THE INSIGHT BEHIND ENERGY SUCCESS 1 CALGARY LONDON HOUSTON THE INSIGHT BEHIND ENERGY SUCCESS The Energy Round Table 2006 Investment Drivers for Oil Sands Tom Ebbern Executive Managing Director Institutional Research

THE INSIGHT BEHIND ENERGY SUCCESS 2 Tristone Capital Inc. Full Service Global Energy Boutique Globally Positioned For Success in Energy  Calgary  Houston  London  3 Countries   100 People   Tristone Capital has main offices in Calgary, Houston and London  Tristone Capital is a fully integrated investment dealer that actively combines three primary advisory services: Capital Markets Institutional Research Institutional Sales Institutional Trading Asset Management Investment Banking Mergers & Acquisitions Strategic Advisory Equity Underwriting Fairness Opinions Valuations Property A&D Negotiated Sale Mid-Value Negotiated Land-Value Negotiated

THE INSIGHT BEHIND ENERGY SUCCESS 3 Drivers for Investors in Oil Sands  Long-term view for crude oil – fundamentals remain strong  Resource optionality  Increasing valuations and new players moving in (Total, Royal Dutch, Tech, China)  Competitive landscape for new projects – too much all at once?  Cost pressures have reduced or eliminated the benefit of higher prices  Synthetic or bitumen – where is the best return?  Growing differentiation of SCO

THE INSIGHT BEHIND ENERGY SUCCESS 4 Source: Tristone Capital Inc., Bloomberg, Investment Returns in Oil Sands  An index of oil sands (COS, OPC, SU, SYN, UTS, WTO) has increased 900% in the last 7 years (40% CAGR)

THE INSIGHT BEHIND ENERGY SUCCESS 5 Global Excess Capacity vs. Oil Prices  With virtually no surplus global production capacity, oil prices are expected to remain in the $60 range for many years Source: Tristone Capital Inc., Bloomberg,, EIA, IMF

THE INSIGHT BEHIND ENERGY SUCCESS 6 Global Refining Capacity  Excess global refining capacity has finally been used up – it means more capital is required to go from a resource in the ground to the end product Source: EIA, IEA, Oil & Gas Journal, Tristone Capital

THE INSIGHT BEHIND ENERGY SUCCESS 7 World Proved Oil Reserves  Investors are attracted to the enormous resource potential of the oil sands Source: Oil & Gas Journal Jan 1/06

THE INSIGHT BEHIND ENERGY SUCCESS 8 Alberta Oil Sands Land Sales – Very Little is Left Note: As of Aug 23 land sale Source: GeoScout

THE INSIGHT BEHIND ENERGY SUCCESS 9 Alberta Oil Sands Acquisition Prices Source: Company Reports  The value of undeveloped oil sands resources has increased significantly

THE INSIGHT BEHIND ENERGY SUCCESS 10 Proposed Mining Projects  Big growth plans – not likely to get done as currently planned Source: Company Reports

THE INSIGHT BEHIND ENERGY SUCCESS 11 Forecast Labour Market in Western Canada Source: Construction Owners Association of Alberta (COAA)  The system is already stressed at current levels of 15,000. How can we get to 30,000?

THE INSIGHT BEHIND ENERGY SUCCESS 12 Year over Year Forecast Labour Changes Source: Construction Owners Association of Alberta (COAA)  The reality is that project timing will get pushed back – we are already seeing it happen

THE INSIGHT BEHIND ENERGY SUCCESS 13 Forecast Scorecard – 2002 to 2006 Source: Company Reports, Tristone Capital  The oil sand industry has a history of over-promising which will get worse as the landscape becomes busier.

THE INSIGHT BEHIND ENERGY SUCCESS 14 Proposed In-Situ Projects Source: Company Reports  Impressive growth planned for thermal – with only two commercial SAGD projects currently running – we may see some surprises

THE INSIGHT BEHIND ENERGY SUCCESS 15 Cumulative Steam Oil Ratio Comparison Source: GeoScout  Mixed results from thermal projects are starting to add concern to investors

THE INSIGHT BEHIND ENERGY SUCCESS 16 Oil Sands Historical and Forecast Additions Cost Source: Company Reports  Costs have risen as fast as crude prices. Smaller projects (thermal without upgrading) have seen less cost pressure

THE INSIGHT BEHIND ENERGY SUCCESS 17 Mining & Upgrading Project Returns: Cost vs. Oil Prices (US$/b) Source: Tristone Capital  Costs have risen as fast as crude prices. Smaller projects (thermal without upgrading) have seen less cost pressure

THE INSIGHT BEHIND ENERGY SUCCESS 18 SAGD Project Returns: Costs vs. Oil Prices  Costs have risen as fast as crude prices. Smaller projects (thermal without upgrading) have seen less cost pressure Source: Tristone Capital

THE INSIGHT BEHIND ENERGY SUCCESS 19 Value Erosion  Long term crude forecast has increased 175% in five years, but rising costs – both capital and operating have eliminated the benefit to investors. Source: Tristone Capital

THE INSIGHT BEHIND ENERGY SUCCESS 20 Synthetic Crude Differentials to Edmonton Light Source: Company Reports, Tristone Capital  Differences in SCO quality (API, Cetane, Smoke Point, Sulphur etc) are becoming more important as SCO volumes increase.