TORC Oil & Gas Ltd. T.TOG

Orion has increased target to $15 from $12

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What Happened? • We are providing a more detailed look at TriStar’s leverage to the Bakken play in southeast Saskatchewan. • Through higher crude oil prices and technological advances in fracing, the Bakken Formation has become one of the most attractive light oil plays in western Canada. • Total crude oil in place is estimated over two billion barrels with only a small percentage recovered to date. Most engineering estimates contemplate an 8%–12% ultimate recovery rate. • Recently, TriStar announced that it had agreed to acquire all outstanding shares of Kinwest Corporation (Kinwest) along with additional complimentary assets, enhancing its already strong position in the Bakken Formation. With the proposed acquisition of Peerless by Petrobank, there are essentially only three main players left in the play: Crescent Point, Petrobank and TriStar. • Including Kinwest, TriStar has accumulated approximately 79 net sections of land within the southeast Saskatchewan Bakken light oil play, identifying as many as 543 (316 net) drilling locations based on four wells per section. • We estimate the company’s exposure to the Bakken at over 300 MMBbl OOIP. On TriStar’s 2006 year-end reserves, the company had booked less than 500,000 barrels of Bakken reserves. • TriStar is scheduled to spend approximately 55% of its $160 million capital budget within southeast Saskatchewan in 2008, facilitating the drilling of 54 (33.8 net) wells. The company currently has three drilling rigs dedicated to the Bakken play. What Does it Mean? • Assuming 79 net sections to the company and reserves of 100 MBoe per well, we estimate TriStar’s risked resource potential within Bakken at approximately 28.2 MMBoe. • Through improvements in technology and enhanced recovery, we believe our estimate could prove to be highly conservative. What Is it Worth? • As a result of increased leverage to long-life reserves along with superior economics in southeast Saskatchewan, we have increased our target price from $12.00 to $15.00, representing 6.2x our 2008E FDCFPS estimate of $2.44. Conclusion • A strong crude price environment and increasing exposure to one of the most attractive light oil plays in western Canada puts TriStar in an enviable position.