Stability and Bold New Ventures

Perpetual's core properties combine stability with high-impact growth opportunities. Perpetual is one of the only intermediate-sized Canadian energy companies with a large component of sustainable base assets, our cash flow generators, which require modest capital investment to offset production declines.

Our building blocks for growth are a suite of 'game changers' where we hold strong positions in some of the industry's most promising resource-style plays. Having captured these opportunities, we are evaluating these plays in 2010 with our sights on project development in 2011 and beyond.

Perpetual Energy Operations Profile

Average Daily Production (Q2 2010)	165.2 MMcfe/d (27,533 BOE/D)
Deemed Gas over Bitumen Production	26.5 MMcf/d
Reserves (December 31, 2009)	518.3 Bcf (P+P)
Reserves to Production Ratio (RPR) (1)	8.8 years
Land (December 31, 2009)
P&NG Leases
Developed	1.7 million net acres
Undeveloped	2.0 million net acres
Bitumen Leases
Developed	320,000 net acres
Undeveloped	326,091 net acres

⁽¹⁾ Also referred to as Reserve Life Index (RLI)

Eastern District 

Conventional Shallow Gas

800+ new drill prospects
1,200 uphole recompletions

• Low cost reserve addition
• High working interests >80%
• Large component of 100% operated facilities

In eastern Alberta Perpetual's legacy assets produce sweet, shallow gas from stacked reservoirs and have a low base decline rate of less than 20%. Activity focuses on sustaining production through low cost production and reserve additions. More than 800 new drills, targeting an average 0.3 Bcf and initial deliverability of 300 Mcf/d, are in inventory at various stages of technical refinement. Locations are defined on 2-D and 3-D seismic and are usually within a one-mile step-out radius from existing infrastructure, which has led to historical drilling success greater than 90%.

Wells typically are brought on production in lower horizons and once those deplete, uphole zones are completed at very low costs. Some 150 recompletions are conducted annually.

ln addition, assets shut-in by the provincial regulator due to the gas over bitumen issue generate very predictable cash flow through the Alberta Crown's financial solution, subject only to changes in natural gas prices.

Northern assets

In northeast Alberta, primarily a winter only area, significant areas of production include Chard/Kettle/Quigley, Corner/Leismer, Craigend, Legend, Liege, Saleski, Teepee Creek, Thornbury, Calling Lake, Darwin, Figure Lake, Marten Hills, Mistahae, Mitsue, Panny, Peter Lake, Stry, Wabasca/Hoole and Woodenhouse. Production is from the Devonian Grosmont, Nisku and Wabaman, the overlying Cretaceous McMurray, Wabiskaw, Clearwater, Grand Rapids and Viking formations.

Southern assets

Our southern assets are varied with characteristics similar to our northern Alberta assets, but with the added advantage of year-round access. Production in this multi-zone potential area is from over 10 different Cretaceous or Devonian-aged reservoirs and consists of both conventional and tight unconventional shallow gas reservoirs. Across both of our Birchwavy properties we have a significant drilling inventory in both the Viking and Colorado Shales.

Birchwavy West - Operations in Birchwavy West focus on conventional stacked Cretaceous reservoirs. The Warwick, Bruce and Killiam areas of central Alberta are the major conventional producing properties.

Birchwavy East - Production from the Birchwavy East area is primarily from Colony channel reservoirs in the Cretaceous Mannville zone as well as other conventional Mannville sand reservoirs. The largest properties in the area are Mannville and Duvernay.

There is medium-heavy oil production in this area which we will begin to grow through recompletions and a small drilling program in 2010. There is room to expand and develop this play in future years.

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Viking and Colorado Shale Tight Shallow Gas

1,525 sections on trend
2,500 locations

• Stacked Colorado silty shales and Viking sands
• Targeting 2.4 Bcf per 12 well program
• Two multi-well programs in 2010

The stacked Viking and Colorado shales present an extensive resource fairway for development of unconventional shallow gas. As an emerging play, stimulation and production technologies are still evolving to improve recoveries and ultimately profitability of development. The Viking and Colorado become more attractive when existing conventional wellbores and infrastructure can be used as a foundation for future production.

