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P RESENTATION T O T HE C ALGARY S OCIETY O F P ETROLEUM E NGINEERS S TATE O WNED E NTERPRISES (SOE S ) IN THE C ANADIAN E NERGY I NDUSTRY M ARCH , 12 2013 P RESENTED B Y : L ESLIE K ENDE , P.E NG , MBA M ANAGING D IRECTOR , A CQUISITIONS & D

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ALTACORP CAPITAL INC. | MARCH 2013 |

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY MARCH, 12 2013

PRESENTATION TO THE CALGARY SOCIETY OF PETROLEUM ENGINEERS

PRESENTED BY: LESLIE KENDE, P.ENG, MBA MANAGING DIRECTOR, ACQUISITIONS & DIVESTITURES

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 1

AltaCorp Capital Inc. (“AltaCorp”) appreciates the opportunity to present to the

Calgary Society of Petroleum Engineers about State Owned Enterprises (SOEs) in the Canadian energy industry

This presentation will discuss the following:

I. AltaCorp Capital Overview
II. State Owned Enterprises (SOEs) in the Canadian Energy Industry
III. Near / Medium / Longer Term Considerations
IV. Australia’s Foreign Investment Policy
V. Discussion and Summary

INTRODUCTION

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 2

AltaCorp has formed a strategic

alliance with ATB Financial to provide corporate and institutional clients the full spectrum of advisory, equity capital markets and financial services

ATB is Alberta’s single largest and
ldest full-service financial institution

with assets over $26.5 billion and 5,000 Associates across the province

ATB has a 65 year history providing

Personal, Business and Agricultural Financial Services, Investor Services and Corporate Financial Services to more than 670,000 Albertans

ATB owns 19.9% of AltaCorp; the

remaining 80.1% is owned by AltaCorp employees

AltaCorp has formed a strategic

alliance with ATB Financial to provide corporate and institutional clients the full spectrum of advisory, equity capital markets and financial services

ATB is Alberta’s single largest and
ldest full-service financial institution

with assets over $26.5 billion and 5,000 Associates across the province

ATB has a 65 year history providing

Personal, Business and Agricultural Financial Services, Investor Services and Corporate Financial Services to more than 670,000 Albertans

ATB owns 19.9% of AltaCorp; the

remaining 80.1% is owned by AltaCorp employees

IPO / RTO High Yield Debt

AltaCorp provides full service financial and advisory

services to corporations in any stage of the life cycle

focused on the key drivers of the Western Canadian

economy and overlapping subsectors of Energy, Agri-Industry and Energy Infrastructure & Industrials

AltaCorp has over 50 employees between

Calgary (head office) and Toronto

Start-up Private Equity Financing Institutional Equity Research Grey Market Trading ‘Private Liquidity’ Global Institutional Sales & Trading Corporate M&A / Acquisitions & Divestitures Follow-on Private Equity

ALTACORP CAPITAL OVERVIEW

FULL SPECTRUM, ALBERTA-BASED INVESTMENT BANK

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 3

ALTACORP CAPITAL OVERVIEW

FIRM-WIDE EXPERTISE

Equity Research

George Gosbee Chairman & Chief Executive Officer

Brent Norrey Managing Director Institutional Trading Tate Pinder, MBA Managing Director Institutional Trading Cheryl Polan Managing Director Institutional Trading Jon Varley Director Institutional Trading

Investment Banking & A&D

ver 50 professionals

across offices in Calgary and Toronto

Jason Caldarelli, MBA Managing Director Debt Capital Markets

Debt Capital Markets Sales & Trading

Kerk Hilton Managing Director Institutional Sales Brent Taylor, CFA Managing Director Institutional Sales Adam Carlson, MBA Managing Director Institutional Sales Jamie Riff, MBA, P. Eng. Director Institutional Sales

Paul Sarachman, CFA, FCSI President & Managing Director Capital Markets Shauna Campbell, CA Chief Financial Officer Govind Achyuthan, CFA Chief Compliance Officer Rita Sivadas Operations Manager

