Salman Partners Research Report released with a $2.50 target

Salman Partners has released a new Research Report on Canadian Spirit Resources Inc. (SPI) with a Speculative Buy recommendation and a $2.50 target price based upon "modest assumptions about recovery rates and the value of reserves in the ground." "That represents a 50% discount to our estimate of Net Asset Value, simply because of the early stage of development."

- "Land sale activity in 2008 and 2009, together with drilling activity conducted by Talisman Energy, Progress Energy and Crew Energy on adjacent properties has validated the prospectivity of Canadian Spirit's acreage."

- Salman Partners says Phil Geiger, President of SPI, was a pioneer in unconventional gas and was on to "unconventional gas long before the phrase crept into the lexicon." He and SPI surveyed all of western Canada in 2002 looking for gas in unconventional formations and chose the Farrell Creek area at a time when it was a "blank spot on the map" and when there was very little competition for land. "Today, NE B.C. is a hotbed of exploration activity driven by large quantities of gas that have been found in the Montney formation." "By being early on the play and establishing a significant toe-hold before the rest of the petroleum industry got really excited about the Montney, Canadian Spirit has been able to attract farm-in partners and is benefitting from drilling activity conducted by competitors on surrounding acreage." Because Geiger and SPI were able to lease land when there was very little interest in the area, SPI has been able to lease the best land that is suitable for development with a high gas resource potential.

- Talisman Energy has "drilled a number of very productive vertical wells" and is satisfied with the results. They estimate that recoveries will be 5 bcf/well able to produce at a stabalized rate of 4.5mcf/day after 30 days of production. Talisman "built a 23 mmcf/day gas plant, which is alread full and is being expanded to 60 mmcf/day." Talisman's success has significantly de-risked SPI's Montney play because the two companies' land is adjacent to one another.

- "Canadian Spirit and its partner, Canbriam Energy, are beneficiaries of Talisman's activity in the Farrell Creek area. They are able to look at the results of Talisman's wells that are more than a year old, and some of Talisman's 2010 wells will be on a little 'island' of Talisman acreage, which is completely surrounded by Canadian Spirit land holdings."

- "Canbriam and Canadian Spirit could have three wells on-stream and producing from the Montney by year-end, at a combined rate of 20.0 mmcf/day or approximately 6.0 mmcf/day net to CSRI. Assuming an Aeco gas price of $6.50/mcf, we estimate the company could generate $13.2 million in cash flow in 2011."

- "Assuming modest recovery rates and production volumes, the stock could be worth $5.00/share based on the Montney alone."