PROBABLE |       | 170,856                                                                                                                                        |       | 138,419 |   | 117,574 |   | 102,959 |   | 92,108 |   |

 

21

----

 

**ConstantPrices Used in Estimates**

** **

The following table identifies benchmarkreference pricing.  The oil, gas, NGLreference prices, inflation rates and exchange rates used in the forecastedprice evaluation were prepared by GLJ, the Corporation’s independent qualifiedreserves evaluator and are as follows:

 

**CrudeOil and Natural Gas Prices**

 
| ** **             | ** ** | ** **    | ** ** | ** **               | ** ** | **West Texas  Intermediate  Crude Oil at** | ** ** | **Brent Blend  Crude Oil** | ** ** | **Light, Sweet  Crude Oil (40** | ** ** | **Bow River  Crude Oil** | ** ** | **LLB Crude  Oil At** | ** ** | **Medium  Crude Oil (29** | ** ** | **Alberta National Gas Liquids** | ** ** |
|------------------------|------------|---------------|------------|--------------------------|------------|-----------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------------------|------------|------------------------------------|------------|---------------------------------|------------|-------------------------------------|------------|-------------------------------------------------|------------|
| ** **             | ** ** | ** **    | ** ** | ** **               | ** ** | **Cushing**                                               | ** ** | **FOB North**                   | ** ** | **API, 0.3%S)**                           | ** ** | **Stream Quality**            | ** ** | **Hardisty**                    | ** ** | **API, 2.0%S)**                | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Edmonton** | ** ** |
| ** **             | ** ** | ** **    | ** ** | **Exchange**             | ** ** | **Oklahoma**                                              | ** ** | **Sea Then**                    | ** ** | **at Edmonton**                           | ** ** | **at Hardisty**               | ** ** | **Then**                        | ** ** | **at Cromer**                  | ** ** | **Spec**                                        | ** ** | **Edmonton** | ** ** | **Edmonton** | ** ** | **Pentanes** | ** ** |
| **Year**               | ** ** | **Inflation** | ** ** | **Rate**                 | ** ** | **Then Current**                                     | ** ** | **Current**                          | ** ** | **Then Current**                          | ** ** | **Then Current**              | ** ** | **Current**                     | ** ** | **Then Current**               | ** ** | **Ethan**                                       | ** ** | **Propane** | ** ** | **Butane** | ** ** | **Plus** | ** ** |
| ** **             | ** ** | **%**         | ** ** | **$ US/$ Cdn** | ** ** | **$ US/bbl**                                         | ** ** | **$ Cdn/bbl**                   | ** ** | **$ Cdn/bbl**                             | ** ** | **$ Cdn/bbl**                 | ** ** | **$ Cdn/bbl**              | ** ** | **$ Cdn/bbl**                  | ** ** | **$Cdn/bbl**                                    | ** ** | **$Cdn/bbl** | ** ** | **$Cdn/bbl** | ** ** | **$Cdn/bbl** | ** ** |
| 1999 Average           |       | 1.7           |       | 0.6750                   |       | 19.29                                                     |       | 17.81                                |       | 27.69                                          |       | 23.84                              |       | 22.14                           |       | 25.42                               |       | n/a                                             |       | 15.89 |   | 18.70 |   | 27.71 |   |
| 2000 Average           |       | 2.7           |       | 0.6740                   |       | 30.22                                                     |       | 28.35                                |       | 44.56                                          |       | 35.25                              |       | 32.61                           |       | 39.91                               |       | n/a                                             |       | 32.18 |   | 35.60 |   | 46.31 |   |
| 2001 Average           |       | 2.6           |       | 0.6448                   |       | 25.97                                                     |       | 24.37                                |       | 39.40                                          |       | 27.70                              |       | 23.48                           |       | 31.56                               |       | n/a                                             |       | 31.85 |   | 31.17 |   | 42.48 |   |
| 2002 Average           |       | 2.2           |       | 0.6376                   |       | 26.08                                                     |       | 24.99                                |       | 40.33                                          |       | 31.83                              |       | 30.60                           |       | 35.48                               |       | n/a                                             |       | 21.39 |   | 27.08 |   | 40.73 |   |
| 2003 Average           |       | 2.8           |       | 0.7213                   |       | 31.07                                                     |       | 28.93                                |       | 43.66                                          |       | 32.11                              |       | 31.18                           |       | 37.55                               |       | n/a                                             |       | 32.14 |   | 34.36 |   | 44.23 |   |
| 2004 Average           |       | 1.8           |       | 0.7680                   |       | 41.38                                                     |       | 38.20                                |       | 52.96                                          |       | 36.86                              |       | 35.64                           |       | 45.75                               |       | n/a                                             |       | 34.70 |   | 39.97 |   | 54.07 |   |
| 2005 Average           |       | 2.2           |       | 0.8250                   |       | 56.58                                                     |       | 55.12                                |       | 69.11                                          |       | 44.97                              |       | 43.15                           |       | 56.62                               |       | n/a                                             |       | 43.04 |   | 51.80 |   | 69.47 |   |
|                   |       |          |       |                     |       |                                                      |       |                                 |       |                                           |       |                               |       |                            |       |                                |       |                                            |       |   |   |   |   |   |   |
| **December  31, 2005** | ** ** | **0.0**       | ** ** | **0.8577**               | **(1)**    | **61.04**                                                 | **(2)**    | **58.98**                            | **(3)**    | **68.27**                                      | **(4)**    | **3.00**                           | **(5)**    | **39.20**                       | **(6)**    | **51.84**                           | **(7)**    | **32.92**                                       | ** ** | **43.69** | ** ** | **50.52** | ** ** | **71.67** | **(8)** |

 

**Constant Thereafter**

 

**Natural Gas and Sulphur**

 
| ** **             | ** ** | **US Gulf**           | ** ** | ** **          | ** ** | ** **            | ** ** | ** **           | ** ** | ** **        | ** ** | ** **        | ** ** | ** **        | ** ** | ** **        | ** ** | ** **        | ** ** | ** **        | ** ** | ** **        | ** ** | ** **          | ** ** | ** **       | ** ** | ** **          | ** ** |
|------------------------|------------|----------------------------|------------|---------------------|------------|-----------------------|------------|----------------------|------------|-------------------|------------|-------------------|------------|-------------------|------------|-------------------|------------|-------------------|------------|-------------------|------------|-------------------|------------|---------------------|------------|------------------|------------|---------------------|------------|
| ** **             | ** ** | **Coast Gas at** | ** ** | **Midwest at** | ** ** | ** **            | ** ** | **Spot Plant**  | ** ** | ** **        | ** ** | ** **        | ** ** | ** **        | ** ** | ** **        | ** ** | **Sask.**         | ** ** | ** **        | ** ** | ** **        | ** ** | ** **          | ** ** | ** **       | ** ** | ** **          | ** ** |
| ** **             | ** ** | **Henry Hub**         | ** ** | **Chicago**         | ** ** | ** **            | ** ** | **Gate**             | ** ** | **ARP**           | ** ** | **Aggregator**    | ** ** | **Alliance**      | ** ** | **SaskEnergy**    | ** ** | **Spot**          | ** ** | ** **        | ** ** | **CanWest**       | ** ** | ** **          | ** ** | **Sulphur**      | ** ** | **Alberta**         | ** ** |
| ** **             | ** ** | **Then**                   | ** ** | **Then**            | ** ** | **AECO-C Spot**  | ** ** | **Then**             | ** ** | **Plant**         | ** ** | **Plant**         | ** ** | **Plant**         | ** ** | **Plant**         | ** ** | **Plant**         | ** ** | **Sumas**         | ** ** | **Plant**         | ** ** | **B.C. Spot**  | ** ** | **FOB**          | ** ** | **Sulphur at** | ** ** |
| **Year**               | ** ** | **Current**                | ** ** | **Current**         | ** ** | **Then Current** | ** ** | **Current**          | ** ** | **Gate**          | ** ** | **Gate**          | ** ** | **Gate**          | ** ** | **Gate**          | ** ** | **Gate**          | ** ** | **Spot**          | ** ** | **Gate**          | ** ** | **Plant Gate** | ** ** | **Vancouver**    | ** ** | **Plant Gate** | ** ** |
| ** **             | ** ** | **$ US/mmbtu**        | ** ** | **$ US/mmbtu** | ** ** | **$ Cdn/mmbtu**  | ** ** | **$ Cdn/mmbtu** | ** ** | **$ /mmbtu** | ** ** | **$ /mmbtu** | ** ** | **$ /mmbtu** | ** ** | **$ /mmbtu** | ** ** | **$ /mmbtu** | ** ** | **$ /mmbtu** | ** ** | **$ /mmbtu** | ** ** | **$ /mmbtu**   | ** ** | **$ US/LT** | ** ** | **$ Cdn/LT**   | ** ** |
| 1999 Average           |       | 2.32                       |       | 2.34                |       | 2.92                  |       | 2.75                 |       | 2.48              |       | n/a               |       | n/a               |       | 2.83              |       | 2.97              |       | 2.15              |       | 2.51              |       | 2.78                |       | 33.74            |       | 6.93                |       |
| 2000 Average           |       | 4.33                       |       | 4.38                |       | 5.08                  |       | 4.92                 |       | 4.50              |       | 4.60              |       | n/a               |       | 4.79              |       | 5.16              |       | 4.17              |       | 5.27              |       | 4.88                |       | 38.14            |       | 13.59               |       |
| 2001 Average           |       | 4.05                       |       | 4.17                |       | 6.21                  |       | 6.07                 |       | 5.41              |       | 5.30              |       | 5.61              |       | 5.71              |       | 6.20              |       | 4.56              |       | 6.76              |       | 6.29                |       | 18.29            |       | -14.66              |       |
| 2002 Average           |       | 3.36                       |       | 3.30                |       | 4.04                  |       | 3.88                 |       | 3.88              |       | 3.83              |       | 3.82              |       | 4.04              |       | 4.08              |       | 2.68              |       | 3.64              |       | 3.93                |       | 29.38            |       | 3.04                |       |
| 2003 Average           |       | 5.50                       |       | 5.60                |       | 6.66                  |       | 6.49                 |       | 6.13              |       | 5.89              |       | 6.69              |       | 6.40              |       | 6.68              |       | 4.66              |       | 5.71              |       | 6.32                |       | 59.81            |       | 39.83               |       |
| 2004 Average           |       | 6.19                       |       | 6.13                |       | 6.88                  |       | 6.70                 |       | 6.31              |       | 6.16              |       | 6.44              |       | 6.48              |       | 6.78              |       | 5.26              |       | 5.52              |       | 6.45                |       | 62.99            |       | 38.61               |       |
| 2005 Average           |       | 8.97                       |       | 8.24                |       | 8.58                  |       | 8.42                 |       | 8.41              |       | 8.30              |       | 8.45              |       | 8.40              |       | 8.55              |       | 7.13              |       | 6.33              |       | 8.12                |       | 63.50            |       | 33.77               |       |
|                   |       |                       |       |                |       |                  |       |                 |       |              |       |              |       |              |       |              |       |              |       |              |       |              |       |                |       |             |       |                |       |
| **December  31, 2005** | ** ** | **11.23**                  | **(9)**    | **9.06**            | **(10)**   | **9.71**              | **(11)**   | **9.46**             | ** ** | **9.46**          | ** ** | **9.36**          | ** ** | **8.96**          | ** ** | **9.61**          | ** ** | **9.61**          | ** ** | **8.25**          | **(10)**   | **7.77**          | ** ** | **8.64**            | ** ** | **63.50**        | **(12)**   | **31.00**           | **(12)**   |

 

**ConstantThereafter**

 

*Unless otherwise stated, the gasprice reference point is the receipt point on the applicable provincial gastransmission system known as the plant gate. The plant gate price represents the price before raw gas gathering andprocessing charges are deducted.  Spotrefers to weighted average one month price.*

 

22

----

 

----

**Note:These prices are actual posted prices at the referenced date; other referenceprices are derived based on historical price differentials.**

 

(1)                                  Non Rate from the Bank ofCanada.

 

(2)                                  Settlement price for promptmonth delivery from NYMEX.

 

(3)                                  Reported price by the IPE.

 

(4)                                  Average price reported byImperial, Shell, Flint Hill, Petro-Canada, BP and Suncor.

 

(5)                                  Average price reported byImperial, Flint Hill, EnCana and BP.

 

(6)                                  Average price reported byPetro-Canada, Flint Hill, EnCana and BP.

 

(7)                                  Average price reported byShell, Flint Hill, EnCana, BP and Suncor.

 

(8)                                  Average price reported byShell, Flint Hill, EnCana and BP.

 

(9)                                  Settlement price for promptmonth delivery from NYMEX.

 

(10)                            Same day settlement price fromPlatts.

 

(11)                            Same day settlement price fromNGX.

 

(12)                            Utilized current GLJ forecastprice.

 

* Note:  All prices reflect the last business day,December 30, 2005.

 

23

----

 

**ForecastPrices Used in Estimates**

** **

The following table represents forecastprices for crude oil and natural gas liquids used in preparing reserves data byGLJ, the Corporation’s independent qualified reserves evaluator.  This standard price forecast of GLJ iseffective January 1, 2005:

 

**GJL Petroleum ConsultantsCrude Oil and Natural Gas LiquidsPrice ForecastEffective January 1, 2006**

 
| ** **     | ** ** | ** **    |   | **Bank of  Canada  Average  Noon** |   | **West Texas  Intermediate Crude  Oil at Cushing  Oklahoma** |   | **Brent Blend Crude  Oil FOB North Seas** |   | **Light, Sweet Crude  Oil (40 API, 0.3%S)  at Edmonton** |       | **Bower River Crude Oil  Stream Quality at  Hardisty** |   |
|----------------|------------|---------------|--------|-----------------------------------------|--------|----------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|--------|
| **Year**       | ** ** | **Inflation** |   | **Exchange  Rate**                      |   | **Constant  2006 $**                                                        |   | **Then  Current**                                                  |   | **Constant  2006 $**                                                              | ** ** | **Then  Current**                                                               |   | **Constant  2006 $** | ** ** | **Then  Current** | ** ** | **Constant  2006 $** |   | **Then  Current** |   |
| ** **     | ** ** | **%**         |   | **$ US/$ Cdn**                |   | **$ US/bbl**                                                                |   | **$ US/bbl**                                                  |   | **$ US/bbl**                                                                      |       | **$ US/bbl**                                                               |   | **$ Cdn/bbl** |   | **$ Cdn/bbl** |   | **$ Cdn/bbl** |   | **$ Cdn/bbl** |   |
| 1994           |       | 0.2           |   | 0.732                                   |   | 21.47                                                                            |   | 17.18                                                              |   | 19.77                                                                                  |       | 15.82                                                                           |   | 27.77 |   | 22.22 |   | 23.08 |   | 18.47 |   |
| 1995           |       | 2.2           |   | 0.729                                   |   | 22.93                                                                            |   | 18.39                                                              |   | 21.25                                                                                  |       | 17.04                                                                           |   | 30.22 |   | 24.23 |   | 25.94 |   | 20.80 |   |
| 1996           |       | 1.6           |   | 0.733                                   |   | 26.84                                                                            |   | 21.99                                                              |   | 24.94                                                                                  |       | 20.43                                                                           |   | 35.87 |   | 29.39 |   | 30.67 |   | 25.13 |   |
| 1997           |       | 1.6           |   | 0.722                                   |   | 24.76                                                                            |   | 20.61                                                              |   | 23.04                                                                                  |       | 19.18                                                                           |   | 33.46 |   | 27.85 |   | 25.43 |   | 21.17 |   |
| 1998           |       | 0.9           |   | 0.675                                   |   | 17.05                                                                            |   | 14.42                                                              |   | 15.17                                                                                  |       | 12.83                                                                           |   | 24.07 |   | 20.36 |   | 17.31 |   | 14.64 |   |
| 1999           |       | 1.7           |   | 0.673                                   |   | 22.61                                                                            |   | 19.29                                                              |   | 20.87                                                                                  |       | 17.81                                                                           |   | 32.45 |   | 27.69 |   | 27.94 |   | 23.84 |   |
| 2000           |       | 2.7           |   | 0.673                                   |   | 34.82                                                                            |   | 30.22                                                              |   | 32.67                                                                                  |       | 28.35                                                                           |   | 51.35 |   | 44.56 |   | 40.62 |   | 35.25 |   |
| 2001           |       | 2.6           |   | 0.646                                   |   | 29.14                                                                            |   | 25.97                                                              |   | 27.34                                                                                  |       | 24.37                                                                           |   | 44.21 |   | 39.40 |   | 31.08 |   | 27.70 |   |
| 2002           |       | 2.2           |   | 0.637                                   |   | 28.52                                                                            |   | 26.08                                                              |   | 27.33                                                                                  |       | 24.99                                                                           |   | 44.10 |   | 40.33 |   | 34.81 |   | 31.83 |   |
| 2003           |       | 2.8           |   | 0.721                                   |   | 33.24                                                                            |   | 31.07                                                              |   | 30.96                                                                                  |       | 28.93                                                                           |   | 46.71 |   | 43.66. |   | 34.36 |   | 32.11 |   |
| 2004           |       | 1.8           |   | 0.768                                   |   | 43.08                                                                            |   | 41.38                                                              |   | 39.76                                                                                  |       | 38.20                                                                           |   | 55.13 |   | 52.96 |   | 38.37 |   | 36.86 |   |
| 2005(e)        |       | 2.2           |   | 0.825                                   |   | 57.86                                                                            |   | 56.60                                                              |   | 56.38                                                                                  |       | 55.15                                                                           |   | 70.65 |   | 69.11 |   | 45.96 |   | 44.96 |   |
| 2006 Q1        |       | 2.0           |   | 0.850                                   |   | 56.00                                                                            |   | 56.00                                                              |   | 54.50                                                                                  |       | 54.50                                                                           |   | 65.25 |   | 65.25 |   | 39.25 |   | 39.25 |   |
| 2006 Q2        |       | 2.0           |   | 0.850                                   |   | 56.00                                                                            |   | 56.00                                                              |   | 54.50                                                                                  |       | 54.50                                                                           |   | 65.25 |   | 65.25 |   | 44.25 |   | 44.25 |   |
| 2006 Q3        |       | 2.0           |   | 0.850                                   |   | 57.50                                                                            |   | 57.50                                                              |   | 56.00                                                                                  |       | 56.00                                                                           |   | 67.00 |   | 67.00 |   | 48.25 |   | 48.25 |   |
| 2006 Q4        |       | 2.0           |   | 0.850                                   |   | 58.00                                                                            |   | 58.00                                                              |   | 56.50                                                                                  |       | 56.50                                                                           |   | 67.50 |   | 67.50 |   | 40.50 |   | 40.50 |   |
|           |       |          |   |                                    |   |                                                                             |   |                                                               |   |                                                                                   |       |                                                                            |   |   |   |   |   |   |   |   |   |
| 2006 Full Year |       | 2.0           |   | 0.850                                   |   | 57.00                                                                            |   | 57.00                                                              |   | 55.50                                                                                  |       | 55.50                                                                           |   | 66.25 |   | 66.25 |   | 43.00 |   | 43.00 |   |
| 2007           |       | 2.0           |   | 0.850                                   |   | 54.00                                                                            |   | 55.00                                                              |   | 52.50                                                                                  |       | 53.50                                                                           |   | 62.75 |   | 64.00 |   | 41.75 |   | 42.50 |   |
| 2008           |       | 2.0           |   | 0.850                                   |   | 49.00                                                                            |   | 51.00                                                              |   | 47.50                                                                                  |       | 49.50                                                                           |   | 57.00 |   | 59.25 |   | 39.50 |   | 41.00 |   |
| 2009           |       | 2.0           |   | 0.850                                   |   | 45.25                                                                            |   | 48.00                                                              |   | 43.75                                                                                  |       | 46.50                                                                           |   | 52.50 |   | 55.75 |   | 37.25 |   | 39.50 |   |
| 2010           |       | 2.0           |   | 0.850                                   |   | 43.00                                                                            |   | 46.50                                                              |   | 41.50                                                                                  |       | 45.00                                                                           |   | 50.00 |   | 54.00 |   | 36.50 |   | 39.50 |   |
| 2011           |       | 2.0           |   | 0.850                                   |   | 40.75                                                                            |   | 45.00                                                              |   | 39.50                                                                                  |       | 43.50                                                                           |   | 47.25 |   | 52.25 |   | 36.00 |   | 39.75 |   |
| 2012           |       | 2.0           |   | 0.850                                   |   | 40.00                                                                            |   | 45.00                                                              |   | 38.75                                                                                  |       | 43.50                                                                           |   | 46.50 |   | 52.25 |   | 35.25 |   | 39.75 |   |
| 2013           |       | 2.0           |   | 0.850                                   |   | 40.00                                                                            |   | 46.00                                                              |   | 38.75                                                                                  |       | 44.50                                                                           |   | 46.25 |   | 53.25 |   | 35.25 |   | 40.50 |   |
| 2014           |       | 2.0           |   | 0.850                                   |   | 40.00                                                                            |   | 46.75                                                              |   | 38.50                                                                                  |       | 45.25                                                                           |   | 46.25 |   | 54.25 |   | 35.25 |   | 41.25 |   |
| 2015           |       | 2.0           |   | 0.850                                   |   | 40.00                                                                            |   | 47.75                                                              |   | 38.75                                                                                  |       | 46.25                                                                           |   | 46.50 |   | 55.50 |   | 35.25 |   | 42.25 |   |
| 2016           |       | 2.0           |   | 0.850                                   |   | 40.00                                                                            |   | 48.75                                                              |   | 38.75                                                                                  |       | 47.25                                                                           |   | 46.25 |   | 56.50 |   | 35.25 |   | 43.00 |   |
| 2017+          |       | 2.0           |   | 0.850                                   |   | 40.00                                                                            |   | +2.0                                                               | %/yr   | 38.75                                                                                  |       | +2.0                                                                            | %/yr   | 46.25 |   | +2.0 | %/yr | 35.25 |   | _+2.0 | %/yr |

