The Beaver River natural gas field is located in Northern British Columbia and was discovered by Amoco in 1961 with commercial production beginning in 1971 from the deeper Nahanni reservoirs that are also producing from the adjacent Fort Liard area of the southern Northwest Territories where large gas discoveries by Chevron and Encana have confirmed the region's natural gas potential. The Nahanni is historically estimated to contain 1.5-3.0 Tcf original gas in place, with a recovery factor of 10-20%. Situated approximately 150 km northwest of Fort Nelson, the Beaver River field ties into the Duke Energy transmission pipeline. The Company aims to produce bypassed pockets of gas to increase the recovery factor from the Nahanni reservoir.

The field has a series of shale formations over a total thickness of 3000m that are all thought to contain produceable gas columns, the Mattson, Besa River and Golata shales. The Mattson is currently producing in well A-7 and the Besa River in well A-2. An additional hydraulic fracturing programme is planned for later in 2008 to commence shale gas production from up to 6 existing wells.

The Company holds a farm-in agreement with Questerre Energy Corporation that will provide Transeuro with a 50% working interest in the Beaver River Field and all the infrastructure.

Transeuro has identified the potential for a significant enhanced shale gas play in the shallow sections of the field, in 3 disctinct horizons and has started a multi-well program to appraise the size and commercial viability of the resource:

• Mattson shale from around 1200 - 2100m with A-7 producing
• Besa River Shale from around 2000 - 3000m with A-2 producing
• Golata and Muskwa shales from 3000m - 4000m

The initial phase of the Beaver River farm in commitments was completed during the winter of 2005/06. Re-entry and perforating operations were conducted in three old wells, the A2, A6 and B2. Wells A2 and A6 were successfully re-completed to the Mattson formation and hydraulically fractured to stimulate production. Well A-2 has been on production since March 2006 with gas rates increasing gradually with time from 1.6 to 4.5 million cubic feet per day (MMcf/d). Well A-6 produced successfully at around 0.5 MMcf/d prior to fracturing but following a small fracturing operation, has struggled to clean up sufficiently to flow at commercial rates. A larger slickwater fracturing operation is planned. Operations on well B-2 were suspended due to poor cement isolation between casing and the wellbore was retained for a future deep sidetrack into the Nahanni.

The first shallow well, the A7, was drilled in the north of the field to target the same intervals producing successfully in the A-2 well. Following drilling and mechanical problems the well failed to reach the target and was completed and fractured in the Mattson formation. The well is currently on production. A second shallow well, the B3, was drilled logged and cased by the end of March 2007. Different small hydraulic fracturing methods were used and obtain gas from all 4 intervals, but not at commercial rates. Larger slickwater fracs are now planned to achieve commercial rates.

Substantial evidence exists to suggest that the shallow shows at Beaver River are in fact due to the presence of a substantial shale gas reservoir. The pursuit of shale gas fields in northeast British Columbia has seen a huge increase in activity during 2007, particularly in the Horn River basin, located just to the East of Beaver River. The same Muskwa shales there are present in Beaver River as the deeper of the 3 potential horizons. While shale gas resources are not much in production in Canada, this non-conventional reservoir is being successfully developed in a number of areas of the USA, including the Barnett shale in Texas and the Lewis shale in California. Transeuro is currently at the leading edge of this technology in Canada.

The reservoirs are being characterised by Transeuro as an 'enhanced' shale gas prospect as the presence of sand in the shale increases the porosity to the range of 4-7%, somewhat higher than conventional shale gas plays, thereby allowing for a greater gas saturation. Additionally, the field is located in the foothills of the Rockies, in a region of historically high rock stresses that have generated a high density of natural fractures in the shales. These natural fractures are essential in shale reservoirs to increase the overall permeability in the rock that allows the gas to flow towards the wells. The higher density of fractures suggests that the wells will flow at a higher rate and will drain a larger area around the wellbore. Overall cumulative recovery of gas in place should also be enhanced.

Results from the initial campaign of workovers and new drills has provided mixed success, which is not unusual in the development of shale reservoirs. A review of the fracturing technology has been completed and the next phase of appraisal will involve fracturing of up to 14 horizons in 6 wells across the field, to assess the commercial potential of all 3 horizons across the field.

Transeuro is in the process of completing a fully-integrated reservoir study of the deeper Nahanni reservoir to identify possible infill locations and new exploration targets for bypassed gas production. Advanced special core analysis has been completed to provide accurate detailed capillary pressure and relative permeability data as well as fracture and matrix interaction. Seven possible infill and step-out well locations have already been identified. A dual porosity reservoir simulation model will be used to assess the potential of each location and the risked economics of new wells.

In early 2008 the A-8 well was completed into the Nahanni formation, targeting an area of the reservoir that was thought to be an isolated fault compartment. Well results show that the area was not isolated and had been affected by the production from adjacent wells. 3 intervals were identified in the Nahanni and the top interval was tested, but produced mostly water and some gas. The lower 2 intervals will be tested later in 2008 and are expected to flow dry gas.