**EXHIBIT99.1**

 

 

 

**REVISED ANNUAL INFORMATIONFORM**

 

 

 

 

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

 

 

 

 

**Dated: June 7, 2006**

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**TABLE OF CONTENTS**
|                                                                                            | Page       |
|-------------------------------------------------------------------------------------------------|------------|
| **GLOSSARY OF TECHNICAL TERMS**                                                                 | ** ** |
| **CURRENCY OF INFORMATION**                                                                     | ** ** |
| **ABBREVIATIONS**                                                                               | ** ** |
| **CONVERSION**                                                                                  | ** ** |
| **THE  CORPORATION**                                                                            | ** ** |
| **GENERAL DEVELOPMENT OF THE BUSINESS**                                                         | ** ** |
| **DESCRIPTION OF THE BUSINESS**                                                                 | ** ** |
| General                                                                                         |       |
| Oil  and Gas Properties and Wells                                                               |       |
| **STATEMENT OF RESERVES DATA AND OTHER  OIL AND GAS INFORMATION**                               | ** ** |
| General                                                                                         |       |
| Selected  Reserves Information                                                                  |       |
| Reserves  Data - Constant Prices and Costs                                                      |       |
| Summary of Oil and Gas Reserves and  Net Present Values of Future Net Revenue, Constant Pricing |       |
| Future Net Revenue by Production  Group, Constant Pricing                                       |       |
| Reserves Data — Forecast Prices and  Costs                                                 |       |
| Summary of Oil and Gas Reserves and  Net Present Values of Future Net Revenue                   |       |
| Net Present Value Summary                                                                       |       |
| Total Future Net Revenue  (Undiscounted)                                                        |       |
| Future Net Revenue by Production  Group                                                         |       |
| Constant Prices Used in Estimates                                                               |       |
| Forecast Prices Used in Estimates                                                               |       |
| Reserves Reconciliation                                                                         |       |
| Future Net Revenue Reconciliation                                                               |       |
| Undeveloped  Reserves                                                                           |       |
| Significant Factors or Uncertainties  Affecting Reserves Data                                   |       |
| Future Development Costs                                                                        |       |
| Oil and Gas Properties and Wells                                                                |       |
| Properties With No Attributed  Reserves                                                         |       |
| Expirations and Work Commitments                                                                |       |
| Undeveloped Land Due to Expire                                                                  |       |
| Forward Contracts and Future  Commitments                                                       |       |
| Historical Production Volume by  Field                                                          |       |
| Additional Information Concerning  Abandonment and Reclamation Costs                            |       |
| Tax  Horizon                                                                                    |       |
| Costs  Incurred                                                                                 |       |
| Exploration and Development  Activities                                                         |       |
| Production  Estimates                                                                           |       |
| **RISK FACTORS**                                                                                | ** ** |
| Exploration, Development and  Production Risks                                                  |       |
| Substantial Capital Requirements and  Liquidity                                                 |       |
| Additional Funding Requirements                                                                 |       |
| Issuance  of Debt                                                                               |       |
| Prices, Markets and Marketing of  Crude Oil and Natural Gas                                     |       |

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| Insurance                                                        |       |
|------------------------------------------------------------------|------------|
| Legal  Proceedings                                               |       |
| Environmental  Risks                                             |       |
| Competition                                                      |       |
| Reserve  Replacement                                             |       |
| Reliance on Operators and Key  Employees                         |       |
| Permits  and Licenses                                            |       |
| Royalties, Incentives and Production  Taxes                      |       |
| Land  Tenure                                                     |       |
| Title  to Properties                                             |       |
| Corporate  Matters                                               |       |
| **DIVIDENDS**                                                    | ** ** |
| **DESCRIPTION OF CAPITAL STRUCTURE**                             | ** ** |
| Common  Shares                                                   |       |
| Preferred  Shares                                                |       |
| Shareholder  Rights Plan                                         |       |
| **MARKET FOR SECURITIES**                                        | ** ** |
| Trading  Price and Volume                                        |       |
| **DIRECTORS AND OFFICERS**                                       | ** ** |
| Names, Occupations and Security  Holders                         |       |
| Cease Trade Orders, Bankruptcies,  Penalties or Sanctions        |       |
| Conflicts  of Interest                                           |       |
| **LEGAL PROCEEDINGS**                                            | ** ** |
| **INTERESTS OF MANAGEMENT AND OTHERS  IN MATERIAL TRANSACTIONS** | ** ** |
| **TRANSFER AGENT AND REGISTRAR**                                 | ** ** |
| **INTERESTS OF EXPERTS**                                         | ** ** |
| **AUDIT COMMITTEE**                                              | ** ** |
| Mandate of the Audit Committee                                   |       |
| Relevant Education and Experience of  Audit Committee Members    |       |
| Audit  Committee Oversight                                       |       |
| External  Auditor Fees                                           |       |
| Audit  Fees                                                      |       |
| Audit-Related  Fees                                              |       |
| Tax  Fees                                                        |       |
| All  Other Fees                                                  |       |
| **ADDITIONAL INFORMATION**                                       | ** ** |
| **APPENDIX “A”**                                       | ** ** |
| **APPENDIX “B”**                                       | ** ** |
| **APPENDIX “C”**                                       | ** ** |

 

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**GLOSSARY OF TECHNICAL TERMS**

As used inthis Annual Information Form, the following technical terms and acronyms havethe respective meanings specified below.

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

(i)                                     the Corporation’s prices and costs as atthe effective date of the estimation, held constant throughout the estimatedlives of the properties to which the estimate applies;

(ii)                                  if, and only to the extent that, there arefixed or presently determinable future prices or costs to which the Corporationis legally bound by a contractual or other obligation to supply a physicalproduct, including those for an extension period of a contract that is likelyto be extended, those prices or costs rather than the prices and costs referredto in paragraph (i).

For thepurpose of paragraph (i), the Corporation’s prices will be the postedprice for oil and the spot price for gas, after historical adjustments fortransportation, 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 orestimated.  It does not include solutiongas or natural gas liquids.

(c)                                  “**development costs**”means costs incurred to obtain access to reserves and to provide facilities forextracting, 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 locationsfor drilling, including surveying well locations for the purpose of determiningspecific development drilling sites, clearing ground, draining, road building,and relocating public roads, gas lines and power lines, to the extent necessaryin developing the reserves;

(ii)                                  drill and equip development wells,development type stratigraphic test wells and service wells, including thecosts of platforms and of well equipment such as casing, tubing, pumpingequipment and the wellhead assembly;

(iii)                               acquire, construct and install productionfacilities such as flow lines, separators, treaters, heaters, manifolds,measuring devices and production storage tanks, natural gas cycling andprocessing plants, and central utility and waste disposal systems; and

(iv)                              provide improved recovery systems.

(d)                                 “**development well**”means a well drilled inside the established limits of an oil or gas reservoir,or in close proximity to the edge of the reservoir, to the depth of astratigraphic horizon known to be productive.

(e)                                  “**exploration costs**”means costs incurred in identifying areas that may warrant examination and inexamining specific areas that are considered to have prospects that may containoil and gas reserves, including costs of drilling exploratory wells andexploratory type stratigraphic test wells. Exploration costs may be incurred both before acquiring the relatedproperty (sometimes referred to in part as “prospecting costs”) and afteracquiring the property.  Explorationcosts, which include applicable operating costs of support equipment andfacilities and other costs of exploration activities, are:

 

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(i)                                     costs of topographical, geochemical,geological and geophysical studies, rights of access to properties to conductthose studies, and salaries and other expenses of geologists, geophysical crewsand others conducting those studies (collectively sometimes referred to as “geologicaland geophysical costs”);

(ii)                                  costs of carrying and retaining unprovedproperties, such as delay rentals, taxes (other than income and capital taxes)on properties, legal costs for title defence, and the maintenance of land andlease records;

(iii)                               dry hole contributions and bottom holecontributions;

(iv)                              costs of drilling and equipping exploratorywells; and

(v)                                 costs of drilling exploratory typestratigraphic test wells.

(f)                                    “**exploratory well**”means a well that is not a development well, a service well or a stratigraphictest well.

(g)                                 “**field**” means anarea consisting of a single reservoir or multiple reservoirs all grouped on orrelated to the same individual geological structural feature and/orstratigraphic condition.  There may betwo or more reservoirs in a field that are separated vertically by interveningimpervious strata or laterally by local geologic barriers, or both.  Reservoirs that are associated by being inoverlapping or adjacent fields may be treated as a single or common operationalfield.  The geological terms “structuralfeature” and “stratigraphic condition” are intended to denote localized geologicalfeatures, in contrast to broader terms such as “basin”, “trend”, “province”, “play”or “area of interest”.

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

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

(ii)                                  if, and only to the extent that, there arefixed or presently determinable future prices or costs to which the Corporationis legally bound by a contractual or other obligation to supply a physicalproduct, including those for an extension period of a contract that is likelyto be extended, those prices or costs rather than the prices and costs referredto in paragraph (i).

(i)                                     “**future net revenue**”means the estimated net amount to be received with respect to the developmentand production of reserves (including synthetic oil, coal bed methane and othernon-conventional reserves) estimated using constant prices and costs orforecast prices and costs.

(j)                                     “**gross**” means:

(i)                                     in relation to the Corporation’s interestin production or reserves, its “company gross reserves”, which are its workinginterest (operating or non-operating) share before deduction of royaltiesand without including any royalty interests of the Corporation;

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

(iii)                               in relation to properties, the total areaof properties in which the Corporation has an interest.

(k)                                  “**natural gas**”means the lighter hydrocarbons and associated non-hydrocarbon substancesoccurring naturally in an underground reservoir, which under atmosphericconditions are essentially gases but which may contain natural gasliquids.  Natural gas can exist in areservoir either dissolved in crude oil (solution gas) or in a gaseous phase(associated gas or non-associated gas). Non-hydrocarbon substances may include hydrogen sulphide, carbondioxide and nitrogen.

 

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(l)                                     “**natural gas liquids**”means those hydrocarbon components that can be recovered from natural gas asliquids including, 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 interestin production or reserves its working interest (operating or non-operating)share after deduction of royalty obligations, plus its royalty interests inproduction or reserves;

(ii)                                  in relation to the Corporation’s interestin wells, the number of wells obtained by aggregating the Corporation’s workinginterest in each of its gross wells; and

(iii)                               in relation to the Corporation’s interestin a property, the total area in which the Corporation has an interestmultiplied by the working interest owned by the Corporation.

(n)                                 “**non-associated gas**”means an accumulation of natural gas in a reservoir where there is no crudeoil.

(o)                                 “**operating costs**”or “**production costs**” means costs incurredto operate and maintain wells and related equipment and facilities, includingapplicable operating costs of support equipment and facilities and other costsof operating and maintaining those wells and related equipment and facilities.

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

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

(i)                                     fee ownership or a lease, concession,agreement, permit, license or other interest representing the right to extractoil or gas subject to such terms as may be imposed by the conveyance of thatinterest;

(ii)                                  royalty interests, production paymentspayable in oil or gas, and other non-operating interests in propertiesoperated by others; and

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

A propertydoes not include supply agreements, or contracts that represent a right topurchase, rather than extract, oil or gas.

(r)                                    “**proved property**”means a property or part of a property to which reserves have been specificallyattributed.

(s)                                  “**reservoir**”means a porous and permeable underground formation containing a naturalaccumulation of producible oil or gas that is confined by impermeable rock orwater barriers and is individual and separate from other reservoirs.

(t)                                    “**service well**”means a well drilled or completed for the purpose of supporting production inan existing field.  Wells in this classare drilled for the following specific purposes: gas injection (natural gas,propane, butane or flue gas), water injection, steam injection, air injection,salt-water disposal, water supply for injection, observation, orinjection for combustion.

(u)                                 “**unproved property**”means a property or part of a property to which no reserves have beenspecifically attributed.

 

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(v)                                 “**well abandonment costs**”means costs of abandoning a well (net of salvage value) and of disconnectingthe well from the surface gathering system. They do not include costs of abandoning the gathering system orreclaiming the wellsite.

 

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**CURRENCY OF INFORMATION**

Theinformation in this annual information form is stated as at December 31, 2005,unless otherwise indicated.  For anexplanation of the capitalized terms and expressions and certain defined terms,please refer to the ‘Glossary of Terms’ in this annual information form.  Except as otherwise indicated, all dollaramounts in this annual information form are expressed in Canadian dollars andreferences to $ are to Canadian dollars.

**FORWARD LOOKING STATEMENTS**

CanadianSuperior 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 looking statements.  Forward looking statements often, but notalways, are identified by the use of words such as “seek”, “anticipate”, “believe”,“continue”, “plan”, “estimate”, “expect”, “target”, and “intend” and statementsthat an event or result “may”, “will”, “should”, “could” or “might” occur or beachieved and other similar expressions. Forward-looking statements in this document include, but are notlimited to, statements about:

•                                          The future commercial successof the Corporation’s oil and natural gas exploration, development andproduction activities;

•                                          The stability of world-wideoil and natural gas prices;

•                                          The Corporation’s ability tomake necessary capital expenditures for the acquisition, exploration,development and production of oil and natural gas reserves in the future;

•                                          Competition with and amongother oil and gas companies for the acquisition, exploration, production anddevelopment of oil and natural gas properties;

•                                          The Corporation’s oil andnatural gas reserves;

•                                          The Corporation’s ability to obtainthe required licenses and permits from governmental authorities for itsexploration, development and production activities; and

•                                          The Corporation’s ability tosuccessfully defend against pending or future litigation.

Thisannual information form contains forward-looking information on futureproduction, 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.

Statementscontained in this annual information form relating to future results, eventsand expectations are forward-looking statements within the meaning of Section27A of the Securities Act of 1933 and Section 21E of the Securities ExchangeAct of 1934.  These forward-lookingstatements involve known and unknown risks, uncertainties and other factorswhich may cause our actual results, performance or achievements, or the actualresults, performance or achievements of our industry, to be materiallydifferent from any future results, performance or achievements expressed orimplied by such statements. All statements in this annual information form, orincorporated herein, other than statements of historical fact, includingstatements regarding estimates of reserves, estimates of future production aswell as other statements about anticipated future events or results are forwardlooking statements.

Thisannual information form, the documents incorporated by reference into thisannual information form, and other reports and filings made with the securitiesregulatory authorities include forward-looking statements.  All forward-

 

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lookingstatements are based on the Corporation’s beliefs and assumptions based oninformation available at the time the assumption was made.  Forward-looking statements relate to, amongother things, anticipated financial performance, business prospects, strategies,regulatory developments, new services, market forces, commitments andtechnological developments.  Much of thisinformation 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 except as required by securities law.

**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**

Thefollowing table sets forth certain standard conversions from Standard Imperialunits 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             |

 

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| **To Convert From** | ** ** | **To**     | ** ** | **Multiplied By** |
|---------------------|------------|------------|------------|-------------------|
| Metres              |       | Feet       |       | 3.281             |
| Miles               |       | Kilometres |       | 1.609             |
| Kilometres          |       | Miles      |       | 0.621             |
| Acres               |       | Hectares   |       | 0.405             |
| Hectares            |       | Acres      |       | 2.471             |
| Gigajoules          |       | MMBTU      |       | 0.950             |

 

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**THE CORPORATION**

CanadianSuperior was incorporated as 297272 Alberta Ltd. by Articles of Incorporationunder the *Business Corporations Act*(Alberta) onMarch 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) onJanuary 19, 1999, to permit the appointment of up to one-thirdadditional directors between annual meetings and to restate its articles in aconsolidated form.  On August 24, 2000, afurther amendment changed the name of the Corporation to “Canadian SuperiorEnergy Inc.” and consolidated its issued and outstanding Common Shares on a 1-for-2basis.

CanadianSuperior is a reporting issuer, or the equivalent, in the provinces of BritishColumbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, NovaScotia, Prince Edward Island, and Newfoundland. The Common Shares are listed and posted for trading on the Toronto StockExchange and the American Stock Exchange under the symbol “SNG”.

TheCorporation’s head office is located at 3300, 400 — 3rd Avenue S.W., Calgary,Alberta, T2P 4H2 and its registered office is located at 3300, 421 - 7thAvenue S.W., Calgary, Alberta, T2P 4K9. In addition, the Corporation has an east coast office located at 704,1959 Upper Water Street, Halifax, Nova Scotia, B3J 3N2.

The Corporationhas no subsidiaries which individually represent more than 10%, nor in theaggregate represent more than 20%, of the total consolidated assets and totalconsolidated revenues of the Corporation, as at December 31, 2005.

**GENERAL DEVELOPMENT OF THE BUSINESS**

CanadianSuperior is a crude oil and natural gas exploration and production company withits primary emphasis on the exploration for, and production of, crude oil andnatural gas in western Canada, offshore Nova Scotia, and offshore Trinidad and Tobago.

Themost significant events in the development of the business of Canadian Superiorduring the past three completed fiscal years are described below.

OnFebruary 1, 2006, the Corporation completed a private placement of US $15million of preferred share purchase units.

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

OnNovember 10, 2005, the Corporation announced that they had been advised by theCanada-Nova Scotia Offshore Petroleum Board (“**CNSOPB**”)that the consolidation of its deepwater Mayflower exploration licence (EL 2406)and itsshallow water Mariner exploration licence (EL 2409) has been approved by theGovernment of Canada and the Province of Nova Scotia.  The consolidation comes into effect upon thedrilling of the next Mariner exploration well and will allow the workcommitments and related work commitment deposits for these two explorationlicences (EL 2406 and EL 2409) to be combined, allowing the existing workdeposit for Mayflower, approximately $10 million, to be applied directlyagainst 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 nextMariner well.

OnNovember 2, 2005, the Corporation announced the appointment of Michael (Mike)Coolen, Halifax, Nova Scotia and Kaare (Kory) Idland, Red Deer, Alberta to theBoard of Directors of the Corporation.

 

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OnSeptember 6, 2005, the Corporation and its insurers reached an agreement tosettle all securities class action litigation and actions pending in Canadaagainst the Corporation and certain of its officers and directors resultingfrom the drilling last year of the Mariner I-85 exploration well drilledoffshore Nova Scotia.  The $2.15 millionsettlement, which is covered by the Corporation’s insurance, was been reachedwith no admission of liability by any party. See “*Legal Proceedings*”.

On July21, 2005, the Corporation announced that the Government of Trinidad and Tobagoand Canadian Superior had entered into a production sharing contract foroffshore exploration and production on offshore Block 5(c), locatedapproximately 90 km off the east coast of Trinidad in the Columbus Basin.  The production share contract providesCanadian Superior the right to explore on Block 5(c) which covers 80,041 grossacres.

On July12, 2005, the Corporation closed a private placement of $5.5 million specialwarrants at a price of $2.00 per special warrant for gross proceeds ofapproximately $11.0 million.

On June8, 2005, the Corporation announced that it and its insurers reached anagreement to settle all securities class action litigation and actions pendingin the United States against the Corporation and certain of its officers anddirectors resulting from the drilling last year of the Canadian Superior ElPaso Mariner I-85 exploration well drilled with El Paso Corporation in offshoreNova 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*”.