 
| ** **     | ** ** | **Heavy Crude Oil  Proxy (12 API) at  Hardisty** | ** ** | **Medium Crude Oil  (20 API. 2.0%S) at  Cromer** | ** ** | ** **         | ** ** | **Alberta Natural Gas Liquids  (Then Current Dollars)** | ** ** | **Edmonton**       | ** ** |
|----------------|------------|---------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|--------------------|------------|----------------------------------------------------------------------------------|------------|--------------------|------------|
| ** **     | ** ** | **Constant  2006 $**                                                 | ** ** | **Then  Current**                                                         | ** ** | **Constant  2005** | ** ** | **Then  Current**                                                                | ** ** | **Spec.  Ethane**  | ** ** | **Edmonton  Propane** | ** ** | **Edmonton  Butane** | ** ** | **Pentanes  Plus** | ** ** |
| ** **     | ** ** | **$ Cdn/bbl**                                                        | ** ** | **$ Cdn/bbl**                                                        | ** ** | **$ Cdn/bbl** | ** ** | **$ Cdn/bbl**                                                               | ** ** | **$ Cdn/bbl** | ** ** | **$ Cdn/bbl** | ** ** | **$ Cdn/bbl** | ** ** | **$ Cdn/bbl** | ** ** |
| 1994           |       | 18.77                                                                     |       | 15.02                                                                     |       | 24.12              |       | 19.30                                                                            |       | n/a                |       | 12.53 |   | 13.45 |   | 21.69 |   |
| 1995           |       | 21.55                                                                     |       | 17.28                                                                     |       | 27.05              |       | 21.69                                                                            |       | n/a                |       | 13.90 |   | 13.79 |   | 24.11 |   |
| 1996           |       | 24.49                                                                     |       | 20.06                                                                     |       | 31.86              |       | 26.10                                                                            |       | n/a                |       | 22.31 |   | 17.15 |   | 30.06 |   |
| 1997           |       | 17.31                                                                     |       | 14.41                                                                     |       | 28.50              |       | 23.72                                                                            |       | n/a                |       | 18.62 |   | 18.73 |   | 30.91 |   |
| 1998           |       | 11.17                                                                     |       | 9.45                                                                      |       | 20.04              |       | 16.95                                                                            |       | n/a                |       | 11.15 |   | 12.44 |   | 21.83 |   |
| 1999           |       | 23.05                                                                     |       | 19.67                                                                     |       | 29.79              |       | 25.42                                                                            |       | n/a                |       | 15.89 |   | 18.70 |   | 27.71 |   |
| 2000           |       | 31.50                                                                     |       | 27.34                                                                     |       | 45.99              |       | 39.91                                                                            |       | n/a                |       | 32.18 |   | 35.60 |   | 46.31 |   |
| 2001           |       | 19.01                                                                     |       | 16.94                                                                     |       | 35.41              |       | 31.56                                                                            |       | n/a                |       | 31.85 |   | 31.17 |   | 42.48 |   |
| 2002           |       | 29.06                                                                     |       | 26.57                                                                     |       | 38.80              |       | 35.48                                                                            |       | n/a                |       | 21.39 |   | 27.08 |   | 40.73 |   |
| 2003           |       | 28.10                                                                     |       | 26.26                                                                     |       | 40.18              |       | 37.55                                                                            |       | n/a                |       | 32.14 |   | 34.36 |   | 44.23 |   |
| 2004           |       | 30.30                                                                     |       | 29.11                                                                     |       | 47.62              |       | 45.75                                                                            |       | n/a                |       | 34.70 |   | 39.97 |   | 54.07 |   |
| 2005(e)        |       | 34.90                                                                     |       | 34.14                                                                     |       | 58.33              |       | 57.07                                                                            |       | n/a                |       | 42.55 |   | 51.41 |   | 69.45 |   |
| 2006 Q1        |       | 28.50                                                                     |       | 28.50                                                                     |       | 52.25              |       | 52.25                                                                            |       | 35.50              |       | 41.75 |   | 48.25 |   | 66.00 |   |
| 2006 Q2        |       | 35.25                                                                     |       | 35.25                                                                     |       | 56.00              |       | 56.00                                                                            |       | 35.25              |       | 41.75 |   | 48.25 |   | 66.00 |   |
| 2006 Q3        |       | 38.75                                                                     |       | 38.75                                                                     |       | 58.25              |       | 58.25                                                                            |       | 35.50              |       | 43.00 |   | 49.50 |   | 67.75 |   |
| 2006 Q4        |       | 30.25                                                                     |       | 30.25                                                                     |       | 56.75              |       | 56.75                                                                            |       | 37.50              |       | 43.25 |   | 50.00 |   | 68.25 |   |
|           |       |                                                                      |       |                                                                      |       |               |       |                                                                             |       |               |       |   |   |   |   |   |   |
| 2006 Full Year |       | 33.25                                                                     |       | 33.25                                                                     |       | 55.75              |       | 55.75                                                                            |       | 36.00              |       | 42.50 |   | 49.00 |   | 67.00 |   |
| 2007           |       | 32.00                                                                     |       | 32.75                                                                     |       | 54.25              |       | 55.25                                                                            |       | 31.25              |       | 41.00 |   | 47.25 |   | 65.25 |   |
| 2008           |       | 31.25                                                                     |       | 32.50                                                                     |       | 49.25              |       | 51.25                                                                            |       | 27.00              |       | 38.00 |   | 43.75 |   | 60.50 |   |
| 2009           |       | 30.25                                                                     |       | 32.00                                                                     |       | 45.50              |       | 48.25                                                                            |       | 25.25              |       | 35.75 |   | 41.25 |   | 56.75 |   |
| 2010           |       | 29.50                                                                     |       | 32.00                                                                     |       | 43.25              |       | 46.75                                                                            |       | 24.25              |       | 34.50 |   | 40.00 |   | 55.00 |   |
| 2011           |       | 30.25                                                                     |       | 33.50                                                                     |       | 41.00              |       | 45.25                                                                            |       | 23.25              |       | 33.50 |   | 38.75 |   | 53.25 |   |
| 2012           |       | 29.75                                                                     |       | 33.50                                                                     |       | 40.25              |       | 45.25                                                                            |       | 23.25              |       | 33.50 |   | 38.75 |   | 53.25 |   |
| 2013           |       | 29.50                                                                     |       | 34.00                                                                     |       | 40.00              |       | 46.00                                                                            |       | 23.75              |       | 34.00 |   | 39.50 |   | 54.25 |   |
| 2014           |       | 29.75                                                                     |       | 34.75                                                                     |       | 40.00              |       | 47.00                                                                            |       | 24.25              |       | 34.75 |   | 40.25 |   | 55.25 |   |
| 2015           |       | 29.50                                                                     |       | 35.25                                                                     |       | 40.25              |       | 48.00                                                                            |       | 25.00              |       | 35.50 |   | 41.00 |   | 56.50 |   |
| 2016           |       | 29.50                                                                     |       | 36.00                                                                     |       | 40.00              |       | 48.75                                                                            |       | 25.50              |       | 36.25 |   | 41.75 |   | 57.75 |   |
| 2017+          |       | 29.50                                                                     |       | +2.0                                                                      | %/yr       | 40.00              |       | +2.0                                                                             | %/yr       |               |       | Escalate at  2.0% per year |   |   |   |

 

Revised January 3, 2006 8:42 AM

 

24

----

 

The following table represents forecastprices for natural gas and sulphur used in preparing reserves data by GLJ, theCorporation’s independent qualified reserves evaluator.  This standard price forecast of GLJ iseffective January 1, 2006:

 

**GJL Petroleum Consultants.Natural Gas and SulphurPrice ForecastEffective January 1, 2006**

 
| ** **     | ** ** | ** **                                                             | ** ** | ** **                | ** ** | **Midwest**             | ** ** | ** **              | ** ** | **Alberta Plant Gate** | ** ** |
|----------------|------------|------------------------------------------------------------------------|------------|---------------------------|------------|-------------------------|------------|-------------------------|------------|----------------------------------|------------|
| ** **     | ** ** | **US Gulf Coast Gas Price @  Henry Hub** | ** ** | **Price @  Chicago** | ** ** | **AECO-C  Spot**        | ** ** | **Spot**                | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Year**       | ** ** | **Constant  2006 $**                                              | ** ** | **Then  Current**         | ** ** | **Then  Current ** | ** ** | **Then  Current ** | ** ** | **Constant  2006 $**             | ** ** | **Then  Current** | ** ** | **ARP** | ** ** | **Aggregator** | ** ** | **Alliance** | ** ** |
| ** **     | ** ** | **$/mmbtu**                                                            | ** ** | **$/mmbtu**               | ** ** | **$ US/mmbtu**     | ** ** | **$ US/mmbtu**     | ** ** | **$ US/mmbtu**              | ** ** | **$ Cdn/mmbtu** | ** ** | **$ /mmbtu** | ** ** | **$ /mmbtu** | ** ** | **$ /mmbtu** | ** ** |
| 1994           |       | 2.42                                                                   |       | 1.94                      |       | 2.11                    |       | 1.98                    |       | 2.32                             |       | 1.86 |   | 1.81 |   | n/a |   | n/a |   |
| 1995           |       | 2.12                                                                   |       | 1.70                      |       | 1.69                    |       | 1.15                    |       | 1.27                             |       | 1.02 |   | 1.31 |   | n/a |   | n/a |   |
| 1996           |       | 3.08                                                                   |       | 2.52                      |       | 2.73                    |       | 1.39                    |       | 1.54                             |       | 1.26 |   | 1.63 |   | n/a |   | n/a |   |
| 1997           |       | 2.97                                                                   |       | 2.47                      |       | 2.75                    |       | 1.84                    |       | 2.03                             |       | 1.69 |   | 1.96 |   | n/a |   | n/a |   |
| 1998           |       | 2.55                                                                   |       | 2.16                      |       | 2.20                    |       | 2.03                    |       | 2.22                             |       | 1.88 |   | 1.94 |   | n/a |   | n/a |   |
| 1999           |       | 2.72                                                                   |       | 2.32                      |       | 2.34                    |       | 2.92                    |       | 3.22                             |       | 2.75 |   | 2.48 |   | n/a |   | n/a |   |
| 2000           |       | 4.99                                                                   |       | 4.33                      |       | 4.38                    |       | 5.08                    |       | 5.67                             |       | 4.92 |   | 4.50 |   | 4.60 |   | n/a |   |
| 2001           |       | 4.54                                                                   |       | 4.05                      |       | 4.17                    |       | 6.21                    |       | 6.81                             |       | 6.07 |   | 5.41 |   | 5.30 |   | 5.61 |   |
| 2002           |       | 3.67                                                                   |       | 3.36                      |       | 3.30                    |       | 4.04                    |       | 4.24                             |       | 3.88 |   | 3.88 |   | 3.83 |   | 3.82 |   |
| 2003           |       | 5.88                                                                   |       | 5.50                      |       | 5.60                    |       | 6.66                    |       | 6.94                             |       | 6.49 |   | 6.13 |   | 5.89 |   | 6.69 |   |
| 2004           |       | 6.44                                                                   |       | 6.19                      |       | 6.13                    |       | 6.88                    |       | 6.98                             |       | 6.70 |   | 6.31 |   | 6.16 |   | 6.44 |   |
| 2005(e)        |       | 9.17                                                                   |       | 8.97                      |       | 8.24                    |       | 8.58                    |       | 8.60                             |       | 8.42 |   | 8.35 |   | 8.36 |   | 8.45 |   |
| 2006 Q1        |       | 11.00                                                                  |       | 11.00                     |       | 10.80                   |       | 10.45                   |       | 10.20                            |       | 10.20 |   | 10.20 |   | 10.15 |   | 11.05 |   |
| 2006 Q2        |       | 10.00                                                                  |       | 10.00                     |       | 9.80                    |       | 10.35                   |       | 10.10                            |       | 10.10 |   | 10.10 |   | 10.00 |   | 9.90 |   |
| 2006 Q3        |       | 10.00                                                                  |       | 10.00                     |       | 9.80                    |       | 10.45                   |       | 10.20                            |       | 10.20 |   | 10.20 |   | 10.10 |   | 9.90 |   |
| 2006 Q4        |       | 11.00                                                                  |       | 11.00                     |       | 10.85                   |       | 11.05                   |       | 10.80                            |       | 10.80 |   | 10.80 |   | 10.75 |   | 11.10 |   |
|           |       |                                                                   |       |                      |       |                    |       |                    |       |                             |       |   |   |   |   |   |   |   |   |
| 2006 Full Year |       | 10.50                                                                  |       | 10.50                     |       | 10.30                   |       | 10.60                   |       | 10.35                            |       | 10.35 |   | 10.35 |   | 10.25 |   | 10.50 |   |
| 2007           |       | 8.60                                                                   |       | 8.75                      |       | 8.90                    |       | 9.25                    |       | 8.80                             |       | 9.00 |   | 9.00 |   | 9.00 |   | 8.90 |   |
| 2008           |       | 7.20                                                                   |       | 7.50                      |       | 7.65                    |       | 8.00                    |       | 7.45                             |       | 7.75 |   | 7.75 |   | 7.75 |   | 7.45 |   |
| 2009           |       | 6.60                                                                   |       | 7.00                      |       | 7.15                    |       | 7.50                    |       | 6.85                             |       | 7.25 |   | 7.25 |   | 7.25 |   | 6.90 |   |
| 2010           |       | 6.25                                                                   |       | 6.75                      |       | 6.90                    |       | 7.20                    |       | 6.40                             |       | 6.95 |   | 6.95 |   | 6.95 |   | 6.65 |   |
| 2011           |       | 5.90                                                                   |       | 6.50                      |       | 6.65                    |       | 6.90                    |       | 6.05                             |       | 6.65 |   | 6.65 |   | 6.65 |   | 6.35 |   |
| 2012           |       | 5.75                                                                   |       | 6.50                      |       | 6.65                    |       | 6.90                    |       | 5.90                             |       | 6.65 |   | 6.65 |   | 6.65 |   | 6.35 |   |
| 2013           |       | 5.75                                                                   |       | 6.65                      |       | 6.80                    |       | 7.05                    |       | 5.95                             |       | 6.80 |   | 6.80 |   | 6.80 |   | 6.50 |   |
| 2014           |       | 5.75                                                                   |       | 6.75                      |       | 6.90                    |       | 7.20                    |       | 5.95                             |       | 6.95 |   | 6.95 |   | 6.95 |   | 6.65 |   |
| 2015           |       | 5.75                                                                   |       | 6.90                      |       | 7.05                    |       | 7.40                    |       | 6.00                             |       | 7.15 |   | 7.15 |   | 7.15 |   | 6.80 |   |
| 2016           |       | 5.75                                                                   |       | 7.05                      |       | 7.20                    |       | 7.55                    |       | 6.00                             |       | 7.30 |   | 7.30 |   | 7.30 |   | 6.95 |   |
| 2017+          |       | 5.75                                                                   |       | +2.0                      | %/yr       | +2.0                    | %/yr       | +2.0                    | %/yr       | 6.00                             |       | +2.0 | %/yr |   |   |   |   |   |   |
|                |            |                                                                        |            |                           |            |                         |            |                         |            |                                  |            |  |  |  |  |  |  |  |  |  |

