Octagon April 11 2007

Antrim Energy Inc.

2

April 11, 2007

Antrim Energy Inc. AEN-TSX/AEY-AIM: $5.34 Target Price: $7.50 (from $6.00) Recommendation: BUY

2006 a Pivotal Year; 2007 Looks Even Better

COMPANY BULLETIN April 11, 2007

During 2006, Antrim established a significant reserve base offshore of the United Kingdom, with Ryder Scott assigning 12.3 million probable barrels

Overview

equivalent to the three fault compartments at Causeway, and 9.2 million

•

probable equivalent barrels at the Fyne & Dandy fields. These were the

•

• • •

After a successful 2006, we see an acceleration of Antrim’s growth. Antrim has established a significant reserve base offshore of the U.K., with Ryder Scott assigning 12.3 million probable barrels equivalent to the three fault compartments at Causeway, and 9.2 million probable equivalent barrels at the Fyne & Dandy fields. Some additional value is also likely to be added from the Argentinean assets; however, the bulk of the asset growth is likely to be the North Sea. Substantial value creation is underway, causing us to increase our target to $7.50 (from $6.00). We maintain our BUY recommendation.

first steps in the development of these fields and particularly at Causeway, we expect to see substantial reserve additions as development continues. The North Sea accounts for about 95% of total Company reserves. Last year’s reserve additions resulted in extremely low finding costs of $2.59 per equivalent barrel, and after adding in an estimate of future development costs, there is still a very respectable $19.56 in finding and development costs for the current reserve base, shown in Exhibit 1. As drilling resumes later this year at the fourth fault compartment at Causeway and at Fyne & Dandy, successive reserve additions could bring

Price Shares O/S (mm) Avg. daily vol. EPS (basic) CFPS Production/mm shares P/CF EV/DACF Revenues (mm) Cash Flow Net earnings Oil & NGLs (bpd) Natural gas (mmcfd) Equivalent (6:1 boed) Quarterly CFPS (basic) Q1 Q2 Q3 Q4

$5.34 87.1 203,258

Market cap. ($mm) $ Net debt Enterprise Value $

465.1 (55.4) 409.7

2005 (0.07) 0.06 25.2

2006 0.02 0.06 16.5

2007e 0.01 0.07 212.0

2008e 2.90 4.06 212.0

n/a n/a

95.7 109.8

73.3 64.6

1.3 1.2

$10.0 2.5 (3.2)

$13.9 3.7 1.3

$19.5 6.3 0.8

$432.0 353.7 252.5

562 2.2 931

550 3.3 1,105

1,000 6.0 2,000

17,469 6.0 18,469

$0.01 0.01 0.02 0.01

$0.02 0.00 0.02 0.00

$0.01 0.02 0.02 0.02

$0.04 0.04 1.94 2.04

down these average costs. Production from the North Sea fields is expected to come onstream in 2008, when we expect to see substantial cash flow – approximately $2.00 per quarter basic or $1.70 diluted (if the Company maintains its current balance sheet). Companies usually trade on a multiple of the 12-month forecast cash flow, meaning the market could begin to price Antrim’s stock on the North Sea financials later this year. Annualized cash flow could be $8.00 basic by Q3/08 ($6.80 diluted), and even using a low multiple of 2x to account for some additional dilution or farming down of interests implies significant upside to the current stock price. Ryder Scott valued Antrim’s 24.3 million barrels of equivalent reserves (economic conversion) at $119 million, or $4.90 per barrel (Exhibit 2), a relatively low figure reflecting the probable nature of most of the reserves. Once a development plan has been approved for the North Sea fields, these reserves can be classified as proven, with a subsequent increase in value that could be as much as three times the probable amount. There is still the potential for over 50 million barrels to be added in the North Sea. Ultimately, the best-case scenario indicates the potential for some 75 million barrels equivalent, which, if valued at $15.00 per barrel, could be worth $1.1 billion, or over $11.00 a share. (Production in 2008 could peak at almost 35,000 bd; at $50,000/bd, the producing assets could be worth $1.8 billion). Analyst: Warren Verbonac · (403) 750-0497· [email protected]

Antrim Energy Inc.

2

April 11, 2007

Some additional value is also likely to be added from the Argentinean assets; however, the bulk of the asset growth is likely to be the North Sea. The next series of high-impact drilling is expected to commence at Causeway by the third quarter, with three locations to be followed by connecting the producing wells to a nearby platform for production next year. Later this year, a location at East Kerloch and another at the Fyne & Dandy Fields are also expected, both of which could add production in 2008. We expect the stock to begin to react to the upcoming drilling program, and the anticipation of large production volumes and cash flow in 2008. As these potential events are becoming near-term, we are raising our price target to $7.50 and are maintaining our BUY recommendation.