OnFebruary 16, 2005, Canadian Superior announced that the Toronto Stock Exchangecompleted its review of Canadian Superior Energy and determined that CanadianSuperior met the Toronto Stock Exchange’s continued listing requirements.

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

OnDecember 30, 2004, Canadian Superior closed a private placement consisting of1,377,000 Common Shares issued on a “flow-through” basis at a price of$2.50 per share, for gross proceeds of $3,442,500.

OnDecember 6, 2004, the Corporation announced that the Toronto Stock Exchange wasreviewing the Common Shares of Canadian Superior with respect to meeting therequirements for continued listing on the Toronto Stock Exchange.

OnNovember 30, 2004, Canadian Superior announced that it and GlobalSantaFeCorporation (“**GlobalSantaFe**”) entered into anagreement for GlobalSantaFe to drill Canadian Superior’s next Mariner projectexploration well, offshore Nova Scotia, Canada and Canadian Superior’s firstIntrepid exploration well offshore Trinidad and Tobago, subject to regulatoryand governmental approvals.  GlobalSantaFe’sharsh environment jackup drilling rig, the Galaxy II, which had been workingnear Canadian Superior’s Mariner Block in the Sable Island area, offshore NovaScotia, Canada was selected and awarded the contract to drill the next Marinerwell.   In addition, GlobalSantaFe’s semi-submersibledrilling rig, the Arctic I, which had been working in Venezuelan waters southof Canadian Superior’s Trinidad Intrepid Block 5(c), was selected and awardedthe contract to drill Canadian Superior’s first offshore well on its IntrepidBlock 5(c) off the east coast of Trinidad.

OnNovember 12, 2004, Mr. Alex Squires joined the Board of Directors ofCanadian Superior and on November 5, 2004, Mr. Ross A. Jones joinedCanadian Superior as Chief Financial Officer.

OnNovember 1, 2004, the Corporation announced that in addition to the five wellsthat were drilled in the second quarter of 2004, nine wells were drilled in thethird quarter, with eight out of the nine being successful.  Six were successful gas wells and two were successfuloil wells.  One of the producing gaswells was dually completed for

 

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conventionalgas and for coal bed methane.  Of thenine wells, eight are 100% working interest wells that are operated by CanadianSuperior.

OnOctober 12, 2004, Canadian Superior Energy announced that it had determined toproceed with its Mariner Project offshore Nova Scotia, near Sable Island.

OnOctober 6, 2004, Mr. Gregory Noval, President and Chief Executive Officerof Canadian Superior, reassumed the role of Chief Operating Officer.  Mr. Harvey R. Klingensmith, whopreviously served as Chief Operating Officer, resigned effective October 6,2004.

OnSeptember 21, 2004, the Corporation announced that that an independent petrophysicalevaluation of the Canadian Superior El Paso Mariner I-85 exploration wellwas completed to analyze the well for hydrocarbon potential.  In the independent assessment, 24.6 m (80.7feet) of net pay had been assigned to the Canadian Superior El Paso Mariner I-85well from the well log analysis.

OnSeptember 15, 2004, the Corporation announced that Canadian Superior acquiredEl 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-35Awell data, Mariner I-85 well data and related inventory and extensive taxpools were acquired.

OnAugust 30, 2004, the Corporation announced that its offshore wellsite surveywork, initiated earlier in August 2004, was successfully completed at two newproposed future Mariner Project drilling locations.  The field work was completed on August 29,2004 on the offshore Mariner Block (EL 2409) located in shallow waterapproximately 275 kilometres (170 miles) southeast of Halifax, Nova Scotia,Canada.

OnAugust 24, 2004, the Corporation announced that it received the necessarygeophysical and geological work authorization approval from the CNSOPB tocommence additional wellsite survey activities on its Mariner block (EL 2409)located offshore, approximately 275 kilometres (170 miles) southeast ofHalifax, Nova Scotia, Canada.

On June9, 2004, the Corporation announced that it retained the law firms of Morrison& Foerster LLP of New York, NY and Borden Ladner Gervais LLP of Calgary,Alberta to represent the Corporation with respect to a number of class actionproceedings against the Corporation.

On May27, 2004, the Corporation’s President & Chief Executive Office,Mr. Gregory Noval, commenced an action against the National Post, itsowners and certain of its reporters for $75 million for damages relating toalleged misleading reporting on Canadian Superior’s Mariner well and certainclass action lawsuits.

On May11, 2004, the Corporation announced that it had been informed by the Trinidadand Tobago Ministry of Energy and Energy Industries that its bid for 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).

OnMarch 30, 2004, the Corporation announced that it had extended the expiry dateof its Common Share purchase warrants, issued in December 2003 and January2004, from March 31, 2004 to December 31, 2004. The extension did not apply to any Common Share purchase warrants heldby officers, director and securityholders holding in excess of 10% of the issuedand outstanding securities of the Corporation or any of their respectiveassociates or affiliates.

OnMarch 17, 2004, the Corporation announced that it had been made aware ofannouncements by a number of United States law firms indicating that they plannedto commence a class action lawsuit against the Corporation and a number

 

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of its seniorofficers with respect to events surrounding the Canadian Superior El PasoMariner I-85 exploration well, offshore Nova Scotia.  See “*Legal Proceedings*”.

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

InDecember 2003 and January 2004, Canadian Superior closed the private placementof 7,400,180 special warrants at a price of $3.00 per special warrant and142,857 flow-through special warrants at a price of $3.50 per flow-throughspecial warrant for total gross proceeds of $22,700,540.

InNovember and December 2003, Canadian Superior closed the private placement of4,998,463 Common Shares issued on a “flow-through” basis at a price of$3.25 per flow-through Common Share, for total gross proceeds of$16,245,005.

OnNovember 20, 2003, Canadian Superior announced that drilling had commenced onthe Mariner I-85 exploration well and that El Paso Oil & Gas Canada,Inc., an indirect subsidiary of El Paso Corporation, was participating in thedrilling by paying 2/3 of the costs to earn a 50% interest in the Marinerblock.

OnNovember 17, 2003, Canadian Superior announced that the CNSOPB had approved thedrilling program authorization application for the Canadian Superior El PasoMariner I-85 exploration well.

OnNovember 13, 2003, Canadian Superior announced that it had successfullyacquired two major exploration licences from the CNSOPB totalling 370,881 acresfor work expenditure bids totalling $14,107,000.

OnApril 16, 2003, Canadian Superior announced that a Canadian subsidiary of ElPaso had formally elected to farm-in and participate in the drilling anddevelopment of the Corporation’s Mariner block.

OnApril 15, 2003, Canadian Superior announced two new natural gas discoverieslocated on the Corporation’s East Ladyfern natural gas property.

OnMarch 21, 2003, Canadian Superior announced that it had successfully completedthe acquisition of El Paso’s Drumheller, Alberta area oil and gas assetsproduction facilities, gas plants and undeveloped lands located in centralAlberta, for approximately $53.5 million, net of purchase price adjustments.

OnMarch 13, 2003, Canadian Superior closed a best efforts financing and issued9,040,333 units, each unit consisting of one Common Share and one half of oneCommon Share purchase warrant, at a price of $1.50 per unit, for total grossproceeds of $13,560,500.

OnFebruary 25, 2003, Canadian Superior closed a bought deal financing and issued13,400,000 Common Shares at $1.60 per Common Share for total gross proceeds of$21,440,000.

OnJanuary 22, 2003, Canadian Superior announced that the CNSOPB had completed itsreview and had issued its environmental approval of the Corporation’s “EnvironmentalAssessment for Exploration Drilling in License EL 2409”.

OnJanuary 13, 2003, Canada Superior announced it had entered into an agreementwith the Canadian division of El Paso to acquire their Drumheller area oil andgas assets, production facilities, gas plants and undeveloped lands, effectiveOctober 1, 2002, for approximately $59.0 million, net of purchase priceadjustments.

 

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**DESCRIPTION OF THE BUSINESS**

**General**

*Competition*

The oiland gas industry in Canada and Trinidad and Tobago is highly competitive in allaspects, including the exploration for, and the development of, new sources ofsupply, the acquisition of oil and gas interests and the marketing of, crudeoil, natural gas and natural gas liquids. The Corporation competes with other companies in this sector for theexploration and development of oil and gas reserves.

TheCorporation actively competes for reserve acquisitions, exploration leases,licences and concessions and skilled industry personnel with a substantialnumber of other oil and gas companies. The Corporation’s competitors include major integrated oil and naturalgas companies and numerous other independent oil and natural gas companies andindividual producers and operators, many of which of which possesssignificantly greater financial resources than the Corporation.

*Cyclical Nature of Business*

TheCorporation’s business is generally not cyclical, however, its revenue from thesale of natural gas is highly seasonal, with demand for natural gas risingduring cold winder months and hot summer months.

*Specialized Skill and Knowledge*

TheCorporation believes its success is largely dependant on the performance of itsmanagement and key employees, many of whom have specialized knowledge andskills relating to conventional and offshore oil and gas operations.  The Corporation believes that they haveadequate personnel with the specialized skills required to successfully carryout its operations.

*Foreign Operations*

TheCorporation currently has no production or revenue from foreign operations.

*Environmental Protection*

Allaspects of the oil and gas industry present potential environmental risks andare, accordingly, subject to a variety of Canadian federal, provincial andmunicipal 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.

Allphases of the oil and natural gas business present environmental risks andhazards and are subject to environmental regulation pursuant to a variety ofinternational conventions and provincial and municipal laws and regulations.  Environmental legislation provides for, amongother things, restrictions and prohibitions on spills, releases or emissions ofvarious substances produced in association with oil and gas operations.  The legislation also requires that wells andfacility sites be operated, maintained, abandoned and reclaimed to thesatisfaction 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

 

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the costs ofproduction, development or exploration activities or otherwise adversely affectthe Corporation’s financial condition, capital expenditures, results ofoperations, competitive position or prospects.

TheCorporation conducts its operations in Canada in a manner consistent withenvironmental regulations as stipulated in provincial and federallegislation.  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.

*Human Resources*

TheCorporation has a total of 39 full-time staff, including 5 staff membersin the Halifax office and 7 staff members in the Drumheller, Alberta fieldoffice and 2 staff members in the Trinidad and Tobago field office.

**Oil and Gas Properties and Wells**

CanadianSuperior’s principal properties can be divided into three distinct groups:

2.                                       Trinidad and Tobago;

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

4.                                       Western Canadian Holdings

Trinidadand Tobago

In2005, the Corporation continued to make steady progress in preparing forexploration and development on its offshore Trinidad and Tobago holdings.  The Corporation was awarded the right toexplore on Block 5(c), which the Corporation has named “Intrepid”, in theGovernment of Trinidad and Tobago Ministry of Energy and Energy Industries’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 drillinglocations.

On July20, 2005, the Corporation signed a production sharing contract with theGovernment of Trinidad and Tobago for Block 5(c), which provides CanadianSuperior the right to explore on Block 5(c) which covers 80,041 gross acres.

TheCorporation submitted its “Application for a Certificate of EnvironmentalClearance” to the Trinidad and Tobago Environmental Management Authority (“**EMA**”) for explorations drilling on Block 5(c) within theEast Coast Marine Area.  CanadianSuperior has conducted two “Public Consultation Meetings” in Mayaro, onDecember 17, 2005 and on February 13, 2006, to discuss the proposed projectwith affected stakeholders.  AnEnvironmental Baseline Survey was conducted in Block 5 (c).

East Coast,Offshore Nova Scotia, Canada

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

 

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In2005, the Corporation was advised by the CNSOPB that the consolidation of itsdeepwater “Mayflower” exploration licence (EL 2406) and the shallower waterMariner exploration licence (EL 2409) had been approved by the Government ofCanada and the Province of Nova Scotia. This consolidation will come intoeffect upon the drilling of the next Mariner exploration well and will allowthe work commitments and related work commitment deposits for these twoexploration licences (EL 2406 and EL 2409) to be combined, allowing theexisting 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 CanadianSuperior with $10 million of additional capital to be applied to drilling thenext Mariner well.

TheMariner Project lands are located approximately nine kilometres northeast ofSable Island, offshore Nova Scotia.  Thefirst exploration well, Mariner I-85, was drilled on this block in 2003/2004(November 2003 to March 2004). Furthermore, upon consolidation, the explorationterm for Canadian Superior’s 100% deepwater “Mayflower” license (EL 2406) willbe extended for 2 additional years, from the current expiry date of December31, 2006 to December 31, 2008; and, thereafter, 50 % of the licence area willbe extended for an additional 2 years to December 31, 2010. Canadian Superior’sMayflower deepwater project exploration licence covers approximately 712,000acres.

Inaddition to Canadian Superior’s Mariner exploration project targetingCretaceous and Jurassic gas bearing sands, we continue to monitor drillingactivities near the Corporation’s Abenaki Reef Marquis 100% prospects. The Corporation’sMarquis Project lands encompass two exploration licences with approximately111,000 contiguous acres located in shallow water depths.

*Western Canada Holdings*

All ofCanadian Superior’s current production is located in Western Canada where theCorporation has interests in several key areas including Drumheller, Windfall,Boundary Lake, East Ladyfern, Giroux Lake and Teepee.

During2005, the Corporation drilled or participated in 67 gross (28.22 net) wellswhich included 17 gross (14.42 net) operated wells and 50 gross (13.8 net ) non—operatedwells.  The Corporation completed or tiedin 63 wells for a success rate of 94%.

TheCorporation maintained its extensive land holdings in Western Canada. AtDecember 31, 2005, the Corporation held 275,710 gross acres (193,576 net acres)of land at an average working interest of 70%.

*DrumhellerArea*

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

*Conventional Plays*

TheDrumheller area offers a multitude of opportunities that include both oil andgas play types and are contained in four distinct stratagtraphic zones.

Theshallow targets include the Belly River and the Edmonton Groups and range indepth from 300-700 meters (980—2300 feet). Well production in these zones range from 50—750 Mcf/d with associatedreserve size of .1 -2 Bcf.

 

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*CoalBed Methane*

CanadianSuperior’s current activities in coal bed methane are centered on the HorseshoeCanyon in which the Corporation drilled or participated in 46 wells during2005.  All of these wells have beensuccessful and the Company will continue to develop these assets in to2006.  Canadian Superior holds 157 gross(81 net) sections  of Horseshoe Canyonrights.  The Horseshoe Canyon Coal depthsrange from 200—400 meters (650—1300 feet) and are typically found in 8—10 coalseams with thicknesses averaging from .75—1.5 meters ( 2.5—5 feet).  These coals contain dry gas and producelittle or no water.

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

*BoundaryLake/Teepee*

TheBoundary Lake / Teepee area is a high reward medium risk area and was a majorfocus area for Canadian Superior in 2005. At the end of 2005, this property represented a minor portion of theCorporation’s total production, but renewed emphasis has been placed on thisyear round access area.  The Corporationpurchased 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*

CanadianSuperior drilled or participated in two wells in the Windfall area in2005.  Both these wells were successfuland have been tied in.  Both wells areproducing between 750—1000 Mcf/d.

*EastLadyfern*

In2005, the Corporation followed up its Slave Point play in the East Ladyfernarea with addition 2D seismic and the drilling of the 1-26-91-11W6 well.  This well was drilled in late January 2005due to delayed freeze-up and rig availability. The well was logged, cased and rig released in early March 2005.  Due to early break-up, no testing could bedone at that time.  The logs over theSlave Point showed gas over water and do not justify further testing.

*SouthCentral W5*

CanadianSuperior continues to grow its operation base in Western Canada and isexpanding 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.  TheCorporation is focusing its efforts in this area towards strategic landacquisitions and seismic purchases.

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

**General**

Thereserve disclosure presented below conforms with the requirements of NationalInstrument 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 this information.  Boe may be misleading, particularly if usedin isolation.  A boe

 

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conversionratio of 6 Mcf:1 bbl is based on an energy equivalency conversion methodprimarily applicable at the burner tip and does not represent a valueequivalency at the wellhead.

All ofthe Corporation’s reserves are in Canada, more specifically in the provinces ofBritish Columbia, Alberta and Saskatchewan.

**Selected Reserves Information**

Thefollowing tables set forth certain information relating to the oil and naturalgas reserves of the Corporation’s properties and the present value of theestimated future net cash flow associated with such reserves as at December 31,2005.  The information set forth below isderived from the report, with a preparation date of March 6, 2006, prepared byGLJ 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.**

TheCorporation has a Reserves Committee consisting of the entire Board ofDirectors which reviews the qualifications and appointment of the independentqualified reserves evaluators.  TheReserves Committee also reviews the procedures for providing information to theevaluators.  All booked reserves arebased upon annual evaluation and review by the independent qualified reservesevaluators.

Inaccordance 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 and Directors on Oil and Gas Disclosure*in Form 51-101F3 are attached as Appendices ”A” and “B” hereto,respectively.

