Oilexco Incorporated (OIL–T, $7.

13)
J. Frederick Kozak, P.Eng. (403-509-1938, fkozak@haywood.com)
David Warkentin, P.Eng. (403-509-1926, dwarkentin@haywood.com)
August 4, 2006

MEMBER CIPF

Investment Brief – Oilexco is a public international junior oil and gas exploration company that is focused on opportunities in the
U.K. North Sea. Through a carefully thought-out and executed strategy, the Company has discovered an oil field due to come onstream
in Q4/06 at approximately 30,000 bbl/d and has unrisked exposure to significant incremental production from new exploration projects.

Rating

SECTOR OUTPERFORM

OIL is a Radar Portfolio Selection and 2006 Top Pick

Nicol Production Well Tested – Results Confirm
Productive Capability for Q4/06 Onstream Date

C$12.00

ƒ Oilexco announced test results from the Nicol production well

Target Price

Current Price
C$7.13
Return (incl. dividend)
68%
52-Week High / Low
C$7.17 / C$3.10
Shares O/S
195.2M (basic) / 212.7M (F/D)
Market Capitalization
$1,239 million
Enterprise Value
$1,339 million
Daily Volume
518,000
Currency
US$ unless noted
Company CEO
Arthur Millholland
Company Web Site
www.oilexco.com
Financial Forecast
2006E
Liquids (bbl/d)
6,760
Natural Gas (mmcf/d)
0.0
Total (boe/d)
6,768
% Liquids
100%
Cash Flow ($M)
115.0
F/D CFPS
$0.54
F/D EPS
$0.30
Capital Expenditures ($M)
280.0
Net Debt ($M)
85.3
WTI (US$/bbl)
$67.50
AECO ($/GJ)
$6.67
Valuation Parameters
Price/CFPS (multiple)
11.8
Price/EPS (multiple)
20.8
EV/boe/d
Source: Oilexco and Haywood Securities

2007E
30,487
0.0
30,490
100%
530.4
$2.50
$1.79
250.0
(195.0)
$65.00
$7.51

2008E 2008E/2007E
33,994
12%
0.0
154%
34,001
12%
100%
(0%)
434.8
(18%)
$2.05
(18%)
$1.23
(31%)
250.0
0%
(379.8)
95%
$65.00
0%
$7.51
0%

2.5
3.5
$43,908

3.1
5.1
$39,374

ƒ Production testing confirms Nicol field potential
The test results were limited by equipment available on the Sedco 712, as
well as U.K. government restrictions on the amount of oil that was
permitted to be burned during testing. However, the flow rate is slightly
better than we had expected and more than supports our 2007 production
forecast for Oilexco.

ƒ Combined production potential of 56,000 bbl/d
With the completion of drilling and testing of the first four production
wells in the Brenda/Nicol field, Oilexco has a total combined production
potential of 56,000 bbl/d. However, we note that the production is
unlikely to ever reach that rate as Oilexco is committed to maximizing
reserve recovery, which means production rates in the 30,000 bbl/d to
35,000 bbl/d range.

ƒ Production is on track for Q4/06 start-up
All wells have now been drilled for initial production to start up later this
year. We note, however, that Oilexco has one more Brenda horizontal
production well in inventory to be completed in Spring 2007 and suggest
that a second Nicol well is now also possible, as there would appear to be
more reserves than previously expected in the Nicol pool.
Expectations – Based on the test results to date, Brenda could exceed our
2007 production estimates as previously published. However, until we have
sufficient production history, our estimates remain unchanged.

Price Performance
$8.00

Oilexco Incorporated (OIL-TSX)
$7.00

Valuation – Our target price of $12.00 represents a 4.3x multiple of 2007
fully diluted CFPS. We note that the upside potential is still significant, as
there is no exploration success factored into our estimates. We also note that
other international producers command multiples of as much as 10.0x CFPS.

$6.00

$5.00

$4.00

$3.00
50 Day M.A.
$2.00

$1.00
Dec-04
4.0

22%
45%
(10%)

The well tested at a maximum rate of 10,165 bbl/d of light sweet oil. The
test rate was higher than originally expected and represents an
approximate production rate of 12,000 bbl/d at the formation, at 8%
reservoir drawdown.