Exhibit 1: Finding and Development Costs Net Reserve Changes

2004

2005

2006

3 Year Weighted Average

Oil, mmb - Proven Probable Gas, bcf - Proven Probable Total, mmboe Finding and Development Costs, mm Finding and Development Costs per boe Future Development Costs, Proven plus Probable, mm Finding, Development and Future Costs, per boe

0.314

0.9

0.6

(0.287)

0.2

22.3

0.181

17.2

7.3

(0.061)

6.2

20.7

0.051

1.6

23.7

$6.4

$18.0

$61.20

$124.75

$11.20

$2.59

$4.9

$401.5

$14.25

$19.56

$5.47

McDaniel & Associates to 2005, Ryder Scott thereafter, Constant Pricing, Before Royalty (Argentina 12%, U.K. 0%) Gas converted to oil at economic equivalencies, in 2004 at 5.0:1, 2005 at 49.9:1, 2006 at 38.5:1 Source: Company Data and Octagon Capital Corporation

Exhibit 2: Asset Value

Constant 2006

Forecast 2006

Oil and Gas, P+P, PV 10%

$34.1

Working Capital

$55.4

$55.4

Net Asset Value

$89.5

$174.6

Shares Outstanding, Basic Asset Value per Share, Basic

$119.2

87.1

87.1

$1.03

$2.01

Proceeds of Dilutive Instruments

$36.3

$36.3

Shares Outstanding, Fully Diluted

101.0

101.0

Asset Value per Share, Fully Diluted

$1.25

$2.09

Ryder Scott, After Taxes Forecast Pricing Includes Causeway and Fyne & Dandy Fields Source: Company Data and Octagon Capital Corporation

Analyst: Warren Verbonac · (403) 750-0497· [email protected]

TORONTO 181 University Ave. 4th Floor Toronto, ON M5H 3M7 Tel: (416) 368-3322 Fax: (416) 368-3811

Chairman David McLeish

President & Chief Executive Officer John Palumbo (416) 306-2511

(416) 306-2518

[email protected] Vice Chairman Peter Winnell

CALGARY 606 – 4th St., S.W. Suite 1400 Calgary, AB T2P 1T1 Tel: (403) 750-0475 Fax: (403) 750-0499

[email protected]

(416) 306-2517

Consumer Products

HOLD: The stock is expected to be in line with the average total return of the industry sector, on a risk-adjusted basis, over the next twelve months.

Base Metals (416) 306-2544

Hendrik M. Visagie, MBA

[email protected]

(416) 306-2519

[email protected]

Energy

Media & Telecom (403) 750-0481

Marianne Godwin

[email protected] Warren Verbonac

(416) 306-2515

[email protected]

Tracy Nong

(416) 306-2549

[email protected] Industrial Products (416) 306-2512

Nancy Turner

[email protected]

SELL: The stock is expected to be below the average total return of the industry sector, on a risk-adjusted basis, over the next twelve months. Distribution of Ratings Out of approximately 32 stocks in the Octagon Capital Corporation coverage universe, the ratings distribution is as follows:

Associates

(403) 750-0497

[email protected]

Abid Mukhtar

Stock Ratings

BUY: The stock is expected to exceed the average total return of the industry sector, on a risk-adjusted basis, over the next twelve months.

RESEARCH

Jeffrey J. Fiell, CMA, CFA

IMPORTANT DISCLOSURES

Speculative BUY: The stock is in a high growth sector where price patterns are more volatile and of inherently greater risk.

[email protected]

Robert Gibson, CFA

MONTRÉAL 1 Place Ville Marie Suite 2821 Montréal, QC H3B 4R4 Tel: (514) 875-9339 Fax: (514) 875-2868

(416) 306-2538

Speculative BUY BUY HOLD SELL Under Review

12.5% 56.3% 25.0% 3.1% 3.1%

Distribution of ratings is updated the first of every month.

[email protected]

Compensation Policy Annie Zhang, CFA

(416) 304-7792

[email protected] SALES Murray McDonald

(416) 306-2510

[email protected] Gordon Fernandes

(416) 304-7781

[email protected] Spyros Karellas

Sylvia Lai

(416) 304-7782

[email protected] Milosh Banjeglav

(416) 304-7789

[email protected] (416) 306-2541

[email protected]

Sales & Trading Assistant Miranda Forkan

(416) 304-7844

[email protected] TRADING John Ponech

(416) 306-2516

[email protected] Jeff Coulthard

Gordon Baker

(416) 306-2532

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[email protected] (416) 306-2522

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Jean-Marc Musacchia

(416) 306-2528

[email protected]

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