 
| ** **     | ** ** | **Saskatchewan Plant  Gate** | ** ** | ** **        | ** ** | **British Columbia** | ** ** | ** **               | ** ** | ** **            | ** ** |
|----------------|------------|-----------------------------------|------------|-------------------|------------|---------------------------|------------|--------------------------|------------|-----------------------|------------|
| **Year**       | ** ** | **SaskEnergy**                    | ** ** | **Spot**          | ** ** | **Sumas Spot**       | ** ** | **CanWest  Plant  Gate** | ** ** | **Spot  Plant  Gate** | ** ** | **Sulphur  FOB  Vancouver** | ** ** | **Alberta  Sulphur  at Plant  Gate** | ** ** |
| ** **     | ** ** | **$ /mmbtu**                 | ** ** | **$ /mmbtu** | ** ** | **$ US/mmbtu**       | ** ** | **$ /mmbtu**        | ** ** | **$ /mmbtu**     | ** ** | **$ US/LT** | ** ** | **$ Cdn/LT** | ** ** |
| 1994           |       | 1.88                              |       | 1.88              |       | 1.59                      |       | 1.81                     |       | 1.87                  |       | 44.96 |   | 16.57 |   |
| 1995           |       | 1.35                              |       | 0.98              |       | 1.03                      |       | 1.29                     |       | 1.12                  |       | 54.99 |   | 30.07 |   |
| 1996           |       | 1.52                              |       | 1.28              |       | 1.32                      |       | 1.50                     |       | 1.47                  |       | 36.28 |   | 14.44 |   |
| 1997           |       | 1.84                              |       | 1.75              |       | 1.70                      |       | 1.80                     |       | 1.98                  |       | 34.75 |   | 11.50 |   |
| 1998           |       | 2.05                              |       | 2.13              |       | 1.60                      |       | 1.94                     |       | 2.00                  |       | 24.59 |   | -6.51 |   |
| 1999           |       | 2.83                              |       | 2.97              |       | 2.15                      |       | 2.51                     |       | 2.78                  |       | 33.74 |   | 6.93 |   |
| 2000           |       | 4.79                              |       | 5.13              |       | 4.17                      |       | 5.27                     |       | 4.88                  |       | 38.14 |   | 13.59 |   |
| 2001           |       | 5.71                              |       | 6.13              |       | 4.56                      |       | 6.76                     |       | 6.29                  |       | 18.29 |   | -14.66 |   |
| 2002           |       | 4.04                              |       | 4.08              |       | 2.68                      |       | 3.64                     |       | 3.93                  |       | 29.38 |   | 3.04 |   |
| 2003           |       | 6.40                              |       | 6.68              |       | 4.66                      |       | 5.71                     |       | 6.32                  |       | 59.81 |   | 39.83 |   |
| 2004           |       | 6.48                              |       | 6.78              |       | 5.26                      |       | 5.52                     |       | 6.45                  |       | 62.99 |   | 38.61 |   |
| 2005(e)        |       | 8.32                              |       | 8.36              |       | 7.13                      |       | 6.33                     |       | 8.14                  |       | 63.50 |   | 34.04 |   |
| 2006 Q1        |       | 10.35                             |       | 10.35             |       | 9.70                      |       | 8.40                     |       | 10.75                 |       | 63.50 |   | 31.00 |   |
| 2006 Q2        |       | 10.25                             |       | 10.25             |       | 8.90                      |       | 8.30                     |       | 9.85                  |       | 63.50 |   | 31.00 |   |
| 2006 Q3        |       | 10.35                             |       | 10.35             |       | 8.90                      |       | 8.40                     |       | 9.85                  |       | 63.50 |   | 31.00 |   |
| 2006 Q4        |       | 10.95                             |       | 10.95             |       | 10.10                     |       | 8.85                     |       | 11.20                 |       | 63.50 |   | 31.00 |   |
|           |       |                              |       |              |       |                      |       |                     |       |                  |       |   |   |   |   |
| 2006 Full Year |       | 10.50                             |       | 10.50             |       | 9.40                      |       | 8.50                     |       | 10.40                 |       | 63.50 |   | 31.00 |   |
| 2007           |       | 9.15                              |       | 9.15              |       | 8.15                      |       | 8.60                     |       | 9.00                  |       | 55.00 |   | 21.00 |   |
| 2008           |       | 7.90                              |       | 7.90              |       | 7.00                      |       | 7.65                     |       | 7.65                  |       | 45.00 |   | 9.50 |   |
| 2009           |       | 7.40                              |       | 7.40              |       | 6.55                      |       | 7.15                     |       | 7.15                  |       | 45.00 |   | 9.50 |   |
| 2010           |       | 7.10                              |       | 7.10              |       | 6.30                      |       | 6.85                     |       | 6.85                  |       | 46.00 |   | 10.50 |   |
| 2011           |       | 6.80                              |       | 6.80              |       | 6.05                      |       | 6.55                     |       | 6.55                  |       | 47.00 |   | 12.00 |   |
| 2012           |       | 6.80                              |       | 6.80              |       | 6.05                      |       | 6.55                     |       | 6.55                  |       | 48.00 |   | 13.00 |   |
| 2013           |       | 6.95                              |       | 6.95              |       | 6.20                      |       | 6.70                     |       | 6.70                  |       | 49.00 |   | 14.00 |   |
| 2014           |       | 7.10                              |       | 7.10              |       | 6.30                      |       | 6.85                     |       | 6.85                  |       | 50.00 |   | 15.50 |   |
| 2015           |       | 7.30                              |       | 7.30              |       | 6.45                      |       | 7.00                     |       | 7.00                  |       | 51.00 |   | 17.00 |   |
| 2016           |       | 7.45                              |       | 7.45              |       | 6.60                      |       | 7.15                     |       | 7.15                  |       | 52.00 |   | 18.00 |   |
| 2017+          |       | Escalate at  2.0% per year        |       |              |       | +2.0 %/yr                 |       |

 

*Unless otherwise stated,the gas price reference point is the receipt point on the applicable provincialgas transmission system known as the plant gate.  The plant gate price represents the pricebefore raw gas gathering and processing charges are deducted.  Spot refers to weighted average one monthprice.*

 

RevisedJanuary 3, 2006 8:42 AM

 

25

----

 

**Reserves Reconciliation**

 

The following table provides a reconciliation of theCorporation’s net reserves based on forecast pricing, by principal producttype, between this analysis and the Corporation’s prior year-end evaluation:

 
| ** **           | ** ** | **Light and Medium Oil** | ** ** | **Unconventional Gas (CBM)** | ** ** | **Conventional Natural Gas** | ** ** | **Natural Gas Liquids** | ** ** | **BOE**           | ** ** |
|----------------------|------------|-----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|-----------------------------------|------------|-------------------|------------|
| **FACTORS**          | ** ** | **Net  Proved**                         | ** ** | **Net  Probable**                      | ** ** | **Net  Proved  Plus  Probable**        | ** ** | **Net  Proved**                   | ** ** | **Net  Probable** | ** ** | **Net  Proved  Plus  Probable** | ** ** | **Net  Proved** | ** ** | **Net  Probable** | ** ** | **Net  Proved  Plus  Probable** | ** ** | **Net  Proved** | ** ** | **Net  Provable** | ** ** | **Net  Proved  Plus  Probable** | ** ** | **Net  Proved** | ** ** | **Net  Provable** | ** ** | **Net  Proved  Plus  Probable** | ** ** |
| ** **           | ** ** | **(Mbbl)**                              | ** ** | **(Mbbl)**                             | ** ** | **(Mbbl)**                             | ** ** | **(MMcf)**                        | ** ** | **(MMcf)**        | ** ** | **(MMcf)** | ** ** | **(MMcf)** | ** ** | **(MMcf)** | ** ** | **(MMcf)** | ** ** | **(Mbbl)** | ** ** | **(Mbbl)** | ** ** | **(Mbbl)** | ** ** | **(Mboe)** | ** ** | **(Mboe)** | ** ** | **(Mboe)** | ** ** |
|                 |       |                                    |       |                                   |       |                                   |       |                              |       |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December  31, 2004   |       | 708                                     |       | 655                                    |       | 1,363                                  |       | 824                               |       | 893               |       | 1,717 |   | 16,050 |   | 5,588 |   | 21,638 |   | 134 |   | 62 |   | 196 |   | 3654 |   | 1797 |   | 5451 |   |
|                 |       |                                    |       |                                   |       |                                   |       |                              |       |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Extensions           |       | 14                                      |       | 0                                      |       | 14                                     |       | 2,212                             |       | 1,720             |       | 3,932 |   | 2,674 |   | 152 |   | 2,826 |   | 19 |   | -1 |   | 18 |   | 847 |   | 311 |   | 1158 |   |
| Improved  Recovery   |       | 36                                      |       | 18                                     |       | 54                                     |       | 3                                 |       | 20                |       | 23 |   | 618 |   | 20 |   | 638 |   | 5 |   | 1 |   | 6 |   | 145 |   | 26 |   | 170 |   |
| Technical  Revisions |       | 102                                     |       | -81                                    |       | 21                                     |       | -36                               |       | 40                |       | 3 |   | -313 |   | 16 |   | -297 |   | -16 |   | -7 |   | -23 |   | 28 |   | -78 |   | -50 |   |
| Discoveries          |       | 0                                       |       | 0                                      |       | 0                                      |       |                              |       | 0                 |       |   |   | 216 |   | 421 |   | 637 |   | 2 |   | 1 |   | 3 |   | 38 |   | 71 |   | 109 |   |
| Acquisitions         |       | 0                                       |       | 0                                      |       | 0                                      |       |                              |       | 0                 |       |   |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| Dispositions         |       |                                    |       | 0                                      |       | 0                                      |       |                              |       | 0                 |       |   |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| Economic  Factors    |       | 7                                       |       | 7                                      |       | 14                                     |       | 4                                 |       | 4                 |       | 9 |   | 80 |   | 28 |   | 108 |   | 1 |   | 0 |   | 1 |   | 22 |   | 12 |   | 34 |   |
| Production           |       | -162                                    |       |                                   |       | -162                                   |       | -40                               |       | 0                 |       | -40 |   | -3,448 |   |   |   | -3448 |   | -32 |   | 0 |   | -32 |   | -775 |   | 0 |   | -775 |   |
|                 |       |                                    |       |                                   |       |                                   |       |                              |       |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December  31, 2005   |       | 705                                     |       | 599                                    |       | 1,304                                  |       | 2,967                             |       | 2,677             |       | 5,644 |   | 15,877 |   | 6,225 |   | 22,102 |   | 113 |   | 56 |   | 169 |   | 3959 |   | 2139 |   | 6097 |   |

 

The Corporation has no unconventionalreserves (Bitumen, Synthetic Crude Oil, Natural Gas from Coal, etc.)

 

26

----

 

**FutureNet Revenue Reconciliation**

 

The following table provides areconciliation of the changes in the net present values of future net revenuebased on constant prices and costs, calculated using a discount rate of 10percent: 

 
| **Period and Factor**                                                                      | ** ** | **After Tax** | ** ** | **Before  Tax** | ** ** |
|--------------------------------------------------------------------------------------------|------------|---------------|------------|-----------------|------------|
| ** **                                                                                 | ** ** | **(M$)**      | ** ** | **(M$)**        | ** ** |
|                                                                                       | ** ** | ** **    | ** ** | ** **      | ** ** |
| Estimated Net Present Value at December 31, 2004                                           | ** ** | **74,162**    | ** ** | **76,539**      | ** ** |
| Oil  and Gas Sales During the Period Net of Production Costs and Royalties (1)             |       | (37,590       | )          | (37,590         | )          |
| Changes  due to Prices, Production Costs and Royalties Related to Forecast Production  (2) |       | 50,759        |       | 50,759          |       |
| Development  Costs During the Period (3)                                                   |       | 19,972        |       | 19,972          |       |
| Changes  In Forecast Development Costs (4)                                                 |       | (23,742       | )          | (23,742         | )          |
| Changes  Resulting from Extensions and Improved Recovery (5)                               |       | 29,388        |       | 29,388          |       |
| Changes  Resulting from Discoveries (5)                                                    |       | 1,083         |       | 1,083           |       |
| Changes  Resulting from Acquisitions of Reserves (5)                                       |       | —        |       | —          |       |
| Changes  Resulting from Dispositions of Reserves (5)                                       |       | —        |       | 0               |       |
| Accretion  of Discount (6)                                                                 |       | 7,654         |       | 7,654           |       |
| Net  Change in Income Taxes (7)                                                            |       | (14,301       | )          | —          |       |
| Changes  Resulting from Technical Reserves Revisions                                       |       | 2,636         |       | 2,636           |       |
| All  Other Changes (8)                                                                     |       | 1,661         |       | 1,661           |       |
|                                                                                       |       |          |       |            |       |
| Estimated Net Present Value at End of Period  December 31, 2005                            | ** ** | **111,682**   | ** ** | **128,360**     | ** ** |

 

----

(1)                                  Company actual before incometaxes, excluding G&A.

 

(2)                                  The impact of changes inprices and other economic factors on future net revenue.

 

(3)                                  Actual capital expendituresrelating to the exploration, development and production of oil and gasreserves.

 

(4)                                  The change in forecastdevelopment costs for the properties evaluated at the beginning of the period.

 

(5)                                  End of period net presentvalue of the related reserves.

 

(6)                                  Estimated as 10% of thebeginning of period net present value.

 

(7)                                  The difference betweenforecast income taxes at beginning of period and the actual taxes for theperiod plus forecast income taxes at the end of period.

 

(8)                                  Includes changes due torevised production profiles, development timing, operating costs, royaltyrates, actual price received in 2003 versus forecast, etc.

 

27

----

 

**UndevelopedReserves**

** **

Proved and probable undeveloped reserveshave been estimated in accordance with procedures and standards contained inthe COGE Handbook.  The significantmajority of the undeveloped reserves are scheduled to be developed within thenext two years of the effective date, that is December 31, 2005.

 

**SignificantFactors or Uncertainties Affecting Reserves Data**

** **

The evaluated oil and gas properties of theCorporation have no material extraordinary risks or uncertainties beyond thosewhich are inherent of an oil and gas producing company.

 

**FutureDevelopment Costs**

** **

The Corporation expects to fund its futuredevelopment from internally generated cash flow from operations, debt (wheredeemed appropriate) and new equity issues (if available on favourableterms).  In addition, the Corporation mayconsider farm-out arrangements for certain projects.  The Corporation does not expect that the costof funding could make the development of a property uneconomic for theCorporation, nor is it expected that the cost of such funding will impact theCorporation’s reserves or future net revenue.

