Questerre Energy Corp (Canada) T.QEC

RE: QUESTERRE - updates is expected today after TS

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Questerre investment summary

• Main partner Talisman will put high priority on the Quebec play

– Drilling 16 wells and spending $100m-130m 2008/2009

– Highlighting Lorraine shale zone above the Utica shale, with 30% higher resource

potential

– This clearly shows Talisman’s confidence and commitment to Quebec

• Questerre probably has highest quality acreage in the Quebec shales

– Uniform structure throughout most of the acreage, between the Yamaska fault and

the ’Logan’s line’

– EnCana study analyzing 28 well samples from 2007 showed good results

• We have a BUY recommendation and NOK 40 Target Price

– Unrisked value is NOK ~200 per share, around NOK 100 per share in each of the

Utica and Lorraine zones

–We have risked Utica at 30% probability and Lorraine at 10% probability

– Further upside on Lorraine as only 10% of potential included in unrisked valuation

Further 50-100% valuation upside

• Based on Talisman’s and Forest’s guidance we get

– Utica: NOK 90 per share unrisked potential

– Lorraine: NOK 110 per share unrisked potential

– NOK 40 Target Price with 30% risk factor on Utica and 10% risk factor on

Lorraine

• If next well results are in line with Forest and Talisman guidance, we will

increase the probability factors

– Utica potentially from 30% to 50% by year end ?? +NOK ~20 per share

– Lorraine potentially from 10% to 50% by year end ?? +NOK ~40 per share

• Questerre internally estimates significantly higher resource potential on both

zones, in the order of +50-100%

– This may be firmed up on the next wells to be drilled

– In that case we could look at unrisked value of NOK 300-400 per share,

and NOK 150-200 risked value / target price by year end

Huge upside on Lorraine shale potential

• Talisman estimates 120 bcf/section on Lorraine shales vs 93

bcf/section on Utica (30% higher)

• This is however only based on around 1/10 of the total height of the

Lorraine reservoir (the remaining part of Lorraine has not been

analysed)

• In an upside scenario, Lorraine could hold more than 1,000 bcf/section

(1 TCF) or 10x as much as we have based our valuation on

• This means the unrisked upside in QEC could be in excess of NOK

1,000 per share vs our current NOK 200 per share estimate (~NOK

100 on Utica and ~NOK 100 on Lorraine)

Thomas Aarrestad / Petter Gillesen Pareto