SPI announces 4.7mmcf/day initial flow rate from Upper Montney Horizontal Well

Canadian Spirit Resources Inc. (SPI) announced today that they have achieved an intitial flow rate test of up to 4.7 mmcf/d from their c-18-I upper Montney horizontal well. Although the release states that the flow rates are inconsistent with expectations, conversations with management indicate that they are not discouraged at all. The well received an 8 stage frac and the fracture mapping indicates that there may have been issues with the 7th and 8th frac stages. These two fracs may have gone back into the 6th stage resulting in two understimulated stages and one overstimulated stage. With the possibility of issues from three fracs, the intial results were within industry expected rates. Talisman has been achieving between 600 mcf/d to 1 mmcf/d initial rates and 450 mcf/d to 700 mcf/d rates after 30 days of flow. It should be noted that this was SPI and Canbriam's first upper Montney well and results should improve with more experience in completing those zones.

Additional news contained in the release indicate that they will be fracture stimulating the b-17-I lower Montney horizontal well prior to the c-A18-I upper Montney horizontal well due to a casing issue. SPI indicates that they plan to stimulate the c-A18-I upper Montney horizontal well before year-end.

Lastly, consturuction of the gas processing facility has commenced and is expected to be completed in January. This slight delay is due to a delay in regulatory approvals. Because of this delay, year end reserve data may be affected.

We believe that the tone of the news release is not indicative of management's enthusiasm and see this as being a buying opportunity.