Associates: Ashley Connolly Tanya Finney Bradley MacDonald Thomas Matthews, P. Eng. George Ulybyshev Jennifer Wood Brodie Woods Shereen Zahawi, MBA Jared Coulson Dirk Lever, CA Managing Director E&P Analyst Don Rawson, MBA Managing Director E&P Analyst Dana Benner, CFA Managing Director Oilfield Services Analyst John Chu, CFA, MBA Managing Director Agriculture Analyst Jeremy McCrea, CFA Director E&P Analyst Chris Cox E&P and Oil Sands Analyst Jason Sawatzky Director Oilfield Services Analyst Gurdeep Gill, CFA Managing Director E&P Lee Girardo, CFA Managing Director E&P Bill Murray, CFA, MBA Managing Director Agri-Industry/Energy Infrastructure & Industrials Cliff Johnson Director, A&D Greg Smiddy Senior Analyst Yi Huang Analyst Leslie Kende, MBA, P.Eng. Managing Director A&D Matt Colucci Managing Director Oilfield Services Jim Lee, P.Geol. Director, A&D Patrick Stables Associate Jesse Hardage Associate Kelly Wylie Associate, A&D

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 4

ALTACORP CAPITAL OVERVIEW

A&D PROCESS - SITUATION MAP

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 5

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY

SOES IN CANADA - THE GROUND RULES

State Owned Enterprise takeovers will be reviewed at $330mm or greater Private sector foreign bidders will be reviewed at $1,000mm or greater SOEs are barred from further takeovers in Canada’s oilsands (Other than exceptional

circumstances)

“Property on which only exploration activities are conducted is not treated as the

acquisition of an interest in a “business”, and is not subject to either notification or review(1)

“Net benefits to assessed on:

Where to export
Where to process
Participation of Canadians in its operations in Canada and elsewhere
Impact of the investment on the productivity and industrial efficiency in Canada
Support of on-going innovation and R&D in Canada
Appropriate level of capex to maintain the Canadian business in a globally

competitive position(1)

(1) Source: http://www.ic.gc.ca/eic/site/ica-lic.nsf/eng/lk00064.html#state-owned

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 6

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY

CHINA’S OVERSEAS INVESTMENT

China’s overseas direct investment has grown dramatically since 2005,

now totalling over $600Bn

2012 estimated at > $120Bn

Source: www.heritage.org/research/projects/china-investment-tracker-interactive-map

China’s Global Reach China’s Global Reach

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 7

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY

CHINA’S OVERSEAS INVESTMENT (CONT’D)

Of China’s overseas direct investment nearly ½ is in energy In this backdrop recent activity in Canada was inevitable Proportionally, energy investment in Canada and Australia are of similar size

Source: www.heritage.org/research/projects/china-investment-tracker-interactive-map

China’s Global Reach China’s Global Reach

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 8

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY

FORECASTED WORLD ENERGY DEMANDS

OECD energy forecast demand is relatively flat Non-OECD grows by > 100% In particular, North American demand is totally flat

Source: ExxonMobil, 2012 The Outlook for Energy: A view to 2040

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 9

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY

GLOBAL ENERGY DEMAND BY ENERGY TYPE

Large projected growth in natural gas, investment is being positioned now

Source: ExxonMobil, 2012 The Outlook for Energy: A view to 2040

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 10

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY

PROSPERITY AND POPULATION EFFECTS

Growing population and prosperity is part of the forecast Expected ongoing gains in energy efficiency temper future energy requirements

Source: ExxonMobil, 2012 The Outlook for Energy: A view to 2040

Households By Region in 2040 Households By Region in 2040 Residential Energy Use / Household Residential Energy Use / Household

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 11

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY

INDUSTRIAL FUEL GROWTH

Source: ExxonMobil, 2012 The Outlook for Energy: A view to 2040

This is the market! Oil +25% driven by chemical feedstock Gas +50% primarily on industrial demand

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 12

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY

GLOBAL OIL SUPPLY

Global Oil Production by Discovery Date Global Oil Production by Discovery Date Modest growth in the oil discovery, new production rates suggest that there will be

few major surprises in oil resource discovery

Production growth should be a function of extraction cost vs. oil price (i.e. oilsands)

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 13

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY

CANADIAN OIL EXPORTS TO THE U.S.