**Reserves Data - Constant Prices andCosts**

Thefollowing table sets forth a summary of reserves and values of the Corporationusing constant pricing and costs:

 

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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 |   | 27,992 |   | -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 followingtable sets forth the discounted future net revenue of the Corporation’s oil andgas reserves by production group:

**Summary of Oil and Gas Reserves and NetPresent Values of Future Net Revenue, Constant Pricing**
| ** **                           | ** **   | **Reserves**              | ** **   |
|--------------------------------------|--------------|---------------------------|--------------|
| ** **                           | ** **   | **Light and  Medium Oil** | ** **   | **Heavy Oil** | ** ** | **Natural Gas** | ** ** | **Natural Gas  Liquids** | ** ** | **Oil Equivalent** | ** ** |
| **Entity Description**               | ** **   | **W.I.  Mbbl**            | ** **   | **Net  Mbbl** | ** ** | **W.I.  Mbbl** | ** ** | **Net  Mbbl** | ** ** | **W.I.  MMcf** | ** ** | **Net  MMcf** | ** ** | **W.I.  Mbbl** | ** ** | **Net  Mbbl** | ** ** | **W.I.  Mbbl** | ** ** | **Net  Mbbl** | ** ** |
| ***Proved  Producing***              | *** *** | *** ***              | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Conventional Oil  and Gas            |         | 772                       |         | 711 |   | 0 |   | 0 |   | 17,505 |   | 14,486 |   | 162 |   | 111 |   | 3,852 |   | 3,237 |   |
| Non-conventional  Natural Gas        |         | 0                         |         | 0 |   | 0 |   | 0 |   | 739 |   | 609 |   | 0 |   | 0 |   | 123 |   | 102 |   |
|                                 |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total: Proved Producing              |         | 772                       |         | 711 |   | 0 |   | 0 |   | 18,244 |   | 15,095 |   | 162 |   | 111 |   | 3,975 |   | 3,338 |   |
|                                 |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved  Developed Nonproducing*** | *** *** | *** ***              | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Conventional Oil  and Gas            |         | 10                        |         | 10 |   | 0 |   | 0 |   | 1,389 |   | 1,109 |   | 3 |   | 2 |   | 244 |   | 196 |   |
| Non-conventional  Natural Gas        |         | 0                         |         | 0 |   | 0 |   | 0 |   | 734 |   | 609 |   | 0 |   | 0 |   | 122 |   | 101 |   |
|                                 |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total: Proved Developed Nonproducing |         | 10                        |         | 10 |   | 0 |   | 0 |   | 2,123 |   | 1,717 |   | 3 |   | 2 |   | 367 |   | 298 |   |
|                                 |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved  Undeveloped***            | *** *** | *** ***              | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Conventional Oil  and Gas            |         | 0                         |         | 0 |   | 0 |   | 0 |   | 614 |   | 498 |   | 2 |   | 1 |   | 104 |   | 84 |   |
| Non-conventional  Natural Gas        |         | 0                         |         | 0 |   | 0 |   | 0 |   | 1,924 |   | 1,749 |   | 0 |   | 0 |   | 321 |   | 292 |   |
|                                 |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total: Proved Undeveloped            |         | 0                         |         | 0 |   | 0 |   | 0 |   | 2,538 |   | 2,248 |   | 2 |   | 1 |   | 425 |   | 376 |   |
|                                 |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total  Proved***                  | *** *** | *** ***              | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Conventional Oil  and Gas            |         | 782                       |         | 721 |   | 0 |   | 0 |   | 19,508 |   | 16,093 |   | 167 |   | 114 |   | 4,200 |   | 3,517 |   |
| Non-conventional  Natural Gas        |         | 0                         |         | 0 |   | 0 |   | 0 |   | 3,397 |   | 2,967 |   | 0 |   | 0 |   | 566 |   | 495 |   |
|                                 |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total: Total Proved                  |         | 782                       |         | 721 |   | 0 |   | 0 |   | 22,905 |   | 19,060 |   | 167 |   | 114 |   | 4,766 |   | 4,012 |   |
|                                 |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total  Probable***                | *** *** | *** ***              | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Conventional Oil  and Gas            |         | 708                       |         | 628 |   | 0 |   | 0 |   | 7,952 |   | 6,364 |   | 85 |   | 57 |   | 2,118 |   | 1,746 |   |
| Non-conventional  Natural Gas        |         | 0                         |         | 0 |   | 0 |   | 0 |   | 2,983 |   | 2,642 |   | 0 |   | 0 |   | 497 |   | 440 |   |
|                                 |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total: Total Probable                |         | 708                       |         | 628 |   | 0 |   | 0 |   | 10,935 |   | 9,006 |   | 85 |   | 57 |   | 2,615 |   | 2,186 |   |
|                                 |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total  Proved Plus Probable***    | *** *** | *** ***              | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Conventional Oil  and Gas            |         | 1,489                     |         | 1,349 |   | 0 |   | 0 |   | 27,460 |   | 22,457 |   | 252 |   | 171 |   | 6,318 |   | 5,264 |   |
| Non-conventional  Natural Gas        |         | 0                         |         | 0 |   | 0 |   | 0 |   | 6,380 |   | 5,609 |   | 0 |   | 0 |   | 1,063 |   | 935 |   |
|                                 |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total: Total Proved Plus Probable    |         | 1,489                     |         | 1,349 |   | 0 |   | 0 |   | 33,840 |   | 28,066 |   | 252 |   | 171 |   | 7,381 |   | 6,198 |   |

 

18

----

 

**NETPRESENT VALUE OF FUTURE NET REVENUE (Constant Dollars as at December 31, 2005)**

 
| ** **                 | ** ** | **Net Present Values of Future Net Revenue  Before Income Taxes Discounted At (%/year)** | ** ** |
|----------------------------|------------|------------------------------------------------------------------------------------------|------------|
| **Reserves Category**      | ** ** | **0%  M$**                                                                               | ** ** | **5%  M$** | ** ** | **10%  M$** | ** ** | **15%  M$** | ** ** | **20%  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%  M$**                                                                              | ** ** | **5%  M$** | ** ** | **10%  M$** | ** ** | **15%  M$** | ** ** | **20%  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 |   |

 

Thefollowing table sets forth the total future net revenue of Canadian Superior,undiscounted:
| ** **                     | ** ** | **Total  Future Net Revenue (Undiscounted)** | ** ** |
|--------------------------------|------------|----------------------------------------------|------------|
| ** **                     | ** ** | ** **                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Future** | ** ** | ** ** | ** ** | **Future** | ** ** |
| ** **                     | ** ** | ** **                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Net** | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** **                     | ** ** | ** **                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Revenue** | ** ** | ** ** | ** ** | **Revenue** | ** ** |
| ** **                     | ** ** | ** **                                   | ** ** | ** ** | ** ** | ** ** | ** ** | **Capital** | ** ** | ** ** | ** ** | **Before** | ** ** | ** ** | ** ** | **After** | ** ** |
| ** **                     | ** ** | ** **                                   | ** ** | ** ** | ** ** | **Operating** | ** ** | **Development** | ** ** | **Abandonment** | ** ** | **Income** | ** ** | **Income** | ** ** | **Income** | ** ** |
| ** **                     | ** ** | **Revenue**                                  | ** ** | **Royalties** | ** ** | **Costs** | ** ** | **Costs** | ** ** | **Costs** | ** ** | **Taxes** | ** ** | **Tax** | ** ** | **Taxes** | ** ** |
| **Entity  Description**        | ** ** | **(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** | ** ** |

 

19

----

 

**Future Net Revenue by Production Group,Constant Pricing**
| ** **                                       | ** **   | **Future Net Revenue Before  Income Taxes (3)  (Discounted at 10% per year)  M$** | ** **   |
|--------------------------------------------------|--------------|-----------------------------------------------------------------------------------|--------------|
| ***Proved  Producing***                          | *** *** | *** ***                                                                      | *** *** |
| Light & Medium Oil (1)                       |         | 28,430                                                                            |         |
| Natural Gas (2)                                  |         | 78,794                                                                            |         |
| Non-conventional Oil &  Gas Activities (CBM) |         | 3,871                                                                             |         |
| **Total: Proved Producing**                      | ** **   | **111,095**                                                                       | ** **   |
| ***Total  Proved***                              | *** *** | *** ***                                                                      | *** *** |
| Light & Medium Oil (1)                       |         | 28,709                                                                            |         |
| Natural Gas (2)                                  |         | 87,966                                                                            |         |
| Non-conventional Oil &  Gas Activities (CBM) |         | 11,686                                                                            |         |
| **Total: Total Proved**                          | ** **   | **128,360**                                                                       | ** **   |
| ***Total  Proved Plus Probable***                | *** *** | *** ***                                                                      | *** *** |
| Light & Medium Oil (1)                       |         | 39,981                                                                            |         |
| Natural Gas (2)                                  |         | 113,810                                                                           |         |
| Non-conventional Oil &  Gas Activities (CBM) |         | 20,015                                                                            |         |
| **Total: Total Proved Plus  Probable**           | ** **   | **173,807**                                                                       | ** **   |

----

**Comments**

(1)                                  Including solution gas andother by-products

(2)                                  Including by-products butexcluding solution gas

(3)                                  Other company revenue andcosts not related to a specific production group (e.g. ARTC) have been allocatedproportionately to production groups

 

20

----

 

**Reserves Data — Forecast Prices and Costs**

The followingtable sets forth a summary of reserves and values and the net present value offuture net revenue of the Corporation, forecast based:
| **Summary of 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 |   |

 

21

----

 

**Summary of Oil and Gas Reserves and NetPresent Values of Future Net Revenue**
| ** **                            | ** **   | **Reserves**              | ** **   |
|---------------------------------------|--------------|---------------------------|--------------|
| ** **                            | ** **   | **Light and  Medium Oil** | ** **   | **Heavy Oil** | ** ** | **Natural Gas** | ** ** | **Natural Gas  Liquids** | ** ** | **Oil Equivalent** | ** ** |
| **Entity Description**                | ** **   | **W.I.  MBBL**            | ** **   | **Net  Mbbl** | ** ** | **W.I.  Mbbl** | ** ** | **Net  Mbbl** | ** ** | **W.I.  MMcf** | ** ** | **Net  MMcf** | ** ** | **W.I.  Mbbl** | ** ** | **Net  Mbbl** | ** ** | **W.I.  Mbbl** | ** ** | **Net  Mbbl** | ** ** |
| ***Proved Producing***                | *** *** | *** ***              | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Conventional Oil  and Gas             |         | 755                       |         | 695 |   | 0 |   | 0 |   | 17,269 |   | 14,272 |   | 160 |   | 109 |   | 3,793 |   | 3,184 |   |
| Non-conventional  Natural Gas         |         | 0                         |         | 0 |   | 0 |   | 0 |   | 739 |   | 609 |   | 0 |   | 0 |   | 123 |   | 102 |   |
|                                  |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total: Proved  Producing              |         | 755                       |         | 695 |   | 0 |   | 0 |   | 18,008 |   | 14,881 |   | 160 |   | 109 |   | 3,916 |   | 3,285 |   |
|                                  |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Developed  Nonproducing***  | *** *** | *** ***              | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Conventional Oil  and Gas             |         | 10                        |         | 10 |   | 0 |   | 0 |   | 1,387 |   | 1,107 |   | 3 |   | 2 |   | 244 |   | 196 |   |
| Non-conventional  Natural Gas         |         | 0                         |         | 0 |   | 0 |   | 0 |   | 734 |   | 609 |   | 0 |   | 0 |   | 122 |   | 101 |   |
|                                  |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total: Proved  Developed Nonproducing |         | 10                        |         | 10 |   | 0 |   | 0 |   | 2,121 |   | 1,716 |   | 3 |   | 2 |   | 366 |   | 298 |   |
|                                  |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Proved Undeveloped***              | *** *** | *** ***              | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Conventional Oil  and Gas             |         | 0                         |         | 0 |   | 0 |   | 0 |   | 613 |   | 498 |   | 2 |   | 1 |   | 104 |   | 84 |   |
| Non-conventional  Natural Gas         |         | 0                         |         | 0 |   | 0 |   | 0 |   | 1,924 |   | 1,749 |   | 0 |   | 0 |   | 321 |   | 292 |   |
|                                  |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total: Proved  Undeveloped            |         | 0                         |         | 0 |   | 0 |   | 0 |   | 2,537 |   | 2,247 |   | 2 |   | 1 |   | 425 |   | 376 |   |
|                                  |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Proved***                    | *** *** | *** ***              | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Conventional Oil  and Gas             |         | 765                       |         | 705 |   | 0 |   | 0 |   | 19,269 |   | 15,877 |   | 165 |   | 113 |   | 4,141 |   | 3,464 |   |
| Non-conventional  Natural Gas         |         | 0                         |         | 0 |   | 0 |   | 0 |   | 3,397 |   | 2,967 |   | 0 |   | 0 |   | 566 |   | 495 |   |
|                                  |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total: Total  Proved                  |         | 765                       |         | 705 |   | 0 |   | 0 |   | 22,666 |   | 18,844 |   | 165 |   | 113 |   | 4,707 |   | 3,959 |   |
|                                  |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Probable***                  | *** *** | *** ***              | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Conventional Oil  and Gas             |         | 675                       |         | 599 |   | 0 |   | 0 |   | 7,789 |   | 6,225 |   | 83 |   | 56 |   | 2,056 |   | 1,692 |   |
| Non-conventional  Natural Gas         |         | 0                         |         | 0 |   | 0 |   | 0 |   | 2,983 |   | 2,642 |   | 0 |   | 0 |   | 497 |   | 440 |   |
|                                  |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total: Total  Probable                |         | 675                       |         | 599 |   | 0 |   | 0 |   | 10,772 |   | 8,867 |   | 83 |   | 56 |   | 2,553 |   | 2,132 |   |
|                                  |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ***Total Proved Plus  Probable***     | *** *** | *** ***              | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** | *** *** |
| Conventional Oil  and Gas             |         | 1,439                     |         | 1,304 |   | 0 |   | 0 |   | 27,058 |   | 22,102 |   | 248 |   | 169 |   | 6,197 |   | 5,156 |   |
| Non-conventional  Natural Gas         |         | 0                         |         | 0 |   | 0 |   | 0 |   | 6,380 |   | 5,609 |   | 0 |   | 0 |   | 1,063 |   | 935 |   |
|                                  |         |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total: Total  Proved Plus Probable    |         | 1,439                     |         | 1,304 |   | 0 |   | 0 |   | 33,438 |   | 27,711 |   | 248 |   | 169 |   | 7,260 |   | 6,091 |   |

 

22

----

 

**Net Present Value Summary**
| ** **                 | ** ** | **Net Present Values of Future Net Revenue  Before Income Taxes Discounted At (%/year)** | ** ** |
|----------------------------|------------|------------------------------------------------------------------------------------------|------------|
| **Reserves Category**      | ** ** | **0%  M$**                                                                               | ** ** | **5%  M$** | ** ** | **10%  M$** | ** ** | **15%  M$** | ** ** | **20%  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%  M$**                                                                              | ** ** | **5%  M$** | ** ** | **10%  M$** | ** ** | **15%  M$** | ** ** | **20%  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 |   |

** **

**Total Future Net Revenue (Undiscounted)**
| **Reserves Category**           | ** ** | **Revenue  M$** | ** ** | **Royalties  M$** | ** ** | **Operating  Costs  M$** | ** ** | **Capital  Development  Costs   M$** | ** ** | **Abandonment Costs  M$** | ** ** | **Future  Net  Revenue  Before  Income  Taxes  M$** | ** ** | **Income  Tax  M$** | ** ** | **Future  Net  Revenue  After  Income  Taxes  M$** | ** ** |
|---------------------------------|------------|-----------------|------------|-------------------|------------|--------------------------|------------|--------------------------------------|------------|---------------------------|------------|-----------------------------------------------------|------------|---------------------|------------|----------------------------------------------------|------------|
| Proved Producing                |       | 205,281         |       | 30,600            |       | 49,655                   |       | 151                                  |       | 4,072                     |       | 120,804                                             |       | 7,514               |       | 113,289                                            |       |
|                            |       |            |       |              |       |                     |       |                                 |       |                      |       |                                                |       |                |       |                                               |       |
| Proved Developed  Nonproducing  |       | 17,962          |       | 2,097             |       | 3,510                    |       | 2,617                                |       | 445                       |       | 9,293                                               |       | 2,757               |       | 6,536                                              |       |
|                            |       |            |       |              |       |                     |       |                                 |       |                      |       |                                                |       |                |       |                                               |       |
| Proved  Undeveloped             |       | 20,577          |       | 1,787             |       | 4,078                    |       | 5,319                                |       | 459                       |       | 8,934                                               |       | 2,337               |       | 6,597                                              |       |
|                            |       |            |       |              |       |                     |       |                                 |       |                      |       |                                                |       |                |       |                                               |       |
| **Total  Proved**               | ** ** | **243,820**     | ** ** | **34,484**        | ** ** | **57,244**               | ** ** | **8,086**                            | ** ** | **4,976**                 | ** ** | **139,031**                                         | ** ** | **12,608**          | ** ** | **126,423**                                        | ** ** |
| ** **                      | ** ** | ** **      | ** ** | ** **        | ** ** | ** **               | ** ** | ** **                           | ** ** | ** **                | ** ** | ** **                                          | ** ** | ** **          | ** ** | ** **                                         | ** ** |
| **Total  Probable**             | ** ** | **123,741**     | ** ** | **17,513**        | ** ** | **37,401**               | ** ** | **8,209**                            | ** ** | **1,017**                 | ** ** | **59,601**                                          | ** ** | **15,168**          | ** ** | **44,433**                                         | ** ** |
| ** **                      | ** ** | ** **      | ** ** | ** **        | ** ** | ** **               | ** ** | ** **                           | ** ** | ** **                | ** ** | ** **                                          | ** ** | ** **          | ** ** | ** **                                         | ** ** |
| **Total  Proved Plus Probable** | ** ** | **367,561**     | ** ** | **51,997**        | ** ** | **94,645**               | ** ** | **16,295**                           | ** ** | **5,993**                 | ** ** | **198,631**                                         | ** ** | **27,775**          | ** ** | **170,856**                                        | ** ** |

----

**Comments**

(1)                                  Disclosure is required forTotal Proved and Proved Plus Probable reserves

** **

**23**

----

** **

**Future Net Revenue by Production Group**
| ** **                                       | ** **   | **Future Net Revenue Before  Income Taxes (3)  (Discounted at 10% per year)  M$** | ** **   |
|--------------------------------------------------|--------------|-----------------------------------------------------------------------------------|--------------|
| ***Proved  Producing***                          | *** *** | *** ***                                                                      | *** *** |
| Light & Medium Oil (1)                       |         | 22,605                                                                            |         |
| Natural Gas (2)                                  |         | 68,207                                                                            |         |
| Non-conventional Oil &  Gas Activities (CBM) |         | 3,438                                                                             |         |
| **Total: Proved Producing**                      | ** **   | **94,250**                                                                        | ** **   |
| ***Total  Proved***                              | *** *** | *** ***                                                                      | *** *** |
| Light & Medium Oil (1)                       |         | 22,812                                                                            |         |
| Natural Gas (2)                                  |         | 75,504                                                                            |         |
| Non-conventional Oil &  Gas Activities (CBM) |         | 8,411                                                                             |         |
| **Total: Total Proved**                          | ** **   | **106,727**                                                                       | ** **   |
| ***Total  Proved Plus Probable***                | *** *** | *** ***                                                                      | *** *** |
| Light & Medium Oil (1)                       |         | 29,868                                                                            |         |
| Natural Gas (2)                                  |         | 94,341                                                                            |         |
| Non-conventional Oil &  Gas Activities (CBM) |         | 13,542                                                                            |         |
| **Total: Total Proved Plus  Probable**           | ** **   | **137,751**                                                                       | ** **   |

----

**Comments**

(1)                                  Including solution gas andother by-products

(2)                                  Including by-products butexcluding solution gas

(3)                                  Other company revenue andcosts not related to a specific production group (e.g. ARTC) have beenallocated proportionately to production groups

 

24

----

 

**Constant Prices Used in Estimates**

The followingtable identifies benchmark reference pricing. The oil, gas, NGL reference prices, inflation rates and exchange ratesused in the forecasted price evaluation were prepared by GLJ, the Corporation’sindependent qualified reserves evaluator and are as follows:
| **Crude  Oil and Natural Gas Prices** | ** ** |
|---------------------------------------|------------|
| ** **                            | ** ** | ** ** | ** ** | ** ** | ** ** | **West  Texas  Intermediate  Crude Oil at** | ** ** | **Brent  Blend  Crude Oil FOB** | ** ** | **Light,  Sweet  Crude Oil (40 API, 0.3%S) at** | ** ** | **Bow  River  Crude Oil Stream Quality  at** | ** ** | **LLB  Crude  Oil At** | ** ** | **Medium  Crude Oil (29 API, 2.0%S) at** | ** ** | **Alberta  National Gas Liquids** | ** ** |
| **Year**                              | ** ** | **Inflation  %** | ** ** | **Exchange  Rate  $US/$Cdn** | ** ** | **Cushing  Oklahoma  Then Current  $US/bbl** | ** ** | **North  Sea Then  Current  $Cdn/bbl** | ** ** | **Edmonton  Then Current  $Cdn/bbl** | ** ** | **Hardisty  Then Current  $Cdn/bbl** | ** ** | **Hardisty  Then  Current  $Cdn/bbl** | ** ** | **Cromer  Then Current  $Cdn/bbl** | ** ** | **Spec  Ethan  $Cdn/bbl** | ** ** | **Edmonton  Propane  $Cdn/bbl** | ** ** | **Edmonton  Butane  $Cdn/bbl** | ** ** | **Edmonton  Pentanes  Plus********$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)** | **39.00** | **(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** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Alberta** | ** ** |
| ** **                   | ** ** | **at** | ** ** | **Midwest  at** | ** ** | **AECO-** | ** ** | **Spot  Plant** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Sask.** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Sulphur** | ** ** |
| ** **                   | ** ** | **Henry  Hub** | ** ** | **Chicago** | ** ** | **C Spot** | ** ** | **Gate** | ** ** | **ARP** | ** ** | **Aggregator** | ** ** | **Alliance** | ** ** | **SaskEnergy** | ** ** | **Spot** | ** ** | ** ** | ** ** | **CanWest** | ** ** | ** ** | ** ** | **Sulphur** | ** ** | **at** | ** ** |
| ** **                   | ** ** | **Then** | ** ** | **Then** | ** ** | **Then** | ** ** | **Then** | ** ** | **Plant** | ** ** | **Plant** | ** ** | **Plant** | ** ** | **Plant** | ** ** | **Plant** | ** ** | **Sumas** | ** ** | **Plant** | ** ** | **B.C.  Spot** | ** ** | **FOB** | ** ** | **Plant** | ** ** |
| ** **                   | ** ** | **Current** | ** ** | **Current** | ** ** | **Current** | ** ** | **Current** | ** ** | **Gate** | ** ** | **Gate** | ** ** | **Gate** | ** ** | **Gate** | ** ** | **Gate** | ** ** | **Spot** | ** ** | **Gate** | ** ** | **Plant  Gate** | ** ** | **Vancouver** | ** ** | **Gate** | ** ** |
| **Year**                     | ** ** | **$US/mmbtu** | ** ** | **$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)** |
| **Constant  Thereafter**     | ** ** |

 

*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 month price.*

 

25

----

 

**Note: These prices are actual posted pricesat the referenced date; other reference prices are derived based on historicalprice 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.