200 Day M.A.

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Volume in Millions

2.0
0.0

Catalysts – Our forecast for 2006 is based on a conservative estimate of
initial production rates from the Brenda field. Better than expected
production results would have a positive effect on our view of Oilexco.
However, should the onstream timing of the Disraeli/Sheryl discovery occur
in 2007, it would have a positive impact on our view of the Company.

Source: Bloomberg

Industry & Company Profile

Revisions, Date of Record

Oil and Gas – Oilexco is a junior oil and gas exploration
company that is focused on oil and natural gas in the U.K.
North Sea.

Rating – New, September 28, 2005
Forecast Risk
Target – Increased to $12.00 from $8.00, August 2, 2006
Financial Risk
Forecast – Revised 2006, 2007, and 2008 estimates, August 4, 2006 Valuation Risk

Risk Profile

Please see rating structure, important disclosure, risk profile parameters, disclaimers,
and notes on pages 7-10 of this report.

Moderate
Moderate
Moderate
Moderate

Oilexco Incorporated
Oilexco Incorporated (OIL–T)
Rating:
SECTOR OUTPERFORM
One-Year Target Price (C$):
$12.00
Current Price (C$)
$7.13
Market Capitalization ($M)
1,238.7
Current Shares Outstanding (million)
195.2
Dilution
Current Net Debt (est.) ($M)
100.0
Fully Diluted Shares Outstanding (million)
212.7
9.0%
Enterprise Value ($M)
1,338.7
Book Value ($M)
258.6
EV / BV (times)
5.2
ALL $ AMOUNTS ARE IN US$ UNLESS OTHERWISE NOTED
Production
2005
2006E
2007E
2008E
'07E / '06E '08E / '07E
6,760
30,487
33,994
351%
12%
Liquids (bbl/d)
261
Natural Gas (mmcf/d)
0.1
0.0
0.0
0.0
(65%)
154%
6,768
30,490
34,001
351%
12%
Total (boe/d)
270
Percent Liquids
97%
100%
100%
100%
0%
(0%)
Percent Natural Gas
3%
0%
0%
0%
(92%)
127%
5.3

159.9

707.3

790.9

342%

12%

(0.0)
($0.00)
($0.00)

115.0
$0.59
$0.54

530.4
$2.72
$2.50

434.8
$2.23
$2.05
$/FD
Share
$0.046
$0.000
$0.004
$0.005

361%
361%
367%

(18%)
(18%)
(18%)

% of CF
2%
0%
0%
0%

260.4
$1.33
$1.23
250.0
57%

459%
461%
488%
(11%)
(81%)

(31%)
(31%)
(31%)
0%
22%

Revenue ($M)
Cash Flow ($M)
CFPS Basic
CFPS Fully Diluted
CFPS Sensitivity

Earnings ($M)
EPS Basic
EPS Fully Diluted
Capital Expenditures ($M)
Reinvestment Ratio
Net Debt ($M)
Debt / Cash Flow - Trailing (years)
Per BOE Analysis ($/boe)
Revenue
Operating/Transportation Expense
Net Operating Revenue
G&A
Cash Flow
DD&A
Earnings

Oil (US$1.00/bbl)
Gas ($0.25/mcf)
100 bbl/d
1.0 mmcf/d
(16.3)
($0.12)
($0.12)

67.7
$0.35
$0.30

90.1

280.0
243%

378.7
$1.94
$1.79
250.0
47%

(89.1)

85.3
0.7

(195.0)
(0.4)

(379.8)
(0.9)

(329%)
(150%)

95%
138%

$54.08
$40.72
$11.21
$173.01
($161.80)
$31.57
($182.65)

$64.74
$6.17
$58.54
$7.60
$45.86
$13.63
$31.12

$63.56
$6.68
$56.88
$1.62
$47.66
$13.35
$34.03

$63.56
$6.68
$56.88
$0.55
$34.94
$13.35
$20.92

(2%)
8%
(3%)
(79%)
4%
(2%)
9%

(0%)
0%
(0%)
(66%)
(27%)
0%
(39%)

11.8

3.1
1.2
5.2
5.1
$39,374
$51,375

(79%)