 

The following table summarizes the capitaldevelopment costs, in thousands of dollars, related to the recovery of theCorporation’s reserves, based on constant pricing:

 
| ** **                  | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **2015** | ** ** | **2016** | ** ** | **Subtotal** | ** ** | **Remainder** | ** ** | **Total** | ** ** | **10%  Discounted** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|--------------|------------|---------------|------------|-----------|------------|---------------------|------------|
| Proved  Producing           |       | 110      |       | 31       |       |     |       |     |       |     |       |     |       | 10       |       |     |       |     |       |     |       |     |       | 151          |       |          |       | 151       |       | 137                 |       |
|                        |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |         |       |          |       |      |       |                |       |
| Total  Proved               |       | 1,873    |       | 6,146    |       |     |       |     |       |     |       |     |       | 10       |       | 57       |       |     |       |     |       |     |       | 8,086        |       |          |       | 8,086     |       | 7,146               |       |
|                        |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |         |       |          |       |      |       |                |       |
| Total  Proved Plus Probable |       | 2,565    |       | 12,910   |       | 587      |       |     |       |     |       | 166      |       | 10       |       | 57       |       |     |       |     |       |     |       | 16,295       |       |          |       | 16,295    |       | 14,230              |       |

 

The following table summarizes the capitaldevelopment costs, in thousands of dollars, related to the recovery of theCorporation’s reserves, based on forecast pricing and escalating cost: 

 
| ** **                  | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **2015** | ** ** | **2016** | ** ** | **Subtotal** | ** ** | **Remainder** | ** ** | **Total** | ** ** | **10%  Discounted** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|--------------|------------|---------------|------------|-----------|------------|---------------------|------------|
| Proved  Producing           |       | 110      |       | 30       |       |     |       |     |       |     |       |     |       | 9        |       |     |       |     |       |     |       |     |       | 149          |       |          |       | 149       |       | 136                 |       |
|                        |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |         |       |          |       |      |       |                |       |
| Total  Proved               |       | 1,873    |       | 6,025    |       |     |       |     |       |     |       |     |       | 9        |       | 50       |       |     |       |     |       |     |       | 7,957        |       |          |       | 7,957     |       | 7,038               |       |
|                        |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |     |       |         |       |          |       |      |       |                |       |
| Total  Proved Plus Probable |       | 2,565    |       | 12,657   |       | 264      |       |     |       |     |       | 150      |       | 9        |       | 50       |       |     |       |     |       |     |       | 15,995       |       |          |       | 15,995    |       | 13,979              |       |

 

28

----

 

**Oil andGas Properties and Wells**

** **

The following table, as prepared by theCorporation, sets forth Canadian Superior’s gross and net interest in oil andgas wells which are producing as at December 31, 2005:

 
| ** **           | ** ** | **Producing** | ** ** | **Shut-In** | ** ** |
|----------------------|------------|---------------|------------|-------------|------------|
| ** **           | ** ** | **Oil**       | ** ** | **Gas**     | ** ** | **Oil** | ** ** | **Gas** | ** ** |
| ** **           | ** ** | **Gross**     | ** ** | **Net**     | ** ** | **Gross** | ** ** | **Net** | ** ** | **Gross** | ** ** | **Net** | ** ** | **Gross** | ** ** | **Net** | ** ** |
|                 |       |          |       |        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Alberta              |       | 67            |       | 47          |       | 194 |   | 103.4 |   | 23 |   | 14.6 |   | 72 |   | 36.1 |   |
| British Columbia     |       | 0             |       | —      |       | — |   | — |   | — |   | — |   | — |   | — |   |
| Saskatchewan         |       | 0             |       | —      |       | — |   | — |   | — |   | — |   | — |   | — |   |
| Offshore Nova Scotia |       | 0             |       | —      |       | — |   | — |   | — |   | — |   | — |   | — |   |
| TOTAL                |       | 67            |       | 47          |       | 194 |   | 103.4 |   | 23 |   | 14.6 |   | 72 |   | 36.1 |   |

 

----

**Notes:**

** **

(1)                                  “Gross” wells are defined asthe total number of wells in which the Corporation has an interest.

 

(2)                                  “Net” wells are defined as theaggregate of the numbers obtained by multiplying each gross well by theCorporation’s percentage working or participating interest therein.

 

**PropertiesWith No Attributed Reserves**

** **

The following table represents theCorporation’s undeveloped land holdings, as at December 31, 2005:

 
| ** **           | ** ** | **Gross Acres** | ** ** | **Net Acres** | ** ** | **Average WI** | ** ** |
|----------------------|------------|-----------------|------------|---------------|------------|----------------|------------|
| Alberta              |       | 136,588         |       | 114,297       |       | 84             | %          |
| British Columbia     |       | 8,478           |       | 6,328         |       | 75             | %          |
| Saskatchewan         |       | 40              |       | 40            |       | 100            | %          |
| Offshore Nova Scotia |       | 1,309,135       |       | 1,309,135     |       | 100            | %          |
| TOTAL                |       | 1,454,241       |       | 1,429,800     |       | 98             | %          |

 

**Notes:**

** **

(1)                                  “Gross” refers to the totalacres in which the Corporation has or may earn an interest.

 

(2)                                  “Net” refers to the totalacres in which the Corporation has an interest or may earn an interest,multiplied by the percentage working interest therein owned or to be owned bythe Corporation.

 

**Expirationsand Work Commitments**

** **

The following table sets forth theexpirations and work commitment for the undeveloped lands of the Corporation,as at December 31, 2005: 

 

**WorkCommitments offshore Nova Scotia(Marquis, Mariner, Mayflower, Marauder, Marconi)**

 
| Gross Acres                 |   | 1,309,135 |       |
|-----------------------------|--------|-----------|------------|
|                        |   |      |       |
| Net Acres                   |   | 1,309,135 |       |
|                        |   |      |       |
| Work Expenditure Commitment |   | $         | 50,225,280 |   |
|                        |   |      |       |
| Deposits Tendered           |   | Nil       |       |
|                             |        |           |            |  |

 

29

----

 

 

**UndevelopedLand Due to Expire**

** **

The following table represents theundeveloped land of the Corporation due to expire in 2005: 

 
| ** **           | ** ** | **Gross Undeveloped Acres** | ** ** | **Net Undeveloped Acres** | ** ** |
|----------------------|------------|-----------------------------|------------|---------------------------|------------|
|                 |       |                        |       |                      |       |
| Alberta              |       | 41,396                      |       | 34,951                    |       |
| British Columbia     |       | 2,609                       |       | 1,740                     |       |
| Saskatchewan         |       | —                      |       | —                    |       |
| Offshore Nova Scotia |       | 60,125                      |       | 60,125                    |       |
| **TOTAL**            |       | 104,130                     |       | 96,816                    |       |

 

**ForwardContracts and Future Commitments**

** **

The Corporation enters into commodity salesagreements and certain derivative financial instruments to reduce its exposureto commodity price volatility.  Thesefinancial instruments are entered into solely for hedging purposes and are notused for trading or other speculative purposes.

 

At December 31, 2005, the Corporation hadthe following contracts in place:

 
| **Contact**               | ** ** | **Volume** | ** ** | **Price** | ** **       | **Term** | ** **                            |
|---------------------------|------------|------------|------------|-----------|------------------|----------|---------------------------------------|
|                      |       |       |       |      |             |     |                                  |
| Natural Gas - Fixed Price |       | 1000 gj/d  |       | $         | 10.08/gj  (Aeco) |     | January 1, 2006 – March 31, 2006 |   |
|                           |            |            |            |           |                  |          |                                       |  |

 

**ProductionVolume by Field**

** **

The following table discloses for eachimportant field, and in total, the Corporation’s net (before royalty interests)production volumes for the financial year ended December 31, 2004, for eachproduct type.

 
| **Field**   | ** ** | **Light and Medium  Crude Oil** | ** ** | **Natural Gas** | ** ** | **Natural Gas Liquids** | ** ** | **BOE**     | ** ** | **% of total** | ** ** |
|-------------|------------|---------------------------------|------------|-----------------|------------|-------------------------|------------|-------------|------------|----------------|------------|
| ** **  | ** ** | **(Bbls/d)**                    | ** ** | **(mcf/d)**     | ** ** | **(Bbls/d)**            | ** ** | **(BOE/d)** | ** ** | ** **     | ** ** |
|        |       |                            |       |            |       |                    |       |        |       |           |       |
| Drumhelller |       | 496                             |       | 10,317          |       | 106                     |       | 2,322       |       | 88             | %          |
| Total (net) |       | 499                             |       | 12,083          |       | 119                     |       | 2,632       |       | 100            | %          |

 

30

----

 

**AdditionalInformation Concerning Abandonment and Reclamation Costs**

 

The following table represents theCorporation’s projected abandonment costs for future drilling, in thousands ofdollars, using constant pricing:

 
| ** **                  | ** ** | **Year** | ** ** | **Totals** | ** ** | **10%**  | ** ** |
|-----------------------------|------------|----------|------------|------------|------------|----------|------------|
| **Entity Description**      | ** ** | **2006** | ** ** | **2007**   | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **2015** | ** ** | **2016** | ** ** | **2017** | ** ** | **Subtotal** | ** ** | **Remainder** | ** ** | **Total** | ** ** | **Discounted** | ** ** |
|                        |       |     |       |       |       |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proved Producing            |       | 155      |       | 259        |       | 302      |       | 304 |   | 174 |   | 125 |   | 450 |   | 169 |   | 278 |   | 318 |   | 134 |   | 130 |   | 2,799 |   | 699 |   | 3,498 |   | 1,833 |   |
|                        |       |     |       |       |       |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Proved                |       | 185      |       | 259        |       | 331      |       | 304 |   | 174 |   | 176 |   | 543 |   | 181 |   | 296 |   | 365 |   | 246 |   | 233 |   | 3,293 |   | 944 |   | 4,238 |   | 2,132 |   |
|                        |       |     |       |       |       |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total  Proved Plus Probable |       | 133      |       | 309        |       | 103      |       | 243 |   | 297 |   | 153 |   | 108 |   | 233 |   | 276 |   | 272 |   | 183 |   | 417 |   | 2,728 |   | 2,051 |   | 4,779 |   | 1,929 |   |

 

The following table represents theCorporation’s projected abandonment costs for future drilling, in thousands ofdollars, using forecast prices:

 
| ** **                  | ** ** | **Year** | ** ** | **Totals** | ** ** | **10%**  | ** ** |
|-----------------------------|------------|----------|------------|------------|------------|----------|------------|
| **Entity Description**      | ** ** | **2006** | ** ** | **2007**   | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **2015** | ** ** | **2016** | ** ** | **2017** | ** ** | **Subtotal** | ** ** | **Remainder** | ** ** | **Total** | ** ** | **Discounted** | ** ** |
|                        |       |     |       |       |       |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proved Producing            |       | 155      |       | 290        |       | 312      |       | 307 |   | 232 |   | 155 |   | 556 |   | 137 |   | 479 |   | 226 |   | 91 |   | 427 |   | 3,367 |   | 705 |   | 4,072 |   | 2,084 |   |
|                        |       |     |       |       |       |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Proved                |       | 185      |       | 290        |       | 343      |       | 307 |   | 232 |   | 217 |   | 655 |   | 151 |   | 500 |   | 282 |   | 226 |   | 568 |   | 3,956 |   | 1,020 |   | 4,976 |   | 2,437 |   |
|                        |       |     |       |       |       |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total  Proved Plus Probable |       | 133      |       | 344        |       | 129      |       | 223 |   | 315 |   | 213 |   | 103 |   | 339 |   | 373 |   | 304 |   | 367 |   | 361 |   | 3,203 |   | 2,790 |   | 5,993 |   | 2,297 |   |

 

31

----

 

The Corporation estimates the costs toabandon and reclaim all its shut in and producing wells, facilities, gas plantsand pipelines.  The Corporation’s modelfor estimating the amount and timing of future abandonment and reclamationexpenditures was done on an operating area level.  Estimated expenditures for each operatingarea are based on the Alberta Energy and Utilities Board methodology, whichdetails the cost of abandonment and reclamation in each specific geographicregion.  Each region was assigned anaverage cost per well to abandon and reclaim the wells in that area.  Facility reclamation costs are scheduled tobe incurred in the year following the end of the reserve life of its associatedreserves.  The Corporation will be liablefor its share of ongoing environmental obligations and for the ultimatereclamation of the properties held by it upon abandonment.  Ongoing environmental obligations areexpected to be funded out of cash flow. As at December 31, 2005, theCorporation expected to incur reclamation and abandonment costs in respect of432 gross (258 net) wells located on its properties and assets.

 

**TaxHorizon**

** **

The Corporation does not expect to be cashtaxable in 2006.

 

**CostsIncurred**

** **

The following, as prepared by theCorporation, represents the costs incurred, in thousands of dollars, in Canadaby Canadian Superior before property dispositions and corporate assetadditions: 

 
| Property  Acquisitions – Proved Properties  |   | 0      |   |
|--------------------------------------------------|--------|--------|--------|
| Property Acquisitions – Unproved Properties |   | 10,419 |   |
| Exploration Costs                                |   | 4,659  |   |
| Development Costs                                |   | 23,159 |   |

 

**Explorationand Development Activities**

 

The following table sets forth the grossand net exploration and development wells in which the Corporation participatedduring the year ended December 31, 2005: 

 
| ** **        | ** ** | **Development Wells** | ** ** | **Exploration Wells** | ** ** | **Total Wells** | ** ** |
|-------------------|------------|-----------------------|------------|-----------------------|------------|-----------------|------------|
| ** **        | ** ** | **Gross**             | ** ** | **Net**               | ** ** | **Gross**       | ** ** | **Net** | ** ** | **Gross** | ** ** | **Net** | ** ** |
|              |       |                  |       |                  |       |            |       |   |   |   |   |   |   |
| Oil Wells         |       | 2                     |       | 1.2                   |       | 2               |       | 2 |   | 4 |   | 3.2 |   |
| Natural Gas Wells |       | 44                    |       | 14.0                  |       | 18              |       | 10 |   | 62 |   | 24.0 |   |
| Service Wells     |       | 0                     |       | 0                     |       | 0               |       | 0 |   | 0 |   | 0 |   |
| Dry Holes         |       | 1                     |       | 1.0                   |       | 0               |       | 0 |   | 0 |   | 0 |   |
| Total             |       | 47                    |       | 16.2                  |       | 20              |       | 12 |   | 67 |   | 28.2 |   |

 

The following operations strategies buildon and augment the efforts of the Corporation in 2005:

 

1.             Continue to grow Western Canadian cash flow and production, focusingon the Drumheller area and high impact Western Canadian plays;

 

2.             Maintain high interest operational positions and a strong balancesheet;

 

3.             Continue forward with drilling and development of the Corporation’sOffshore Nova Scotia and Offshore Trinidad and Tobago assets; and

 

4.             Continue to focus on increasing the underlying value forshareholders through strategic drilling, development and acquisitions.

 

32

----

 

**ProductionEstimates**

** **

The following table represents a forecast,using constant pricing, of first year production by product type:

 
| ** **                               | ** ** | **2006 Average Daily Production** | ** ** |
|------------------------------------------|------------|-----------------------------------|------------|
| ** **                               | ** ** | **Light and  Medium Oil**         | ** ** | **Heavy Oil** | ** ** | **Natural Gas** | ** ** | **Natural Gas  Liquids** | ** ** | **Oil Equivalent** | ** ** |
| ** **                               | ** ** | **W.I.**                          | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** |
| **Entity Description**                   | ** ** | **bbl/d**                         | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** | **Mcf/d** | ** ** | **Mcf/d** | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Producing***                   |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 15                                |       | 14 |   | 0 |   | 0 |   | 3,902 |   | 2,938 |   | 38 |   | 25 |   | 703 |   | 528 |   |
| Craigmyle-Chain                          |       | 84                                |       | 74 |   | 0 |   | 0 |   | 2,632 |   | 2,054 |   | 3 |   | 2 |   | 525 |   | 418 |   |
| Other  Properties                        |       | 369                               |       | 326 |   | 0 |   | 0 |   | 5,471 |   | 4,350 |   | 57 |   | 39 |   | 1,338 |   | 1,090 |   |
| ARTC/AGCA  Adjustments                   |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Proved Producing**              | ** ** | **468**                           | ** ** | **413** | ** ** | **0** | ** ** | **0** | ** ** | **12,005** | ** ** | **9,342** | ** ** | **98** | ** ** | **66** | ** ** | **2,566** | ** ** | **2,036** | ** ** |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Developed Nonproducing***      |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 7 |   | 6 |   | 0 |   | 0 |   | 2 |   | 1 |   |
| Craigmyle-Chain                          |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 206 |   | 163 |   | 0 |   | 0 |   | 35 |   | 27 |   |
| Other  Properties                        |       | 7                                 |       | 7 |   | 0 |   | 0 |   | 653 |   | 515 |   | 1 |   | 1 |   | 117 |   | 93 |   |
| ARTC/AGCA  Adjustments                   |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Proved Developed Nonproducing** | ** ** | **7**                             | ** ** | **7** | ** ** | **0** | ** ** | **0** | ** ** | **866** | ** ** | **684** | ** ** | **1** | ** ** | **1** | ** ** | **153** | ** ** | **122** | ** ** |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Undeveloped***                 |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| Craigmyle-Chain                          |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 260 |   | 183 |   | 0 |   | 0 |   | 43 |   | 31 |   |
| Other  Properties                        |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 6 |   | 0 |   | 0 |   | 0 |   | 1 |   |
| ARTC/AGCA  Adjustments                   |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Proved Undeveloped**            | ** ** | **0**                             | ** ** | **0** | ** ** | **0** | ** ** | **0** | ** ** | **260** | ** ** | **189** | ** ** | **0** | ** ** | **0** | ** ** | **43** | ** ** | **32** | ** ** |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Proved***                       |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 15                                |       | 14 |   | 0 |   | 0 |   | 3,908 |   | 2,944 |   | 38 |   | 25 |   | 705 |   | 530 |   |
| Craigmyle-Chain                          |       | 84                                |       | 74 |   | 0 |   | 0 |   | 3,099 |   | 2,400 |   | 3 |   | 2 |   | 603 |   | 476 |   |
| Other  Properties                        |       | 376                               |       | 332 |   | 0 |   | 0 |   | 6,125 |   | 4,871 |   | 58 |   | 40 |   | 1,455 |   | 1,184 |   |
| ARTC/AGCA  Adjustments                   |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Total Proved**                  | ** ** | **475**                           | ** ** | **420** | ** ** | **0** | ** ** | **0** | ** ** | **13,131** | ** ** | **10,215** | ** ** | **99** | ** ** | **67** | ** ** | **2,763** | ** ** | **2,190** | ** ** |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Probable***                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 267 |   | 184 |   | 3 |   | 2 |   | 47 |   | 33 |   |
| Craigmyle-Chain                          |       | 3                                 |       | 2 |   | 0 |   | 0 |   | 109 |   | 79 |   | 0 |   | 0 |   | 21 |   | 15 |   |
| ARTC/AGCA Adjustments                    |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Probable**                      | ** ** | **29**                            | ** ** | **22** | ** ** | **0** | ** ** | **0** | ** ** | **821** | ** ** | **600** | ** ** | **4** | ** ** | **3** | ** ** | **170** | ** ** | **125** | ** ** |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Proved Plus  Probable***        |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 15                                |       | 14 |   | 0 |   | 0 |   | 4,175 |   | 3,128 |   | 41 |   | 27 |   | 752 |   | 562 |   |
| Craigmyle-Chain                          |       | 87                                |       | 76 |   | 0 |   | 0 |   | 3,208 |   | 2,480 |   | 3 |   | 2 |   | 624 |   | 491 |   |
| Other Properties                         |       | 402                               |       | 353 |   | 0 |   | 0 |   | 6,569 |   | 5,208 |   | 60 |   | 41 |   | 1,556 |   | 1,262 |   |
| ARTC/AGCA Adjustments                    |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Total Proved Plus  Probable**   | ** ** | **504**                           | ** ** | **443** | ** ** | **0** | ** ** | **0** | ** ** | **13,953** | ** ** | **10,815** | ** ** | **103** | ** ** | **70** | ** ** | **2,933** | ** ** | **2,315** | ** ** |