** **

**26**

----

** **

**Forecast Prices Used in Estimates**

The followingtable represents forecast prices for crude oil and natural gas liquids used inpreparing reserves data by GLJ, the Corporation’s independent qualifiedreserves evaluator.  This standard priceforecast of GLJ is effective 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** | ** ** | **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**                   | ** ** |
|----------------|------------|------------------|------------|------------------------------------|------------|---------------------------------------------------------------|------------|---------------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------|------------|---------------------------------------------------|------------|--------------------------------|------------|-----------------------------------------------------------|------------|--------------------------------|------------|
| **Year**       | ** ** | **Inflation  %** | ** ** | **Exchange  Rate  $US/$Cdn**       | ** ** | **Constant  2006 $  $US/bbl**                                 | ** ** | **Then  Current  $US/bbl**                  | ** ** | **Constant  2006 $  $US/bbl**                             | ** ** | **Then  Current  $US/bbl**                              | ** ** | **Constant  2006 $  $Cdn/bbl**                    | ** ** | **Then  Current  $Cdn/bbl**                       | ** ** | **Constant  2006 $  $Cdn/bbl** | ** ** | **Then  Current  $Cdn/bbl**                               | ** ** | **Constant  2006 $  $Cdn/bbl** | ** ** | **Then  Current  $Cdn/bbl** | ** ** | **Constant  2005  $Cdn/bbl** | ** ** | **Then  Current  $Cdn/bbl** | ** ** | **Spec.  Ethane  $Cdn/bbl** | ** ** | **Edmonton  Propane  $Cdn/bbl** | ** ** | **Edmonton  Butane  $Cdn/bbl** | ** ** | **Pentanes  Plus********$Cdn/bbl** | ** ** |
| 1994           |       | 0.2              |       | 0.732                              |       | 21.47                                                         |       | 17.18                                       |       | 19.77                                                     |       | 15.82                                                   |       | 27.77                                             |       | 22.22                                             |       | 23.08                          |       | 18.47                                                     |       | 18.77                          |       | 15.02 |   | 24.12 |   | 19.30 |   | n/a |   | 12.53 |   | 13.45 |   | 21.69 |   |
| 1995           |       | 2.2              |       | 0.729                              |       | 22.93                                                         |       | 18.39                                       |       | 21.25                                                     |       | 17.04                                                   |       | 30.22                                             |       | 24.23                                             |       | 25.94                          |       | 20.80                                                     |       | 21.55                          |       | 17.28 |   | 27.05 |   | 21.69 |   | n/a |   | 13.90 |   | 13.79 |   | 24.11 |   |
| 1996           |       | 1.6              |       | 0.733                              |       | 26.84                                                         |       | 21.99                                       |       | 24.94                                                     |       | 20.43                                                   |       | 35.87                                             |       | 29.39                                             |       | 30.67                          |       | 25.13                                                     |       | 24.49                          |       | 20.06 |   | 31.86 |   | 26.10 |   | n/a |   | 22.31 |   | 17.15 |   | 30.06 |   |
| 1997           |       | 1.6              |       | 0.722                              |       | 24.76                                                         |       | 20.61                                       |       | 23.04                                                     |       | 19.18                                                   |       | 33.46                                             |       | 27.85                                             |       | 25.43                          |       | 21.17                                                     |       | 17.31                          |       | 14.41 |   | 28.50 |   | 23.72 |   | n/a |   | 18.62 |   | 18.73 |   | 30.91 |   |
| 1998           |       | 0.9              |       | 0.675                              |       | 17.05                                                         |       | 14.42                                       |       | 15.17                                                     |       | 12.83                                                   |       | 24.07                                             |       | 20.36                                             |       | 17.31                          |       | 14.64                                                     |       | 11.17                          |       | 9.45 |   | 20.04 |   | 16.95 |   | n/a |   | 11.15 |   | 12.44 |   | 21.83 |   |
| 1999           |       | 1.7              |       | 0.673                              |       | 22.61                                                         |       | 19.29                                       |       | 20.87                                                     |       | 17.81                                                   |       | 32.45                                             |       | 27.69                                             |       | 27.94                          |       | 23.84                                                     |       | 23.05                          |       | 19.67 |   | 29.79 |   | 25.42 |   | n/a |   | 15.89 |   | 18.70 |   | 27.71 |   |
| 2000           |       | 2.7              |       | 0.673                              |       | 34.82                                                         |       | 30.22                                       |       | 32.67                                                     |       | 28.35                                                   |       | 51.35                                             |       | 44.56                                             |       | 40.62                          |       | 35.25                                                     |       | 31.50                          |       | 27.34 |   | 45.99 |   | 39.91 |   | n/a |   | 32.18 |   | 35.60 |   | 46.31 |   |
| 2001           |       | 2.6              |       | 0.646                              |       | 29.14                                                         |       | 25.97                                       |       | 27.34                                                     |       | 24.37                                                   |       | 44.21                                             |       | 39.40                                             |       | 31.08                          |       | 27.70                                                     |       | 19.01                          |       | 16.94 |   | 35.41 |   | 31.56 |   | n/a |   | 31.85 |   | 31.17 |   | 42.48 |   |
| 2002           |       | 2.2              |       | 0.637                              |       | 28.52                                                         |       | 26.08                                       |       | 27.33                                                     |       | 24.99                                                   |       | 44.10                                             |       | 40.33                                             |       | 34.81                          |       | 31.83                                                     |       | 29.06                          |       | 26.57 |   | 38.80 |   | 35.48 |   | n/a |   | 21.39 |   | 27.08 |   | 40.73 |   |
| 2003           |       | 2.8              |       | 0.721                              |       | 33.24                                                         |       | 31.07                                       |       | 30.96                                                     |       | 28.93                                                   |       | 46.71                                             |       | 43.66.                                            |       | 34.36                          |       | 32.11                                                     |       | 28.10                          |       | 26.26 |   | 40.18 |   | 37.55 |   | n/a |   | 32.14 |   | 34.36 |   | 44.23 |   |
| 2004           |       | 1.8              |       | 0.768                              |       | 43.08                                                         |       | 41.38                                       |       | 39.76                                                     |       | 38.20                                                   |       | 55.13                                             |       | 52.96                                             |       | 38.37                          |       | 36.86                                                     |       | 30.30                          |       | 29.11 |   | 47.62 |   | 45.75 |   | n/a |   | 34.70 |   | 39.97 |   | 54.07 |   |
| 2005(e)        |       | 2.2              |       | 0.825                              |       | 57.86                                                         |       | 56.60                                       |       | 56.38                                                     |       | 55.15                                                   |       | 70.65                                             |       | 69.11                                             |       | 45.96                          |       | 44.96                                                     |       | 34.90                          |       | 34.14 |   | 58.33 |   | 57.07 |   | n/a |   | 42.55 |   | 51.41 |   | 69.45 |   |
| 2006 Q1        |       | 2.0              |       | 0.850                              |       | 56.00                                                         |       | 56.00                                       |       | 54.50                                                     |       | 54.50                                                   |       | 65.25                                             |       | 65.25                                             |       | 39.25                          |       | 39.25                                                     |       | 28.50                          |       | 28.50 |   | 52.25 |   | 52.25 |   | 35.50 |   | 41.75 |   | 48.25 |   | 66.00 |   |
| 2006 Q2        |       | 2.0              |       | 0.850                              |       | 56.00                                                         |       | 56.00                                       |       | 54.50                                                     |       | 54.50                                                   |       | 65.25                                             |       | 65.25                                             |       | 44.25                          |       | 44.25                                                     |       | 35.25                          |       | 35.25 |   | 56.00 |   | 56.00 |   | 35.25 |   | 41.75 |   | 48.25 |   | 66.00 |   |
| 2006 Q3        |       | 2.0              |       | 0.850                              |       | 57.50                                                         |       | 57.50                                       |       | 56.00                                                     |       | 56.00                                                   |       | 67.00                                             |       | 67.00                                             |       | 48.25                          |       | 48.25                                                     |       | 38.75                          |       | 38.75 |   | 58.25 |   | 58.25 |   | 35.50 |   | 43.00 |   | 49.50 |   | 67.75 |   |
| 2006 Q4        |       | 2.0              |       | 0.850                              |       | 58.00                                                         |       | 58.00                                       |       | 56.50                                                     |       | 56.50                                                   |       | 67.50                                             |       | 67.50                                             |       | 40.50                          |       | 40.50                                                     |       | 30.25                          |       | 30.25 |   | 56.75 |   | 56.75 |   | 37.50 |   | 43.25 |   | 50.00 |   | 68.25 |   |
|           |       |             |       |                               |       |                                                          |       |                                        |       |                                                      |       |                                                    |       |                                              |       |                                              |       |                           |       |                                                      |       |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2006 Full Year |       | 2.0              |       | 0.850                              |       | 57.00                                                         |       | 57.00                                       |       | 55.50                                                     |       | 55.50                                                   |       | 66.25                                             |       | 66.25                                             |       | 43.00                          |       | 43.00                                                     |       | 33.25                          |       | 33.25 |   | 55.75 |   | 55.75 |   | 36.00 |   | 42.50 |   | 49.00 |   | 67.00 |   |
| 2007           |       | 2.0              |       | 0.850                              |       | 54.00                                                         |       | 55.00                                       |       | 52.50                                                     |       | 53.50                                                   |       | 62.75                                             |       | 64.00                                             |       | 41.75                          |       | 42.50                                                     |       | 32.00                          |       | 32.75 |   | 54.25 |   | 55.25 |   | 31.25 |   | 41.00 |   | 47.25 |   | 65.25 |   |
| 2008           |       | 2.0              |       | 0.850                              |       | 49.00                                                         |       | 51.00                                       |       | 47.50                                                     |       | 49.50                                                   |       | 57.00                                             |       | 59.25                                             |       | 39.50                          |       | 41.00                                                     |       | 31.25                          |       | 32.50 |   | 49.25 |   | 51.25 |   | 27.00 |   | 38.00 |   | 43.75 |   | 60.50 |   |
| 2009           |       | 2.0              |       | 0.850                              |       | 45.25                                                         |       | 48.00                                       |       | 43.75                                                     |       | 46.50                                                   |       | 52.50                                             |       | 55.75                                             |       | 37.25                          |       | 39.50                                                     |       | 30.25                          |       | 32.00 |   | 45.50 |   | 48.25 |   | 25.25 |   | 35.75 |   | 41.25 |   | 56.75 |   |
| 2010           |       | 2.0              |       | 0.850                              |       | 43.00                                                         |       | 46.50                                       |       | 41.50                                                     |       | 45.00                                                   |       | 50.00                                             |       | 54.00                                             |       | 36.50                          |       | 39.50                                                     |       | 29.50                          |       | 32.00 |   | 43.25 |   | 46.75 |   | 24.25 |   | 34.50 |   | 40.00 |   | 55.00 |   |
| 2011           |       | 2.0              |       | 0.850                              |       | 40.75                                                         |       | 45.00                                       |       | 39.50                                                     |       | 43.50                                                   |       | 47.25                                             |       | 52.25                                             |       | 36.00                          |       | 39.75                                                     |       | 30.25                          |       | 33.50 |   | 41.00 |   | 45.25 |   | 23.25 |   | 33.50 |   | 38.75 |   | 53.25 |   |
| 2012           |       | 2.0              |       | 0.850                              |       | 40.00                                                         |       | 45.00                                       |       | 38.75                                                     |       | 43.50                                                   |       | 46.50                                             |       | 52.25                                             |       | 35.25                          |       | 39.75                                                     |       | 29.75                          |       | 33.50 |   | 40.25 |   | 45.25 |   | 23.25 |   | 33.50 |   | 38.75 |   | 53.25 |   |
| 2013           |       | 2.0              |       | 0.850                              |       | 40.00                                                         |       | 46.00                                       |       | 38.75                                                     |       | 44.50                                                   |       | 46.25                                             |       | 53.25                                             |       | 35.25                          |       | 40.50                                                     |       | 29.50                          |       | 34.00 |   | 40.00 |   | 46.00 |   | 23.75 |   | 34.00 |   | 39.50 |   | 54.25 |   |
| 2014           |       | 2.0              |       | 0.850                              |       | 40.00                                                         |       | 46.75                                       |       | 38.50                                                     |       | 45.25                                                   |       | 46.25                                             |       | 54.25                                             |       | 35.25                          |       | 41.25                                                     |       | 29.75                          |       | 34.75 |   | 40.00 |   | 47.00 |   | 24.25 |   | 34.75 |   | 40.25 |   | 55.25 |   |
| 2015           |       | 2.0              |       | 0.850                              |       | 40.00                                                         |       | 47.75                                       |       | 38.75                                                     |       | 46.25                                                   |       | 46.50                                             |       | 55.50                                             |       | 35.25                          |       | 42.25                                                     |       | 29.50                          |       | 35.25 |   | 40.25 |   | 48.00 |   | 25.00 |   | 35.50 |   | 41.00 |   | 56.50 |   |
| 2016           |       | 2.0              |       | 0.850                              |       | 40.00                                                         |       | 48.75                                       |       | 38.75                                                     |       | 47.25                                                   |       | 46.25                                             |       | 56.50                                             |       | 35.25                          |       | 43.00                                                     |       | 29.50                          |       | 36.00 |   | 40.00 |   | 48.75 |   | 25.50 |   | 36.25 |   | 41.75 |   | 57.75 |   |
| 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                                                  | %          | 29.50                          |       | +2.0/yr | % | 40.00 |   | +2.0%/yr |   | Escalate at 2.0% per  year |   |
|           |       |

 

27

----

 