Export of oil to the U.S. demonstrates the dependence of Canadian energy

producers on the U.S. markets: consumption and pricing disparities

Source: University of Calgary, School of Public Policy, Catching the Brass Ring: Oil Market Diversification Potential for Canada

mbbl/d

Canadian Oil Export to the U.S. Canadian Oil Export to the U.S.

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 14

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY

GLOBAL NATURAL GAS SUPPLY

Gas Supply by Region from 2010 to 2040 Gas Supply by Region from 2010 to 2040 This is a tectonic shift away from Canada’s history of the U.S. as sole customer

This is the lens

f the SOEs and

Integrated Multinationals

Source: ExxonMobil, 2012 The Outlook for Energy: A view to 2040

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 15

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY

IMPACT OF A SINGLE CUSTOMER – FISCAL TREND

Alberta’s royalty take is a proxy for royalty take in the western Canadian oil & gas

producing provinces

The trend on natural gas revenues has continued downwards and oilsands royalties

will be impacted by heavy oil differentials

Source: University of Calgary, School of Public Policy, Size, Role and Performance in the Oil and Gas Sector

Alberta Royalty Revenues Alberta Royalty Revenues

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 16

STATE OWNED ENTERPRISES (SOES) IN THE CANADIAN ENERGY INDUSTRY

A SAMPLING OF SOVEREIGN WEALTH FUNDS

Source: University of Calgary, School of Public Policy, Sovereign Wealth and Pension Funds Controlling Canadian Businesses: Tax-Policy Implications

Considerable foreign equity available with lots

f competing

investment

ptions

Source and Assets of Sovereign Funds Source and Assets of Sovereign Funds Frequently the SWFs coordinate strategies with the SOEs

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 17

NEAR / MEDIUM / LONGER TERM CONSIDERATIONS

RECENT CANADIAN E&P NEW ISSUE MARKET TRENDS Common Share Financings 2005 to YTD(1) Common Share Financings Jan.1, 2011 to YTD(1) Historical Financings

2011 2012 2013 YTD

Intermediates = greater than $1,000 million in EV, Large Juniors = $250 million to $1,000 million, Small Juniors = $30 million to $250 million (1) Ignores flow-through financings

Access to capital has been a problem for the last 2 years

Small Juniors 6% Large Juniors 14% Intermediate 63% Intl's 17% Small Juniors 1% Large Juniors 40% Intermediate 52% Intl's 7%

20 40 60 80 100 120 140 160 180 200 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $10.0 2005 2006 2007 2008 2009 2010 2011 2012 2013YTD Offerings Value Raised (C$ billions) Small Juniors Large Juniors Intermediate Oil Sands Intl's # of Offerings 6 12 18 24 30 36 $0.0 $0.3 $0.6 $0.9 $1.2 $1.5 $1.8 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Offerings Value Raised (C$ billions) Small Juniors Large Juniors Intermediates Oil Sands Internationals # of Offerings

Small Juniors 8% Large Juniors 22% Intermediate 42% Intl's 28%

Total $6.2Bn Total $6.4Bn Total $0.3Bn

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 18

NEAR / MEDIUM / LONGER TERM CONSIDERATIONS

NEAR / MEDIUM TERM – CELTIC, NEXEN AND PROGRESS DEALS FREED UP CAPITAL IN THE SECTOR

Total institutional cashed freed up from Celtic, Nexen and Progress deals amounted to ~$15.2Bn
Allow institutions to deploy capital in other corporations – increasing development in the sector

(C$ in millions)

