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NORTH AMERICAN RIG COUNTSThe U.S. rotary rig count was down 4 at 1,894 for the week of August 31, 2012. It is 74 rigs (3.8%) lower than last year. The number of rotary rigs drilling for oil was up 11 at 1,419. There are 355 more rigs targeting oil than last year. Rigs drilling for oil represent 74.9 percent of all drilling activity. Rigs directed toward natural gas were down 13 at 473. The number of rigs currently drilling for gas is 422 lower than last year's level of 895. Year-over-year oil exploration in the U.S. is up 33.4 percent. Gas exploration is down 47.2 percent. The weekly average of crude oil spot prices is 8.6 percent higher than last year and natural gas spot prices are 32.3 percent lower. Canadian rig activity is down 18 at 316 for the week of August 31, 2012 and is 201 (38.9%) lower than last year's rig count. The number of rigs drilling for oil was down 10 to 237 and is 111 (31.9%) lower than last year. Gas directed rig count was down 8 at 79 and is 90 (53.3%) lower than a year ago.

OIL FALLS ON ECONOMIC CONCERNS

Oil prices fell on Tuesday as concerns about slowing economic growth and curbed demand for petroleum countered hopes for more monetary stimulus from central banks in the United States and Europe. Weak U.S. manufacturing data for August and a reported drop in construction spending in July weighed on oil and equities on Wall Street. "You need to see demand coming through," said Michael Hewson, a markets analyst at CMC Markets in London. "And the only way you are going to get demand growth is if oil prices fall. Any upside in oil is going to be limited." The euro slipped against the dollar on Tuesday as investors grew cautious on fears a European Central Bank plan to tackle the region's debt crisis may lack detail. A stronger dollar is usually bearish for dollar-denominated oil. Limiting oil's price slide, the U.S. oil industry restarted more operations shut by Hurricane Isaac. Still, as of Monday, nearly 60 percent of offshore crude oil production in the Gulf of Mexico was still offline, according to U.S. government reports. Brent October crude futures fell $1.10 to $114.68 a barrel by 1:04 p.m. EDT (1704 GMT), having fallen as low as $114.40 after reaching $116.65. U.S. October crude was $95.47 a barrel, down $1 from its Friday settlement, having swung from $95.02 to $97.37, both sides of the 200-day moving average of $96.65. Brent crude posted a higher settlement on Monday, gaining $1.21, while U.S. markets were shut for the Labor Day holiday. Brent and U.S. crude gained more than 9 percent in August. Brent's premium to U.S. crude CL-LCO1=R

moved above $19 a barrel. After the expiration of September contracts on Friday, U.S. refined products futures were mixed, with October gasoline up about 0.1 percent and heating oil moving less than 0.4 percent to the downside.

KUWAIT'S KPC SAYS IT HAS NOT SIGNED ANY CANADA DEAL

Kuwait Petroleum Corporation (KPC) said late on Friday it had not signed a deal in Canada after reports it had completed a preliminary agreement with Athabasca Oil Corp to develop the Alberta oil sands. "No agreement has been signed. Projects or any investment (are) subject to approvals of KPC board and the Supreme Petroleum Council, and this has not taken place so far," it said in a statement in English to Kuwait News Agency. Athabasca said on Friday it had signed a letter of intent to jointly develop the Hangingstone and Birch oil sands properties without naming its partner, which a source familiar with the talks identified as the state-owned KPC.

NORTHERN GATEWAYHEARINGS RESUME

The economics of the proposed Northern Gateway pipeline will be the focus of the next phase of hearings when they resumed in Edmonton Monday. "The Edmonton hearings are really going to focus on the

financial matters related to this proposed project," said Kristen Higgins with the National Energy Board. "It's also going to look at the general need for the project." Hearings by the joint review panel started in January, but this phase will see a change in tone and purpose. Evidence presented earlier in the process can now be challenged and questioned by intervenors. "It's also the opportunity where the panel is really going to hear about the evidence that is on the record — the testing of that evidence," Higgins said. "And it's going to form a lot of the information that the panel is going to use when they make their recommendat ion . " Ca lgary-based Enbridge Inc. wants to build the $6-billion pipeline to transport raw bitumen from the Alberta oilsands to Kitimat, B.C., where it can then be shipped to Asian markets. However, the project has met with widespread opposition in British Columbia, particularly among environmentalists and First Nations people who worry about the potential damage to inland and coastal areas that would be caused by a pipeline leak. There is political opposition, as well. B.C. Premier Christy Clark sparked a battle with her Alberta counterpart, Alison Redford, when she announced that British Columbia would not approve the project unless conditions, including a larger share of royalties, were met. The federal and the