19.9
20.8

2.5
1.7
4.3
3.5
$43,908
$62,685

(79%)
(83%)

22%
(28%)
22%
45%
(10%)
(18%)

$67.50
$64.77
$6.67
$6.09

$65.00
$63.56
$7.51
$6.77

$65.00
$63.56
$7.51
$6.06

(4%)
(2%)
13%
11%

0%
0%
0%
(10%)

Valuation Parameters
Current Price / F/D CFPS (multiple)
Debt-Adjusted CF Multiple
Target Price / F/D CFPS (multiple)
Current Price / F/D EPS (multiple)
EV/boe/d
Target EV/boe/d
Price Assumptions
Crude Oil WTI (US$/bbl)
Company Average (C$/bbl)
AECO (C$/GJ)
Company Average (C$/GJ)

$56.54
$53.92
$8.37
$11.38

Source: Haywood Securities

J. Frederick Kozak, P.Eng. (403-509-1938, fkozak@haywood.com)

August 4, 2006 — 2

Oilexco Incorporated

Investment Thesis
Oilexco’s management is a well-experienced, hands-on team that has
developed and executed a strategy that is on the verge of returning great
success. Combining the operational and technical expertise of senior
management with the geological and engineering skills of the remainder of the
team, Oilexco will deliver meaningful production growth late in 2006, with
significant exposure to other high-impact projects in 2006 and beyond. We
recommend the Company to investors for this exposure. We are maintaining our
rating for Oilexco Incorporated (OIL–T) of SECTOR OUTPERFORM and our
12-month target price of $12.00 per share.

Operational Update
Oilexco announced the production test results for the final well drilled at
Nicol in the U.K. North Sea. The well flowed at 10,165 bbl/d on testing. We
note, however, that this rate was again limited by testing equipment aboard the
Sedco 712 semi-submersible drilling rig, as well as by restrictions imposed by
the U.K. regulatory authorities as to how much oil could be burned. The
following table summarizes all of the individual Brenda/Nicol wells’ test rates.
Brenda/Nicol Field Test Summary
Test Rate

Calculated Sand-face Rate
(8% drawdown)

Brenda D1 Production Well

6,301 bbl/d

10,000 bbl/d

Brenda D2 Production Well
Brenda D3 Production Well
Nicol N1w Production Well
Total

9,765 bbl/d
10,417 bbl/d
10,165 bbl/d
36,648 bbl/d

14,000 bbl/d
20,000 bbl/d
12,000 bbl/d
56,000 bbl/d

Source: Haywood Securities

Combined with the three Brenda wells, the Nicol results are very positive for
Oilexco. We note that the Nicol test did not encounter any sand or water, and
neither did any of the three Brenda wells. Oil wells in the North Sea have the
potential for high decline rates as a result of water influx, and we are encouraged
there was no water or sand production, as both are indicators of early production
decline. All four wells have been completed with subsea wellheads and are ready
to be tied in to the production manifold, to be installed in September, with first
production on schedule for sometime in October.
While indicated test volumes are impressive, we note that the wells will not
be produced at these rates. Oilexco reiterated in the press release announcing
the Nicol test results that good reservoir management practices will be observed
in order to maximize the recovery of the oil reserves and prevent premature water
breakthrough. Oilexco has a state-of-the-art subsea manifold system whereby it
can test every well in “real time” and adjust each well’s production as required to
fully exploit the oil at Brenda and Nicol. Based on a 56,000 bbl/d total calculated
flow rate, we would expect that the four wells would be produced at 50% to 60%
of the 56,000 bbl/d total or 28,000 bbl/d to 33,600 bbl/d.