 
| ** **                               | ** ** | **Reserves**              | ** ** |
|------------------------------------------|------------|---------------------------|------------|
| ** **                               | ** ** | **Light and  Medium Oil** | ** ** | **Heavy Oil** | ** ** | **Natural Gas** | ** ** | **Natural Gas  Liquids** | ** ** | **Oil Equivalent** | ** ** |
| ** **                               | ** ** | **W.I.**                  | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net.** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** |
| **Entity Description**                   | ** ** | **Mbbl**                  | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **MMcf** | ** ** | **MMcf** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Producing***                   |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 25                        |       | 24 |   | 0 |   | 0 |   | 6,004 |   | 4,925 |   | 58 |   | 38 |   | 1,084 |   | 883 |   |
| Craigmyle-Chain                          |       | 154                       |       | 143 |   | 0 |   | 0 |   | 4,150 |   | 3,409 |   | 4 |   | 3 |   | 850 |   | 714 |   |
| Other Properties                         |       | 592                       |       | 544 |   | 0 |   | 0 |   | 8,090 |   | 6,762 |   | 100 |   | 70 |   | 2,040 |   | 1,741 |   |
| ARTC/AGCA Adjustments                    |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Proved Producing**              | ** ** | **772**                   | ** ** | **711** | ** ** | **0** | ** ** | **0** | ** ** | **18,244** | ** ** | **15,095** | ** ** | **162** | ** ** | **111** | ** ** | **3,975** | ** ** | **3,338** | ** ** |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Developed  Nonproducing***     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 1                         |       | 1 |   | 0 |   | 0 |   | 83 |   | 67 |   | 1 |   | 0 |   | 15 |   | 12 |   |
| Craigmyle-Chain                          |       | 0                         |       | 0 |   | 0 |   | 0 |   | 406 |   | 345 |   | 0 |   | 0 |   | 68 |   | 58 |   |
| Other Properties                         |       | 9                         |       | 9 |   | 0 |   | 0 |   | 1,634 |   | 1,306 |   | 2 |   | 1 |   | 284 |   | 228 |   |
| ARTC/AGCA Adjustments                    |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Proved Developed Nonproducing** | ** ** | **10**                    | ** ** | **10** | ** ** | **0** | ** ** | **0** | ** ** | **2,123** | ** ** | **1,717** | ** ** | **3** | ** ** | **2** | ** ** | **367** | ** ** | **298** | ** ** |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Undeveloped***                 |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| Craigmyle-Chain                          |       | 0                         |       | 0 |   | 0 |   | 0 |   | 247 |   | 189 |   | 0 |   | 0 |   | 41 |   | 31 |   |
| Other Properties                         |       | 0                         |       | 0 |   | 0 |   | 0 |   | 2,291 |   | 2,059 |   | 2 |   | 1 |   | 384 |   | 344 |   |
| ARTC/AGCA Adjustments                    |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Proved Undeveloped**            | ** ** | **0**                     | ** ** | **0** | ** ** | **0** | ** ** | **0** | ** ** | **2,538** | ** ** | **2,248** | ** ** | **2** | ** ** | **1** | ** ** | **425** | ** ** | **376** | ** ** |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Proved***                       |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 26                        |       | 25 |   | 0 |   | 0 |   | 6,087 |   | 4,991 |   | 59 |   | 39 |   | 1,100 |   | 895 |   |
| Craigmyle-Chain                          |       | 154                       |       | 143 |   | 0 |   | 0 |   | 4,803 |   | 3,942 |   | 4 |   | 3 |   | 959 |   | 803 |   |
| Other Properties                         |       | 602                       |       | 553 |   | 0 |   | 0 |   | 12,015 |   | 10,127 |   | 104 |   | 72 |   | 2,708 |   | 2,313 |   |
| ARTC/AGCA Adjustments                    |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Total Proved**                  | ** ** | **782**                   | ** ** | **721** | ** ** | **0** | ** ** | **0** | ** ** | **22,905** | ** ** | **19,060** | ** ** | **167** | ** ** | **114** | ** ** | **4,766** | ** ** | **4,012** | ** ** |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Probable***                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 4                         |       | 4 |   | 0 |   | 0 |   | 1,680 |   | 1,394 |   | 16 |   | 11 |   | 300 |   | 246 |   |
| Craigmyle-Chain                          |       | 43                        |       | 40 |   | 0 |   | 0 |   | 1,214 |   | 1,004 |   | 2 |   | 1 |   | 247 |   | 208 |   |
| ARTC/AGCA Adjustments                    |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Probable**                      | ** ** | **708**                   | ** ** | **628** | ** ** | **0** | ** ** | **0** | ** ** | **10,935** | ** ** | **9,006** | ** ** | **85** | ** ** | **57** | ** ** | **2,615** | ** ** | **2,186** | ** ** |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Proved Plus  Probable***        |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 30                        |       | 28 |   | 0 |   | 0 |   | 7,767 |   | 6,386 |   | 76 |   | 49 |   | 1,400 |   | 1,142 |   |
| Craigmyle-Chain                          |       | 197                       |       | 183 |   | 0 |   | 0 |   | 6,017 |   | 4,947 |   | 6 |   | 4 |   | 1,206 |   | 1,012 |   |
| Other Properties                         |       | 1,263                     |       | 1,138 |   | 0 |   | 0 |   | 20,056 |   | 16,734 |   | 171 |   | 118 |   | 4,776 |   | 4,045 |   |
| ARTC/AGCA Adjustments                    |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Total Proved Plus  Probable**   | ** ** | **1,489**                 | ** ** | **1,349** | ** ** | **0** | ** ** | **0** | ** ** | **33,840** | ** ** | **28,006** | ** ** | **252** | ** ** | **171** | ** ** | **7,381** | ** ** | **6,198** | ** ** |

 

33

----

 

The following table represents a forecast,using forecast pricing, of first year production by product type:

 
| ** **                               | ** ** | **2006 Average Daily Production** | ** ** |
|------------------------------------------|------------|-----------------------------------|------------|
| ** **                               | ** ** | **Light and  Medium Oil**         | ** ** | **Heavy Oil** | ** ** | **Natural Gas** | ** ** | **Natural Gas  Liquids** | ** ** | **Oil Equivalent** | ** ** |
| ** **                               | ** ** | **W.I.**                          | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** |
| **Entity Description**                   | ** ** | **bbl/d**                         | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** | **Mcf/d** | ** ** | **Mcf/d** | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Producing***                   |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 15                                |       | 14 |   | 0 |   | 0 |   | 3,902 |   | 2,938 |   | 38 |   | 25 |   | 703 |   | 528 |   |
| Craigmyle-Chain                          |       | 84                                |       | 74 |   | 0 |   | 0 |   | 2,632 |   | 2,054 |   | 3 |   | 2 |   | 525 |   | 418 |   |
| Other  Properties                        |       | 369                               |       | 326 |   | 0 |   | 0 |   | 5,471 |   | 4,350 |   | 57 |   | 39 |   | 1,338 |   | 1,090 |   |
| ARTC/AGCA  Adjustments                   |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Proved Producing**              | ** ** | **468**                           | ** ** | **413** | ** ** | **0** | ** ** | **0** | ** ** | **12,005** | ** ** | **9,342** | ** ** | **98** | ** ** | **66** | ** ** | **2,566** | ** ** | **2,036** | ** ** |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Developed Nonproducing***      |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 7 |   | 6 |   | 0 |   | 0 |   | 2 |   | 1 |   |
| Craigmyle-Chain                          |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 206 |   | 163 |   | 0 |   | 0 |   | 35 |   | 27 |   |
| Other  Properties                        |       | 7                                 |       | 7 |   | 0 |   | 0 |   | 653 |   | 515 |   | 1 |   | 1 |   | 117 |   | 93 |   |
| ARTC/AGCA  Adjustments                   |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Proved Developed Nonproducing** | ** ** | **7**                             | ** ** | **7** | ** ** | **0** | ** ** | **0** | ** ** | **866** | ** ** | **684** | ** ** | **1** | ** ** | **1** | ** ** | **153** | ** ** | **122** | ** ** |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Undeveloped***                 |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| Craigmyle-Chain                          |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 260 |   | 183 |   | 0 |   | 0 |   | 43 |   | 31 |   |
| Other  Properties                        |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 6 |   | 0 |   | 0 |   | 0 |   | 1 |   |
| ARTC/AGCA  Adjustments                   |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Proved Undeveloped**            | ** ** | **0**                             | ** ** | **0** | ** ** | **0** | ** ** | **0** | ** ** | **260** | ** ** | **189** | ** ** | **0** | ** ** | **0** | ** ** | **43** | ** ** | **32** | ** ** |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Proved***                       |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 15                                |       | 14 |   | 0 |   | 0 |   | 3,908 |   | 2,944 |   | 38 |   | 25 |   | 705 |   | 530 |   |
| Craigmyle-Chain                          |       | 84                                |       | 74 |   | 0 |   | 0 |   | 3,099 |   | 2,400 |   | 3 |   | 2 |   | 603 |   | 476 |   |
| Other  Properties                        |       | 376                               |       | 332 |   | 0 |   | 0 |   | 6,125 |   | 4,871 |   | 58 |   | 40 |   | 1,455 |   | 1,184 |   |
| ARTC/AGCA  Adjustments                   |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Total Proved**                  | ** ** | **475**                           | ** ** | **420** | ** ** | **0** | ** ** | **0** | ** ** | **13,131** | ** ** | **10,215** | ** ** | **99** | ** ** | **67** | ** ** | **2,763** | ** ** | **2,190** | ** ** |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Probable***                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 267 |   | 184 |   | 3 |   | 2 |   | 47 |   | 33 |   |
| Craigmyle-Chain                          |       | 3                                 |       | 2 |   | 0 |   | 0 |   | 109 |   | 79 |   | 0 |   | 0 |   | 21 |   | 15 |   |
| Other  Properties                        |       | 26                                |       | 20 |   | 0 |   | 0 |   | 445 |   | 337 |   | 2 |   | 1 |   | 101 |   | 78 |   |
| ARTC/AGCA  Adjustments                   |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Total Probable**                | ** ** | **29**                            | ** ** | **22** | ** ** | **0** | ** ** | **0** | ** ** | **821** | ** ** | **600** | ** ** | **4** | ** ** | **3** | ** ** | **170** | ** ** | **125** | ** ** |

 
| ** **                               | ** ** | **Reserves**              | ** ** |
|------------------------------------------|------------|---------------------------|------------|
| ** **                               | ** ** | **Light and  Medium Oil** | ** ** | **Heavy Oil** | ** ** | **Natural Gas** | ** ** | **Natural Gas  Liquids** | ** ** | **Oil Equivalent** | ** ** |
| ** **                               | ** ** | **W.I.**                  | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net.** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** |
| **Entity Description**                   | ** ** | **Mbbl**                  | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **MMcf** | ** ** | **MMcf** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Producing***                   |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 24                        |       | 23 |   | 0 |   | 0 |   | 5,988 |   | 4,910 |   | 58 |   | 38 |   | 1,080 |   | 880 |   |
| Craigmyle-Chain                          |       | 154                       |       | 143 |   | 0 |   | 0 |   | 4,100 |   | 3,366 |   | 4 |   | 3 |   | 842 |   | 707 |   |
| Other  Properties                        |       | 577                       |       | 529 |   | 0 |   | 0 |   | 7,919 |   | 6,605 |   | 98 |   | 68 |   | 1,994 |   | 1,698 |   |
| ARTC/AGCA  Adjustments                   |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Proved Producing**              | ** ** | **755**                   | ** ** | **695** | ** ** | **0** | ** ** | **0** | ** ** | **18,008** | ** ** | **14,881** | ** ** | **160** | ** ** | **109** | ** ** | **3,916** | ** ** | **3,285** | ** ** |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Developed Nonproducing***      |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 1                         |       | 1 |   | 0 |   | 0 |   | 82 |   | 65 |   | 1 |   | 0 |   | 15 |   | 12 |   |
| Craigmyle-Chain                          |       | 0                         |       | 0 |   | 0 |   | 0 |   | 406 |   | 345 |   | 0 |   | 0 |   | 68 |   | 58 |   |
| Other  Properties                        |       | 9                         |       | 9 |   | 0 |   | 0 |   | 1,634 |   | 1,306 |   | 2 |   | 1 |   | 284 |   | 228 |   |
| ARTC/AGCA  Adjustments                   |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Proved Developed Nonproducing** | ** ** | **10**                    | ** ** | **10** | ** ** | **0** | ** ** | **0** | ** ** | **2,121** | ** ** | **1,716** | ** ** | **3** | ** ** | **2** | ** ** | **366** | ** ** | **298** | ** ** |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Undeveloped***                 |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| Craigmyle-Chain                          |       | 0                         |       | 0 |   | 0 |   | 0 |   | 247 |   | 189 |   | 0 |   | 0 |   | 41 |   | 31 |   |
| Other  Properties                        |       | 0                         |       | 0 |   | 0 |   | 0 |   | 2,290 |   | 2,058 |   | 2 |   | 1 |   | 384 |   | 344 |   |
| ARTC/AGCA  Adjustments                   |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Proved Undeveloped**            | ** ** | **0**                     | ** ** | **0** | ** ** | **0** | ** ** | **0** | ** ** | **2,537** | ** ** | **2,247** | ** ** | **2** | ** ** | **1** | ** ** | **425** | ** ** | **376** | ** ** |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Proved***                       |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 25                        |       | 24 |   | 0 |   | 0 |   | 6,070 |   | 4,976 |   | 59 |   | 39 |   | 1,095 |   | 892 |   |
| Craigmyle-Chain                          |       | 154                       |       | 143 |   | 0 |   | 0 |   | 4,753 |   | 3,900 |   | 4 |   | 3 |   | 951 |   | 796 |   |
| Other  Properties                        |       | 586                       |       | 538 |   | 0 |   | 0 |   | 11,843 |   | 9,969 |   | 102 |   | 71 |   | 2,661 |   | 2,271 |   |
| ARTC/AGCA  Adjustments                   |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Total Proved**                  | ** ** | **765**                   | ** ** | **705** | ** ** | **0** | ** ** | **0** | ** ** | **22,666** | ** ** | **18,844** | ** ** | **165** | ** ** | **113** | ** ** | **4,707** | ** ** | **3,959** | ** ** |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Probable***                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                          |       | 4                         |       | 3 |   | 0 |   | 0 |   | 1,667 |   | 1,384 |   | 16 |   | 11 |   | 298 |   | 244 |   |
| Craigmyle-Chain                          |       | 43                        |       | 40 |   | 0 |   | 0 |   | 1,194 |   | 988 |   | 2 |   | 1 |   | 244 |   | 206 |   |
| Other  Properties                        |       | 628                       |       | 556 |   | 0 |   | 0 |   | 7,910 |   | 6,496 |   | 65 |   | 44 |   | 2,011 |   | 1,683 |   |
| ARTC/AGCA  Adjustments                   |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                     |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Total Probable**                | ** ** | **675**                   | ** ** | **599** | ** ** | **0** | ** ** | **0** | ** ** | **10,772** | ** ** | **8,867** | ** ** | **83** | ** ** | **56** | ** ** | **2,553** | ** ** | **2,132** | ** ** |

 

34

----

 
| ** **                            | ** ** | **2006 Average Daily Production** | ** ** |
|---------------------------------------|------------|-----------------------------------|------------|
| ** **                            | ** ** | **Light and  Medium Oil**         | ** ** | **Heavy Oil** | ** ** | **Natural Gas** | ** ** | **Natural Gas  Liquids** | ** ** | **Oil Equivalent** | ** ** |
| ** **                            | ** ** | **W.I.**                          | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** |
| **Entity Description**                | ** ** | **bbl/d**                         | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** | **Mcf/d** | ** ** | **Mcf/d** | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** | **bbl/d** | ** ** |
| ***Total Proved Plus Probable***      |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                       |       | 15                                |       | 14 |   | 0 |   | 0 |   | 4,175 |   | 3,128 |   | 41 |   | 27 |   | 752 |   | 562 |   |
| Craigmyle-Chain                       |       | 87                                |       | 76 |   | 0 |   | 0 |   | 3,208 |   | 2,480 |   | 3 |   | 2 |   | 624 |   | 491 |   |
| Other  Properties                     |       | 402                               |       | 353 |   | 0 |   | 0 |   | 6,569 |   | 5,208 |   | 60 |   | 41 |   | 1,556 |   | 1,262 |   |
| ARTC/AGCA  Adjustments                |       | 0                                 |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                  |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Total Proved Plus Probable** | ** ** | **504**                           | ** ** | **443** | ** ** | **0** | ** ** | **0** | ** ** | **13,953** | ** ** | **10,815** | ** ** | **103** | ** ** | **70** | ** ** | **2,933** | ** ** | **2,315** | ** ** |

 
| ** **                            | ** ** | **Reserves**              | ** ** |
|---------------------------------------|------------|---------------------------|------------|
| ** **                            | ** ** | **Light and  Medium Oil** | ** ** | **Heavy Oil** | ** ** | **Natural Gas** | ** ** | **Natural Gas  Liquids** | ** ** | **Oil Equivalent** | ** ** |
| ** **                            | ** ** | **W.I.**                  | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net.** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** |
| **Entity Description**                | ** ** | **Mbbl**                  | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **MMcf** | ** ** | **MMcf** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** |
| ***Total Proved Plus Probable***      |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                       |       | 28                        |       | 27 |   | 0 |   | 0 |   | 7,737 |   | 6,359 |   | 75 |   | 49 |   | 1,393 |   | 1,136 |   |
| Craigmyle-Chain                       |       | 197                       |       | 183 |   | 0 |   | 0 |   | 5,947 |   | 4,887 |   | 6 |   | 4 |   | 1,194 |   | 1,002 |   |
| Other  Properties                     |       | 1,214                     |       | 1,094 |   | 0 |   | 0 |   | 19,754 |   | 16,465 |   | 166 |   | 115 |   | 4,673 |   | 3,953 |   |
| ARTC/AGCA  Adjustments                |       | 0                         |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                                  |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total: Total Proved Plus Probable** | ** ** | **1,439**                 | ** ** | **1,304** | ** ** | **0** | ** ** | **0** | ** ** | **33,438** | ** ** | **27,711** | ** ** | **248** | ** ** | **169** | ** ** | **7,260** | ** ** | **6,091** | ** ** |

 

35

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**RISK FACTORS**

 

A number of factors, including but not limited to, those discussed inthis section could cause the Corporation’s results to differ materially fromits expectations.

