Annual General Meeting and Special Meeting of Shareholders

1
Annual General Meeting and Special Meeting of
Shareholders

• August 25th, 2010

2
Agenda

• Rational for the Sale of Assets
• Review of Fortress Strategy
• North American Natural Gas Markets
• What Next

3
Fortress Business Strategy

• Natural Gas Focus
• High Working Interest
• Concentrated Ownership
• Operated Production
• Mix of Development and Exploration Assets
• Low Finding and Development Costs
• Low Operating Costs
• 6.00 per mcf
• Financial Flexibility

4
Ladyfern Area Today Exploitation Exploration
Avg. WI 83, Operated 40 Development
Location Acquisition and Operating efficiencies
Avg. FEI Production 9.9
mmcf/d Total FEI Reserves
43 Bcf Total FEI Land (undev.)
85,000 net acres
Acquire and Exploit
5
Square Creek Exploration and Development

• 100 WI Fortress Operated
• Discovered by Fortress in 2007
• Developed and on-stream in 2008/09
• Production
• Well Capability gt9.0 mmcf/d
• Recoverable Reserves -24.2 bcf
• FD Costs 0.95/mcf

6
Natural Gas Fortress History of Market
Timing
7
AECO Natural Gas Prices Forward Strip
8
US Natural Gas Directed Rig Count Supply?

• Natural gas directed drilling activity has been
  flat for the past 16 weeks
• HZ drilling activity in Shale plays continue to
  provide increasing production.
• Although activity has flattened out supply
  continues to increase.

Source Baker Hughes
9
US Natural Gas Production Increasing
US Production

• US Production is increasing with HZ drilling
  activity focused on Shale Plays
• Supply Comparison
• 2010 Year to date 56.7 bcf/d
• 2009 Year to date 56.7 bcf/d
• 2010 July Average. 57.8 bcf/d

Source Bentek
10
Canadian Gas Export to the United States

• Canadian Gas Exports tracking 2009 levels
• Canadian Exports year to date
• 0.2 bcf/d over 2009
• -1.7 bcf/d under 5 yr average
• Expect Canadian Exports to be approximately the
  same as 2009.

Source Bentek
11
LNG Surplus Supply

• Qatar Gas has reduced output by 66 until prices
  improve
• Delivery of LNG tankers intentionally slowed to
  reduced landed supplies
• LNG is being diverted to higher priced European
  and Asian markets
• LNG Exports Year to Date
• 0.1 bcf/d over 2009
• - 0.3 bcf/d under 5 yr average
• Expect the Rest of Year LNG supply to be the
  same as 2009.

Source Bentek
12
Power Demand Weather

• Power Demand has been strong and likely to
  continue
• Low prices and recent hot weather has resulted
  in strong power burn
• Power Demand
• Year to date 1.7 bcf over 2009
• 2010 July Power Burn 3.8 bcf/d above 2009 levels
• Expect rest of year Power Burn to be 1.1 bcf/d
  over 2009

Source Bentek 2009
13
Demand Industrial Demand

• Industrial Demand is seasonally weak
• Industrial Demand has not yet recovered from
  recessionary lows
• Industrial Demand
• 0.6 bcf/d over 2009
• - 0.5 bcf/d under 5 yr average
• Expect Rest of Year same as 2009

Source Bentek 2010
14
Residential/ Commercial Demand

• Notwithstanding hot weather, demand is tracking
  2009
• 0.1 bcf/d over 2009
• 0.1 bcf/d over 5 yr average
• Expect Rest of year same as 2009

15
Natural Gas Inventories Looking like 2009
Source EIA
16
Change in Natural Gas Inventory Supply/Demand
Balance
Inventories are being affected most by anomalous
weather
Source EIA
17
US Production Forecast 954 Gas Rigs - Flat
18
Forecast Inventories - Full in Fall 2010

• Very likely full inventories at the end of
  injection season
• Assumes
• Flat Production
• Industrial and Residential Demand flat
• Power Demand 3.0 bcf/d above five year average.

19
Terra Transaction Summary
Consideration 0 00 Per Fortress Share Consideration
Cash 25,600 0.47
Shares 3,665 0.07
Buick Property Adjustment 2,403 0.04
Terra Share Consideration (1.50 per share) 5,498 0.10
Total 31,098 0.57
20
Fortress - Remaining Assets
Assets Unit Value Shares 000 0 Per Share
Pre Paid 300 0.01
Commodity Contract - -
ITC Receivable 3,400 0.06
Paloma Shares 4.25 625 2,656 0.05
Altheia Shares 0.20 1,900 371 0.01
Tax Pools 0.05 50,000 2,500 0.05
Oil and Gas Properties 7,765 0.14
16,992 0.31

Liabilitites
Bank Debt (21,800) (0.40)
Net Working Capital (1,100) (0.02)
Royalty Recoveries 400 0.01
Income Tax (285) (0.01)
Severance (900) (0.02)
Bank Extension Fees (105) (0.00)
Transaction Costs (250) (0.00)
(24,040) (0.44)

Net Asset Value Net Asset Value
Working Capital 1,860 0.03
Oil and Gas Properties 7,765 0.14
Terra Shares 5,498 0.10
Bio Technology Private Company Shares Bio Technology Private Company Shares 3,027 0.06
ITC Receivable 3,400 0.06
Total Remaining Asset 21,549 0.39

Remaining Liability Remaining Liability
Flow Through Obligation 3,000
21
Next Steps

• Re- Capitalization Transaction
• New Management Team
• New Corporate Strategy
• Advantages of Fortress
• Surplus Unused Tax Pools 50 million
• Cash in the Bank
• Producing Resource Properties
• TSX Listing