J. Frederick Kozak, P.Eng. (403-509-1938, fkozak@haywood.com)

August 4, 2006 — 3

Oilexco Incorporated

Revising 2006 and 2007 Production Estimates
As a result of the test data from the Brenda/Nicol field, we are adjusting our
production estimates up. Note that our 2007 estimates now include risked
production from the soon-to-be appraised Sheryl field. We have now deferred
production from the Black Horse discovery until the middle of 2008. As we
noted previously, our increased commodity prices result in Oilexco now
becoming taxable in Q4/07. For comparative purposes, we are also adding a
preliminary estimate of 2008 production and cash flow on an after-tax basis.
Revisions to Estimates
2006E
Production

2007E

2008E

Revised

Previous

Change

%

Revised

Previous

Change

%

New

Liquids (bbl/d)
Gas (mmcf/d)

6,760
0.0

6,460
0.0

300
0.0

5%
0%

30,487
0.0

26,952
0.0

3,535
0.0

13%
7%

33,994
0.0

Total (boe/d)

6,768

6,468

300

5%

30,490

26,955

3,535

13%

34,001

Sales Price
Liquids Price ($/bbl)
Gas ($/GJ)
Equivalent ($/boe)

$64.77
$6.09
$64.74

$64.77
$6.09
$64.74

($0.00)
$0.00
($0.00)

(0%)
0%
(0%)

$63.56
$6.77
$63.56

$63.56
$6.77
$63.56

$0.00
$0.00
$0.00

0%
0%
0%

$63.56
$6.06
$63.56

Financials
Cash Flow ($M)
F/D CFPS
Earnings ($M)
F/D EPS
Net Debt ($M)
Trailing D/CF (multiple)
Capital Expenditures ($M)

$115.0
$0.54
$67.7
$0.30
$85.3
0.7
$280.0

$108.9
$0.51
$62.8
$0.28
$91.4
0.8
$280.0

$6.1
$0.03
$4.9
$0.02
($6.1)
(0.1)
$0.0

6%
6%
8%
8%
(7%)
(12%)
0%

$530.4
$2.50
$378.7
$1.79
($195.0)
(0.4)
$250.0

$464.3
$2.19
$328.7
$1.55
($172.8)
(0.4)
$200.0

$66.1
$0.31
$50.0
$0.23
($22.2)
0.0
$50.0

14%
14%
15%
15%
13%
(1%)
25%

$434.8
$2.05
$260.4
$1.23
$379.8
(0.9)
$250.0

Source: Haywood Securities

2006 Outlook
The rest of 2006 will see significant news flow as Oilexco continues with
North Sea operations. We are again updating the previously published table
below with the results of the Brenda/Nicol production well testing. The
remainder of 2006 will be a mix of production and exploration news and
promises to provide positive support to Oilexco’s share price.

J. Frederick Kozak, P.Eng. (403-509-1938, fkozak@haywood.com)

August 4, 2006 — 4

Oilexco Incorporated
2006 Activity Calendar
Month

Activity

News Item

Impact

June

Test Brenda D1 production well

Production test data

Neutral

June

Test Brenda D2 production well

Production test data

Positive

June

Test Brenda D3 production well

Production test data

Positive

July
August

Production test data
Production test data

Positive
Positive

September

Drill Nicol production well
Drill Sheryl (formerly Disraeli)
appraisal well
Drill 100% interest Shelly prospect

Results in October

Depends

October
December

Drill 50% interest Kildare prospect
Drill Laurel Valley farm-in

Results Nov/Dec
Results in early 2007

Depends
Depends

Comments
Expected flow rate range 7,000 bbl/d to 10,000 bbl/d.
Actual below low end
Expected flow rate range 7,000 bbl/d to 10,000 bbl/d.
Actual at high end of range.
Expected flow rate range 7,000 bbl/d to 10,000 bbl/d.
Actual exceeded 10,000 bbl/d
Expected flow rate better than 5,000 bbl/d. Actual
exceeded 10,000 bbl/d
News in late August – will confirm size of Sheryl
discovery
Shallow prospect could be a field similar to Brenda,
but not factored into our estimates
Highly prospective target
Multiple horizon potential

Source: Haywood Securities

As previously noted, Oilexco has contracted the Sedco 712 semi-submersible
drilling rig through to 2010. The table above highlights activity only into early
2007, but Oilexco has significant drilling planned well into 2007. In addition, the
results of the 24th Licensing Round are due to be announced before the end of
Q3/06. As Oilexco is one of the most active independent operators in the U.K.
North Sea, we believe that it bid on prospective acreage and will also continue to
evaluate other farm-in opportunities.

