Results for the Trilogy operated horizontal wells drilled in the Presley area of South Kaybob in 2009 were very encouraging. Capitalizing on recent developments in drilling technology, Trilogy increased the measured depth of its wells drilled as well as the length of the horizontal sections of the wellbores in its operated wells. First quarter 2009 wells were drilled to 3,500 meters measured depth and completed with seven stage fracture stimulations, whereas third and fourth quarter wells were drilled to a maximum depth between 4,000 and 4,500 meters and completed with twelve to sixteen-stage fracture stimulations. Montney horizontal wells currently cost $3.5 to $4.0 million to drill, complete and tie in if there are no operational issues and the well is drilled from an existing surface lease. Third and fourth quarter wells flowed back natural gas at test rates of 8 to 15 MMcf/d with flowing pressures between 10 to 15 Mpa. The additional horizontal fractures have provided increased reservoir contact, which we anticipate will provide incremental reserves and deliverability at costs similar to those associated with wells drilled in the first quarter. Given the success in the third and fourth quarter, Trilogy made plans to expand current compression capacity by installing a fifth compressor at the 3-29 compressor site to increase capacity to 50 MMcf/d. This project received regulatory approval and was constructed during February 2010. Trilogy intends to pursue a development drilling plan in 2010 that will fully utilize available compression and maintain rates at maximum capacity. Given continued encouraging drilling results on the eight horizontal wells being drilled in the first quarter 2010 Trilogy will be evaluating the option of installing a sixth compressor before the end of the year.

The following table updates and summarizes the well data, test results and costs for Trilogy operated horizontal Montney wells drilled and completed in the Presley area of South Kaybob during the third and fourth quarters

Regulatory approval to produce as many as five horizontal wells per section has been granted for the Montney in certain lands within the Kaybob area. Trilogy estimates that it has an interest in 50 (43.6 net) contiguous sections of prospective land in the Presley area. The number of drilling locations Trilogy has available will be determined, in part, by the drilling density to maximize economic recovery. Trilogy will continue to evaluate the economics of increasing downspacing from three to five wells per section over the next few years, while at the same time trying to maximize return by drilling longer reach horizontals and increasing fracture density on each well. Subject to receiving regulatory approval for further downspacing, these parameters would suggest 150 - 250 locations specifically for the Montney formation in the Presley area, of which twelve were drilled prior to the end of 2009.

Through the end of 2009, Trilogy continued the engineering, design and procurement of material for its proposed Presley Pipeline and Kaybob North Plant projects pending regulatory approval. The Presley Pipeline project involves the construction of a 12-inch pipeline running 53 kilometers from Trilogy's Montney gas development project at Presley, in South Kaybob, to the Trilogy-operated Kaybob North Plant. The existing Kaybob North Plant would be expanded to include a functional unit designed to process approximately 50 to 60 MMcf/d of raw sour gas production from the Montney development at Presley. The proposed pipeline and sour gas processing unit would work in conjunction with a new acid gas disposal system to reduce greenhouse gas emissions generated during the sweetening process. The project is estimated to cost approximately $38 million, of which $15.3 million was incurred in 2009. Anticipated start-up of these projects has been delayed while Trilogy continues to pursue regulatory approval. Trilogy estimates the proposed projects will provide cost savings of up to $12 million per year through reduced operating expense over the life of the reserves, and a reduction in the shrinkage of the natural gas stream as compared to the current process. Additional benefits of the project are expected to include increased reliability in the processing of Trilogy's natural gas, increased control over gas and liquids production, a reduction in green house gas emissions and potential third party processing revenues. Trilogy believes that a further opportunity may exist to expand the Kaybob North Plant by an additional 50 MMcf/d of sour gas processing capacity to match the pipeline capacity of 100 MMcf/d.

Refer to Legal Notice and Forward Looking Statement Advisory