 

**Exploration,Development and Production Risks**

 

An investment in the Corporation’s securities would be speculative dueto the nature of the Corporation’s involvement in the exploration, developmentand production of oil and natural gas and its present stage of development.

 

Oil and natural gas exploration involves a high degree of risk andthere is no assurance that expenditures made on future exploration by theCorporation will result in new discoveries of oil or natural gas in commercialquantities.  It is difficult to projectthe costs of implementing an exploratory drilling program due to the inherentuncertainties of drilling in unknown formations, the costs associated withencountering various drilling conditions, such as over pressured zones andtools lost in the hole, and changes in drilling plans and locations as a resultof prior exploratory wells or additional seismic data and interpretationsthereof.

 

Management will evaluate exploration and development prospects on anongoing basis in a manner consistent with industry standards.  The long-term commercial success of the Corporationdepends on its ability to find, acquire, develop and commercially produce oiland natural gas reserves.  No assurancecan be given that the Corporation will be able to locate satisfactoryproperties for acquisition or participation. Moreover, if such acquisitions or participations are identified, theCorporation may determine that current markets, terms of acquisition andparticipation or pricing conditions make such acquisitions or participationsuneconomic.

 

Future oil and gas exploration may involve unprofitable efforts, notonly from dry wells, but from wells that are productive but do not producesufficient net revenues to return a profit after drilling, operating and othercosts.  Completion of a well does notassure a profit on the investment or recovery of drilling, completion andoperating costs.  In addition, drillinghazards or environmental damage could greatly increase the cost of operations,and various field operating conditions may adversely affect the production fromsuccessful wells.  These conditionsinclude delays in obtaining governmental approvals or consents, shut-ins ofconnected wells resulting from extreme weather conditions, insufficient storageor transportation capacity or other geological and mechanical conditions.  While close well supervision and effectivemaintenance operations can contribute to maximizing production rates over time,production delays and declines from normal field operating conditions cannot beeliminated and can be expected to adversely affect revenue and cash flow levelsto varying degrees.

 

In addition, oil and gas operations are subject to the risks ofexploration, development and production of oil and natural gas properties,including encountering unexpected formations or pressures, premature declinesof reservoirs, blow-outs, cratering, sour gas releases, fires and spills.  Losses resulting from the occurrence of anyof these risks could have a materially adverse effect on future results ofoperations, liquidity and financial condition.

 

**SubstantialCapital Requirements and Liquidity**

** **

The Corporation anticipates that it will make substantial capitalexpenditures for the acquisition, exploration, development and production ofoil and natural gas reserves in the future. If the Corporation’s revenues or reserves decline, the Corporation mayhave limited ability to expend the capital necessary to undertake or completefuture drilling programs.  There can beno assurance that debt or equity financing, or cash generated by operationswill be available or sufficient to meet these requirements or for othercorporate purposes or, if debt or equity financing is available, that it willbe on terms acceptable to the Corporation. Moreover, future activities may require the Corporation to alter itscapitalization significantly.  Theinability of the Corporation to access sufficient capital for its operationscould have a material adverse effect on the Corporation’s financial condition,results of operations or prospects.

 

36

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**AdditionalFunding Requirements**

** **

The Corporation’s cash flow from its reserves may not be sufficient tofund its ongoing activities at all times. From time to time, the Corporation may require additional financing inorder to carry out its oil and natural gas acquisition, exploration anddevelopment activities.  Failure toobtain such financing on a timely basis could cause the Corporation to forfeitits interest in certain properties, miss certain acquisition opportunities andreduce or terminate its operations.  Ifthe Corporation’s revenues from its reserves decrease as a result of lower oiland natural gas prices or otherwise, it will affect the Corporation’s abilityto expend the necessary capital to replace its reserves or to maintain itsproduction.  If the Corporation’s cashflow from operations is not sufficient to satisfy its capital expenditurerequirements, there can be no assurance that additional debt or equityfinancing will be available to meet these requirements or available onfavourable terms.

 

**Issuanceof Debt**

** **

From time to time the Corporation may enter into transactions toacquire assets or the shares of other corporations.  These transactions may be financed partiallyor wholly with debt, which may increase the Corporation’s debt levels aboveindustry standards.  Neither theCorporation’s articles nor its by-laws limit the amount of indebtedness thatthe Corporation may incur.  The level ofthe Corporation’s indebtedness from time to time could impair the Corporation’sability to obtain additional financing in the future on a timely basis to takeadvantage of business opportunities that may arise.

 

**Prices,Markets and Marketing of Crude Oil and Natural Gas**

** **

Oil and natural gas are commodities whose prices are determined basedon world demand, supply and other factors, all of which are beyond the controlof the Corporation.  World prices for oiland natural gas have fluctuated widely in recent years.  Any material decline in prices could resultin a reduction of net production revenue. Certain wells or other projects may become uneconomic as a result of adecline in world oil prices and natural gas prices, leading to a reduction inthe volume of the Corporation’s oil and gas reserves.  The Corporation might also elect not toproduce from certain wells at lower prices. All of these factors could result in a material decrease in theCorporation’s future net production revenue, causing a reduction in its oil andgas acquisition and development activities. In addition, bank borrowings available to the Corporation are in partdetermined by the borrowing base of the Corporation.  A sustained material decline in prices fromhistorical average prices could limit the Corporation’s borrowing base,therefore reducing the bank credit available to the Corporation, and couldrequire that a portion of any then existing bank debt of the Corporation berepaid.

 

In addition to establishing markets for its oil and natural gas, theCorporation must also successfully market its oil and natural gas toprospective buyers.  The marketabilityand price of oil and natural gas which may be acquired or discovered by theCorporation will be affected by numerous factors beyond its control.  The Corporation will be affected by thedifferential between the price paid by refiners for light quality oil and thegrades of oil produced by the Corporation. The ability of the Corporation to market its natural gas may depend uponits ability to acquire space on pipelines which deliver natural gas tocommercial markets.  The Corporation willalso likely be affected by deliverability uncertainties related to theproximity of its reserves to pipelines and processing facilities and related tooperational problems with such pipelines and facilities and extensive governmentregulation relating to price, taxes, royalties, land tenure, allowableproduction, the export of oil and natural gas and other aspects of the oil andnatural gas business.

 

**Insurance**

** **

The Corporation’s involvement in the exploration for and development ofoil and natural gas properties may result in the Corporation becoming subjectto liability for pollution, blow-outs, property damage, personal injury orother hazards.  Although the Corporationhas obtained insurance in accordance with industry standards to address suchrisks,

 

37

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such insurance has limitations on liability that may not be sufficientto cover the full extent of such liabilities. In addition, such risks may not, in all circumstances be insurable or,in certain circumstances, the Corporation may elect not to obtain insurance todeal with specific risks due to the high premiums associated with suchinsurance or other reasons.  The paymentof such uninsured liabilities would reduce the funds available to theCorporation.  The occurrence of asignificant event that the Corporation is not fully insured against, or theinsolvency of the insurer of such event, could have a material adverse effecton the Corporation’s financial position, results of operations or prospects.

 

**LegalProceedings**

** **

Litigation may be time consuming, expensive, and distracting from theconduct of our business, and the outcome of litigation may be difficult topredict.  The Corporation is unable todetermine the ultimate aggregate amount of monetary liability or financialimpact in these legal matters, which unless otherwise specified, seek damagesof indeterminate amounts.  TheCorporation cannot determine whether these matters will, individually orcollectively, have a material adverse effect on our business, results oroperations and financial condition.  Tothe extent expenses incurred in connection with litigation or any potentialregulatory proceeding or action (which may include substantial fees ofattorneys and other professional advisors and potential obligations toindemnify officers and directors who may be parties to such actions) are notcovered by available insurance, such expenses could adversely affect our cashposition.  The Corporation, and any ofour named directors or officers, intend to vigorously defend these actionssuits, claims, proceedings and investigations. The Corporation may in the future be subject to other litigation arisingin the normal course of our business.

 

**EnvironmentalRisks**

** **

All phases of the oil and natural gas business present environmentalrisks and hazards and are subject to environmental regulation pursuant to avariety of international conventions and national, provincial and municipallaws and regulations.  Environmentallegislation provides for, among other things, restrictions and prohibitions onspills, releases or emissions of various substances produced in associationwith oil and gas operations.  Thelegislation also requires that wells and facility sites be operated, maintained,abandoned and reclaimed to the satisfaction of applicable regulatoryauthorities.  Compliance with suchlegislation can require significant expenditures and a breach may result in theimposition of fines and penalties, some of which may be material.  The Corporation believes that it is insubstantial compliance with existing legislation.  Environmental legislation is evolving in amanner expected to result in stricter standards and enforcement, larger finesand liability and potentially increased capital expenditures and operatingcosts.  The discharge of oil, natural gasor other pollutants into the air, soil or water may give rise to liabilities togovernments and third parties and may require the Corporation to incur costs toremedy such discharge.  No assurance canbe given that environmental laws will not result in a curtailment of productionor a material increase in the costs of production, development or explorationactivities or otherwise adversely affect the Corporation’s financial condition,results of operations or prospects.

 

**Competition**

** **

The Corporation actively competes for reserve acquisitions, explorationleases, licences and concessions and skilled industry personnel with asubstantial number of other oil and gas companies, many of which havesignificantly greater financial resources than the Corporation.  The Corporation’s competitors include majorintegrated oil and natural gas companies and numerous other independent oil andnatural gas companies and individual producers and operators.

 

The oil and gas industry is highly competitive.  The Corporation’s competitors for theacquisition, exploration, production and development of oil and natural gasproperties, and for capital to finance such activities, include companies thathave greater financial and personnel resources available to them than theCorporation.

 

38

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Certain of the Corporation’s customers and potential customers arethemselves exploring for oil and gas, and the results of such explorationefforts could affect the Corporation’s ability to sell or supply oil or gas tothese customers in the future.  TheCorporation’s ability to successfully bid on and acquire additional propertyrights, to discover reserves, to participate in drilling opportunities and toidentify and enter into commercial arrangements with customers will bedependent upon developing and maintaining close working relationships with itsfuture industry partners and joint operators and its ability to select and evaluatesuitable properties and to consummate transactions in a highly competitiveenvironment.

 

**ReserveReplacement**

** **

The Corporation’s future oil and natural gas reserves, production, andcash flows to be derived therefrom are highly dependent on the Corporationsuccessfully acquiring or discovering new reserves.  Without the continual addition of newreserves, any existing reserves the Corporation may have at any particular timeand the production therefrom will decline over time as such existing reservesare exploited.  A future increase in theCorporation’s reserves will depend not only on the Corporation’s ability todevelop any properties it may have from time to time, but also on its abilityto select and acquire suitable producing properties or prospects.  There can be no assurance that theCorporation’s future exploration and development efforts will result in thediscovery and development of additional commercial accumulations of oil andnatural gas.

 

**Relianceon Operators and Key Employees**

** **

To the extent the Corporation is not the operator of its oil andnatural gas properties, the Corporation will be dependent on such operators forthe timing of activities related to such properties and will largely be unableto direct or control the activities of the operators.  In addition, the success of the Corporationwill be largely dependent upon the performance of its management and keyemployees.  The Corporation has no key-maninsurance policies, and therefore there is a risk that the death or departureof any member of management or any key employee could have a material adverseeffect on the Corporation.

 

**Permitsand Licenses**

** **

The operations of the Corporation may require licenses and permits fromvarious governmental authorities.  Therecan be no assurance that the Corporation will be able to obtain all necessarylicenses and permits that may be required to carry out exploration anddevelopment at its projects.

 

**Royalties,Incentives and Production Taxes**

** **

In addition to federal regulations, each province has legislation andregulations which govern land tenure, royalties, production rates,environmental protection and other matters. The royalty regime is a significant factor in the profitability of oiland natural gas production.  Royaltiespayable on production from lands other than Crown lands are determined bynegotiations between the mineral owner and the lessee.  Crown royalties are determined by governmentregulation and are generally calculated as a percentage of the value of thegross production, and the rate of royalties payable generally depends in parton prescribed reference prices, well productivity, geographical location, fielddiscovery date and the type or quality of the petroleum product produced.

 

From time to time, the Governments of Canada, Alberta, British Columbiaand Saskatchewan have established incentive programs which have includedroyalty rate reductions, royalty holidays and tax credits for the purpose ofencouraging oil and natural gas exploration or enhanced planning projects.

 

Oil and natural gas royalty holidays and reductions for specific wellsreduce the amount of Crown royalties paid by the Corporation to the provincialgovernments.  In Alberta, the AlbertaRoyalty Tax Credit program provides a rebate on Alberta Crown royalties paid inrespect of eligible producing properties. Both of these incentives have the effect of increasing the net income ofthe Corporation.

 

39

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Producers of oil and natural gas in the Province of British Columbiaare also required to pay annual rental payments in respect of Crown leases androyalties and freehold production taxes in respect of oil and gas produced fromCrown and freehold lands, respectively. The amount payable as a royalty in respect of oil depends on the vintageof the oil (whether it was produced from a pool discovered before or afterOctober 31, 1975), the quantity of oil produced in a month and the value of theoil.  In specific circumstances, oil producedfrom newly discovered pools may be exempt from the payment of a royalty for thefirst 36 months of production.

 

**LandTenure**

** **

Crude oil and natural gas located in the western provinces is ownedpredominantly by the respective provincial governments.  Provincial governments grant rights toexplore for and produce oil and natural gas pursuant to leases, licences andpermits for varying terms and on conditions set forth in provincial legislationincluding requirements to perform specific work or make payments.  Oil and natural gas located in such provincescan also be privately owned and rights to explore for and produce such oil andnatural gas are granted by lease on such terms and conditions as may benegotiated.

 

**Titleto Properties**

** **

The Corporation has not obtained a legal opinion as to the title to itsfreehold properties other than the El Paso Properties and cannot guarantee orcertify that a defect in the chain of title may not arise to defeat theCorporation’s interest in certain of such properties.  Remediation of title problems could result inadditional costs and litigation.  Iftitle defects are unable to be remedied, the Corporation may lose some of itsinterest in the disputed properties resulting in reduced production.

 

Although title reviews were conducted prior to the purchase of the ElPaso Properties and may be conducted prior to the purchase of other oil andnatural gas producing properties or the commencement of drilling wells, suchreviews may not discover unforeseen title defects that could adversely affectthe Corporation’s title to or proportionate interest in the property orentitlement to revenue from the property.

 

**CorporateMatters**

** **

To date, the Corporation has not declared any dividends payable on itsoutstanding common shares.  The Board ofDirectors of the Corporation will consider the Corporation’s dividend policyfrom time to time to assess whether the declaration of dividends payable on itsoutstanding common shares is appropriate. Certain of the directors and officers of the Corporation are alsodirectors and officers of other oil and gas companies involved in naturalresource exploration and development, and conflicts of interest may arisebetween their duties as officers and directors of the Corporation and asofficers and directors of such other companies. Such conflicts must be disclosed in accordance with, and are subject tosuch other procedures and remedies as apply under the *BusinessCorporations Act* (Alberta).

 

**DIVIDENDS**

 

To date, the Corporation has not declared any dividends payable on itsoutstanding Common Shares.  The Board ofDirectors of the Corporation will consider the Corporation’s dividend policyfrom time to time to assess whether the declaration of dividends payable on itsoutstanding common shares is appropriate.

 

**DESCRIPTION OF CAPITAL STRUCTURE**

 

The Corporation’s authorized share capital consists of an unlimitednumber of common shares (the “Common Shares”) and an unlimited number of firstpreferred shares, issuable in series (the “Preferred Shares”).

 

40

----

 

**CommonShares**

** **

The Common Shares in the capital of the Corporation are entitled tonotice of and to vote at all meetings of shareholders (except meetings at whichonly holders of a specified class or series of shares are entitled to vote) andare entitled to one vote per share.  Theholders of common shares in the capital of the Corporation are entitled toreceive such dividends as the Board of Directors may declare and, uponliquidation, to receive such assets of Canadian Superior as are distributableto holders of common shares in the capital of the Corporation.