Valuation
To value Oilexco shares, we use a multiple of cash flow. The shares currently
trade at 11.8x our estimated 2006 fully diluted CFPS but only 2.5x our 2007 fully
diluted CFPS. Our production profile assumes production from Brenda/Nicol
coming on midway through Q4/06, with additional production from Sheryl
coming onstream in Q4/07. Our 12-month target reflects 4.3x 2007 estimated
after tax fully-diluted CFPS, but note that Oilexco becomes taxable in Q4/07
under our assumptions.

J. Frederick Kozak, P.Eng. (403-509-1938, fkozak@haywood.com)

August 4, 2006 — 5

Oilexco Incorporated
Valuation Comparison Table
Candax
CAX-T

Oilexco
OIL-T

PanOcean
POC.B-T

TransGlobe
TGL-T

(US$ Except Share &
Target Price)

(US$ Except Share &
Target Price)

(US$ Except Share &
Target Price)

4.5

30,487
0.0

29,935
0.0

4,450
9.0

Total (boe/d)

2,950

30,490

29,935

5,950

Share Price
2007 F/D CFPS
Current P/CF Multiple (times)
Target Price
Target P/CF Multiple (times)

$1.01
$0.25
4.0
$1.15
4.5

$7.13
$2.50
2.6
$12.00
4.3

$57.60
$12.66
4.1
$58.50
4.2

$5.36
$0.93
5.8
$8.50
9.1

Current Shares Outstanding (millions)
F/D Shares Outstanding (millions)

168.9
180.4

195.2
212.7

24.8
26.8

58.7
61.8

45.6
35.0
(63.3)
103.9
$35,212
$43,798

530.4
250.0
(195.0)
1338.7
$43,908
$62,685

326
149
(98)
1408
$47,045
$49,140

56.9
55.0
(5.5)
271.9
$45,702
$82,046

Production (2007 estimate)
Oil and NGL (bbl/d)

2,200

Natural Gas (mmcf/d)

2007 Cash Flow ($M)
2007 Capital Expenditures ($M)
2007 Net Debt ($M)
Enterprise Value ($M)
Current EV / boe/d
Target EV / boe/d
Source: Company data and Haywood Securities

Valuation Comparison Table
$14.00
Closing Price
$12.00

Target Price

Price ($CAD)

$10.00

$8.00

$6.00

$4.00

$2.00

8/3/2006

6/21/2006

5/9/2006

3/27/2006

2/13/2006

12/30/2005

11/16/2005

10/4/2005

$-

Source: Company data and Haywood Securities

J. Frederick Kozak, P.Eng. (403-509-1938, fkozak@haywood.com)

August 4, 2006 — 6

Oilexco Incorporated

Distribution
This report is for distribution in Canada and to institutional clients in the United States.

Analyst Certification
I, J. Frederick Kozak, hereby certify that the views expressed in this report (which include the rating assigned to
the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal
views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or
indirectly related to the specific recommendations.

Important Disclosures
This report is prepared by Haywood Securities Inc. for use by Haywood Securities Inc., Haywood Securities
(USA) Inc. and Haywood Securities (UK) Limited and their clients. Haywood Securities Inc. is a Canadian
broker-dealer and a member of the Toronto Stock Exchange and the Canadian Venture Exchange. Haywood
Securities (USA) Inc. is a wholly owned subsidiary of Haywood Securities Inc., registered with the U.S.
Securities and Exchange Commission, and is a member of the National Association of Securities Dealers (NASD)
and the Securities Investor Protection Corporation (SIPC).
Haywood Securities, Inc., and Haywood Securities (USA) Inc. do have officers in common however, none of
those common officers affect or control the ratings given a specific issuer or which issuer will be the subject of
Research coverage. In addition, the firm does maintain and enforce written policies and procedures reasonably
designed to prevent influence on the activities of affiliated analysts.
Of the companies included in the report the following Important Disclosures apply:

The Analyst preparing this report (or a member of the Analyst’s households) has a financial interest in
TransGlobe Energy (TGL–T), Candax Energy Inc. (CAX–T), and Oilexco Inc. (OIL–T).

Haywood Securities, Inc. has reviewed lead projects of Oilexco Inc. (OIL–T), Candax Energy Inc. (CAX–T),
and PanOcean Energy (POC.B–T), and a portion of the expenses for this travel have been reimbursed by the
issuer.