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**

** **
| ** **     | ** ** | **US Gulf  Coast Gas Price @ Henry Hub** | ** ** | **Midwest  Price @ Chicago** | ** ** | **AECO-C  Spot**            | ** ** | **Alberta  Plant Gate**      | ** ** | **Saskatchewan  Plant Gate**      | ** ** | ** **                | ** ** | **British  Columbia**      | ** ** | ** **              | ** ** | ** **            | ** ** |
|----------------|------------|------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|------------------------------|------------|-----------------------------------|------------|---------------------------|------------|----------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **     | ** ** | ** **                               | ** ** | ** **                   | ** ** | ** **                  | ** ** | ** **                   | ** ** | **Spot**                          | ** ** | ** **                | ** ** | ** **                 | ** ** | ** **              | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Year**       | ** ** | **Constant  2006 $ $US/mmbtu**      | ** ** | **Then  Current $US/mmbtu**  | ** ** | **Then  Current $US/mmbtu** | ** ** | **Then  Current $Cdn/mmbtu** | ** ** | **Constant  2006 $ $/mmbtu** | ** ** | **Then  Current $/mmbtu** | ** ** | **ARP  $/mmbtu**           | ** ** | **Aggregator  $/mmbtu** | ** ** | **Alliance  $/mmbtu** | ** ** | **SaskEnergy  $/mmbtu** | ** ** | **Spot  $/mmbtu** | ** ** | **Sumas  Spot $US/mmbtu** | ** ** | **CanWest  Plant Gate $/mmbtu** | ** ** | **Spot  Plant Gate $/mmbtu** | ** ** | **Sulphur  FOB Vancouver $US/LT** | ** ** | **Alberta  Sulphur at Plant Gate $Cdn/LT** | ** ** |
| 1994           |       | 2.42                                     |       | 1.94                         |       | 2.11                        |       | 1.98                         |       | 2.32                              |       | 1.86                      |       | 1.81                       |       | n/a                     |       | n/a                   |       | 1.88 |   | 1.88 |   | 1.59 |   | 1.81 |   | 1.87 |   | 44.96 |   | 16.57 |   |
| 1995           |       | 2.12                                     |       | 1.70                         |       | 1.69                        |       | 1.15                         |       | 1.27                              |       | 1.02                      |       | 1.31                       |       | n/a                     |       | n/a                   |       | 1.35 |   | 0.98 |   | 1.03 |   | 1.29 |   | 1.12 |   | 54.99 |   | 30.07 |   |
| 1996           |       | 3.08                                     |       | 2.52                         |       | 2.73                        |       | 1.39                         |       | 1.54                              |       | 1.26                      |       | 1.63                       |       | n/a                     |       | n/a                   |       | 1.52 |   | 1.28 |   | 1.32 |   | 1.50 |   | 1.47 |   | 36.28 |   | 14.44 |   |
| 1997           |       | 2.97                                     |       | 2.47                         |       | 2.75                        |       | 1.84                         |       | 2.03                              |       | 1.69                      |       | 1.96                       |       | n/a                     |       | n/a                   |       | 1.84 |   | 1.75 |   | 1.70 |   | 1.80 |   | 1.98 |   | 34.75 |   | 11.50 |   |
| 1998           |       | 2.55                                     |       | 2.16                         |       | 2.20                        |       | 2.03                         |       | 2.22                              |       | 1.88                      |       | 1.94                       |       | n/a                     |       | n/a                   |       | 2.05 |   | 2.13 |   | 1.60 |   | 1.94 |   | 2.00 |   | 24.59 |   | -6.51 |   |
| 1999           |       | 2.72                                     |       | 2.32                         |       | 2.34                        |       | 2.92                         |       | 3.22                              |       | 2.75                      |       | 2.48                       |       | n/a                     |       | n/a                   |       | 2.83 |   | 2.97 |   | 2.15 |   | 2.51 |   | 2.78 |   | 33.74 |   | 6.93 |   |
| 2000           |       | 4.99                                     |       | 4.33                         |       | 4.38                        |       | 5.08                         |       | 5.67                              |       | 4.92                      |       | 4.50                       |       | 4.60                    |       | n/a                   |       | 4.79 |   | 5.13 |   | 4.17 |   | 5.27 |   | 4.88 |   | 38.14 |   | 13.59 |   |
| 2001           |       | 4.54                                     |       | 4.05                         |       | 4.17                        |       | 6.21                         |       | 6.81                              |       | 6.07                      |       | 5.41                       |       | 5.30                    |       | 5.61                  |       | 5.71 |   | 6.13 |   | 4.56 |   | 6.76 |   | 6.29 |   | 18.29 |   | -14.66 |   |
| 2002           |       | 3.67                                     |       | 3.36                         |       | 3.30                        |       | 4.04                         |       | 4.24                              |       | 3.88                      |       | 3.88                       |       | 3.83                    |       | 3.82                  |       | 4.04 |   | 4.08 |   | 2.68 |   | 3.64 |   | 3.93 |   | 29.38 |   | 3.04 |   |
| 2003           |       | 5.88                                     |       | 5.50                         |       | 5.60                        |       | 6.66                         |       | 6.94                              |       | 6.49                      |       | 6.13                       |       | 5.89                    |       | 6.69                  |       | 6.40 |   | 6.68 |   | 4.66 |   | 5.71 |   | 6.32 |   | 59.81 |   | 39.83 |   |
| 2004           |       | 6.44                                     |       | 6.19                         |       | 6.13                        |       | 6.88                         |       | 6.98                              |       | 6.70                      |       | 6.31                       |       | 6.16                    |       | 6.44                  |       | 6.48 |   | 6.78 |   | 5.26 |   | 5.52 |   | 6.45 |   | 62.99 |   | 38.61 |   |
| 2005(e)        |       | 9.17                                     |       | 8.97                         |       | 8.24                        |       | 8.58                         |       | 8.60                              |       | 8.42                      |       | 8.35                       |       | 8.36                    |       | 8.45                  |       | 8.32 |   | 8.36 |   | 7.13 |   | 6.33 |   | 8.14 |   | 63.50 |   | 34.04 |   |
| 2006 Q1        |       | 11.00                                    |       | 11.00                        |       | 10.80                       |       | 10.45                        |       | 10.20                             |       | 10.20                     |       | 10.20                      |       | 10.15                   |       | 11.05                 |       | 10.35 |   | 10.35 |   | 9.70 |   | 8.40 |   | 10.75 |   | 63.50 |   | 31.00 |   |
| 2006 Q2        |       | 10.00                                    |       | 10.00                        |       | 9.80                        |       | 10.35                        |       | 10.10                             |       | 10.10                     |       | 10.10                      |       | 10.00                   |       | 9.90                  |       | 10.25 |   | 10.25 |   | 8.90 |   | 8.30 |   | 9.85 |   | 63.50 |   | 31.00 |   |
| 2006 Q3        |       | 10.00                                    |       | 10.00                        |       | 9.80                        |       | 10.45                        |       | 10.20                             |       | 10.20                     |       | 10.20                      |       | 10.10                   |       | 9.90                  |       | 10.35 |   | 10.35 |   | 8.90 |   | 8.40 |   | 9.85 |   | 63.50 |   | 31.00 |   |
| 2006 Q4        |       | 11.00                                    |       | 11.00                        |       | 10.85                       |       | 11.05                        |       | 10.80                             |       | 10.80                     |       | 10.80                      |       | 10.75                   |       | 11.10                 |       | 10.95 |   | 10.95 |   | 10.10 |   | 8.85 |   | 11.20 |   | 63.50 |   | 31.00 |   |
|           |       |                                     |       |                         |       |                        |       |                         |       |                              |       |                      |       |                       |       |                    |       |                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2006 Full Year |       | 10.50                                    |       | 10.50                        |       | 10.30                       |       | 10.60                        |       | 10.35                             |       | 10.35                     |       | 10.35                      |       | 10.25                   |       | 10.50                 |       | 10.50 |   | 10.50 |   | 9.40 |   | 8.50 |   | 10.40 |   | 63.50 |   | 31.00 |   |
| 2007           |       | 8.60                                     |       | 8.75                         |       | 8.90                        |       | 9.25                         |       | 8.80                              |       | 9.00                      |       | 9.00                       |       | 9.00                    |       | 8.90                  |       | 9.15 |   | 9.15 |   | 8.15 |   | 8.60 |   | 9.00 |   | 55.00 |   | 21.00 |   |
| 2008           |       | 7.20                                     |       | 7.50                         |       | 7.65                        |       | 8.00                         |       | 7.45                              |       | 7.75                      |       | 7.75                       |       | 7.75                    |       | 7.45                  |       | 7.90 |   | 7.90 |   | 7.00 |   | 7.65 |   | 7.65 |   | 45.00 |   | 9.50 |   |
| 2009           |       | 6.60                                     |       | 7.00                         |       | 7.15                        |       | 7.50                         |       | 6.85                              |       | 7.25                      |       | 7.25                       |       | 7.25                    |       | 6.90                  |       | 7.40 |   | 7.40 |   | 6.55 |   | 7.15 |   | 7.15 |   | 45.00 |   | 9.50 |   |
| 2010           |       | 6.25                                     |       | 6.75                         |       | 6.90                        |       | 7.20                         |       | 6.40                              |       | 6.95                      |       | 6.95                       |       | 6.95                    |       | 6.65                  |       | 7.10 |   | 7.10 |   | 6.30 |   | 6.85 |   | 6.85 |   | 46.00 |   | 10.50 |   |
| 2011           |       | 5.90                                     |       | 6.50                         |       | 6.65                        |       | 6.90                         |       | 6.05                              |       | 6.65                      |       | 6.65                       |       | 6.65                    |       | 6.35                  |       | 6.80 |   | 6.80 |   | 6.05 |   | 6.55 |   | 6.55 |   | 47.00 |   | 12.00 |   |
| 2012           |       | 5.75                                     |       | 6.50                         |       | 6.65                        |       | 6.90                         |       | 5.90                              |       | 6.65                      |       | 6.65                       |       | 6.65                    |       | 6.35                  |       | 6.80 |   | 6.80 |   | 6.05 |   | 6.55 |   | 6.55 |   | 48.00 |   | 13.00 |   |
| 2013           |       | 5.75                                     |       | 6.65                         |       | 6.80                        |       | 7.05                         |       | 5.95                              |       | 6.80                      |       | 6.80                       |       | 6.80                    |       | 6.50                  |       | 6.95 |   | 6.95 |   | 6.20 |   | 6.70 |   | 6.70 |   | 49.00 |   | 14.00 |   |
| 2014           |       | 5.75                                     |       | 6.75                         |       | 6.90                        |       | 7.20                         |       | 5.95                              |       | 6.95                      |       | 6.95                       |       | 6.95                    |       | 6.65                  |       | 7.10 |   | 7.10 |   | 6.30 |   | 6.85 |   | 6.85 |   | 50.00 |   | 15.50 |   |
| 2015           |       | 5.75                                     |       | 6.90                         |       | 7.05                        |       | 7.40                         |       | 6.00                              |       | 7.15                      |       | 7.15                       |       | 7.15                    |       | 6.80                  |       | 7.30 |   | 7.30 |   | 6.45 |   | 7.00 |   | 7.00 |   | 51.00 |   | 17.00 |   |
| 2016           |       | 5.75                                     |       | 7.05                         |       | 7.20                        |       | 7.55                         |       | 6.00                              |       | 7.30                      |       | 7.30                       |       | 7.30                    |       | 6.95                  |       | 7.45 |   | 7.45 |   | 6.60 |   | 7.15 |   | 7.15 |   | 52.00 |   | 18.00 |   |
| 2017+          |       | 5.75                                     |       | +2.0%/yr                     |       | +2.0%/yr                    |       | +2.0%/yr                     |       | 6.00                              |       | -2.0%/yr                  |       | Escalate at 2.0% per  year |       | +2.0%/yr                |       |

 

*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 representsthe price before raw gas gathering and processing charges are deducted. Spotrefers to weighted average one month price.*

 

28

----

 

**Reserves Reconciliation**

** **

The following table provides areconciliation of the Corporation’s net reserves based on forecast pricing, byprincipal product type, between this analysis and the Corporation’s prior year-endevaluation:

 
| ** **           | ** ** | **Light  and Medium Oil** | ** ** | **Unconventional  Gas (CBM)** | ** ** | **Conventional  Natural Gas**           | ** ** | **Natural  Gas Liquids** | ** ** | **BOE**                   | ** ** |
|----------------------|------------|---------------------------|------------|-------------------------------|------------|-----------------------------------------|------------|--------------------------|------------|---------------------------|------------|
| **FACTORS**          | ** ** | **Net  Proved  (Mbbl)**   | ** ** | **Net  Probable  (Mbbl)**     | ** ** | **Net  Proved  Plus  Probable  (Mbbl)** | ** ** | **Net  Proved  (MMcf)**  | ** ** | **Net  Probable  (MMcf)** | ** ** | **Net  Proved  Plus  Probable  (MMcf)** | ** ** | **Net  Proved  (MMcf)** | ** ** | **Net   Probable  (MMcf)** | ** ** | **Net  Proved  Plus Probable  (MMcf)** | ** ** | **Net  Proved  (Mbbl)** | ** ** | **Net  Provable (Mbbl)** | ** ** | **Net  Proved Plus Probable (Mbbl)** | ** ** | **Net  Proved  (Mboe)** | ** ** | **Net  Provable (Mboe)** | ** ** | **Net  Proved Plus Probable (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 |   |

 

29

----

 

**Future Net 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 10 percent:

 
| **Period and Factor**                                                                     | ** ** | **After Tax  (M$)** | ** ** | **Before Tax  (M$)** | ** ** |
|-------------------------------------------------------------------------------------------|------------|---------------------|------------|----------------------|------------|
|                                                                                      |       |                |       |                 |       |
| 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 gas reserves.

 

(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.

** **

**30**

----

** **

**Undeveloped Reserves**

** **

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.  It is expected that commodity prices willcontinue to remain strong, which will increase land prices and new opportunitycosts leaving the most economical path to increased profitability being thedevelopment of existing Proved undeveloped and Probable undeveloped fieldsalready existing in the Company’s inventory.

 

**Significant Factors or UncertaintiesAffecting 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.

 

**Future Development 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:

 

**Capital Development Cost(Constant Dollars)**

** **
| ** **                  | ** ** | **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:

 

**Capital Development Cost(Forecast Pricing)**

** **
| ** **                  | ** ** | **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              |       |

** **

 

31

----

 

**Oil and Gas 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** | ** ** | **Non-Producing** | ** ** |
|----------------------|------------|---------------|------------|-------------------|------------|
| ** **           | ** ** | **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.

 

**Properties With 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:**

** **

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

 

(4)                                  “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.

 

**Expirations and Work Commitments**

** **

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

 
| **Work Commitments 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 |   |

 

32

----

 

**Undeveloped Land Due to Expire**

The followingtable represents the undeveloped 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                    |       |

 

**Forward Contracts and Future Commitments**

TheCorporation enters into commodity sales agreements and certain derivativefinancial instruments to reduce its exposure to commodity pricevolatility.  These financial instrumentsare entered into solely for hedging purposes and are not used for trading orother speculative purposes.

At December31, 2005, the Corporation had the 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 |       |

 

**Historical Production Volume by Field**

The followingtable discloses for each important field, and in total, the Corporation’s gross(before royalty interests) production volumes for the financial year endedDecember 31, 2005, for each product type. 
| **Field**   | ** ** | **Light and Medium Crude Oil  (Bbls/d)** | ** ** | **Natural Gas  (Mcf/d)** | ** ** | **Natural Gas Liquids  (Bbls/d)** | ** ** | **BOE  (BOE/d)** | ** ** | **% of total** | ** ** |
|-------------|------------|------------------------------------------|------------|--------------------------|------------|-----------------------------------|------------|------------------|------------|----------------|------------|
|        |       |                                     |       |                     |       |                              |       |             |       |           |       |
| Drumhelller |       | 496                                      |       | 10,317                   |       | 106                               |       | 2,322            |       | 88             | %          |
| Total (net) |       | 499                                      |       | 12,083                   |       | 119                               |       | 2,632            |       | 100            | %          |

 

 

33

----

 

 

**Additional Information ConcerningAbandonment and Reclamation Costs**

The followingtable represents the Corporation’s projected abandonment costs for futuredrilling, in thousands of dollars, using constant pricing:
| ** **                 | ** ** | **Year** | ** ** | **Totals** | ** ** | ** ** | ** ** |
|----------------------------|------------|----------|------------|------------|------------|------------|------------|
| **Entity  Description**    | ** ** | **2006** | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **2015** | ** ** | **2016** | ** ** | **2017** | ** ** | **Subtotal** | ** ** | **Remainder** | ** ** | **Total** | ** ** | **10%  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 followingtable represents the Corporation’s projected abandonment costs for futuredrilling, in thousands of dollars, using forecast prices:
| ** **                 | ** ** | **Year** | ** ** | **Totals** | ** ** | ** ** | ** ** |
|----------------------------|------------|----------|------------|------------|------------|------------|------------|
| **Entity  Description**    | ** ** | **2006** | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **2014** | ** ** | **2015** | ** ** | **2016** | ** ** | **2017** | ** ** | **Subtotal** | ** ** | **Remainder** | ** ** | **Total** | ** ** | **10%  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 |   |

 

 

 

 

 

34

----

 

TheCorporation estimates the costs to abandon and reclaim all its shut in andproducing wells, facilities, gas plants and pipelines.  The Corporation’s model for estimating theamount and timing of future abandonment and reclamation expenditures was doneon an operating area level.  Estimatedexpenditures for each operating area are based on the Alberta Energy andUtilities Board methodology, which details the cost of abandonment andreclamation in each specific geographic region. Each region was assigned an average cost per well to abandon and reclaimthe wells in that area.  Facilityreclamation costs are scheduled to be incurred in the year following the end ofthe reserve life of its associated reserves. The Corporation will be liable for its share of ongoing environmentalobligations and for the ultimate reclamation of the properties held by it uponabandonment.  Ongoing environmentalobligations are expected to be funded out of cash flow. As at December 31,2005, the Corporation expected to incur reclamation and abandonment costs inrespect of 432 gross (258 net) wells located on its properties and assets.

**Tax Horizon**

TheCorporation does not expect to be cash taxable in 2006 or 2007 and withcontinued exploration activity, we could push one tax horizon further.

**Costs Incurred**

The following,as prepared by the Corporation, represents the costs incurred, in thousands ofdollars, in Canada by Canadian Superior before property dispositions andcorporate asset additions: 
| **Category**                                      | ** ** | **Amount** | ** ** |
|---------------------------------------------------|------------|------------|------------|
| Property Acquisitions —  Proved Properties   |       | 0          |       |
| Property Acquisitions —  Unproved Properties |       | 10,419     |       |
| Exploration Costs                                 |       | 4,659      |       |
| Development Costs                                 |       | 23,159     |       |

 

**Exploration and Development Activities**

The followingtable sets forth the gross and net exploration and development wells in whichthe Corporation participated during 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 followingoperations strategies build on and augment the efforts of the Corporation in2005:

1.                                       Continue to grow Western Canadian cash flowand production, focusing on the Drumheller area and high impact WesternCanadian plays;

2.                                       Maintain high interest operationalpositions and a strong balance sheet;

3.                                       Continue forward with drilling anddevelopment of the Corporation’s Offshore Nova Scotia and Offshore Trinidad andTobago assets; and

 

 

35

----

 

4.             Continue to focuson increasing the underlying value for shareholders through strategic drilling,development and acquisitions.

 
| **Production  History**                                          | ** ** |
|------------------------------------------------------------------|------------|
| ** **                                                       | ** ** |
| **2005 Three Months Ended**                                      | ** ** | **December** | ** ** | **September** | ** ** | **June** | ** ** | **March** | ** ** |
| ** **                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Natural Gas**                                                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Average Daily Production  (Mcf/d)                                |       | 13.489 |   | 12,345 |   | 11,375 |   | 11,092 |   |
| Average Sales Price  ($/Mcf)                                     |       | $ | 11.91 |   | $ | 9.86 |   | $ | 7.66 |   | $ | 7.59 |   |
| Natural Gas Revenue net of  transportation ($000’s)         |       | $ | 14,780 |   | $ | 11,194 |   | $ | 7,929 |   | $ | 7,574 |   |
| Royalties ($/Mcf)                                                |       | $ | 2.40 |   | $ | 1.85 |   | $ | 1.33 |   | $ | 1.51 |   |
| Operating costs ($/Mcf)                                          |       | $ | 1.30 |   | $ | 1.37 |   | $ | 1.13 |   | $ | 1.14 |   |
| Operating Netback ($/Mcf)                                        |       | $ | 8.21 |   | $ | 6.64 |   | $ | 5.20 |   | $ | 4.94 |   |
|                                                             |       | $ |   | $ |   |   |   |   |   |
| **Oil & NGLs**                                               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Average Daily Production  (bbl/d)                                |       | 705 |   | 647 |   | 555 |   | 562 |   |
| Average Net Sales Price  ($/bbl)                                 |       | $ | 59.45 |   | $ | 63.60 |   | $ | 57.01 |   | $ | 50.34 |   |
| Oil & NGLs Revenue net  of transportation ($000’s)      |       | $ | 3,855 |   | $ | 3,788 |   | $ | 2,879 |   | $ | 2,546 |   |
| Royalties ($/bbl)                                                |       | $ | 9.45 |   | $ | 8.90 |   | $ | 7.34 |   | $ | 4.55 |   |
| Operating costs ($/bbl)                                          |       | $ | 6.46 |   | $ | 8.86 |   | $ | 8.46 |   | $ | 7.59 |   |
| Operating Netback ($/bbl)                                        |       | $ | 43.54 |   | $ | 45.84 |   | $ | 41.21 |   | $ | 38.20 |   |
|                                                             |       | $ |   | $ |   |   |   |   |   |
| **Barrels of Oil Equivalent (6:1)**                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Average Daily Production  (boe/d)                                |       | 2,953 |   | 2,705 |   | 2,451 |   | 2,411 |   |
| Average Sales Price  ($/boe)                                     |       | $ | 68.59 |   | $ | 60.21 |   | $ | 48.46 |   | $ | 46.64 |   |
| Total Oil & Gas  Revenue net of transportation ($000’s) |       | $ | 18,635 |   | $ | 14,982 |   | $ | 10,808 |   | $ | 10,120 |   |
| Royalties ($/boe)                                                |       | $ | 13.21 |   | $ | 10.58 |   | $ | 7.84 |   | $ | 8.05 |   |
| Operating costs ($/boe)                                          |       | $ | 7.46 |   | $ | 8.39 |   | $ | 7.18 |   | $ | 6.92 |   |
| Operating Netback ($/boe)                                        |       | $ | 47.92 |   | $ | 41.24 |   | $ | 33.44 |   | $ | 31.57 |   |

 

Note: in 2005the majority of the CBM production occurred in the third quarter of the year,and is immaterial to the total yearly volumes. Also NGL production volumes areimmaterial to total volumes, and therefore are included with the oil.