Celtic Nexen Progress

Top 25 Institutional Holders Top 25 Institutional Holders Top 25 Institutional Holders BMO Asset Management, Inc. $102.7 Capital Research & Management Co. $909.2 Canada Pension Plan $816.0 ProShare Advisors LLC $99.8 Jarislowsky Fraser Ltd. $708.4 Caisse de Depot et Placement du Quebec $329.6 Pyramis Global Advisors (Canada) ULC $83.4

T. Rowe Price Associates, Inc.

$694.6 Vanguard Energy Fund $131.9 GCIC Ltd. $71.2 Public Sector Pension Investment Board $551.3 Dynamic Value Fund of Canada $114.3 Wellington Management Co. LLP $65.1 Letko, Brosseau & Associates, Inc. $527.4 RBC Canadian Dividend Fund $102.5 Invesco Advisers, Inc. $50.6 Platinum Asset Management Ltd. $369.9 Trimark Income Growth Fund $85.2 BlackRock Investments Canada, Inc. $45.5 First Eagle Investment Management LLC $345.4 Trimark Canadian Fund $70.3 CI Investments, Inc. (United States) $43.7 Orbis Investment Management Ltd. $323.9 Dynamic Value Balanced Fund $64.7 AGF Investments, Inc. $39.8 AllianceBernstein LP $323.3 Fidelity True North Fund $63.8 Pyramis Global Advisors LLC $39.0 TDAM USA, Inc. $317.3 Schroder ISF - Global Energy Fund $54.1 Fidelity Management & Research Co. $37.5 Tradewinds Global Investors LLC $313.9 RBC Monthly Income Fund $51.4 RBC Global Asset Management, Inc. $34.0 BlackRock Asset Management Canada Ltd. $296.2 Leith Wheeler Canadian Equity Fund $45.8 MFS Investment Management, Inc. $33.7 Newton Investment Management Ltd. $287.2 Dynamic Canadian Value Class $39.6 Columbia Wanger Asset Management LLC $31.0 RBC Global Asset Management, Inc. $276.6 Trimark Diversified Income Class $38.7 BC Investment Management Corp. $29.2 Greystone Managed Investments, Inc. $264.1 John Hancock Global Opportunities Fund $38.6 Front Street Capital, Inc. $28.6 Pyramis Global Advisors LLC $256.5 British Columbia Inv Management Corp. $36.3 Bissett Investment Management Ltd. $26.6 Connor, Clark & Lunn Investment $213.9 Government Pension Fund $35.1 Caisse de depot et placement du Quebec $26.1 CIBC World Markets, Inc. $206.0 Trimark Canadian Endeavour Fund $34.9 CI Investments, Inc. $26.0 BMO Capital Markets (Canada) $205.4 Investors Mutual of Canada $30.4 Fiera Capital Corp. $23.0 Invesco Trimark Investments $173.3 Trimark Canadian Class $29.5 TDAM USA, Inc. $22.8 Burgundy Asset Management Ltd. $166.6 TD Canadian Value Fund $28.5 Norges Bank Investment Management $18.7 Scheer, Rowlett & Associates Investment $143.2 Mackenzie Universal Canadian Resource $27.5 BlackRock Asset Management Canada Ltd. $18.0 NFJ Investment Group $139.9 Trimark Resources Fund $26.3 CIBC Global Asset Management, Inc. $17.3 GWL Investment Management Ltd. $130.1 Manulife Global Opportunities Class $21.4 Picton Mahoney Asset Management $14.9 Fiera Capital Corp. $127.5 Fidelity Canadian Opportunities Fund $19.8 Other Institutional Holders $153.0 Other Institutional Holders $2,735.3 Other Institutional Holders $661.2 Institutional Investment in Celtic $1,181.1 Institutional Investment in Nexen $11,006.4 Institutional Investment in Progress $2,997.6

$15.2Bn capital freed up from Celtic, Nexen and Progress deals $15.2Bn capital freed up from Celtic, Nexen and Progress deals

Note: Holdings held near announcement date and multiplied by the takeout price Source: FactSet

