- interval in Middle Utica has consistent good gas flows (Dolgeville)

- horizontal wells will be located near vertical wells (Gentilly, St. Edouard #1 well) ???

- 800 to 1000 meters in length, 8 to 10 stage fracs (maybe 10 x vertical rates) ???

- TLM and QEC are showing confidence in their flow tests on the vertical well since Forest Oil only performed a 4 stage frac while TLM & QEC are skipping ahead to production-level

stimulation

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PRESIDENT’S MESSAGE
The consistent well results from the middle Utica interval were a major step up the learning curve in the
Lowlands.
Stabilized test rates throughout the entire deep acreage block have confirmed the requisite rock properties
and areal extent essential for a successful shale gas play. These results were instrumental in our joint
decision with Talisman to accelerate development with two pilot horizontal wells into this interval later
this year.
Prudent investment of capital in the current fiscal climate remained a near-term priority as we continued to
defer development drilling. Picking our spots carefully, we acquired 17.5 net sections at under $100/acre
prospective for the Horn River shale as well as deeper reef targets in northeast BC. We also assessed new
completion techniques at Antler to maximize recovery of the light oil pool. Recent industry activity in both
these areas validates the significant potential of these low-cost investments.
Highlights
• Consistently positive results in the middle Utica
• Acquired significant acreage prospective for Horn River shale gas and deeper targets
• Positive cash flow of $0.72 million and production of 806 boe/d with minimal capital investment in
producing assets, production shut-ins and lower prices
• Capital preservation efforts maintained working capital over $50 million and no debt
St. Lawrence Lowlands, Quebec
Our enthusiasm for the original flow rates of 800 mcf/d from the Gentilly #1 vertical well last year was
endorsed by the subsequent test results from St. David #1 and La Visitation #1 in the quarter.
These flow rates from a specific interval in the middle Utica confirm the interval can be effectively frac’d
and yield sustained gas flows that, at the upper end, border on commercial rates. They were further
correlated with the results from the Leclerville #1 well, seven km southwest of the St. Edouard #1 well,
which we understand tested at 900 mcf/d from the same interval. The consistency in results with over
100 km between the vertical test wells provided the impetus to follow up these results with horizontal wells
this year.
Drilling and completion of the horizontal wells will be operated by Talisman. Programs are under
development and the wells are prognosed to have 800-1000 m horizontal legs in the middle Utica interval
with up to 8 to 10 stage fracs. The wells will be optimally located near the existing verticals that will serve
as monitor wells for real-time microseismic imaging to map frac growth. Based on results from these pilot
horizontals, the partners will proceed to pilot pads with multiple horizontal wells to assess commerciality.
In addition to the middle Utica, we continue to work on other intervals within the Utica and the shallower
Lorraine formations. An evaluation of the Forest Oil horizontal wells that focused on the upper Utica
interval was completed. Several possible solutions were identified to address the issues of high frac gradients
and slow cleanup times experienced. Earlier plans by Forest Oil to test these ideas by re-completing
wells this summer have since been postponed pending an improvement in market conditions.
2 0 0 9 Q 2 I N T E R I M R E P O R T
Q U E S T E R R E E N E R G Y
C O R P O R A T I O N
2
Notwithstanding the Utica test results, we did not lose sight of our original exploration target in the Trenton
Black-River. St. Edouard #1 flowed at 2.2 mmcf/d from the TBR with no produced water. Natural fracturing
contributed to strong initial rates. Predicted reserves are unlikely to bear the tie-in costs and we have since
suspended this interval to test the Utica. Additional TBR prospects will likely be tested in future wells
where the multiple zones can be stacked.