EQUAL ENERGY (EQU)

[Timothy Smith]

The Hunton formation is one of the most misunderstood assets in Equal's portfolio. Yet this asset is the most productive and most valuable in the company's portfolio. The fact that Equal is the sole public company with significant exposure to the Hunton has contributed to the relative obscurity of this play.

It is clear that the Hunton play is a sufficiently developed play with a long production history and well established economics. The play certainly lacks the "sex appeal" of newer shale plays in Oklahoma, such as the Mississippian Lime, yet the Hunton development has continued at a brisk pace over the last few years despite weak and volatile natural gas prices in a testimony to the play's attractive economics.

It is also abundantly clear that the company's Hunton asset is extremely undervalued at current levels and this is exactly why the company is undertaking a strategic review to unlock shareholder value. It is expected that the strategic review would either lead to a full sale of the company or the divesture of its Canadian assets and the conversion of the Hunton and Mississippian asset in a dividend trust. Under both scenarios Equal Energy's stock should experience a significant upward re-rating.