Alberta governments are in favour of the pipeline because it will move Canadian energy into new markets. Enbridge spokesman Ivan Giesbrecht believes Canadians should be excited about this. "This is one opportunity for Canada's resources to be moved into new markets and so, in terms of needing this, yes, we do feel that this is a project that Canada needs right now," he said. Enbridge will appear at the hearing in Edmonton, along with representat ives f rom the Alberta government and Coastal First Nations. The Alberta Federation of Labour will also make a presentation. The group, which represents organized labour in Alberta, plans to argue that the project is not in the public's interest because it will send refining jobs out of the province. "If we're going to be selling raw bitumen to Chinese refineries, then we are shipping tens of thousands of very, very good-paying long term jobs down the pipeline to Asian markets and that, to us, is not putting the public interest first," said AFL policy analyst Shannon Phillips. Two weeks have been set aside for the Edmonton portion of the hearings. The panel will move on to Prince George in October and Prince Rupert in November and December. Final arguments will be presented to the panel next spring, which must make a recommendation by the end of 2013. Ottawa is expected to make a

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OLIVER SAYS CANADA NEEDS FOREIGN CAPITAL TO DEVELOP OIL

Canada does not have enough money to develop its oil resources and move oil to market, and therefore welcomes foreign capital, Natural Resources Minister Joe Oliver said on Tuesday. Oliver was answering a reporter's question about a $15.1 billion bid by China's CNOOC Ltd to buy Canadian oil producer Nexen Inc, and the possibility of state-owned Kuwait Petroleum Corp doing a joint venture in Canada's oil sands with Athabasca Oil Corp . "I don't want to talk about that specific proposal because it will also be reviewed by the ministry, however we know that we have a need for an immense amount of capital to build the infrastructure necessary to develop the resources and move the resources to the market," he said. "We don't have enough capital in this country and so we are welcoming capital from the outside." Financial markets are closely monitoring remarks by ministers as the Canadian government decides whether to allow the CNOOC takeover bid to go through. There is at least some opposition to the idea within cabinet. In answer to another question, Oliver said reciprocity would be one of a number of things that government will look at in determining whether the CNOOC deal

would be of net benefit to Canada. Prime Minister Stephen Harper and Finance Minister Jim Flaherty, when asked about the bid for Nexen, also have alluded to reciprocity, the idea that Beijing must also be open to Canadian investment in China.

TWIN BUTTE TO ACQUIREWASECA ENERGY

Twin Butte Energy Ltd. has announced that it has entered into an arrangement agreement providing for the acquisition by Twin Butte of all of the outstanding securities of Waseca Energy Inc. for total consideration of approximately $127 million including the assumption of approximately $7.5 million of positive working capital after accounting for estimated transaction costs. Waseca is a private company with a focused asset base in the greater Lloydminster area with 100 percent of its production consisting of heavy oil. The consideration for the Waseca Acquisition will be comprised of a minimum of $32.2 million and a maximum of $58.9 million in cash (assuming the Waseca options and performance shares are arranged in accordance with the arrangement agreement) and a minimum of 28.9 million and a maximum of 39 million in Twin Butte common shares depending on elections between cash and shares made by Waseca shareholders. At closing, Twin Butte anticipates it will have approximately 245.9 to 256.1 million shares outstanding.