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 19

NEAR / MEDIUM / LONGER TERM CONSIDERATIONS

NEAR / MEDIUM TERM - CANADIAN PENSION FUNDS

Market Value of Total Assets ($MM) Market Value of Total Assets ($MM) Canadian pension funds have considerable assets and likely need to redeploy

cash from the Nexen, Progress and Celtic M&A deals

Source: University of Calgary, School of Public Policy, Sovereign Wealth and Pension Funds Controlling Canadian Businesses: Tax-Policy Implications

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 20

NEAR / MEDIUM / LONGER TERM CONSIDERATIONS

NEAR / MEDIUM TERM - CANADIAN PENSION FUNDS

Ownership of Assets Percentage Ownership of Assets Percentage Canadian pension funds have become very short on equities and long on bonds in

Canada

“Other Assets” include: miscellaneous pooled investments, mortgages, real estate,

accruals and receivables

Source: University of Calgary, School of Public Policy, Sovereign Wealth and Pension Funds Controlling Canadian Businesses: Tax-Policy Implications

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 21

NEAR / MEDIUM / LONGER TERM CONSIDERATIONS

LONGER TERM

The SOEs may have the desire to vertically integrate oilfield services as per their

pattern of investment elsewhere in the world

The guidelines from Investment Canada will necessitate that SOEs invest in JVs and

risk share more than they have to-date SOE / SWF host countries Reserves Resources / Prospects Independent Energy Co’s Oilfield Services Production Cash Flow

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 22

AUSTRALIA’S FOREIGN INVESTMENT POLICY

AN EXAMPLE OF TRYING TO STRIKE THE RIGHT BALANCE

The approach:

“…foreign investment…has helped build Australia’s economy…”
“Foreign investment brings many benefits. It supports existing jobs and creates new

jobs… innovation… new technologies… new skills…access to overseas markets…promotes competition…”

“Rigid laws that prohibit a class of investments too often also stop valuable

investments”

“The national interest test also recognises the importance of Australia’s market-based

system…decisions are driven by market forces rather than external strategic or non- commercial considerations”

Source: http://www.firb.gov.au/content/_downloads/AFIP_2013.pdf

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 23

AUSTRALIA’S FOREIGN INVESTMENT POLICY

AN EXAMPLE OF TRYING TO STRIKE THE RIGHT BALANCE

Certain details:

Threshold for foreign investment is A$248mm, except for New Zealand and US

investment where the threshold is A$1,078mm

The Treasurer has 30 days to consider application, may extend the period by up to 90

days with an interim order

National interest considerations:

̶ Strategic and security interests ̶ Competition: “gaining control over market pricing”, or “where concentration could lead to distortions to competitive market outcomes” ̶ Transparency: “investors that operate on a transparency and commercial basis are less likely to raise national interest concerns” ̶ The investment is to be commercial not political or strategic contrary to national interests ̶ Certain stipulations made on real estate and agriculture

Source: http://www.firb.gov.au/content/_downloads/AFIP_2013.pdf

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 24

DISCUSSION AND SUMMARY

It appears that the government has provided all the clarity that they intend to provide Australia’s model balances foreign investment with national interest Canada has considerable resources, the key national interest is diversification of markets Global non-OECD appetite is growing, these will be the key markets SOEs will be compelled to take on more of the “up front” risk as they participate in JVs Incremental capital for Canadian equities from recent deals may re-kindle equity markets

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State Owned Enterprises (SOEs) in the Canadian Energy Industry ALTACORP CAPITAL INC. | MARCH 2013| PG 25

Contact: Leslie Kende, P.Eng, MBA Managing Director, Acquisitions & Divestitures l.kende@altacorpcapital.com Direct: (403) 539-8622

CALGARY (Head Office) 1100, 888 - 3rd Street SW, Calgary AB Canada T2P 5C5 Main: 403 539 8600 Fax: 403 539 8575 www.altacorpcapital.com TORONTO 66 Wellington Street West, Suite 4420, Toronto, ON Canada M5K 1K7 Main: 647 776 8230 Fax: 647 776 8248