The Viking is further advanced in development than the Colorado with reserves booked in our year-end reserve report; over 10 Bcf classified as developed producing, 15 Bcf as developed non-producing and 101 Bcf as undeveloped. No Colorado reserves have been booked to date.

Activity in 2010 will include five vertical wells and two horizontal drills to evaluate drilling methods and several stimulation techniques in the Craigend area on the north end of the trend. Development costs and fracture technology will also be assessed through a multi-well program in the Mannville area.

The scope of this opportunity is vast. At our Birchwavy East area with 625 sections within the Colorado/Viking trend and drilling at four wells per section, our current prospect inventory stands at 2,500 locations. We hold another 900 sections at Birchwavy West. We expect a sizeable increase in the number of drilling locations as economics are proven up and development advances.

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Heavy Oil and Bitumen

>5.6 billion barrels of bitumen in place estimated
503 net sections of oil sands rights

• Targeting various geologic formation and recovery methods
• Seven unique project areas
• Two evaluation wells drilled in Q1 2010

Perpetual has extensive exposure to heavy oil and bitumen resources in northeast Alberta. Our oil sands leases cover 326,000 net acres, primarily in the vicinity of our gas operations. The leases generally have over 10 years remaining to expiry of the primary term. Targets include clastic reservoirs in the Wabiskaw-McMurray at Ells, Clyde and Wabasca, the Grand Rapids at Hoole and Wabasca, the Clearwater at Marten Flills, and the Bluesky at Panny, as well as carbonate reservoirs in the Nisku at Panny, and the Grosmont and Leduc at Liege.

Our current emphasis is on shorter-term production at Panny and Marten Hills, our most westerly assets. We believe the heavy oil here to be a lighter grade than in our other project areas where intensive thermal recovery techniques will be required for bitumen extraction.

This year we committed just over $1 million of capital to two projects: Marten Hills, where low-rate cold production has been achieved without heat or solvents, and at Panny where we drilled an oil sands evaluation well. Near-term future spending will also be directed to define contingent resource at Hoole and Liege.

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West Central District

Deep Basin Tight Gas

40 multi-zone vertical locations
60 horizontal drill prospects

• Gas-saturated multi-zone resource fairway
• Liquids-rich targets
• 15% of total production base

Our deep basin tight gas assets are concentrated in the greater Pembina area at Carrot Creek, and at Edson through an acquisition that closed in April 2010. Multiple geologic horizons are targeted for exploitation through vertical wells, averaging 2,450 meters in depth. Gas production is established from the Viking, Bluesky, Lower Mannville, Fernie Sand and Rock Creek formations through massive fracture stimulations and commingling of all zones. Horizontal development of several thicker zones with significant resource in place -- the Rock Creek, Notikewin and we believe the Wilrich, is warranted to increase recoveries and maximize value.

Vertical wells completed in multiple zones cost approximately $1.6 million to drill, complete and tie-in and have initial risked production rates of 800 Mcf/d per well for the first 12 months of production; horizontal wells are forecast to average 2.0 MMcf/d; liquids production ranges from 20 to 40 bbls per MMcf of gas. Our prospect inventory includes 40 vertical locations, 60 horizontal locations and 30 recompletion candidates. A priority is to test the Wilrich formation at Edson, which has proven capable of production at Carrot Creek.

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Elmworth Montney Gas

78 gross sections
200+ locations (100 net)

• One of North America's premier shale gas plays
• Targeting 3-5 Bcf per well
• Three horizontal wells in 2010

Perpetual holds 19,900 gross hectares in the Elmworth Montney play fairway in three blocks acquired at 100% working interest at Crown land sales in 2008. This year we will assess the prospectivity of our Montney rights with a three-well program on our Elmworth acreage. To reduce our risk exposure, we have secured a partner with execution experience in the play. Perpetual will be carried 100% on the first three wells, while our partner will earn a 50% working interest in our Elmworth lands.

We will be working to replicate drilling success surrounding our acreage where competitors have brought four horizontal and four vertical wells on production, drilled six new horizontal wells, and licensed to drill four others over the past 18 months. While wells cost up to $6 million to drill and complete, they qualify for deep gas royalty credits and with the Montney's prolific initial production rates, we forecast a well payout of less than two years.

