A Compelling Case. A Clear Vision.
August 2006
Unconventional Natural Gas
SPI
SPI
DISCLOSURE STATEMENT
The corporate information contained in this presentation contains forward-looking forecast information. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonably accurate by Canadian Spirit Resources Inc. (CSRI) at the time of preparation, may prove to be incorrect. The actual results achieved during the forecast period will vary from the information provided herein and the variations may be material. Consequently, there is no representation by CSRI that actual results achieved during the forecast period will be the same in whole or in part as those forecast.
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Overview
Unconventional natural gas: One of the fastest-growing sectors of North America's energy industry
Canadian Spirit Resources: Focused on developing 1.0 tcf of unconventional natural gas from coal (NGC)
A huge resource play: Farrell Creek, northeast British Columbia, 40,000 + acres, 94% (average) owned by CSRI, 80% of land includes deep rights, $30 million invested to date
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Current Status
Seven test holes drilled and cased
Two holes fracture-stimulated in the Gething Formation
Both holes producing natural gas and water
Dedicated a test hole to evaluate gas-bearing shales
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Resource Potential: Farrell Creek
Sproule Associates Limited Preliminary ReportApril 17, 2006:
Contingent gas-in-place resource potential
Gething coals 12 – 16 bcf per section
Gething shales 11 – 17 bcf per section
Gates & Moosebar shales7 – 8 bcf per section
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Next Steps
Measure production rates
Develop pilot plan to drill and complete more test holes
Focus on engineering, operational and marketing aspects of developing a commercial project
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Fast Facts
Shares outstanding 28.8 million
Recent share price $2.25
Market cap $65 + million
Land 62 + sections (42,000 gross acres)
Contingent resource *
Gething coals 12 – 16 bcf/section
Gething shales 11 – 17 bcf/section
Total contingent resource* 1.4 – 2.0 tcf
Estimated recovery rate 60%
Market cap / recoverable mcf $0.06 per mcf
Largest shareholder Sprott Asset Management (18.8%)
* (Sproule Associates, Apr 17/06, Gething Formation only, Farrell Creek, B.C.)
(As at June 5, 2006) ($ Cdn)
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Natural Gas from Coal (NGC)
U.S. 10 years ahead of Canada
Industry in Western Canada growing rapidly
Production of unconventional gas similar to production of conventional gas
Typically, to economically produce natural gas from coal, formation water must be removed first
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A Compelling Case
NGC compared to conventional gas
Coal can store up to 6 or 7 times more gas
NGC well can have 3 times the life
NGC recovery factors can be as high as 80%
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A Clear Vision
CSRI focused on unconventional gas, including NGC
2002 regional NGC assessment of WCSB
Five-year plan: explore for and develop 1.0 tcf of NGC within five years in an environmentally safe and responsible manner
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A Clear Vision (cont’d)
Within four years:
Identified several large resource plays
Assembled high working interest land position in northeast B.C.
Began evaluating productive capability of principal resource property
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Coalbed Gas Potential in B.C.
CSRI area of interest
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Farrell Creek, NE B.C.
CSRI Test Area
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Farrell Creek Geology
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Resource Overview
Gething Formation
Multiple thin coal seams
As many as 30 individual seams
Net coal thickness: 25 – 50 feet
Gas content: 230 – 550 scf/ton
Contingent resource
Coals 12 – 16 bcf/section
Shales 11 – 17 bcf/section
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Resource Overview
Moosebar/Gates (Shale Formation)
Gas content 2.5 – 11 scf/ton
Thickness 900 feet
Cored 600+ feet
Additional prospects identified
Bluesky, Cadomin, Halfway, Baldonnel, Doig/Montney
Contingent resource
Shales 7 – 8 bcf/section
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Farrell Creek Potential
Land 62 + sections
Well spacing 4 – 8 wells per section
Risked well locations 200 – 400
Productivity per well 250 – 300 mcf/d
Potential production 50 – 120 mmcf/d
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Farrell Creek 2006 Plan of Activities
License 2 – 4 additional locations for summer drilling program
Prepare and submit Feasibility Plan for provincial government approval
Raise funds for pilot phase of production
Drill, complete and test up to 4 additional wells
Initiate application to tie-in to Duke Energy pipeline
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First Half (approved) $3.6
Second Half (estimated) 9.0
$12.6
G & A expense $1.4
Net cash resources (Jan 1/06) $8.0
2006 Capital Program
($ million Cdn)
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Risks
Farrell Creek productivity
Equipment and service costs
Commodity prices
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Strategic Advantages
Resource knowledge and expertise of technical team
Energy development experience of management and directors
High working interest land position with multiple prospective targets
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In Summary
Material land base of 62 + sections
1.4 – 2.0 tcf (coals and shales, Gething only)
Value/Market upside
Additional potential (shallow and deep)
Favorable commodity pricing
200 mmcf/d capacity in nearby Duke Energy pipeline
A Compelling Case. A Clear Vision.
A company with its eye on the prize:
1.0 tcf of NGC
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Canadian Spirit Resources Inc.
Suite 1950, Ford Tower
633 6th Avenue S.W.
Calgary, Alberta T2P 2Y5
Telephone (403) 539-5005
E-mail: [email protected]
TSX Venture: SPI
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