 

**PreferredShares**

** **

The Preferred Shares may be issued in one or more series with eachseries to consist of such number of shares as may, before the issue of theseries, be fixed by the directors of the Corporation.  The directors are authorized, before theissue of the series, to determine the designation, rights, restrictions,conditions and limitations attaching to the Preferred Shares of eachseries.  The Preferred Shares of each seriesrank equally with respect to the payment of dividends and the distribution ofassets in the event of liquidation, dissolution or winding-up and in priorityto the Common Shares and any other shares of the Corporation ranking junior tothe Preferred Shares.  In addition, ifany amount of a fixed cumulative dividend or an amount payable on return ofcapital in respect of shares of a series of Preferred Shares is not paid infull, the shares of the series are entitled to participate rateably with theshares of any other series of the same class in respect of such amounts.

 

**ShareholderRights Plan**

** **

The shareholders of the Corporation have adopted a shareholder rightsplan (the “**Rights Plan**”).  The Rights Plan is contained in an agreementdated as of January 22, 2001, as amended and restated as of May 17, 2001,between the Corporation and Computershare Trust Company of Canada (the “RightsPlan Agreement”).  The effective date ofthe Rights Plan was January 22, 2001 (the “Effective Date”) and it was amendedand restated as of May 17, 2001.  TheRights Plan continues in effect until January 22, 2011, being ten years fromits effective date.

 

Under the Rights Plan, one right (a “Right”) is attached to each commonshare in the capital of the Corporation. The Rights will separate from the common shares in the capital of theCorporation and become exercisable eight trading days (the “Separation Time”)after a person acquires, or commences a take-over bid to acquire, 20% or moreof the voting shares or other securities convertible into voting shares of theCorporation, unless the Separation Time is deferred.  The acquisition by any person (an “AcquiringPerson”) of 20% or more of the common shares in the capital of the Corporation,other than in a permitted manner, is called a “Flip-in Event”.  Any Rights held by an Acquiring Person willbecome void upon the occurrence of a Flip-In Event.

 

Eight trading days after a Flip-in Event, each Right will permit theholder (other than an Acquiring Person) to purchase from the Corporation, onpayment of the $15 exercise price, common shares in the capital of theCorporation with a market value of $30. The result will be massive dilution of the holdings of the AcquiringPerson.  The Corporation anticipates thatno Acquiring Person will be willing to risk such dilution and so will insteadeither make a take-over bid that is permitted by the Rights Plan, negotiatewith the Board of Directors for a waiver of the Rights Plan, or apply toregulatory authorities for an order rendering the Rights Plan ineffective.

 

A person will not become an Acquiring Person, and will not trigger theseparation and ability to exercise the Rights, by becoming the beneficial ownerof 20% or more of the common shares in the capital of the Corporation pursuantto a take-over bid specifically permitted by the Rights Plan (a “Permitted Bid”)or in other circumstances provided for under the Rights Plan.  Investment advisors (for fully managedaccounts), trust companies (acting in their capacities as trustees andadministrators) and statutory bodies acquiring 20% of the common shares in thecapital of the Corporation are exempted from triggering a Flip-In Event,provided that they are not making, and are not part of a group making, a take-overbid.

 

41

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The issue of the Rights is not initially dilutive.  However, upon a Flip-In Event occurring andthe Rights separating from the common shares in the capital of the Corporation,reported earnings per share on a fully diluted or non-diluted basis may beaffected.  Holders of Rights who do not(or, in the case of an Acquiring Person, cannot) exercise their Rights upon theoccurrence of a Flip-In Event will suffer substantial dilution.

 

This summary is qualified in its entirety by reference to the RightsPlan Agreement.  Shareholders may obtaina copy of the Rights Plan Agreement on written request to the CorporateSecretary of the Corporation at the Corporation’s head office.

 

**MARKET FOR SECURITIES**

 

**TradingPrice and Volume**

** **

The common shares of Canadian Superior are listed and posted fortrading on the Toronto Stock Exchange and the American Stock Exchange under thesymbol “SNG”.  The following table setsforth the reported high, low and close sale prices and volume of trading of theCommon Shares as reported by the Toronto Stock Exchange for the periodsindicated.

 
| ** **     | ** ** | **High** | ** ** | **Low** | ** ** | **Close** | ** ** | **Volume** | ** ** |
|----------------|------------|----------|------------|---------|------------|-----------|------------|------------|------------|
|           |       |     |       |    |       |      |       |       |       |
| January 2005   |       | 2.25     |       | 1.86    |       | 1.96      |       | 1,762,586  |       |
| February 2005  |       | 2.83     |       | 1.93    |       | 2.6       |       | 3,059,202  |       |
| March 2005     |       | 2.61     |       | 1.99    |       | 2.12      |       | 2,501,299  |       |
| April 2005     |       | 2.3      |       | 1.88    |       | 2.07      |       | 2,016,556  |       |
| May 2005       |       | 2.15     |       | 1.81    |       | 1.99      |       | 909,301    |       |
| June 2005      |       | 2.17     |       | 1.88    |       | 1.94      |       | 1,267,078  |       |
| July 2005      |       | 2.59     |       | 1.85    |       | 2.46      |       | 2,257,797  |       |
| August 2005    |       | 2.71     |       | 2.26    |       | 2.43      |       | 1,966,890  |       |
| September 2005 |       | 2.95     |       | 2.31    |       | 2.92      |       | 2,403,021  |       |
| October 2005   |       | 2.94     |       | 2.22    |       | 2.4       |       | 1,473,092  |       |
| November 2005  |       | 2.6      |       | 2.3     |       | 2.38      |       | 1,359,380  |       |
| December 2005  |       | 2.6      |       | 2.29    |       | 2.4       |       | 1,668,617  |       |
| January 2006   |       | 3.05     |       | 2.35    |       | 3         |       | 1,731,013  |       |
| February 2006  |       | 3.11     |       | 2.45    |       | 2.76      |       | 2,058,836  |       |

 

**DIRECTORS AND OFFICERS**

 

**Names,Occupations and Security Holders**

** **

The following sets forth the names and municipalities of residence,offices or positions with the Corporation, principal occupations of thedirectors and executive officers of the Corporation during the past five yearsand the number of voting securities held by them, directly or indirectly,beneficially or of record, or over which each exercises control ordirection.  The term of the directors’office expires at the next annual general meeting of the Corporation, when theshareholders will be asked to elect the directors for the following year.  Officers of the Corporation are appointed bythe directors until they resign or until their successors are appointed.

 
| **Name and Municipality of  Residence** | ** ** | **Office or Position**                                              | ** ** | **Present and Principal Occupation During the Last  Five  Years**                                                                                                           |
|-----------------------------------------|------------|---------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                    |       |                                                                |       |                                                                                                                                                                        |
| Leigh Bilton  Calgary, Alberta          |       | Executive  Vice President, Vice President Operations  and Director. |       | Manager  Field Operations of Canadian Superior from 2001 to present. Vice President,  Operations of Canadian 88 Energy Corporation from prior to 1998 to 2001.  Director of |

 

42

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| **Name and Municipality of  Residence**        | ** ** | **Office or Position**                                   | ** ** | **Present and Principal Occupation During the Last  Five  Years**                                                                                                                                                                                                                                                                                            |
|------------------------------------------------|------------|----------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                           |       |                                                     |       |                                                                                                                                                                                                                                                                                                                                                         |
|                                           |       |                                                     |       | the  Corporation since 2002.                                                                                                                                                                                                                                                                                                                                 |
|                                           |       |                                                     |       |                                                                                                                                                                                                                                                                                                                                                         |
| Charles  Dallas  Innisfail, Alberta            |       | Director                                                 |       | Rancher and  independent businessman. Director of the Corporation since 2000.                                                                                                                                                                                                                                                                                |
|                                           |       |                                                     |       |                                                                                                                                                                                                                                                                                                                                                         |
| Thomas J.  Harp(1)  (2)  Calgary, Alberta |       | Director                                                 |       | From 1979 to  present, President of Harp Resources Ltd., a private resources company From  1979- June 1, 2004, Mr Harp was the Chief Executive Officer of Coyote  Oilfield Rentals (Alberta) Ltd. Since 2001, Mr. Harp has been a director  of Cheynne Energy Inc. Mr Harp has been a Director of the Corporation since  2000.                          |
|                                           |       |                                                     |       |                                                                                                                                                                                                                                                                                                                                                         |
| Gerald J.  Maier(1)  Calgary, Alberta          |       | Director                                                 |       | Chairman of  Granmar Investments Ltd., a private company from 1985 to present. Director of  Stream Flo Industries Ltd., from 1998 to present and Vintage Petroleum Inc.  from 2002 to present. Director of the Corporation as of March 8, 2004.                                                                                                              |
|                                           |       |                                                     |       |                                                                                                                                                                                                                                                                                                                                                         |
| Gregory S.  Noval Turner  Valley, Alberta      |       | President  and Chief  Executive Officer, and a  Director |       | President  and Chief Executive Officer of Canadian Superior from 1997 to present.  President and Chief Executive Officer, Canadian 88 from 1988 to 2000.  Director of the Corporation since 1996                                                                                                                                                             |
|                                           |       |                                                     |       |                                                                                                                                                                                                                                                                                                                                                         |
| Michael E.  Coolen  Halifax, Nova Scotia       |       | Vice  President, East Coast  Operations                  |       | Vice  President, East Coast Operations of the Corporation from March 12, 2004 to  present. Director of East Coast Operations of the Corporation from July 1,  2001 to March 12, 2004. For the fours years prior thereto, Manager Health,  Safety and Environment, Sable Offshore Energy Inc., under secondment from  ExxonMobil Canada and Mobil Oil Canada. |
|                                           |       |                                                     |       |                                                                                                                                                                                                                                                                                                                                                         |
| Alexander  Squires(1)  Toronto, Ontario        |       | Director                                                 |       | Mr. Squires  is a Chartered Financial Analyst and was the director of the Toronto Society  of Financial Analysts from 1984 to 1986. Since 1997 Mr. Squires has been  a Managing Partner and Director of Brant Securities Ltd. an independent full  service securities firm.                                                                        |
|                                           |       |                                                     |       |                                                                                                                                                                                                                                                                                                                                                         |
| Ross A.  Jones  Calgary, Alberta               |       | Chief  Financial Officer                                 |       | Chief  Financial Officer of Canadian Superior Energy Inc. from November 2004 to  President. From 2002 to 2004 Mr. Jones was President of Stevlaur  Resources Ltd. an Oil and Gas financial consulting company, and from 1998 to  2001 Mr. Jones vas Vice President of Tikal Resources Corp. a junior oil  and gas company listed on the TSX.       |
|                                           |       |                                                     |       |                                                                                                                                                                                                                                                                                                                                                         |
| Kaare Idland  Red Deer, Alberta                |       | Director                                                 |       | Mr. Idland  is the founder and owner, and President and Chief Executive Officer of Kidd  Construction Ltd., of Red Deer, Alberta, one of Alberta’s largest independent  oil and gas construction service companies. Kory founded Kidd Construction in  1960 and has extensive knowledge of the oil and gas industry.                                    |

 

----

**Notes:**

** **

(1)                                  Member of the Audit Committeeof the Corporation.

 

43

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(2)                                  Mr. Harp is aProfessional Engineer.

 

(3)                                  Mr. Alexander Squires wasappointed to the Board of Directors effective November 12, 2004.

 

As at March 24, 2006, the number of Common Shares beneficiallyowned directly or indirectly or controlled by the directors and executiveofficers of the Corporation, as a group, was 3,627,346 Common Shares, being 3.0%of the outstanding Common Shares of the Corporation.

 

**CeaseTrade Orders, Bankruptcies, Penalties or Sanctions**

** **

Other than as described below, to the knowledge of management of theCorporation, there has been no director or officer, or any shareholder holdinga sufficient number of securities of the Corporation to affect materially thecontrol of the Corporation that is or, within the 10 years before the date ofthis annual information form, has been a director or officer of any issuerthat, while that person was acting in that capacity:

 

(a)                                  was been the subject of a cease trade or similar order, or an orderthat denied the issuer access to any exemptions under securities legislation,for a period of more than 30 consecutive days;

 

(b)                                 was subject to an event that resulted, after the director orexecutive officer ceased to be a director or executive office, in the companybeing subject of a cease trade order or similar order or an order that deniedthe relevant company access to any exemption under securities legislation, fora period of more than 30 consecutive days; or

 

(c)                                  within a year of that person ceasing to act in that capacity orwithin the 10 years before the date of this annual information form, becamebankrupt, made a proposal under any legislation relating to bankruptcy orinsolvency or was subject to or instituted any proceedings, arrangement orcompromise with creditors or had a receiver, receiver manager or trusteeappointed to hold its assets.

 

Further, other than described below, to the knowledge of management ofthe Corporation, no director or officer, or any shareholder holding asufficient number of securities of the Corporation to affect materially thecontrol of the Corporation, has:

 

(a)                                  been subject to any penalties or sanctions imposed by a courtrelating to securities legislation or by a securities regulatory authority orhas entered into a settlement agreement with the securities regulatoryauthority; or

 

(b)                                 been subject to any other penalties or sanctions imposed by a courtor regulatory body that would likely be considered important to a reasonableinvestor in making an investment decision.

 

On October 15, 1997, the Alberta and Ontario Securities Commissions(the “**ASC**” and the “**OSC**”,respectively) issued orders relating to a settlement agreement entered into byCanadian 88, Mr. Noval and two other parties (the “**Respondents**”)in respect of their involvement in a take-over bid made in early 1997 byCanadian 88 for the common shares of Morrison Petroleums Ltd., a corporationwhose common shares were listed on the TSX and the Montreal Exchange.  In spite of the fact that Canadian 88 made inexcess of $14 million and donated $1 million to charity, in a joint submissionwith the ASC and the OSC, the Respondents agreed that their actions and thepublic statements of Mr. Noval on behalf of Canadian 88 were contrary tothe public interest.  Under the terms ofthe settlement agreement, Canadian 88 was required to make a $200,000 paymentto the ASC and was reprimanded by the OSC. Mr. Noval was prohibited from trading securities and from relyingon most exemptions available under the securities legislation of Alberta andOntario for a period of 12 months.

 

44

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**Conflictsof Interest**

** **

Certain of the directors and officers of the Corporation are directorsand officers of other private and public companies.  Some of these private and public companiesmay, from time to time, be involved in business transactions or bankingrelationships which may create situations in which conflicts might arise.  Any such conflicts shall be resolved inaccordance with the procedures and requirements of the relevant provisions ofthe *Business Corporations Act* (Alberta),including the duty of such directors and officers to act honestly and in goodfaith with a view to the best interests of the Corporation.

 

**LEGAL PROCEEDINGS**

 

The Corporation is involved in various claims and litigation arising inthe ordinary course of its business.  Inthe opinion of Canadian Superior, the various claims and litigation arisingtherefrom are not expected to have a material adverse effect on the Corporation’sfinancial position.  The Corporationmaintains insurance, which in the opinion of the Corporation, is in place toaddress any unforeseen claims.

 

During 2004, a number of class action proceedings were initiatedagainst Canadian Superior and certain of its directors and officers in theUnited States District Court, Southern District of New York, in the OntarioSuperior Court of Justice and the Quebec Superior Court by plaintiffs allegingto have purchased securities of the Corporation and alleging they suffereddamages resulting from statements by the Company regarding the Company’sMariner I-85 exploration well drilled offshore Nova Scotia.

 

On September 6, 2005, the Corporation and its insurers reached anagreement to settle all securities class action litigation and actions pendingin Canada against the Corporation and certain of its officers and directorsresulting from the drilling last year of the Mariner I-85 exploration welldrilled offshore Nova Scotia.  The $2.15million settlement, which is covered by the Corporation’s insurance, wasreached with no admission of liability by any party.

 

On June 8, 2005, the Corporation announced that it and its insurersreached an agreement to settle all securities class action litigation andactions pending in the United States against the Corporation and certain of itsofficers and directors resulting from the drilling last year of the CanadianSuperior El Paso Mariner I-85 exploration well drilled with El Paso Corporationoffshore Nova Scotia.  The US$3.2 millionsettlement, covered by the Corporation’s insurance, was reached with no admissionof liability by any party.

 

**INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS**

 

Other than as disclosed herein, none of the directors, officers orprincipal shareholders of the Corporation and no associate or affiliate of anyof them, has or has had any material interest in any transaction or anyproposed transaction which materially affects Corporation or any of itsaffiliates.

 

During the year ended December 31, 2005, the Corporation paid $618,000for oilfield equipment rentals to a company controlled by Gregory Noval, thePresident and Chief Executive Officer and director of the Corporation.

 

In November 2004, the Corporation entered into participation agreementsin the normal course of operations with a company controlled by Gregory Noval,the President and Chief Executive Officer and director of the Corporation inrespect of the Corporation’s offshore Nova Scotia and offshore Trinidad andTobago prospects. Pursuant to the 2004 agreements, the Company had the right toparticipate on a promoted basis for 16 2/3% of Canadian Superior’s costs of theEast Coast wells (this was subsequently increased to 33 1/3%) and the relatedparty Company has the right to participate on a promoted basis for 33 1/3% ofCanadian Superior’s costs of certain earning wells in Trinidad.

 

The transactions described in this section were in the normal course ofoperations and agreed to by the related company and the Corporation based onextensive negotiations and Board approval and approval by the Corporation.

 

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**TRANSFER AGENT AND REGISTRAR**

 

Computershare Trust Company of Canada at 600, 530 - 8th Avenue S.W.,Calgary, Alberta, T2P 3S8, is the transfer agent and registrar for the CommonShares.

