DAWSON HEAVY OIL PROJECT

The Dawson project will be Petrobank's first application of THAI™ in a more conventional heavy oil reservoir and will be an important step in the expansion of THAI™ as a heavy oil application that can be broadly applied in Canada and internationally. The Dawson property is situated on a large heavy oil fairway in the Peace River region of northwest Alberta. The main producing zone is the Bluesky formation, which contains conventional heavy oil capable of being produced using cold production techniques. While there are numerous, large cold producing projects in the area, many operators are considering switching to conventional thermal recovery projects to improve production rates and resource recovery. Existing conventional cold production techniques typically recover less than 10 percent of the original-oil-in-place. With the application of the THAI™ process, we expect to see the recovery potential growing to 70 to 80 percent. The first step in the Dawson project took place in the third quarter of 2007 when we completed the first third party THAI™ license agreement and property acquisition with Duvernay Oil Corp. The acquisition includes a 50 percent working interest in heavy oil lands covering 2,880 acres. Including two existing horizontal wells and related facilities. Based on our internal evaluation using 3D seismic and well data, the Dawson property has a significant, 11° API in-place oil resource that is perfectly suited for THAI™ development. Petrobank is operator of the Dawson project where we are planning a two-well THAI™/ CAPRI™ development which can be easily expanded to accommodate additional wells. Engineering and regulatory work began early in 2008 and, based on timely receipt of regulatory approvals, the Dawson project could be initiated in 2008.