 

 

 

36

----

 

**Production Estimates**

The followingtable represents a forecast, using constant pricing, of first year productionby product type:
| ** **                                     | ** ** | **2006  Average Daily Production** | ** ** | **Reserves**   | ** ** |
|------------------------------------------------|------------|------------------------------------|------------|----------------|------------|
| ** **                                     | ** ** | **Light and**                      | ** ** | ** **     | ** ** | ** ** | ** ** | **Natural Gas** | ** ** | **Oil** | ** ** | **Light and** | ** ** | ** ** | ** ** | ** ** | ** ** | **Natural Gas** | ** ** | **Oil** | ** ** |
| ** **                                     | ** ** | **Medium  Oil**                    | ** ** | **Heavy  Oil** | ** ** | **Natural  Gas** | ** ** | **Liquids** | ** ** | **Equivalent** | ** ** | **Medium Oil** | ** ** | **Heavy Oil** | ** ** | **Natural Gas** | ** ** | **Liquids** | ** ** | **Equivalent** | ** ** |
| ** **                                     | ** ** | **W.I.**                           | ** ** | **Net**        | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **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** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **MMcf** | ** ** | **MMcf** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** |
| ***Proved Producing***                         |       |                               |       |           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                                |       | 15                                 |       | 14             |       | 0 |   | 0 |   | 3,902 |   | 2,938 |   | 38 |   | 25 |   | 703 |   | 528 |   | 25 |   | 24 |   | 0 |   | 0 |   | 6,004 |   | 4,925 |   | 58 |   | 38 |   | 1,084 |   | 883 |   |
| Craigmyle-Chain                                |       | 84                                 |       | 74             |       | 0 |   | 0 |   | 2,632 |   | 2,054 |   | 3 |   | 2 |   | 525 |   | 418 |   | 154 |   | 143 |   | 0 |   | 0 |   | 4,150 |   | 3,409 |   | 4 |   | 3 |   | 850 |   | 714 |   |
| Other Properties                               |       | 369                                |       | 326            |       | 0 |   | 0 |   | 5,471 |   | 4,350 |   | 57 |   | 39 |   | 1,338 |   | 1,090 |   | 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 |   | 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** | ** ** | **772** | ** ** | **711** | ** ** | **0** | ** ** | **0** | ** ** | **18,244** | ** ** | **15,095** | ** ** | **162** | ** ** | **111** | ** ** | **3,975** | ** ** | **3,338** | ** ** |
| ***Proved  Developed Nonproducing***** ** | ** ** | ** **                         | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Aerial-Michichi                                |       | 0                                  |       | 0              |       | 0 |   | 0 |   | 7 |   | 6 |   | 0 |   | 0 |   | 2 |   | 1 |   | 1 |   | 1 |   | 0 |   | 0 |   | 83 |   | 67 |   | 1 |   | 0 |   | 15 |   | 12 |   |
| Craigmyle-Chain                                |       | 0                                  |       | 0              |       | 0 |   | 0 |   | 206 |   | 163 |   | 0 |   | 0 |   | 35 |   | 27 |   | 0 |   | 0 |   | 0 |   | 0 |   | 406 |   | 345 |   | 0 |   | 0 |   | 68 |   | 58 |   |
| Other Properties                               |       | 7                                  |       | 7              |       | 0 |   | 0 |   | 653 |   | 515 |   | 1 |   | 1 |   | 117 |   | 93 |   | 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 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| **Total: Proved Developed  Nonproducing**      | ** ** | **7**                              | ** ** | **7**          | ** ** | **0** | ** ** | **0** | ** ** | **866** | ** ** | **684** | ** ** | **1** | ** ** | **1** | ** ** | **153** | ** ** | **122** | ** ** | **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 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| Craigmyle-Chain                                |       | 0                                  |       | 0              |       | 0 |   | 0 |   | 260 |   | 183 |   | 0 |   | 0 |   | 43 |   | 31 |   | 0 |   | 0 |   | 0 |   | 0 |   | 247 |   | 189 |   | 0 |   | 0 |   | 41 |   | 31 |   |
| Other Properties                               |       | 0                                  |       | 0              |       | 0 |   | 0 |   | 0 |   | 6 |   | 0 |   | 0 |   | 0 |   | 1 |   | 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 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| **Total: Proved Undeveloped**                  | ** ** | **0**                              | ** ** | **0**          | ** ** | **0** | ** ** | **0** | ** ** | **260** | ** ** | **189** | ** ** | **0** | ** ** | **0** | ** ** | **43** | ** ** | **32** | ** ** | **0** | ** ** | **0** | ** ** | **0** | ** ** | **0** | ** ** | **2,538** | ** ** | **2,248** | ** ** | **2** | ** ** | **1** | ** ** | **425** | ** ** | **376** | ** ** |
| ***Total  Proved***                            | ** ** | ** **                         | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Aerial-Michichi                                |       | 15                                 |       | 14             |       | 0 |   | 0 |   | 3,908 |   | 2,944 |   | 38 |   | 25 |   | 705 |   | 530 |   | 26 |   | 25 |   | 0 |   | 0 |   | 6,087 |   | 4,991 |   | 59 |   | 39 |   | 1,100 |   | 895 |   |
| Craigmyle-Chain                                |       | 84                                 |       | 74             |       | 0 |   | 0 |   | 3,099 |   | 2,400 |   | 3 |   | 2 |   | 603 |   | 476 |   | 154 |   | 143 |   | 0 |   | 0 |   | 4,803 |   | 3,942 |   | 4 |   | 3 |   | 959 |   | 803 |   |
| Other Properties                               |       | 376                                |       | 332            |       | 0 |   | 0 |   | 6,125 |   | 4,871 |   | 58 |   | 40 |   | 1,455 |   | 1,184 |   | 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 |   | 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** | ** ** | **782** | ** ** | **721** | ** ** | **0** | ** ** | **0** | ** ** | **22,905** | ** ** | **19,060** | ** ** | **167** | ** ** | **114** | ** ** | **4,766** | ** ** | **4,012** | ** ** |
| ***Total  Probable***                          |       |                               |       |           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                                |       | 0                                  |       | 0              |       | 0 |   | 0 |   | 267 |   | 184 |   | 3 |   | 2 |   | 47 |   | 33 |   | 4 |   | 4 |   | 0 |   | 0 |   | 1,680 |   | 1,394 |   | 16 |   | 11 |   | 300 |   | 246 |   |
| Craigmyle-Chain                                |       | 3                                  |       | 2              |       | 0 |   | 0 |   | 109 |   | 79 |   | 0 |   | 0 |   | 21 |   | 15 |   | 43 |   | 40 |   | 0 |   | 0 |   | 1,214 |   | 1,004 |   | 2 |   | 1 |   | 247 |   | 208 |   |
| Other Properties                               |       | 26                                 |       | 20             |       | 0 |   | 0 |   | 445 |   | 337 |   | 2 |   | 1 |   | 101 |   | 78 |   | 661 |   | 585 |   | 0 |   | 0 |   | 8,042 |   | 6,607 |   | 67 |   | 46 |   | 2,068 |   | 1,732 |   |

 

 

37

----

 
| ** **                                  | ** ** | **2006  Average Daily Production** | ** ** | **Reserves**   | ** ** |
|---------------------------------------------|------------|------------------------------------|------------|----------------|------------|
| ** **                                  | ** ** | **Light and**                      | ** ** | ** **     | ** ** | ** ** | ** ** | **Natural Gas** | ** ** | **Oil** | ** ** | **Light and** | ** ** | ** ** | ** ** | ** ** | ** ** | **Natural Gas** | ** ** | **Oil** | ** ** |
| ** **                                  | ** ** | **Medium  Oil**                    | ** ** | **Heavy  Oil** | ** ** | **Natural  Gas** | ** ** | **Liquids** | ** ** | **Equivalent** | ** ** | **Medium Oil** | ** ** | **Heavy Oil** | ** ** | **Natural Gas** | ** ** | **Liquids** | ** ** | **Equivalent** | ** ** |
| ** **                                  | ** ** | **W.I.**                           | ** ** | **Net**        | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **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** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **MMcf** | ** ** | **MMcf** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** |
| ARTC/AGCA Adjustments                       |       | 0                                  |       | 0              |       | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| **Total: Probable**                         | ** ** | **29**                             | ** ** | **22**         | ** ** | **0** | ** ** | **0** | ** ** | **821** | ** ** | **600** | ** ** | **4** | ** ** | **3** | ** ** | **170** | ** ** | **125** | ** ** | **708** | ** ** | **628** | ** ** | **0** | ** ** | **0** | ** ** | **10,935** | ** ** | **9,006** | ** ** | **85** | ** ** | **57** | ** ** | **2,615** | ** ** | **2,186** | ** ** |
| ***Total  Proved Plus Probable***** ** | ** ** | ** **                         | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Aerial-Michichi                             |       | 15                                 |       | 14             |       | 0 |   | 0 |   | 4,175 |   | 3,128 |   | 41 |   | 27 |   | 752 |   | 562 |   | 30 |   | 28 |   | 0 |   | 0 |   | 7,767 |   | 6,386 |   | 76 |   | 49 |   | 1,400 |   | 1,142 |   |
| Craigmyle-Chain                             |       | 87                                 |       | 76             |       | 0 |   | 0 |   | 3,208 |   | 2,480 |   | 3 |   | 2 |   | 624 |   | 491 |   | 197 |   | 183 |   | 0 |   | 0 |   | 6,017 |   | 4,947 |   | 6 |   | 4 |   | 1,206 |   | 1,012 |   |
| Other Properties                            |       | 402                                |       | 353            |       | 0 |   | 0 |   | 6,569 |   | 5,208 |   | 60 |   | 41 |   | 1,556 |   | 1,262 |   | 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 |   | 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** | ** ** | **1,489** | ** ** | **1,349** | ** ** | **0** | ** ** | **0** | ** ** | **33,840** | ** ** | **28,006** | ** ** | **252** | ** ** | **171** | ** ** | **7,381** | ** ** | **6,198** | ** ** |

 

The followingtable represents a forecast, using forecast pricing, of first year productionby product type:
| ** **                                | ** ** | **2006  Average Daily Production** | ** ** | **Reserves**   | ** ** |
|-------------------------------------------|------------|------------------------------------|------------|----------------|------------|
| ** **                                | ** ** | **Light  and**                     | ** ** | ** **     | ** ** | ** ** | ** ** | **Natural  Gas** | ** ** | **Oil** | ** ** | **Light  and** | ** ** | ** ** | ** ** | ** ** | ** ** | **Natural  Gas** | ** ** | **Oil** | ** ** |
| ** **                                | ** ** | **Medium  Oil**                    | ** ** | **Heavy  Oil** | ** ** | **Natural  Gas** | ** ** | **Liquids** | ** ** | **Equivalent** | ** ** | **Medium  Oil** | ** ** | **Heavy  Oil** | ** ** | **Natural  Gas** | ** ** | **Liquids** | ** ** | **Equivalent** | ** ** |
| ** **                                | ** ** | **W.I.**                           | ** ** | **Net**        | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **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** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **MMcf** | ** ** | **MMcf** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** |
| ***Proved  Producing***                   |       |                               |       |           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Aerial-Michichi                           |       | 15                                 |       | 14             |       | 0 |   | 0 |   | 3,902 |   | 2,938 |   | 38 |   | 25 |   | 703 |   | 528 |   | 24 |   | 23 |   | 0 |   | 0 |   | 5,988 |   | 4,910 |   | 58 |   | 38 |   | 1,080 |   | 880 |   |
| Craigmyle-Chain                           |       | 84                                 |       | 74             |       | 0 |   | 0 |   | 2,632 |   | 2,054 |   | 3 |   | 2 |   | 525 |   | 418 |   | 154 |   | 143 |   | 0 |   | 0 |   | 4,100 |   | 3,366 |   | 4 |   | 3 |   | 842 |   | 707 |   |
| Other Properties                          |       | 369                                |       | 326            |       | 0 |   | 0 |   | 5,471 |   | 4,350 |   | 57 |   | 39 |   | 1,338 |   | 1,090 |   | 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 |   | 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** | ** ** | **755** | ** ** | **695** | ** ** | **0** | ** ** | **0** | ** ** | **18,008** | ** ** | **14,881** | ** ** | **160** | ** ** | **109** | ** ** | **3,916** | ** ** | **3,285** | ** ** |
| ***Proved  Developed Nonproducing***      | ** ** | ** **                         | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Aerial-Michichi                           |       | 0                                  |       | 0              |       | 0 |   | 0 |   | 7 |   | 6 |   | 0 |   | 0 |   | 2 |   | 1 |   | 1 |   | 1 |   | 0 |   | 0 |   | 82 |   | 65 |   | 1 |   | 0 |   | 15 |   | 12 |   |
| Craigmyle-Chain                           |       | 0                                  |       | 0              |       | 0 |   | 0 |   | 206 |   | 163 |   | 0 |   | 0 |   | 35 |   | 27 |   | 0 |   | 0 |   | 0 |   | 0 |   | 406 |   | 345 |   | 0 |   | 0 |   | 68 |   | 58 |   |
| Other Properties                          |       | 7                                  |       | 7              |       | 0 |   | 0 |   | 653 |   | 515 |   | 1 |   | 1 |   | 117 |   | 93 |   | 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 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| **Total: Proved Developed  Nonproducing** | ** ** | **7**                              | ** ** | **7**          | ** ** | **0** | ** ** | **0** | ** ** | **866** | ** ** | **684** | ** ** | **1** | ** ** | **1** | ** ** | **153** | ** ** | **122** | ** ** | **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 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| Craigmyle-Chain                           |       | 0                                  |       | 0              |       | 0 |   | 0 |   | 260 |   | 183 |   | 0 |   | 0 |   | 43 |   | 31 |   | 0 |   | 0 |   | 0 |   | 0 |   | 247 |   | 189 |   | 0 |   | 0 |   | 41 |   | 31 |   |
| Other Properties                          |       | 0                                  |       | 0              |       | 0 |   | 0 |   | 0 |   | 6 |   | 0 |   | 0 |   | 0 |   | 1 |   | 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 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |

 

 

38

----

 
| ** **                             | ** ** | **2006  Average Daily Production** | ** ** | **Reserves**   | ** ** |
|----------------------------------------|------------|------------------------------------|------------|----------------|------------|
| ** **                             | ** ** | **Light  and**                     | ** ** | ** **     | ** ** | ** ** | ** ** | **Natural  Gas** | ** ** | **Oil** | ** ** | **Light  and** | ** ** | ** ** | ** ** | ** ** | ** ** | **Natural  Gas** | ** ** | **Oil** | ** ** |
| ** **                             | ** ** | **Medium  Oil**                    | ** ** | **Heavy  Oil** | ** ** | **Natural  Gas** | ** ** | **Liquids** | ** ** | **Equivalent** | ** ** | **Medium  Oil** | ** ** | **Heavy  Oil** | ** ** | **Natural  Gas** | ** ** | **Liquids** | ** ** | **Equivalent** | ** ** |
| ** **                             | ** ** | **W.I.**                           | ** ** | **Net**        | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **W.I.** | ** ** | **Net** | ** ** | **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** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **MMcf** | ** ** | **MMcf** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** | **Mbbl** | ** ** |
| **Total: Proved Undeveloped**          | ** ** | **0**                              | ** ** | **0**          | ** ** | **0** | ** ** | **0** | ** ** | **260** | ** ** | **189** | ** ** | **0** | ** ** | **0** | ** ** | **43** | ** ** | **32** | ** ** | **0** | ** ** | **0** | ** ** | **0** | ** ** | **0** | ** ** | **2,537** | ** ** | **2,247** | ** ** | **2** | ** ** | **1** | ** ** | **425** | ** ** | **376** | ** ** |
| ***Total  Proved***                    | ** ** | ** **                         | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Aerial-Michichi                        |       | 15                                 |       | 14             |       | 0 |   | 0 |   | 3,908 |   | 2,944 |   | 38 |   | 25 |   | 705 |   | 530 |   | 25 |   | 24 |   | 0 |   | 0 |   | 6,070 |   | 4,976 |   | 59 |   | 39 |   | 1,095 |   | 892 |   |
| Craigmyle-Chain                        |       | 84                                 |       | 74             |       | 0 |   | 0 |   | 3,099 |   | 2,400 |   | 3 |   | 2 |   | 603 |   | 476 |   | 154 |   | 143 |   | 0 |   | 0 |   | 4,753 |   | 3,900 |   | 4 |   | 3 |   | 951 |   | 796 |   |
| Other Properties                       |       | 376                                |       | 332            |       | 0 |   | 0 |   | 6,125 |   | 4,871 |   | 58 |   | 40 |   | 1,455 |   | 1,184 |   | 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 |   | 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** | ** ** | **765** | ** ** | **705** | ** ** | **0** | ** ** | **0** | ** ** | **22,666** | ** ** | **18,844** | ** ** | **165** | ** ** | **113** | ** ** | **4,707** | ** ** | **3,959** | ** ** |
| ***Total  Probable***                  | ** ** | ** **                         | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Aerial-Michichi                        |       | 0                                  |       | 0              |       | 0 |   | 0 |   | 267 |   | 184 |   | 3 |   | 2 |   | 47 |   | 33 |   | 4 |   | 3 |   | 0 |   | 0 |   | 1,667 |   | 1,384 |   | 16 |   | 11 |   | 298 |   | 244 |   |
| Craigmyle-Chain                        |       | 3                                  |       | 2              |       | 0 |   | 0 |   | 109 |   | 79 |   | 0 |   | 0 |   | 21 |   | 15 |   | 43 |   | 40 |   | 0 |   | 0 |   | 1,194 |   | 988 |   | 2 |   | 1 |   | 244 |   | 206 |   |
| Other Properties                       |       | 26                                 |       | 20             |       | 0 |   | 0 |   | 445 |   | 337 |   | 2 |   | 1 |   | 101 |   | 78 |   | 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 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| **Total: Total Probable**              | ** ** | **29**                             | ** ** | **22**         | ** ** | **0** | ** ** | **0** | ** ** | **821** | ** ** | **600** | ** ** | **4** | ** ** | **3** | ** ** | **170** | ** ** | **125** | ** ** | **675** | ** ** | **599** | ** ** | **0** | ** ** | **0** | ** ** | **10,772** | ** ** | **8,867** | ** ** | **83** | ** ** | **56** | ** ** | **2,553** | ** ** | **2,132** | ** ** |
| ***Total  Proved Plus Probable***      | ** ** | ** **                         | ** ** | ** **     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Aerial-Michichi                        |       | 15                                 |       | 14             |       | 0 |   | 0 |   | 4,175 |   | 3,128 |   | 41 |   | 27 |   | 752 |   | 562 |   | 28 |   | 27 |   | 0 |   | 0 |   | 7,737 |   | 6,359 |   | 75 |   | 49 |   | 1,393 |   | 1,136 |   |
| Craigmyle-Chain                        |       | 87                                 |       | 76             |       | 0 |   | 0 |   | 3,208 |   | 2,480 |   | 3 |   | 2 |   | 624 |   | 491 |   | 197 |   | 183 |   | 0 |   | 0 |   | 5,947 |   | 4,887 |   | 6 |   | 4 |   | 1,194 |   | 1,002 |   |
| Other Properties                       |       | 402                                |       | 353            |       | 0 |   | 0 |   | 6,569 |   | 5,208 |   | 60 |   | 41 |   | 1,556 |   | 1,262 |   | 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 |   | 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** | ** ** | **1,439** | ** ** | **1,304** | ** ** | **0** | ** ** | **0** | ** ** | **33,438** | ** ** | **27,711** | ** ** | **248** | ** ** | **169** | ** ** | **7,260** | ** ** | **6,091** | ** ** |

 

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**RISK FACTORS**

A number offactors, including but not limited to, those discussed in this section couldcause the Corporation’s results to differ materially from its expectations.

