Coalbed Methane (CBM)
Approximately 15% of our Canadian production is from our commercial CBM developments at Corbett, Doris and Thunder in the Fort Assiniboine area of central Alberta. We began commercial development in the Upper Mannville coals in 2005 by applying horizontal well technology to increase gas production rates and reduce de-watering time from watersaturated coal. Upper Mannville coals are generally deeper than the Horseshoe Canyon “dry coal” play, which is also being commercially developed in Alberta.

We have a long-term view of this business and plan to increase our CBM production by progressively developing opportunities on our extensive land base. At the end of 2007, we held more than 725 net sections of land in Alberta with CBM potential, some of which overlay existing conventional producing lands. In 2007, we invested approximately $170 million in exploration and development activities. The Government of Alberta recently provided clarification of the length adjustment to be used for calculation of the proposed royalties and we have reinstated our investment program in light of this announcement. In 2008, we plan to tie-in Upper Mannville development wells drilled in 2007 for production and commence development of our Horseshoe Canyon lands.

Shale Gas
Over the past 18 months, we have accumulated a substantial land position of approximately 126,000 net acres in an emerging Devonian shale gas play in the Horn River Basin in northeast British Columbia which has the potential to become one of the most significant shale gas plays in North America. We have a 100% working interest in these lands. Our capital program over the past two winters has primarily focused on the Dilly Creek area in the Horn River Basin where we have approximately 88,000 net acres. This shale gas play has been compared to the Barnett Shale in Texas by other operators in the area as it displays similar rock properties and play characteristics. The average gross shale thickness on our Dilly Creek lands is approximately 175 meters which is almost 50% thicker than the Barnett.

We recently announced positive results from our winter program where we fraced three vertical wells and one horizontal well with encouraging results. Based on our assessment of the data we acquired, additional analysis conducted by third party consultants and assuming a 20% recovery factor, we estimate our Dilly Creek lands contain between 3 and 6 trillion cubic feet (0.5 to 1.0 billion barrels of oil equivalent) of recoverable contingent resources. Further appraisal activity is required before these estimates can be finalized and commerciality established.

To further assess the potential of our lands, we are currently engaged in consultations with various stakeholders and are gearing up to conduct a summer drilling program consisting of two horizontal wells which will be fraced, completed and tied-in. We recently participated in the construction of an all-season road, providing us access to these well locations and approximately half of our Dilly Creek lands year round. This winter we are planning an 8 to 16 well drilling and completion program. We have secured access to 70 mmcf/d of pipeline and processing capacity for our shale gas production for a five year period with a renewal option.