 

**INTERESTS OF EXPERTS**

 

Reserve estimates contained in this annual information form are derivedfrom reserve reports prepared by GLJ Petroleum Consultants Ltd.  As of the date hereof, GLJ PetroleumConsultants Ltd., as a group, does not beneficially own, directly orindirectly, any Common Shares of the Corporation.

 

**AUDIT COMMITTEE**

 

The Audit Committee of the Corporation consists of Mr. Gerald J.Maier, Mr. Alexander Squires and Mr. Thomas J. Harp, each of whom isconsidered “independent” and “financially literate” within the meaning ofMultilateral Instrument 52-110, Audit Committees.

 

**Mandateof the Audit Committee**

** **

The mandate of the Audit Committee is to assist the Board of Directorsof the Corporation in its oversight of the integrity of the financial andrelated information of the Corporation and its subsidiaries and relatedentities, including the financial statements, internal controls and proceduresfor financial reporting and the processes for monitoring compliance with legaland regulatory requirements.

 

The Audit Committee is appointed by the Board of Directors of theCorporation to assist the Board of Directors in fulfilling its oversightresponsibilities, including:

 

(i)                                     the integrity of the Corporation’s financial statements

 

(ii)                                  the integrity of the financial reporting process

 

(iii)                               the system of internal control and management of financial risks

 

(iv)                              the external auditors’ qualifications and independence

 

(v)                                 the external audit process and the Corporation’s process formonitoring compliance with laws and regulations.

 

The Charter of the Audit Committee of the Board of Directors ofCanadian Superior is attached hereto, in its entirety, as Appendix “C”.

 

**RelevantEducation and Experience of Audit Committee Members**

** **

The following is a brief summary of the education or experience of eachmember of the Audit Committee that is relevant to the performance of hisresponsibilities as a member of the Audit Committee, including any education orexperience that has provided the member with an understanding of the accountingprinciples used by the Corporation.

 

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| **Name of Audit Committee  Member** | ** ** | **Relevant Education and Experience**                                                                                                                                                                                                                                                                                               |
|-------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                |       |                                                                                                                                                                                                                                                                                                                                |
| Gerald J.  Maier                    |       | Chairman of  Granmar Investments Ltd., a private company from 1985 to present. Director of  Stream Flo Industries Ltd., from 1998 to present and Vintage Petroleum Inc.  from 2002 to present. Director of the Corporation as of March 8, 2004.                                                                                     |
|                                |       |                                                                                                                                                                                                                                                                                                                                |
| Alexander  Squires, CFA             |       | Since 1997,  Mr. Squires has been a Managing Partner and Director of Brant Securities  Ltd. an independent full service securities firm.                                                                                                                                                                                       |
|                                |       |                                                                                                                                                                                                                                                                                                                                |
| Thomas J.  Harp                     |       | From 1979 to  present, President of Harp Resources Ltd., a private resources company From  1979- June 1, 2004, Mr Harp was the Chief Executive Officer of Coyote  Oilfield Rentals (Alberta) Ltd. Since 2001, Mr. Harp has been a director  of Cheynne Energy Inc. Mr Harp has been a Director of the Corporation since  2000. |

 

**AuditCommittee Oversight**

** **

At no time since the commencement of the Corporation’s most recentlycompleted financial year, has a recommendation of the Audit Committee tonominate or compensate an external auditor not been adopted by the Board ofDirectors of the Corporation.

 

**ExternalAuditor Fees**

** **

For the year ended December 31, 2004 and 2005, Meyers Norris Penny LLPand its affiliates were paid approximately $193,600 and $227,446, respectively,as detailed below:

 

Year endedDecember 31

 
| ** **              | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------|------------|----------|------------|----------|------------|
| **MEYERS NORRIS PENNY** |       |     |       |     |       |
| Audit  fees             |       | 125,000  |       | $        | 150,000    |   |
| Audit-related  fees     |       | 42,550   |       | —   |       |
| Tax  fees               |       | 4,600    |       | —   |       |
| All  other fees (1)     |       | 55,296   |       | 43,600   |       |
| Total  fees             |       | $        | 227,446    |     | $          | 193,600 |   |
|                         |            |          |            |          |            |  |  |

 

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(1)                                  Total includes $44,696 paid toKPMG LLP in 2005

 

**AuditFees**

** **

Audit fees consist of fees for the audit of the Corporation’s annualfinancial statements or services that are normally provided in connection withstatutory and regulatory filings or engagements.

 

**Audit-RelatedFees**

** **

Audit-related fees included fees relating to the review of ourquarterly financial statements.

 

**TaxFees**

** **

Tax fees included tax compliance, tax planning, tax advice and varioustaxation matters.

 

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**AllOther Fees**

** **

All other fees consists of services provided by our principalaccountant other than audit, audit-related and tax services, includingprospectus and other offering related work.

 

**ADDITIONAL INFORMATION**

 

Additional information relating to the Corporation may be found onthrough the internet on the System for Electronic Document Analysis andRetrieval (SEDAR) which can be accessed at www.sedar.com.  Additional information, including directors’and officers’ remuneration and indebtedness, principal holders of theCorporation’s securities and securities authorized for issuance under equitycompensation plans, if applicable, is contained in the Corporation’s ManagementInformation Circular for its most recent annual meeting of security holdersthat involved the election of directors. Additional financial information is provided in the Corporation’sfinancial statements and Management’s Discussion & Analysis for its mostrecently completed year.

 

Additional copies of this Annual Information Form and the materialslisted in this section are available upon request by contacting the Corporationat 3300, 400 - 3rd Avenue S.W., Calgary, Alberta T2P 4H2 or by phone at (403)294-1411 or fax at (403) 216-2374.

 

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# **APPENDIX “A”**

#  

**REPORT ON RESERVES DATABYINDEPENDENT QUALIFIED RESERVESEVALUATOR OR AUDITOR**

 

To the board of directors of Canadian Superior Energy Inc. (the “Company”):  See pdf file attached to e-mail

 

1.                                       We have prepared an evaluation of the Company’s reserves data as atDecember 31, 2005.  The reservesdata consist of the following:

 

(a)                                  (i)                                     proved and proved plus probable oil and gas reserves estimated as atDecember 31, 2005, using forecast prices and costs; and

 

(ii)                                  the related estimated future net revenue; and

 

(b)                                 (i)                                     proved oil and gas reserves estimated as at December 31, 2005,using constant prices and costs; and

 

(ii)                                  the related estimated future net revenue.

 

2.                                       The reserves data are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on the reserves data based on our evaluation.

 

We carried out our evaluation in accordance withstandards set out in the Canadian Oil and Gas Evaluation Handbook (the “COGEHandbook”) prepared jointly by the Society of Petroleum Evaluation Engineers(Calgary Chapter) and the Canadian Institute of Mining, Metallurgy &Petroleum (Petroleum Society).

 

3.                                       Those standards require that we plan and perform an evaluation toobtain reasonable assurance as to whether the reserves data are free ofmaterial misstatement.  An evaluationalso includes assessing whether the reserves data are in accordance withprinciples and definitions in the COGE Handbook.

 

4.                                       The following table sets forth the estimated future net revenue(before deduction of income taxes) attributed to proved plus probable reserves,estimated using forecast prices and costs and calculated using a discount rateof 10 percent, included in the reserves data of the Company evaluated by us forthe year ended December 31, 2005, and identifies the respective portionsthereof that we have audited, evaluated and reviewed and reported on to theCompany’s board of directors:

 
| **Independent  Qualified Reserves** | ** ** | **Description and  Preparation Date of  Evaluation** | ** ** | **Location of  Reserves  (Country or  Foreign  Geographic** | ** ** | **Net Present Value of Future Net Revenue  (before income taxes, 10% discount rate - $M)** | ** ** |
|-------------------------------------|------------|------------------------------------------------------|------------|-------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------|------------|
| **Evaluator**                       | ** ** | **Report**                                           | ** ** | **Area)**                                                   | ** ** | **Audited**                                                                                | ** ** | **Evaluated** | ** ** | **Reviewed** | ** ** | **Total** | ** ** |
|                                |       |                                                 |       |                                                        |       |                                                                                       |       |   |   |   |   |   |   |
| GLJ Petroleum Consultants           |       | March 6,  2005                                       |       | Canada                                                      |       | —                                                                                     |       | $ | 137,751 |   | — |   | $ | 137,751 |   |
|                                     |            |                                                      |            |                                                             |            |                                                                                            |            |  |  |  |  |  |  |  |  |

 

5.                                       In our opinion, the reserves data respectively evaluated by us have,in all material respects, been determined and are in accordance with the COGEHandbook.

 

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6.                                       We have no responsibility to update our reports referred to inparagraph 4 for events and circumstances occurring after their respectivepreparation dates.

 

7.                                       Because the reserves data are based on judgements regarding futureevents, actual results will vary and the variations may be material.

 

 

EXECUTED as to our report referred to above:

 

 

GLJ Petroleum Consultants Ltd., Calgary, Alberta, Canada, March 7,2006

 

 

ORIGINALLY SIGNED BY

 

Dana B. Laustsen, P. Eng.Executive Vice-President

 

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# **APPENDIX “B”**

#  

**REPORT OF MANAGEMENT AND DIRECTORSON RESERVES DATA AND OTHER INFORMATION**

** **

*Termsto which a meaning is ascribed in National Instrument 51-101 have the samemeaning herein.*

 

Management of Canadian Superior Energy Inc. (the “Corporation”) areresponsible for the preparation and disclosure of information with respect tothe Corporation’s oil and gas activities in accordance with securitiesregulatory requirements.  Thisinformation includes reserves data, which consist of the following:

 

(a)                                  (i)                                     proved and proved plus probable oil and gas reserves estimated as atDecember, 31, 2005 using forecast prices and costs; and

 

(ii)                                  the related estimated future net revenue; and

 

(b)                                 (i)                                     proved oil and gas reserves estimated as at December 31, 2005 usingconstant prices and costs; and

 

(ii)                                  the related estimated future net revenue.

 

An independent qualified reserves evaluator has evaluated and reviewedthe Corporation’s reserves data.  Thereport of the independent qualified reserves evaluator is presented in Schedule“A” to the Annual Information Form of Canadian Superior Energy Inc. datedMarch 24, 2006.

 

The Reserves Committee, which is comprised of the Board of Directors ofthe Corporation as a whole, has:

 

(a)                                  reviewed the Corporation’s procedures for providing information tothe independent qualified reserves evaluator;

 

(b)                                 met with the independent qualified reserves evaluator to determinewhether any restrictions affected the ability of the independent qualifiedreserves evaluator to report without reservation; and

 

(c)                                  reviewed the reserves data with management and the independentqualified reserves evaluators.

 

The Reserves Committee, comprised of the Board of Directors of theCorporation as a whole, has reviewed the Corporation’s procedures forassembling and reporting other information associated with oil and gasactivities and has reviewed that information with Management.  The Board of Directors has, on therecommendation of the Reserves Committee, approved:

 

(a)                                  the content and filing with securities regulatory authorities of thereserves data and other oil and gas information;

 

(b)                                 the filing of the report of the independent qualified reservesevaluator on the reserves data; and

 

(c)                                  the content and filing of this report.

 

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Because the reserves data are based on judgements regarding futureevents, actual results will vary and the variations may be material.

 
| DATED March  24, 2006.                      |   |   |
|---------------------------------------------|--------|--------|
|                                        |   |   |
| Signed:  “***Gregory S. Noval***” |   |   | Signed:  “***Ross A. Jones***” |   |
| Gregory  S. Noval                           |   |   | Ross  A. Jones |   |
| President  and Chief Executive Officer      |   |   | Chief  Financial Officer |   |

 

 
| Signed:  “***Michael E. Coolen”*** |   |   | Signed:  “***Gerald J. Maier***” |   |
|----------------------------------------------|--------|--------|--------------------------------------------|--------|
| Michael  E. Coolen                           |   |   | Gerald  J. Maier                           |   |
| Director                                     |   |   | Director                                   |   |

 

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# **APPENDIX “C”**

#  

**CHARTER OF THE AUDIT COMMITTEE OF THE**

** **

**BOARD OF DIRECTORS OF CANADIAN SUPERIORENERGY INC.**

** **

**Purpose/Objectives**

 

The Audit Committee is appointed by the Board to assist the Board infulfilling its oversight responsibilities, including:

 

•                                          the integrity of the Corporation’s financial statements

 

•                                          the integrity of the financial reporting process

 

•                                          the system of internal control and management of financial risks

 

•                                          the external auditors’ qualifications and independence

 

•                                          the external audit process and the Corporation’s process formonitoring compliance with laws and regulations

 

In performing its duties, the Committee will maintain effective workingrelationships with the Board, management and the external auditors.  To perform his or her role effectively, eachCommittee member will obtain an understanding of the Corporation’s business,operations, risks and related legislation, regulations and industrystandards.  So that the Audit Committeecan discharge the duties as a whole, all Audit Committee members must befinancially literate, and at least one member must have significant accountingor related financial management experience.

 

**Authority**

 

The Board authorizes the Committee within its scope of duties andresponsibilities, to:

 

•                                          seek any information it requires from any employee of theCorporation (whose employees are directed to co-operate with any request madeby the Committee);

 

•                                          seek any information it requires directly from external partiesincluding the external auditors and independent reservoir engineering firm; and

 

•                                          obtain outside legal or professional advice without seeking Boardapproval (however providing notice to the Chair of the Board).

 

**Organization**

 

The following provisions and regulations shall apply to the compositionof the Committee:

 

•                                          The Committee shall consist of three members of the Board of theCorporation;

 

•                                          The members of the Committee shall be independent members of theBoard as defined in section 1.4 of Multilateral Instrument 52-110 AuditCommittees, as well as Part 1, sec 121(A) of the AMEX Company manual;

 

•                                          The Chairman of the Committee shall be determined by the Board;

 

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•                                          Two members of the Committee shall constitute a quorum thereof;

 

•                                          No business shall be transacted by the Committee except at a meetingof its members at which a quorum is present in person or by telephone or by aresolution in writing signed by all members of the Committee;

 

•                                          The meetings and proceedings of the Corporation that regulatemeetings and proceedings of the Board shall apply to the Committee;

 

•                                          The Committee may invite such directors, officers or employees ofthe Corporation, the external auditors and the independent reservoirengineering firm as it may see fit, to attend its meetings and take part in thediscussion and consideration of the affairs of the Committee; and

 

•                                          Meetings shall be held not less than four times per year, generallycoinciding with the release of interim or year-end financial informationincluding consecutive sessions with Management and the External Auditors.  Special meetings may be convened as requiredupon the request of the Committee.  Theexternal auditors and independent reservoir engineering firm may convene ameeting if they consider that it is desirable or necessary; and the proceedingsof all meetings will be minuted.

 

**Duties and Responsibilities**

 

The Board hereby delegates and authorizes the Committee to carry outthe following duties and responsibilities to the extent that these activitiesare not carried out by the Board as a whole:

 

**CorporateInformation and Internal Control**

** **

•                                          review and recommend for approval of quarterly and annual financialstatements, MD&A and annual reports of the Corporation;

 

•                                          review of internal control systems maintained by the Corporation;

 

•                                          review of significant accounting and tax compliance issues wherethere is choice among various alternatives or where application of a policy hasa significant effect on the financial results of the Corporation;

 

•                                          review of significant proposed non-recurring events such as mergers,acquisitions or divestitures; and

 

•                                          review of press releases or other publicly circulated documentscontaining financial information.

 

**ExternalAuditors**

 

•                                          retain and/or terminate the external auditors (subject to regulatoryand shareholder notification) who, in turn, will report directly to the Audit Committee;

 

•                                          review the terms of the external auditors’ engagement and theappropriateness and reasonableness of the proposed engagement fees;

 

•                                          annually, obtain and review a certificate attesting to the externalauditors’ independence, identifying all relationships between the externalauditors and the Corporation;

 

•                                          annually, evaluate the external auditors’ qualifications,performance and independence;

 

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•                                          annually, to assure continuing auditors’ independence, consider therotation of the lead audit partner or the external audit firm;

 

•                                          •                                          pre-approve engagements for non-audit services provided by theexternal auditors or their affiliates together with estimated fees andpotential issues of independence; and

 

•                                          •                                          review hiring policies for employees or former employees of theexternal auditors.

 

**Audit**

** **

•                                          review the audit plan for the coming year with the external auditorsand with management;

 

•                                          review with management and the external auditors any proposedchanges in major accounting policies, the presentation and impact ofsignificant risks and uncertainties, and key estimates and judgements ofmanagement that may be material to financial reporting;

 

•                                          query management and the external auditors regarding significantfinancial reporting issues during the fiscal period and the method ofresolution;

 

•                                          review any problems experienced by the external auditors inperforming the audit, including any restrictions imposed by management ofsignificant accounting issues in which there was a disagreement withmanagement;

 

•                                          review audited annual financial statements and quarterly financialstatements with management and the external auditors (including disclosuresunder “Management Discussion & Analysis”), in conjunction with the reportof the external auditors and obtain explanation from management of allsignificant variances between comparative reporting periods; and

 

•                                          review the auditors’ report to management, containingrecommendations of the external auditors, and management’s response andsubsequent remedy of any identified weaknesses.

 

**Other Duties and Responsibilities**

 

•                                          The responsibilities, practices and duties of the Committee outlinedherein are not intended to be comprehensive. The Board may, from time to time charge the Committee with theresponsibility of reviewing items of a financial or control, risk management orreserves nature;

 

•                                          The Committee shall periodically report to the Board the results ofreviews undertaken and any associated recommendations;

 

•                                          The Committee shall monitor the receipt, retention and treatment ofcomplaints received by the issuer regarding accounting, internal accountingcontrols, or auditing matters; and

 

•                                          The Committee shall monitor the confidential, anonymous submissionsby employees of concerns regarding questionable accounting or auditing matters.

 

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