Waseca is owned 81.1 percent by Sprott Resource Corp. On closing of the Waseca Acquisition it is anticipated that Sprott Resource Corp. will own approximately 9 percent of the outstanding Twin Butte common shares. Waseca shareholders choosing Twin Butte shares will receive 0.5133 Twin Butte shares for each Waseca share. This ratio was based on the 10 day volume weighted average trading price of Twin Butte ended on August 31, 2012 of $2.63 per share. Twin Butte also announced that conditional on the closing of the Waseca Acquisition, it will increase its monthly dividend by 6.7 percent from $0.015 to $0.016 per share, or to $0.192 per share annually. It is anticipated that the

increased dividend will be payable on December 17, 2012 to shareholders of record on November 30, 2012. The Company believes that the Waseca Acquisition in combination with the recently completed Avalon Exploration Ltd. acquisition have created accretive growth for Twin Butte allowing the Company to increase its return to shareholders. The Waseca Acquisition is consistent with Twin Butte's historic strategy of acquiring quality assets, with large resource potential within focus areas where Twin Butte has expertise. The Waseca Acquisition like previous ones materially increases the size and scope of heavy oil lands and opportunities for Twin Butte. Twin Butte's

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undeveloped land, se ismic, and development and exploratory drilling inventories have increased materially since the beginning of 2012 which will lead to strong capital efficiencies in its capital plan for many years. The Waseca lands are contiguous to Twin Butte's existing lands in the Lloydminster area, and enhance Twin Butte's position as a significant operator in the area. RBC Capital Markets is acting as financial advisor to Waseca and has provided the Board of Directors of Waseca with an opinion that the consideration to be received by the Waseca shareholders pursuant to the Waseca Acquisition is fair, from a financial point of view, to Waseca shareholders. Peters & Co. Limited is acting as financial advisor and Raymond James Ltd. and National Bank Financial Inc. are acting as advisor to Twin Butte.

RARE OIL AND GAS EQUIPMENTAUCTION IN HOUSTON

Precision Drilling has announced the sale of its non-utilized oilfield services assets, including legacy drilling rigs, service rigs and ancillary equipment. Precision has partnered with Kruse Energy & Equipment, LLC, www.kruseenergy.com, to make this equipment available for sale via auction. The equipment being sold is of a wide variety of sizes, styles, new, used and locations across Canada and the U.S.A. "Kruse Energy and Equipment was chosen by Precision for this international event because of our four decade and 700 years combined experience as the leader in this field," said Jim Richie, co-founder and chief auctioneer of Kruse. "Competitive bidding is always the best way to sell equipment." Kruse will hold the digital image auction in

Houston, Texas at the Sheraton Intercontinental North Hotel on September 25 and 26, 2012. Starting time is 9:00 am both mornings. The equipment offered will include 74 drilling rigs varying in size from 1500HP to 350 HP, 10 coil tubing drilling rigs, 10 well service rigs, over 675,000 feet of used drill pipe, (5) five unit mobile man camps, 20 oilfield rig-up and pump trucks and a large assortment of powered draw-works, powered and un-powered triplex mud pumps (new, re-built and used), blowout preventers, engines and related rig components. The Day 1 auction will include rigs and equipment in Louisiana, Texas, Colorado and North Dakota along with drill pipe in these four states and in the Canadian Provinces of Saskatchewan, Alberta and British Columbia. Day 2 will include drilling rigs, work-over rigs and other equipment in

Saskatchewan, Alberta and British Columbia. "This auction will attract contractors needing complete drilling rigs or major components to upgrade their rigs," said Larry Mitchell with Kruse. David Long, President of Kruse says, "The variety of equipment being offered will attract buyers from around the world. This is good for the oil and gas industry." Kruse Energy and Equipment LLC is the world's largest auction firm specializing in the auction sale of oilfield related equipment. Kruse Energy has offices in Odessa, San Antonio, and Tyler, Texas, Oklahoma City and Tulsa. For more visit www.kruseenergy.com.