**Exploration, Development and ProductionRisks**

An investmentin the Corporation’s securities would be speculative due to the nature of theCorporation’s involvement in the exploration, development and production of oiland natural gas and its present stage of development.

Oil andnatural gas exploration involves a high degree of risk and there is noassurance that expenditures made on future exploration by the Corporation willresult in new discoveries of oil or natural gas in commercial quantities.  It is difficult to project the costs of implementingan exploratory drilling program due to the inherent uncertainties of drillingin unknown formations, the costs associated with encountering various drillingconditions, such as over pressured zones and tools lost in the hole, andchanges in drilling plans and locations as a result of prior exploratory wellsor additional seismic data and interpretations thereof.

Managementwill evaluate exploration and development prospects on an ongoing basis in amanner consistent with industry standards. The long-term commercial success of the Corporation depends on itsability to find, acquire, develop and commercially produce oil and natural gasreserves.  No assurance can be given thatthe Corporation will be able to locate satisfactory properties for acquisitionor participation.  Moreover, if suchacquisitions or participations are identified, the Corporation may determinethat current markets, terms of acquisition and participation or pricingconditions make such acquisitions or participations uneconomic.

Future oil andgas exploration may involve unprofitable efforts, not only from dry wells, butfrom wells that are productive but do not produce sufficient net revenues toreturn a profit after drilling, operating and other costs.  Completion of a well does not assure a profiton the investment or recovery of drilling, completion and operating costs.  In addition, drilling hazards orenvironmental damage could greatly increase the cost of operations, and variousfield operating conditions may adversely affect the production from successfulwells.  These conditions include delaysin obtaining governmental approvals or consents, shut-ins of connectedwells resulting from extreme weather conditions, insufficient storage ortransportation 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 of exploration, development andproduction of oil and natural gas properties, including encountering unexpectedformations or pressures, premature declines of reservoirs, blow-outs,cratering, sour gas releases, fires and spills. Losses resulting from the occurrence of any of these risks could have amaterially adverse effect on future results of operations, liquidity andfinancial condition.

**Substantial Capital Requirements andLiquidity**

TheCorporation anticipates that it will make substantial capital expenditures forthe acquisition, exploration, development and production of oil and natural gasreserves in the future.  If theCorporation’s revenues or reserves decline, the Corporation may have limitedability to expend the capital necessary to undertake or complete futuredrilling programs.  There can be noassurance that debt or equity financing, or cash generated by operations willbe available or sufficient to meet these requirements or for other corporatepurposes or, if debt or equity financing is available, that it will be on termsacceptable to the Corporation.  Moreover,future activities may require the Corporation to alter its capitalizationsignificantly.  The inability of theCorporation to access sufficient capital for its operations could have amaterial adverse effect on the Corporation’s financial condition, results ofoperations or prospects.

 

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**Additional Funding Requirements**

TheCorporation’s cash flow from its reserves may not be sufficient to fund itsongoing activities at all times.  Fromtime to time, the Corporation may require additional financing in order tocarry out its oil and natural gas acquisition, exploration and developmentactivities.  Failure to obtain suchfinancing on a timely basis could cause the Corporation to forfeit its interestin certain properties, miss certain acquisition opportunities and reduce orterminate its operations.  If theCorporation’s revenues from its reserves decrease as a result of lower oil andnatural gas prices or otherwise, it will affect the Corporation’s ability toexpend the necessary capital to replace its reserves or to maintain its production.  If the Corporation’s cash flow fromoperations is not sufficient to satisfy its capital expenditure requirements,there can be no assurance that additional debt or equity financing will beavailable to meet these requirements or available on favourable terms.

**Issuance of Debt**

From time totime the Corporation may enter into transactions to acquire assets or theshares of other corporations.  Thesetransactions may be financed partially or wholly with debt, which may increasethe Corporation’s debt levels above industry standards.  Neither the Corporation’s articles nor its by-lawslimit the amount of indebtedness that the Corporation may incur.  The level of the Corporation’s indebtednessfrom time to time could impair the Corporation’s ability to obtain additionalfinancing in the future on a timely basis to take advantage of businessopportunities that may arise.

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

Oil andnatural gas are commodities whose prices are determined based on world demand,supply and other factors, all of which are beyond the control of theCorporation.  World prices for oil andnatural 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 toestablishing markets for its oil and natural gas, the Corporation must alsosuccessfully market its oil and natural gas to prospective buyers.  The marketability and price of oil andnatural gas which may be acquired or discovered by the Corporation will beaffected 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 extensivegovernment regulation relating to price, taxes, royalties, land tenure,allowable production, the export of oil and natural gas and other aspects ofthe oil and natural gas business.

**Insurance**

TheCorporation’s involvement in the exploration for and development of oil andnatural gas properties may result in the Corporation becoming subject toliability for pollution, blow-outs, property damage, personal injury orother hazards.  Although the Corporationhas obtained insurance in accordance with industry standards to address such risks,

 

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such insurancehas limitations on liability that may not be sufficient to cover the fullextent of such liabilities.  In addition,such risks may not, in all circumstances be insurable or, in certaincircumstances, the Corporation may elect not to obtain insurance to deal withspecific risks due to the high premiums associated with such insurance or otherreasons.  The payment of such uninsuredliabilities would reduce the funds available to the Corporation.  The occurrence of a significant event thatthe Corporation is not fully insured against, or the insolvency of the insurerof such event, could have a material adverse effect on the Corporation’sfinancial position, results of operations or prospects.

**Legal Proceedings**

Litigation maybe time consuming, expensive, and distracting from the conduct of our business,and the outcome of litigation may be difficult to predict.  The Corporation is unable to determine theultimate aggregate amount of monetary liability or financial impact in theselegal matters, which unless otherwise specified, seek damages of indeterminateamounts.  The Corporation cannotdetermine whether these matters will, individually or collectively, have amaterial adverse effect on our business, results or operations and financialcondition.  To the extent expensesincurred in connection with litigation or any potential regulatory proceedingor action (which may include substantial fees of attorneys and otherprofessional advisors and potential obligations to indemnify officers anddirectors who may be parties to such actions) are not covered by availableinsurance, such expenses could adversely affect our cash position.  The Corporation, and any of our nameddirectors or officers, intend to vigorously defend these actions suits, claims,proceedings and investigations.  TheCorporation may in the future be subject to other litigation arising in thenormal course of our business.

**Environmental Risks**

All phases ofthe oil and natural gas business present environmental risks and hazards andare subject to environmental regulation pursuant to a variety of internationalconventions and national, provincial and municipal laws and regulations.  Environmental legislation provides for, amongother things, restrictions and prohibitions on spills, releases or emissions ofvarious substances produced in association with oil and gas operations.  The legislation also requires that wells andfacility sites be operated, maintained, abandoned and reclaimed to thesatisfaction 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. The Corporation believes that it is in substantial compliance withexisting legislation.  Environmentallegislation is evolving in a manner expected to result in stricter standardsand enforcement, larger fines and liability and potentially increased capitalexpenditures and operating costs.  Thedischarge of oil, natural gas or other pollutants into the air, soil or watermay give rise to liabilities to governments and third parties and may requirethe Corporation to incur costs to remedy such discharge.  No assurance can be given that environmentallaws will not result in a curtailment of production or a material increase inthe costs of production, development or exploration activities or otherwiseadversely affect the Corporation’s financial condition, results of operationsor prospects.

**Competition**

TheCorporation actively competes for reserve acquisitions, exploration leases,licences and concessions and skilled industry personnel with a substantialnumber of other oil and gas companies, many of which have significantly greaterfinancial resources than the Corporation. The Corporation’s competitors include major integrated oil and naturalgas companies and numerous other independent oil and natural gas companies andindividual producers and operators.

The oil andgas industry is highly competitive.  TheCorporation’s competitors for the acquisition, exploration, production anddevelopment of oil and natural gas properties, and for capital to finance suchactivities, include companies that have greater financial and personnel resourcesavailable to them than the Corporation.

 

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Certain of theCorporation’s customers and potential customers are themselves exploring foroil and gas, and the results of such exploration efforts could affect theCorporation’s ability to sell or supply oil or gas to these customers in thefuture.  The Corporation’s ability tosuccessfully bid on and acquire additional property rights, to discoverreserves, to participate in drilling opportunities and to identify and enterinto commercial arrangements with customers will be dependent upon developingand maintaining close working relationships with its future industry partnersand joint operators and its ability to select and evaluate suitable propertiesand to consummate transactions in a highly competitive environment.

**Reserve Replacement**

TheCorporation’s future oil and natural gas reserves, production, and cash flowsto be derived therefrom are highly dependent on the Corporation successfullyacquiring or discovering new reserves. Without the continual addition of new reserves, any existing reservesthe Corporation may have at any particular time and the production therefromwill decline over time as such existing reserves are exploited.  A future increase in the Corporation’sreserves will depend not only on the Corporation’s ability to develop anyproperties it may have from time to time, but also on its ability to select andacquire 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.

**Reliance on Operators and Key Employees**

To the extentthe Corporation is not the operator of its oil and natural gas properties, theCorporation will be dependent on such operators for the timing of activitiesrelated to such properties and will largely be unable to direct or control theactivities of the operators.  Inaddition, the success of the Corporation will be largely dependent upon theperformance of its management and key employees.  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.

**Permits and Licenses**

The operationsof the Corporation may require licenses and permits from various governmentalauthorities.  There can be no assurancethat the Corporation will be able to obtain all necessary licenses and permitsthat may be required to carry out exploration and development at its projects.

**Royalties, Incentives and Production Taxes**

In addition tofederal regulations, each province has legislation and regulations which governland tenure, royalties, production rates, environmental protection and othermatters.  The royalty regime is asignificant factor in the profitability of oil and natural gas production.  Royalties payable on production from landsother than Crown lands are determined by negotiations between the mineral ownerand the lessee.  Crown royalties aredetermined by government regulation and are generally calculated as apercentage of the value of the gross production, and the rate of royaltiespayable generally depends in part on prescribed reference prices, wellproductivity, geographical location, field discovery date and the type orquality of the petroleum product produced.

From time totime, the Governments of Canada, Alberta, British Columbia and Saskatchewanhave established incentive programs which have included royalty ratereductions, royalty holidays and tax credits for the purpose of encouraging oiland natural gas exploration or enhanced planning projects.

Oil andnatural gas royalty holidays and reductions for specific wells reduce theamount 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.

 

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Producers ofoil and natural gas in the Province of British Columbia are also required topay annual rental payments in respect of Crown leases and royalties andfreehold production taxes in respect of oil and gas produced from Crown andfreehold lands, respectively.  The amountpayable as a royalty in respect of oil depends on the vintage of the oil (whetherit was produced from a pool discovered before or after October 31, 1975), thequantity of oil produced in a month and the value of the oil.  In specific circumstances, oil produced fromnewly discovered pools may be exempt from the payment of a royalty for thefirst 36 months of production.

**Land Tenure**

Crude oil andnatural gas located in the western provinces is owned predominantly by therespective provincial governments. Provincial governments grant rights to explore for and produce oil andnatural gas pursuant to leases, licences and permits for varying terms and onconditions set forth in provincial legislation including requirements toperform specific work or make payments. Oil and natural gas located in such provinces can also be privately ownedand rights to explore for and produce such oil and natural gas are granted bylease on such terms and conditions as may be negotiated.

**Title to Properties**

TheCorporation has not obtained a legal opinion as to the title to its freeholdproperties other than the El Paso Properties and cannot guarantee or certifythat a defect in the chain of title may not arise to defeat the Corporation’sinterest in certain of such properties. Remediation of title problems could result in additional costs andlitigation.  If title defects are unableto be remedied, the Corporation may lose some of its interest in the disputedproperties resulting in reduced production.

Although titlereviews were conducted prior to the purchase of the El Paso Properties and maybe conducted prior to the purchase of other oil and natural gas producingproperties or the commencement of drilling wells, such reviews may not discoverunforeseen title defects that could adversely affect the Corporation’s title toor proportionate interest in the property or entitlement to revenue from theproperty.

**Corporate Matters**

To date, theCorporation has not declared any dividends payable on its outstanding commonshares.  The Board of Directors of theCorporation will consider the Corporation’s dividend policy from time to timeto assess whether the declaration of dividends payable on its outstandingcommon shares is appropriate.  Certain ofthe directors and officers of the Corporation are also directors and officersof other oil and gas companies involved in natural resource exploration anddevelopment, and conflicts of interest may arise between their duties asofficers and directors of the Corporation and as officers and directors of suchother companies.  Such conflicts must bedisclosed in accordance with, and are subject to such other procedures andremedies as apply under the *Business Corporations Act*(Alberta).

**DIVIDENDS**

To date, theCorporation has not declared any dividends payable on its outstanding CommonShares.  The Board of Directors of the Corporationwill consider the Corporation’s dividend policy from time to time to assesswhether the declaration of dividends payable on its outstanding common sharesis appropriate.

**DESCRIPTION OF CAPITAL STRUCTURE**

TheCorporation’s authorized share capital consists of an unlimited number ofcommon shares (the “Common Shares”) and an unlimited number of first preferredshares, issuable in series (the “Preferred Shares”).

 

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**Common Shares**

The CommonShares in the capital of the Corporation are entitled to notice of and to voteat all meetings of shareholders (except meetings at which only holders of aspecified class or series of shares are entitled to vote) and are entitled toone vote per share.  The holders ofcommon shares in the capital of the Corporation are entitled to receive suchdividends as the Board of Directors may declare and, upon liquidation, toreceive such assets of Canadian Superior as are distributable to holders ofcommon shares in the capital of the Corporation.

**Preferred Shares**

The PreferredShares may be issued in one or more series with each series to consist of suchnumber of shares as may, before the issue of the series, be fixed by thedirectors of the Corporation.  Thedirectors are authorized, before the issue of the series, to determine thedesignation, rights, restrictions, conditions and limitations attaching to thePreferred Shares of each series.  ThePreferred Shares of each series rank equally with respect to the payment of dividendsand the distribution of assets in the event of liquidation, dissolution orwinding-up and in priority to the Common Shares and any other shares ofthe Corporation ranking junior to the Preferred Shares.  In addition, if any amount of a fixed cumulativedividend or an amount payable on return of capital in respect of shares of aseries of Preferred Shares is not paid in full, the shares of the series areentitled to participate rateably with the shares of any other series of thesame class in respect of such amounts.

**Shareholder Rights Plan**

Theshareholders of the Corporation have adopted a shareholder rights plan (the “**Rights Plan**”).  TheRights Plan is contained in an agreement dated as of January 22, 2001, asamended and restated as of May 17, 2001, between the Corporation andComputershare Trust Company of Canada (the “Rights Plan Agreement”).  The effective date of the Rights Plan wasJanuary 22, 2001 (the “Effective Date”) and it was amended and restated as ofMay 17, 2001.  The Rights Plan continuesin effect until January 22, 2011, being ten years from its effective date.

Under theRights Plan, one right (a “Right”) is attached to each common share in thecapital of the Corporation.  The Rightswill separate from the common shares in the capital of the Corporation andbecome exercisable eight trading days (the “Separation Time”) after a personacquires, or commences a take-over bid to acquire, 20% or more of thevoting 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 tradingdays after a Flip-in Event, each Right will permit the holder (other thanan Acquiring Person) to purchase from the Corporation, on payment of the $15exercise price, common shares in the capital of the Corporation with a marketvalue of $30.  The result will be massivedilution of the holdings of the Acquiring Person.  The Corporation anticipates that no AcquiringPerson will be willing to risk such dilution and so will instead either make atake-over bid that is permitted by the Rights Plan, negotiate with theBoard of Directors for a waiver of the Rights Plan, or apply to regulatoryauthorities for an order rendering the Rights Plan ineffective.

A person willnot become an Acquiring Person, and will not trigger the separation and abilityto exercise the Rights, by becoming the beneficial owner of 20% or more of thecommon shares in the capital of the Corporation pursuant to a take-overbid specifically permitted by the Rights Plan (a “Permitted Bid”) or in othercircumstances 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.

 

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The issue ofthe Rights is not initially dilutive. However, upon a Flip-In Event occurring and the Rights separatingfrom the common shares in the capital of the Corporation, reported earnings pershare on a fully diluted or non-diluted basis may be affected.  Holders of Rights who do not (or, in the caseof an Acquiring Person, cannot) exercise their Rights upon the occurrence of aFlip-In Event will suffer substantial dilution.

This summaryis qualified in its entirety by reference to the Rights Plan Agreement.  Shareholders may obtain a copy of the RightsPlan Agreement on written request to the Corporate Secretary of the Corporationat the Corporation’s head office.

