Western Canada Winter 2012 Supply/Demand Outlook. Cynthia Loke

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1 Western Canada Winter 212 Supply/Demand Outlook Cynthia Loke

2 Observations WCSB gas drilling is the lowest in 15 years However new well productivity continues to increase due to horizontal drilling US supply growth continues to pressure AECO/NIT prices Storage injections are providing support to gas prices Western Canada storage levels could be at record high levels by the end of summer Record high injections to date WCSB exports are expected to decline this winter Due to market competition and increased WCSB demand 2

3 AECO/NIT Gas Prices 12 C$/GJ

4 WCSB Active Drilling Rigs # of Rigs 8 6 6/7 7/8 8/9 9/1 1/ % Data to Sept. 9 4

5 WCSB Total Wells Drilled/Month 3 25 # of wells 17 Year Range 8/9 9/1 1/ % 5

6 Cumulative Gas Wells Drilled By Province # of Wells Drilled AB -11% 1/11 1 Year Range 8/9 9/1 # of Wells Drilled BC 8/9 1/11-14% 9/1 # of Wells Drilled SK -34% 1/11 8/9 9/1 # of Wells Drilled WCSB -14% 8/9 9/1 1/11 6

7 Cumulative Gas Well Connections By Province # of Connections # of Connections AB -1% SK -53% 5/6 6/7 7/8 8/9 9/1 1/11 est 5/6 6/7 7/8 # of Connections # of Connections BC +2% WCSB % 5/6 6/7 1/11 est 7/8 9/1 8/9 5/6 6/7 7/8 8/9 8/9 9/1 1/11 est 9/1 1/11 est Nov Jan Mar May Jul Sept 7

8 New Tie-in Supply By Province Bcf/ d Mmcf/d AB +4% N D J F M A M J J A S O SK 1/11 est -75% 5/6 6/7 7/8 9/1 8/9 5/6 6/7 7/8 8/9 9/1 N D J F M A M J J A S O Mmcf/d Bcf/ d BC 7/8 N D J F M A M J J A S O WCSB 1/11 est Non-associated gas only 1/11 est 9/1 5/6 6/7 8/9 +61% +22% 5/6 6/7 7/8 9/1 8/9 N D J F M A M J J A S O New supply is higher despite decline in drilling due to stronger well productivity. 8

9 Horizontal Gas Wells Drilled By Province # of Wells # of Wells AB 1/11 est 9/1 +3% 3 +9% 8/9 7/8 6/ BC 1/11 est 9/1 7/8 6/7 8/ WCSB +19% 1/11 est 9/1 7/8 4 8/9 2 6/7 9

10 211 Gas Well Completions Horn R Muskwa, Klua,Evie Town - Farell Creek Montney N. Extension Ekwan Jean Marie Vertical gas completion Horizontal gas completion TransCanada Pipeline Dawson Creek Montney Edson - Deep Basin Mannville Spectra Pipeline Grande Prairie Edmonton Calgary Wilson Creek Hoadley Glauconite 1

11 % Horizontal Gas Wells Drilled By Area 1% 1% 8% NW 8% BC 6% 6% 4% 4% 2% 2% % 6/7 7/8 8/9 9/1 1/11 % 6/7 7/8 8/9 9/1 1/11 1% 8% SW 1% 8% WCSB 6% 6% 4% 4% 2% 2% % 6/7 7/8 8/9 9/1 1/11 Nov. to Jul. comparison % 6/7 7/8 8/9 9/1 1/11 11

12 Horizontal and Vertical Initial Production Rates by AB Quadrant NW Horizontal Vertical SE /2 2/3 3/4 4/5 5/6 6/7 7/8 8/9 9/1 1/ /2 SW 2/3 3/4 4/5 5/6 6/7 7/8 8/9 9/1 1/ Nov. to Jun. comparison CBM Wells have been excluded.2 1/2 2/3 3/4 4/5 5/6 6/7 7/8 8/9 9/1 1/11 12

13 Initial Well Productivity by Region MMcf/d BC SK NE AB NW AB SE AB SW AB WCSB /3 3/4 4/5 5/6 6/7 7/8 8/9 9/1 1/11 Nov. to Jun. comparison 13

14 Shift in Gas Well Connections % of WCSB Connections 8% East Half WCSB West Half WCSB 6% 4% 2% % 95/96 97/98 99/ 1/2 3/4 5/6 7/8 9/1 Nov. to Jul. comparison 14

15 WCSB Initial Gas Well Production Rates/Decline Rate Initial New Well Production Rate MMcf/d/well.7 % 25 Composite Decline Rate * /93 95/96 98/99 1/2 4/5 7/8 1/11 * estimate 9/91 93/94 96/97 99/ 2/3 5/6 8/9 15

16 WCSB Monthly Production to June 211 Bcf/d Bcf/d Nov Nov Dec AB -.55 Bcf/d 6/7 7/8 8/9 9/1 1/11 Jan Feb Mar Apr May Jun SK -.9 Bcf/d 6/7 7/8 8/9 9/1 1/11 Dec Jan Feb Mar Apr May Jun Jul Jul Aug Sep Oct Aug Sep Oct Bcf/d /7 7/8 8/9 9/1 1/11 Nov Dec Bcf/d 18 Marketable gas from Government sources, includes solution gas (some reporting lag) BC +.5 Bcf/d Jan Feb Mar Apr May Jun Nov Dec Jan Feb Mar Apr May Jun Jul Aug WCSB -.17 Bcf/d Jul Aug Sep Oct 6/7 7/8 8/9 9/1 1/11 Sep Oct 16

17 Seasonal Flows on the Alberta System Bcf/d est. Forecast Winter 7/8 Summer 28 Winter 8/9 Summer 29 Winter 9/1 Summer 21 Winter 1/11 Summer 211 Winter 1/11 8 3/4 5/6 Excluding Storage, including ATCO Data Current to Oct. 2,

18 WCSB Coalbed Methane Production MMcf/d Wells NE AB NW AB SW AB SE AB Total Prod Wells Nov-2 Mar-3 Jul-3 Nov-3 Mar-4 Jul-4 Nov-4 Mar-5 Jul-5 Nov-5 Mar-6 Jul-6 Nov-6 Mar-7 Jul-7 Nov-7 Mar-8 Jul-8 Nov-8 Mar-9 Jul-9 Nov-9 Mar-1 Jul-1 Nov-1 Mar-11 Data as of Jun. 211

19 Western Canada* Working Gas In Storage Bcf 5 Year Range 9/1 1/11 5 Yr Avg 1 WINTER SUMMER Source: BC, Sask, AB governments, TransCanada 19

20 Eastern Canada Storage Status Bcf 5 Year Range 9/1 1/11 5 Yr Avg 5 WINTER SUMMER Source: Canadian Enerdata 2

21 U.S. Storage Status Tcf WINTER 5 Year Range 9/1 1/11 5 Yr Avg SUMMER Source: EIA 21

22 Conclusions WCSB supply expected to be flat in 211, 1-3 Mmcf/d growth expected in 212. WCSB demand expected to grow 2 Mmcf/d driven by increased oilsands demand. Initial well productivity (IP) will continue to grow with the increase in horizontal drilling. Throughput on the Alberta System is expected to average Bcf/d this winter compared to 1.1 Bcf/d last winter (including ATCO flows). Unconventional gas supply development will contribute to supply growth in the next few years. 22