Haywood Securities, Inc. or an Affiliate has managed or co-managed a public offering of securities for
Oilexco Inc. (OIL–T) and PanOcean Energy (POC.B–T) in the past 12 months.

Haywood Securities, Inc. or an Affiliate has received compensation for investment banking services from
Oilexco Inc. (OIL–T) and PanOcean Energy (POC.B–T) in the past 12 months.

Other material conflict of interest of the research analyst of which the research analyst or member knows or has
reason to know at the time of publication or at the time of public appearance:
• n/a

Rating Structure
SECTOR OUTPERFORM – Haywood’s top rating category. The analyst believes that the security will
outperform its sector. Furthermore, the shares are forecast to provide attractive returns measured against
alternative investments when considering risk profiles. The rating carries a minimum total return threshold of
15% for equities and 12% for trusts. The rating applies to companies that have tangible underlying assets that give
a measure of support to the market valuation. The rating category considers both the absolute and relative values
in assigning the highest rating on the security.
SECTOR PERFORM – The analyst believes that the security will trade with tight correlation to its underlying
sector. Furthermore, the target price (together with any anticipated distributions) is at or above the market price,
and forecast risk-adjusted returns are attractive relative to alternative investments.

J. Frederick Kozak, P.Eng. (403-509-1938, fkozak@haywood.com)

August 4, 2006 — 7

Oilexco Incorporated
SECTOR UNDERPERFORM – Investors are advised to sell the security or hold alternative securities within
the sector. Stocks in this category are expected to underperform relative to their sector. The category also
represents stocks with unattractive forecast returns relative to alternative investments.
TENDER – The analyst is recommending that investors tender to a specific offering for the company’s stock.
RESEARCH COMMENT – An analyst comment about an issuer event that does not include a rating.
COVERAGE DROPPED – Haywood Securities will no longer cover the issuer. Haywood will provide notice to
clients whenever coverage of an issuer is discontinued. The termination of coverage will not occur unless clients
have been provided with advice relating to positions they may still hold, such as a recommendation to sell their
securities.
The above ratings are determined by the analyst at the time of publication. On occasion, total returns may fall
outside of the ranges due to market price movements and/or short term volatility. At the discretion of Haywood’s
Management, these deviations may be permitted after careful consideration.
Investment Banking Services Provided
within the past 12 months as of July 15, 2006

Rating Distribution as of July 15, 2006
1%

ro
pp
ed

0%

ov
er
ag
e

D

ev
ie
w
nd
er
R

rm

3%

0%

C

Coverage Dropped

73%

Se
ct
or
Pe
rfo

Under Review

Se
ct
or
O
ut
pe
r fo
rm

Tender

0%

U

3%

Te
nd
er

Sector Underperform

er
fo
rm

Sector Perform

17%

nd
er
p

Sector Outperform

93%

or
U

0%
6%

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Se
ct

3%

For further information on Haywood Securities’ research dissemination policies, please visit:
http://www.haywood.com/research_dissemination.asp

Risk Profile Parameters
SPECULATIVE: – Investment for risk accounts only. Companies within this category carry greater financial
and/or execution risk. All junior/venture companies that carry great financial and/or liquidity risk will be tagged
“SPECULATIVE”. A stock indicating a SPECUALTIVE risk is determined from sector specific criteria outlined
below listed below.

Risk Profile Parameters – Oil and Gas Sector
Forecast Risk: High – Haywood forecasts are below guidance. The Company has a history of missing targets
and/or Haywood expects guidance to be lowered. Limited hedging increases commodity risk beyond peers. To
raise expectations requires higher commodity prices or production that is ahead of guidance. Moderate –
Haywood forecasts are generally in line with guidance. The Company has a history of meeting or exceeding
guidance. Forecasts are consistent with current commodity pricing and production guidance. Hedging practices
are in line with peers. Low – Haywood forecasts exceed guidance. The Company has a history of meeting or
exceeding guidance. Forecasts allow for modestly lower commodity pricing or production levels. Commodity
hedging lowers volatility relative to peers.