**MARKET FOR SECURITIES**

**Trading Price and Volume**

The commonshares of Canadian Superior are listed and posted for trading on the TorontoStock Exchange and the American Stock Exchange under the symbol “SNG”.  The following table sets forth the reportedhigh, low and close sale prices and volume of trading of the Common Shares asreported by the Toronto Stock Exchange for the periods indicated.
| ** **     | ** ** | **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 followingsets forth the names and municipalities of residence, offices or positions withthe Corporation, principal occupations of the directors and executive officersof the Corporation during the past five years and the number of votingsecurities held by them, directly or indirectly, beneficially or of record, orover which each exercises control or direction. The term of the directors’ office expires at the next annual generalmeeting of the Corporation, when the shareholders will be asked to elect thedirectors for the following year. Officers of the Corporation are appointed by the directors until theyresign or until their successors are appointed. 
| **Name  and Municipality of Residence** | ** ** | **Office  or Position**                                           | ** ** | **Present  and Principal Occupation During the Last Five Years**                                                                                                                                        |
|-----------------------------------------|------------|-------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                    |       |                                                              |       |                                                                                                                                                                                                    |
| Leigh BiltonCalgary, Alberta            |       | Executive  Vice President, Vice President Operationsand 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 the Corporation since 2002. |

 

 

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| 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.  CoolenHalifax, 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.

 

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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 atMarch 24, 2006, the number of Common Shares beneficially owned directly orindirectly or controlled by the directors and executive officers of theCorporation, as a group, was 3,627,346 Common Shares, being 3.0% of theoutstanding Common Shares of the Corporation.

**Cease Trade Orders, Bankruptcies, Penaltiesor Sanctions**

Other than asdescribed below, to the knowledge of management of the Corporation, there hasbeen no director or officer, or any shareholder holding a sufficient number ofsecurities of the Corporation to affect materially the control of theCorporation that is or, within the 10 years before the date of this annualinformation form, has been a director or officer of any issuer that, while thatperson was acting in that capacity:

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

(b)                                 was subject to an event that resulted,after the director or executive officer ceased to be a director or executiveoffice, in the company being subject of a cease trade order or similar order oran order that denied the relevant company access to any exemption undersecurities legislation, for a period of more than 30 consecutive days; or

(c)                                  within a year of that person ceasing to actin that capacity or within the 10 years before the date of this annualinformation form, became bankrupt, made a proposal under any legislationrelating to bankruptcy or insolvency or was subject to or instituted anyproceedings, arrangement or compromise with creditors or had a receiver,receiver manager or trustee appointed to hold its assets.

Further, otherthan described below, to the knowledge of management of the Corporation, nodirector or officer, or any shareholder holding a sufficient number ofsecurities of the Corporation to affect materially the control of theCorporation, has:

(a)                                  been subject to any penalties or sanctionsimposed by a court relating to securities legislation or by a securitiesregulatory authority or has entered into a settlement agreement with thesecurities regulatory authority; or

(b)                                 been subject to any other penalties orsanctions imposed by a court or regulatory body that would likely be consideredimportant to a reasonable investor in making an investment decision.

On October 15,1997, the Alberta and Ontario Securities Commissions (the “**ASC**”and the “**OSC**”, respectively) issued ordersrelating to a settlement agreement entered into by Canadian 88, Mr. Novaland 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.

 

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**Conflicts of Interest**

Certain of thedirectors and officers of the Corporation are directors and officers of otherprivate and public companies.  Some ofthese private and public companies may, from time to time, be involved inbusiness transactions or banking relationships which may create situations inwhich conflicts might arise.  Any suchconflicts shall be resolved in accordance with the procedures and requirementsof the relevant provisions of the *Business Corporations Act*(Alberta), including the duty of such directors and officers to act honestlyand in good faith with a view to the best interests of the Corporation.

**LEGAL PROCEEDINGS**

TheCorporation is involved in various claims and litigation arising in theordinary course of its business.  In theopinion 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, anumber of class action proceedings were initiated against Canadian Superior andcertain of its directors and officers in the United States District Court,Southern District of New York, in the Ontario Superior Court of Justice and theQuebec Superior Court by plaintiffs alleging to have purchased securities ofthe Corporation and alleging they suffered damages resulting from statements bythe Company regarding the Company’s Mariner I-85 exploration well drilledoffshore Nova Scotia.

On September6, 2005, the Corporation and its insurers reached an agreement to settle allsecurities class action litigation and actions pending in Canada against theCorporation and certain of its officers and directors resulting from thedrilling last year of the Mariner I-85 exploration well drilled offshore NovaScotia.  The $2.15 million settlement,which is covered by the Corporation’s insurance, was reached with no admissionof liability by any party.

On June 8,2005, the Corporation announced that it and its insurers reached an agreementto settle all securities class action litigation and actions pending in theUnited States against the Corporation and certain of its officers and directorsresulting from the drilling last year of the Canadian Superior El Paso MarinerI-85 exploration well drilled with El Paso Corporation offshore NovaScotia.  The US$3.2 million settlement,covered by the Corporation’s insurance, was reached with no admission ofliability by any party.

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

Other than asdisclosed herein, none of the directors, officers or principal shareholders ofthe Corporation and no associate or affiliate of any of them, has or has hadany material interest in any transaction or any proposed transaction whichmaterially affects Corporation or any of its affiliates.

During theyear ended December 31, 2005, the Corporation paid $618,000 for aircraftrentals to a company controlled by Gregory Noval, the President and ChiefExecutive Officer and director of the Corporation.

In November2004, the Corporation entered into participation agreements in the normalcourse of operations with a company controlled by Gregory Noval, the Presidentand Chief Executive Officer and director of the Corporation in respect of theCorporation’s offshore Nova Scotia and offshore Trinidad and Tobagoprospects.  Pursuant to the 2004agreements, the Company had the right to participate on a promoted basis for 162/3% of Canadian Superior’s costs of the East Coast wells (this wassubsequently increased to 33 1/3%) and the related party Company has the rightto participate on a promoted basis for 33 1/3% of Canadian Superior’s costs ofcertain earning wells in Trinidad.

Thetransactions described in this section were in the normal course of operationsand agreed to by the related company and the Corporation based on extensivenegotiations and Board approval and approval by the Corporation.

 

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**TRANSFER AGENT AND REGISTRAR**

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

**INTERESTS OF EXPERTS**

Reserveestimates contained in this annual information form are derived from reservereports 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 AuditCommittee 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.

**Mandate of the Audit Committee**

The mandate ofthe Audit Committee is to assist the Board of Directors of the Corporation inits oversight of the integrity of the financial and related information of theCorporation and its subsidiaries and related entities, including the financialstatements, internal controls and procedures for financial reporting and theprocesses for monitoring compliance with legal and regulatory requirements.

The AuditCommittee is appointed by the Board of Directors of the Corporation to assistthe Board of Directors in fulfilling its oversight responsibilities, including:

(i)                                     the integrity of the Corporation’sfinancial statements

(ii)                                  the integrity of the financial reportingprocess

(iii)                               the system of internal control andmanagement of financial risks

(iv)                              the external auditors’ qualifications andindependence

(v)                                 the external audit process and theCorporation’s process for monitoring compliance with laws and regulations.

The Charter ofthe Audit Committee of the Board of Directors of Canadian Superior is attachedhereto, in its entirety, as Appendix “C”.

**Relevant Education and Experience of AuditCommittee Members**

The followingis a brief summary of the education or experience of each member of the AuditCommittee that is relevant to the performance of his responsibilities as amember of the Audit Committee, including any education or experience that hasprovided the member with an understanding of the accounting principles used bythe 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. |

 

**Audit Committee Oversight**

At no timesince the commencement of the Corporation’s most recently completed financialyear, has a recommendation of the Audit Committee to nominate or compensate anexternal auditor not been adopted by the Board of Directors of the Corporation.

**External Auditor Fees**

For the yearended December 31, 2004 and 2005, Meyers Norris Penny LLP and its affiliateswere paid approximately $193,600 and $227,446, respectively, as detailedbelow:  
| ** **              | ** ** | **Year ended December 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

 

**Audit Fees**

Audit feesconsist of fees for the audit of the Corporation’s annual financial statementsor services that are normally provided in connection with statutory andregulatory filings or engagements.

**Audit-Related Fees**

Audit-relatedfees included fees relating to the review of our quarterly financialstatements.

**Tax Fees**

Tax feesincluded tax compliance, tax planning, tax advice and various taxation matters.

 

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**All Other Fees**

All other feesconsists of services provided by our principal accountant other than audit,audit-related and tax services, including prospectus and other offering relatedwork.

**ADDITIONAL INFORMATION**

Additionalinformation relating to the Corporation may be found on through the internet onthe System for Electronic Document Analysis and Retrieval (SEDAR) which can beaccessed at www.sedar.com. Additional information, including directors’ and officers’ remunerationand indebtedness, principal holders of the Corporation’s securities andsecurities authorized for issuance under equity compensation plans, ifapplicable, is contained in the Corporation’s Management Information Circularfor its most recent annual meeting of security holders that involved theelection of directors.  Additionalfinancial information is provided in the Corporation’s financial statements andManagement’s Discussion & Analysis for its most recently completed year.

Additionalcopies of this Annual Information Form and the materials listed in this sectionare available upon request by contacting the Corporation at 3300, 400 -3rd Avenue S.W., Calgary, Alberta T2P 4H2 or by phone at (403) 294-1411or fax at (403) 216-2374.

 

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# **APPENDIX“A”**

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

 

To the boardof directors of Canadian Superior Energy Inc. (the “Company”):

1.                                       We have prepared an evaluation of theCompany’s reserves data as at December 31, 2005.  The reserves data consist of the following:

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

(ii)                                  the related estimated future net revenue;and

(b)                                 (i)            provedoil and gas reserves estimated as at December 31, 2005, using constantprices and costs; and

(ii)                                  the related estimated future net revenue.

2.                                       The reserves data are the responsibility ofthe Company’s management.  Ourresponsibility is to express an opinion on the reserves data based on ourevaluation.

We carried outour evaluation in accordance with standards set out in the Canadian Oil and GasEvaluation Handbook (the “COGE Handbook”) prepared jointly by the Society ofPetroleum Evaluation Engineers (Calgary Chapter) and the Canadian Institute ofMining, Metallurgy & Petroleum (Petroleum Society).

3.                                       Those standards require that we plan andperform an evaluation to obtain reasonable assurance as to whether the reservesdata are free of material misstatement. An evaluation also includes assessing whether the reserves data are inaccordance with principles and definitions in the COGE Handbook.

4.                                       The following table sets forth theestimated future net revenue (before deduction of income taxes) attributed toproved plus probable reserves, estimated using forecast prices and costs andcalculated using a discount rate of 10 percent, included in the reserves dataof the Company evaluated by us for the year ended December 31, 2005, andidentifies the respective portions thereof that we have audited, evaluated andreviewed and reported on to the Company’s board of directors:
| **Independent  Qualified Reserves  Evaluator** | ** ** | **Description and  Preparation Date of  Evaluation  Report** | ** ** | **Location of  Reserves  (Country or  Foreign  Geographic  Area)** | ** ** | **Net Present Value of Future Net Revenue  (before income taxes, 10% discount rate - $M)** | ** ** |
|------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------|------------|
| ** **                                     | ** ** | ** **                                                   | ** ** | ** **                                                         | ** ** | ** **                                                                                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                     | ** ** | ** **                                                   | ** ** | ** **                                                         | ** ** | **Audited**                                                                                | ** ** | **Evaluated** | ** ** | **Reviewed** | ** ** | **Total** | ** ** |
|                                           |       |                                                         |       |                                                               |       |                                                                                       |       |   |   |   |   |   |   |
| GLJ Petroleum Consultants                      |       | March  6, 2005                                               |       | Canada                                                             |       | —                                                                                     |       | $137,751 |   | — |   | $137,751 |   |

 

5.                                       In our opinion, the reserves datarespectively evaluated by us have, in all material respects, been determinedand are in accordance with the COGE Handbook.

 

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6.                                       We have no responsibility to update ourreports referred to in paragraph 4 for events and circumstances occurringafter their respective preparation dates.

7.                                       Because the reserves data are based onjudgements regarding future events, actual results will vary and the variationsmay be material.

 

 

EXECUTED as toour report referred to above:

 

GLJ PetroleumConsultants Ltd., Calgary, Alberta, Canada, March 7, 2006

 

 

 

ORIGINALLYSIGNED 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**

** **

*Terms to which a meaningis ascribed in National Instrument 51-101 have the same meaning herein.*

Management ofCanadian Superior Energy Inc. (the “Corporation”) are responsible for thepreparation and disclosure of information with respect to the Corporation’s oiland gas activities in accordance with securities regulatory requirements.  This information includes reserves data,which consist of the following:

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

(ii)                                  the related estimated future net revenue;and

(b)                                 (i)            provedoil and gas reserves estimated as at December 31, 2005 using constant pricesand costs; and

(ii)                                  the related estimated future net revenue.

An independentqualified reserves evaluator has evaluated and reviewed the Corporation’sreserves data.  The report of theindependent qualified reserves evaluator is presented in Schedule “A” to theAnnual Information Form of Canadian Superior Energy Inc. dated March 24,2006.

The ReservesCommittee, which is comprised of the Board of Directors of the Corporation as awhole, has:

(a)                                  reviewed the Corporation’s procedures forproviding information to the independent qualified reserves evaluator;

(b)                                 met with the independent qualified reservesevaluator to determine whether any restrictions affected the ability of theindependent qualified reserves evaluator to report without reservation; and

(c)                                  reviewed the reserves data with managementand the independent qualified reserves evaluators.

The ReservesCommittee, comprised of the Board of Directors of the Corporation as a whole,has reviewed the Corporation’s procedures for assembling and reporting otherinformation associated with oil and gas activities and has reviewed thatinformation with Management.  The Boardof Directors has, on the recommendation of the Reserves Committee, approved:

(a)                                  the content and filing with securitiesregulatory authorities of the reserves data and other oil and gas information;

(b)                                 the filing of the report of the independentqualified reserves evaluator on the reserves data; and

(c)                                  the content and filing of this report.

 

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Becausethe reserves data are based on judgements regarding future events, actualresults 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 SUPERIOR ENERGY INC.**

**Purpose/Objectives**

The AuditCommittee is appointed by the Board to assist the Board in fulfilling itsoversight responsibilities, including:

—                                   the integrity of theCorporation’s financial statements

—                                   the integrity of the financialreporting process

—                                   the system of internal controland management of financial risks

—                                   the external auditors’qualifications and independence

—                                   the external audit process andthe Corporation’s process for monitoring compliance with laws and regulations

In performingits duties, the Committee will maintain effective working relationships withthe 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 Boardauthorizes the Committee within its scope of duties and responsibilities, to:

—                                   seek any information itrequires from any employee of the Corporation (whose employees are directed toco-operate with any request made by the Committee);

—                                   seek any information itrequires directly from external parties including the external auditors andindependent reservoir engineering firm; and

—                                   obtain outside legal orprofessional advice without seeking Board approval (however providing notice tothe Chair of the Board).

**Organization**

The followingprovisions and regulations shall apply to the composition of the Committee:

—                                   The Committee shall consist ofthree members of the Board of the Corporation;

—                                   The members of the Committeeshall be independent members of the Board as defined in section 1.4 ofMultilateral Instrument 52-110 Audit Committees, as well as Part 1,sec 121(A) of the AMEX Company manual;

—                                   The Chairman of the Committeeshall be determined by the Board;

 

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—                                   Two members of the Committeeshall constitute a quorum thereof;

—                                   No business shall betransacted by the Committee except at a meeting of its members at which aquorum is present in person or by telephone or by a resolution in writingsigned by all members of the Committee;

—                                   The meetings and proceedingsof the Corporation that regulate meetings and proceedings of the Board shallapply to the Committee;

—                                   The Committee may invite suchdirectors, officers or employees of the Corporation, the external auditors andthe independent reservoir engineering firm as it may see fit, to attend itsmeetings and take part in the discussion and consideration of the affairs ofthe Committee; and

—                                   Meetings shall be held notless than four times per year, generally coinciding with the release of interimor year-end financial information including consecutive sessions withManagement and the External Auditors. Special meetings may be convened as required upon the request of theCommittee.  The external auditors andindependent reservoir engineering firm may convene a meeting if they considerthat it is desirable or necessary; and the proceedings of all meetings will beminuted.

**Duties and Responsibilities**

The Boardhereby delegates and authorizes the Committee to carry out the following dutiesand responsibilities to the extent that these activities are not carried out bythe Board as a whole:

**Corporate Information and Internal Control**

—                                   review and recommend forapproval of quarterly and annual financial statements, MD&A and annual reportsof the Corporation;

—                                   review of internal controlsystems maintained by the Corporation;

—                                   review of significantaccounting and tax compliance issues where there is choice among variousalternatives or where application of a policy has a significant effect on thefinancial results of the Corporation;

—                                   review of significant proposednon-recurring events such as mergers, acquisitions or divestitures; and

—                                   review of press releases orother publicly circulated documents containing financial information.

**                ExternalAuditors**

—                                   retain and/or terminate theexternal auditors (subject to regulatory and shareholder notification) who, inturn, will report directly to the Audit Committee;

—                                   review the terms of theexternal auditors’ engagement and the appropriateness and reasonableness of theproposed engagement fees;

—                                   annually, obtain and review acertificate attesting to the external auditors’ independence, identifying allrelationships between the external auditors and the Corporation;

—                                   annually, evaluate the externalauditors’ qualifications, performance and independence;

 

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—                                   annually, to assure continuingauditors’ independence, consider the rotation of the lead audit partner or theexternal audit firm;

—                                   -               pre-approve engagements for non-auditservices provided by the external auditors or their affiliates together withestimated fees and potential issues of independence; and

—                                   -               review hiring policies for employees or formeremployees of the external auditors.

**Audit**

—                                   review the audit plan for thecoming year with the external auditors and with management;

—                                   review with management and theexternal auditors any proposed changes in major accounting policies, thepresentation and impact of significant risks and uncertainties, and keyestimates and judgements of management that may be material to financialreporting;

—                                   query management and theexternal auditors regarding significant financial reporting issues during thefiscal period and the method of resolution;

—                                   review any problemsexperienced by the external auditors in performing the audit, including anyrestrictions imposed by management of significant accounting issues in whichthere was a disagreement with management;

—                                   review audited annualfinancial statements and quarterly financial statements with management and theexternal auditors (including disclosures under “Management Discussion &Analysis”), in conjunction with the report of the external auditors and obtainexplanation from management of all significant variances between comparativereporting periods; and

—                                   review the auditors’ report tomanagement, containing recommendations of the external auditors, and management’sresponse and subsequent remedy of any identified weaknesses.

**Other Duties and Responsibilities**

—                                   The responsibilities,practices and duties of the Committee outlined herein are not intended to becomprehensive.  The Board may, from timeto time charge the Committee with the responsibility of reviewing items of afinancial or control, risk management or reserves nature;

—                                   The Committee shallperiodically report to the Board the results of reviews undertaken and anyassociated recommendations;

—                                   The Committee shall monitorthe receipt, retention and treatment of complaints received by the issuerregarding accounting, internal accounting controls, or auditing matters; and

—                                   The Committee shall monitorthe confidential, anonymous submissions by employees of concerns regardingquestionable accounting or auditing matters.

 

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