Our growth potential in the Elmworth play is significant. On our 22 section north block alone, we envision a preliminary development scenario of 25 gross (12.5 net) wells to prove up 80 to 100 Bcf of reserves. An additional 56 gross sections of prospective acreage offer considerable future scope. Other zones of interest in the area include the Doig, Halfway and Nikanassin.

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Pembina Cardium Tight Oil

67 sections with Cardium rights
138 horizontal locations (71 net)

• Light oil being unlocked with horizontal drilling and multi-stage fracture technology
• Targeting 150 Mboe per well
• Five horizontal drills in 2010

Cardium horizontal development in the greater Pembina area is one of Western Canada's fastest evolving light oil plays. Perpetual has captured significant resource potential at two properties; Carrot Creek and through a farm-in at Edson.

At Carrot Creek, Perpetual has Cardium rights across 61 gross sections (36 net). ln our 2010 development program we plan to drill three horizontal wells, along with one gross vertical exploration well.

ln conjunction with our recent Edson acquisition, we have farmed-in on 37 sections (31 net) of undeveloped land with a commitment to drill and complete two horizontal wells with each one earning 50% of the vendor's net interest in four sections. The agreement includes a rolling option to earn additional lands on the same basis.

The scope on our lands is considerable. At Carrot Creek, we have identified 94 gross (52 net) unrisked locations, and up to 44 gross (19 net) potential drills through our farm-in at Edson. Capital costs are estimated at $3.2 million per location but as development continues, we expect cost reductions by drilling multiple wells from centralized pads and optimizing well design, stimulation programs and facilities

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Severo Energy Corp.

In 2006, to facilitate development of minor assets south of the Athabasca core area, Paramount Energy Trust transferred certain assets in the Radway/Abee area to a new private company, Severo Energy Corp. Perpetual  Energy Inc has an indirect ownership of 89% in Severo.

Production in the Radway/Abee area is primarily derived from the second White Specks,  Mannville, and Wabamum formations.

Severo's business strategy concentrates on continued growth in the core area of Big Bend/Radway/Redwater through re-completions, low risk drills and synergistic consolidating acquisitions. In addition, higher-risk oil and gas exploration prospects in the Western Canadian Sedimentary Basin are being pursued for higher impact growth.

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Regions	Production (MMcfe/d)		Developed Land Position (acres)		Producing Wells
	Q2 2010	Q2 2009	Gross	Net	Gross	Net
Eastern District					Gas/Oil	Gas/Oil
Northeast	48.6	66.7	933,774	757,244	681	657.3
Athabasca	34.2	45.7	430,535	287,101	454/12	349.9/11.4
Subtotal	82.8	112.4	1,364,310	1,044,345	1,135/12	707.2/11.4
Birchwavy West	19.7	16.4	335,405	257,717	341/45	269.3/37.8
Birchwavy East	30.3	29.8	345,443	284,343	390/90	332.5/63.6
Subtotal	50.0	46.2	680,847	542,060	731/135	601.8/101.4
West Central District
Elmworth			17,920	15,320
Pembina/Carrot Creek	25.9	0	76,686	44,474	86/19	55.5/13.4
Subtotal	25.9	0	94,606	59,794	86/19	55.5/13.4
Severo Energy Corp.	5.9	6.0	122,500	65,300	129	69.5
Other	0.6	0.9	14,240	3,405	197/5	83.4/4.1
Total	165.2	165.5	2,276,503	1,714,904	2,278/171	1,817.4/130.2
Gas over bitumen deemed production(1)	26.5	18.1	640	320
Total actual plus deemed production	191.7	183.6	2,277,143	1,715,224	2,278/171	1817.4/130.2

⁽¹⁾ In July 2004, gas production was shut-in where the Energy Resources Conservation Board deemed continued gas production could impact the future recovery of bitumen. A financial solution is in place with Alberta Crown for an amount equal to approximately 70 percent of the lost cash flow. Cash flow from these assets is recovered through a deduction of royalties otherwise payable. The deemed production in the financial solution formula declines at 10 percent annually and will be in place until 2014.

View detailed information on our operating areas in our Annual Information Form

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