J. Frederick Kozak, P.Eng. (403-509-1938, fkozak@haywood.com)

August 4, 2006 — 8

Oilexco Incorporated
Financial Risk: High – The capital expenditure program in the current year or the next year of the forecast is not
fully funded but requires additional debt and/or equity financing. This categorization does not necessarily predict
whether the additional funds will be raised. Moderate – The capital expenditure program in the current year or the
next year is fully funded with cash flow and limited debt. Low – The capital expenditure program in the current
year or the next year is fully funded with cash flow and no new debt.
Political Risk: High – Properties are located in an area with limited petroleum industry activity or infrastructure.
An environment unfriendly to the industry makes obtaining permits to drill or produce hydrocarbons challenging.
Significant government or local opposition exists. Moderate – Properties are located in an area with minimal
petroleum industry activity or infrastructure. An environment friendly to the industry makes obtaining permits
relatively straightforward. All levels of government are considered indifferent to hydrocarbon activity. Low –
Properties are located in an area with established petroleum exploration and development activity. Oil and gas
Production Sharing Agreements or Exploration Permits are in hand. Government at all levels supports the sector.
Valuation Risk: High – The current valuation is at the high end of historic levels and/or at a premium to peers.
The valuation reflects continued production growth and/or continuing strong commodity prices or further
appreciation. Where applicable, the market capitalization exceeds the NAV by more than 30%. Moderate – The
current valuation is within historic ranges and generally consistent with peers. The valuation reflects reasonable
production growth and/or commodity price appreciation. Where applicable, the market capitalization exceeds the
NAV by 15% to 30%. Low – The current valuation is at the low end of historic ranges and/or at a discount to peer
valuations. The valuation reflects limited production growth and/or no commodity price appreciation. Where
applicable, the market capitalization exceeds the NAV by less than 15% or falls below the capitalization.

Disclaimers
Estimates and projections contained herein, whether or not our own, are based on assumptions that we believe to
be reasonable. The information presented, while obtained from sources we believe reliable, is checked but not
guaranteed against errors or omissions.
Haywood Securities Inc., its subsidiaries and their respective officers, directors, and employees may hold
positions in the securities mentioned and may purchase and/or sell them from time to time.
This report is neither a solicitation for the purchase of securities nor an offer of securities. Our ratings are intended
only for clients of Haywood Securities Inc. Haywood Securities (USA) Inc., and those of Haywood Securities
(UK) Limited and such clients are cautioned to consult the respective firm prior to purchasing or selling any
security recommended or views contained in this report. Haywood Securities (UK) Limited (“HSUK”) is a wholly
owned subsidiary of Haywood Securities Inc. authorized and regulated in the UK by the Financial Services
Authority as a stock broker and investment adviser and is a member of the London Stock Exchange.
This report has been approved by HSUK for the purposes of section 21 of the UK’s Financial Services and
Markets Act 2000.If you wish to contact HSUK please email D. Kim Gorius at kgorius@haywood.com..
If you are a UK resident private customer your attention is drawn to the risk warnings set out below:
Haywood Securities Inc or its subsidiaries or respective officers, directors or employees have or may have a
material interest in the securities to which this report relates.
Past performance should not be seen as an indication of future performance. The investments to which this report
relates can fluctuate in value and accordingly you are not certain to make a profit on any investment: you could
make a loss.
Changes in the rates of exchange between currencies may cause the value of your investment to fluctuate.
If you are a UK resident private customer and you propose to do business with Haywood Securities Inc, please
take note of the following:

J. Frederick Kozak, P.Eng. (403-509-1938, fkozak@haywood.com)

August 4, 2006 — 9

Oilexco Incorporated
Any investment services undertaken on your behalf by Haywood Securities Inc are not covered by the rules and
regulations made for the protection of private investors in the UK. This means that you will not have the benefit
of rights designed to protect investors under the Financial Services and Markets Act 2000 and under the rules of
the Financial Services Authority (“FSA”).In particular, you will not benefit from the following UK protections:
(a) the right to claim through the UK’s Financial Services Compensation Scheme for losses resulting in the
unlikely event of our default;
(b) in the event of a dispute, access to the UK’s Financial Ombudsman Service;
(c) protection of money held on your behalf under the FSA’s Client Money Rules.

J. Frederick Kozak, P.Eng. (403-509-1938, fkozak@haywood.com)

August 4, 2006 — 10