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IRAN SAYS OIL EXPORTSUNAFFECTED BY SANCTIONS

Iran's oil exports are at their normal levels and are unaf fected by Western embargoes, an Iranian oil official was quoted as saying on Sunday. "We don't see anything abnormal, almost everything is progressing routinely," Mohammad Ali Khat ib i Tabatabae i , d i rec tor fo r international affairs at the National Iranian Oil Company (NIOC), told the Iranian Students' News Agency (ISNA). He did not give any figures on Iran's current oil export levels. Iran's top oil customers have slashed Iranian purchases under pressure from European Union and U.S. sanctions that aim to squeeze Tehran's oil income and curb its nuclear programme. Japan's imports of Iranian crude fell to zero in July for the first time since 1981, trade ministry

data showed last week. To compensate, Japan increased imports from the United Arab Emirates and Iraq, among other suppliers. South Africa imported no crude oil from Iran in July, customs data showed last week. The country used to import a quarter of its crude from Iran. The EU's embargo also included a ban on insurance of Iranian cargoes. Tehran has offered to provide up to $1 billion of insurance cover to Iranian vessels shipping oil. "This step has been taken in the last few months and everyone saw that the insurance companies could provide $1 billion in coverage," Tabatabaei was quoted as saying.

NORWAY DRILLERS REACH WAGE DEAL TO AVOID STRIKE

Norwegian oil drilling workers reached a last-minute wage deal with employers on Sunday to avoid a second strike in just two months, bringing relief to one of the world's top oil and gas exporters. The sides agreed to a 4.5 percent wage increase plus a one-off 3,641 crown ($630) cash supplement for 650 workers at services firm KCA Deutag, and unions called off a strike which would have impacted two key North Sea installations, union Industri Energi and the oil industry association OLF said separately. In July, a 16-day strike among Norway's oil production workers halted 13 percent of Norway's oil production before the government forcibly stopped it to protect the country's reputation as a stable exporter. Norway is the world's eighth

largest oil exporter and Europe's second biggest natural gas supplier. The country's oil workers are the best paid in the world, earning around $180,000 a year on average. Norway's economy has been one of Europe's brightest points this year, growing by an annual 5 percent in the second quarter, and employees in all sectors are increasingly demanding a bigger share of the country's success. Oil services workers, also demanding better pay and conditions, have also threatened strikes and their case is still unresolved.

CENOVUS BEGINS PHASE D PRODUCTION AT CHRISTINA LAKE

Cenovus Energy Inc is producing oil from phase D at its Christina Lake oil sands operation approximately three months ahead of schedule and within budget. The company began injecting steam in the second quarter of this year and began producing in late July. Production at Christina Lake in August averaged more than 61,000 barrels per day (bbls/d) gross, an increase of nearly 4,000 bbls/d when compared to production in the second quarter. Christina Lake is operated by Cenovus and jo in t ly owned wi th ConocoPhillips. “Cenovus continues to demonstrate the strength of our phased approach to expansions,” said John Brannan, Cenovus Executive Vice-President & Chief Operating Officer. “We’re very pleased with the early completion of the phase D expansion and anticipate a successful ramp-up to full capacity.” Phase

D is planned to produce approximately 40,000 bbls/d. Cenovus expects the production ramp-up to be complete in six to nine months, similar to the ramp-up of phase C and considerably faster than the industry average. The efficient ramp-ups achieved at Christina Lake are due to the high quality of the reservoir and the use of acce lera ted s tar t -up techn iques. Commissioning of the phase D facilities is almost complete and will bring total production capacity at Christina Lake to 98,000 bbls/d. With additional expansions and ptimization, Cenovus anticipates Christina Lake will have a total production capacity of about 300,000 bbls/d. “Cenovus has decades of growth ahead in the oil sands,” said Brannan. “The manufacturing approach we use to develop our oil sands projects supports this long-term growth. We plan to bring on a new phase of oil sands production every 12 to 18 months for the next five years and we also have a portfolio of emerging oil sands projects to develop.” Construction continues on phase E, the next expansion at Christina Lake, and is currently ahead of schedule. The phase is about 55% complete, with initial production anticipated for the fourth quarter of 2013. Site preparation, engineering and major equipment fabrication is underway for Christina Lake phase F with first production expected in 2016. The company plans to provide an update to full-year production forecasts with its third quarter results in October.

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