BakkenIn just over one year, the Canadian Business Unit has built a platform of sustainable and significant growth for many years to come. Petrobank is one of the most active players in the emerging Bakken oil light play in southeast Saskatchewan. Active drilling programs by Petrobank and others continue to expand the absolute size of the recoverable oil-in-place from this large Bakken resource. With further delineation through drilling, we expect that this resource play will rank as one of the biggest light oil developments in the history of the Western Canadian Sedimentary Basin. 
Petrobank's strong presence in the Bakken stems from an aggressive strategy of identifying underdeveloped areas, applying and refining advanced technologies and quietly acquiring an extensive land position. Starting from a small land footprint acquired with the acquisition of Barrington Petroleum Ltd. in 2001, we have expanded our Bakken position to 214 net sections (137,000 net acres) through farmins, acquisitions and Crown land sales. Of this 186 net sections remain to be developed and entering 2008 we estimated our drilling inventory at over 660 locations (624 net), based on only four wells per section. In 2008 we plan to drill or participate in drilling over 150 of these locations, making Petrobank the most active driller on the play. At the end of 2006, the Company's land base in the area with Bakken potential totaled 62,448 acres (49,105 net). Since the beginning of 2007, through Crown land sales and acquisitions, we have increased our acreage by a further 52,950 (52,845 net) acres to a total of 115,398 (101,950 net) acres. The majority of this increase was Crown land purchased at Saskatchewan's April 2007 land sale where we spent $59.5 million to acquire 47,285 (47,285 net) acres. We are also in the process of closing an additional acquisition and a farm-in transaction that, combined, will provide an additional 9,426 (4,813 net) earned interest acres and the potential to earn a further 13,345 (9,400 net) acres on the Bakken play through drilling. These acquisitions will increase our total potential Bakken land position to 138,169 (116,163 net) acres. Petrobank's Competitive Advantage Petrobank's extensive undeveloped land position includes non-expiring fee simple lands in Saskatchewan and Manitoba. In 2005, the Company farmed-out lands in southeast Saskatchewan to a company pursuing the Bakken play in exchange for a combination of royalty interests and carried working interests. This strategy enabled Petrobank to monitor the early technical development of the play with no capital risk. Based on that vantage point, the Company developed its own operational drilling, completion and fracture stimulation strategies, which were tested with eight horizontal wells, evaluating alternative approaches for efficient capture of this large resource base. Significant upside potentialOur independent reserve evaluators, Sproule, have included 171 future drilling locations in the 3P reports compared to our estimated inventory of over 624 net locations. Our activity levels are expected to be considerably higher than those reflected in our reserve evaluation for the foreseeable future. These additional locations, coupled with ongoing technology enhancements and secondary recovery projects, are expected lead to significant future upside. The economics are attractive in the Bakken play. At least four wells per section can be drilled. Drilling and completion costs are approximately $1.7 million per well, and according to our independent reserve evaluator, proved plus probable reserves are 100,000 barrels of oil per well, representing less than 10 percent recovery of original oil-in-place, are well below our internal estimates of well potential. This leaves considerable upside potential for improved recoveries. The economics are further enhanced by high realized oil prices due to the high quality oil and the Saskatchewan government's royalty holiday of 37,740 barrels per well. |
 
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