Wrong Wrong Wrong

JOHN HEINZL

Globe and Mail Update

November 13, 2008 at 6:00 AM EST

As we watched the stock market take another sickening dive yesterday, a thought occurred to us. Two thoughts, actually.

Thought #1: Boy, things really suck out there.

Thought #2: Everything we were told about investing was dead wrong.

There is no need to dwell on #1, for it is now widely understood that things well and truly suck everywhere you look. But it is worth delving a little deeper into #2, because we all probably wish we'd been more skeptical of the assumptions we accepted as gospel before the financial world blew up.

For example, we were told time and again that nothing would stop Americans from spending. “Never bet against the U.S. consumer” went the refrain, and for years that was a smart strategy, because whether they were facing high gas prices, hurricanes or rising interest rates, Joe and Jane American kept shopping as if it were part of their genetic makeup.

Of course, we now understand what was behind the great American spending spree: an obscene amount of debt. It wasn't rising incomes or job growth that kept the malls packed, but credit cards, home-equity loans and various no-interest, money-down schemes made possible by asset-backed securities markets that were hungry for any paper you could feed them.

These sources of credit have either dried up or been seriously curtailed, which is why we have retailers such as Circuit City going into Chapter 11 and Best Buy slashing its forecast yesterday, citing “seismic changes in consumer behaviour [that] have created the most difficult climate we've ever seen.”

Best Buy's grim outlook – it warned that same-store sales could tumble by as much as 15 per cent between now and February – helped cut the knees out from under the stock market again yesterday, sending the Dow Jones industrial average down 411.3 points or 4.7 per cent to 8,282.66.

Another investing “truth” that turned out to be a myth was that the price of oil – being a finite resource in a world of ever-growing demand – could only go up. A related myth was that China's huge appetite for commodities would keep resource-based economies such as Canada's humming right along, thank you very much.

Both of these assumptions have now been exposed as false. With the global economy sinking fast, the price of oil yesterday slid another $3.17 (U.S.) or 5.3 per cent to $56.16 a barrel – the lowest close in 21 months and a far cry from the $147 it fetched last summer. As oil plunges, so does Canada's main stock index, which dropped 501.43 points or 5.3 per cent to 8,922.57 yesterday.

China, meanwhile, is looking more and more like a bubble in the process of popping. Property prices are plunging, factories are closing and the government – in a desperate move to prevent a severe economic slump that would spark widespread social unrest – is pouring more than a half-trillion dollars into infrastructure projects. Focusing on its domestic economy makes sense, given that Americans are no longer in a position to buy the goods rolling off Chinese assembly lines.

It's easy, in hindsight, to identify all the faulty assumptions that have now landed investors in a world of hurt. The hard part will be spotting such falsehoods the next time around, before they become so obvious to everyone.

QEC:Excellent Early Results From Shale Programs in Third Quarter

Questerre Energy Corporation: Excellent Early Results From Shale Programs in Third Quarter


00:15 EST Thursday, November 13, 2008

CALGARY, ALBERTA--(Marketwire - Nov. 13, 2008) -

NOT FOR DISTRIBUTION ON U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Questerre Energy Corporation ("Questerre" or the "Company") (TSX:QEC) (OSLO:QEC) reported today on its financial and operating results for the third quarter of 2008.

"The appraisal of our major shale gas discovery in Quebec began in the third quarter with excellent early results," commented Michael Binnion, President and Chief Executive Officer. "Pilot programs by our partners are on track to assess the commerciality of the Utica and Lorraine shales. We were also encouraged by a 10 mmcf/d test of the Liard shales at the Beaver River Field in British Columbia."

"The success of the drilling program in Antler largely contributed to our improved financial results during the quarter," Mr. Binnion added. "Despite lower realized prices, cash flow from operations was $5.41 million up from $5.14 million in the preceding quarter. We maintained a strong balance sheet with no debt and positive working capital of over $67 million at the end of the quarter."

"Our financial strength and conventional assets allows us to weather these challenging markets and thoroughly evaluate what could yet prove to be the most valuable natural gas find in Canada."

Highlights

- Successful Utica shale production test in the St. Lawrence Lowlands, Quebec

- Expanded pilot programs commenced in the Lowlands with 4 wells spud during the quarter

- Liard shale well tests at over 10 mmcf/d at Beaver River Field, British Columbia

- Antler, Saskatchewan development program underway with drilling of 2 wells and stimulation of 5 wells in the third quarter

- Quarterly cash flow from operations increased over 124% to $5.41 million from $2.41 million in the third quarter of 2007

- Increased oil production contributed to improved operating netbacks of $48.51 per boe from $17.39 per boe in the prior year

Cash flow from operations for the third quarter of 2008 grew to $5.41 million from $2.41 million in 2007 and $5.14 million in the second quarter. The increase reflects the higher oil weighting in the Company's production profile and stronger commodity prices and netbacks during the quarter. The Company maintained its financial position with a working capital surplus of $67.83 million at September 30, 2008 as compared to $10.00 million at December 31, 2007.

Petroleum and natural gas revenue for the three months ended September 30, 2008 was $8.89 million. This represents a 105% increase over revenue of $4.34 million in the same period in 2007 and relatively unchanged over revenue of $9.04 million in the second quarter of this year. With average daily production of 1,292 boe/d (2007: 1,206 boe/d) in the quarter, higher commodity prices were primarily responsible for the higher revenue. The Company reported net earnings of $0.29 million for the quarter as compared to a loss of $0.68 million in 2007.

Questerre is a Calgary-based independent resource company actively engaged in the exploration, development and acquisition of high-impact exploration and development oil and gas projects in Canada.

This news release contains forward-looking information. Implicit in this information are assumptions regarding commodity pricing, production, royalties and expenses, that, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. These forward-looking statements are based on certain assumptions that involve a number of risks and uncertainties and are not guarantees of future performance. Actual results could differ materially as a result of changes in the Company's plans, commodity prices, equipment availability, general economic, market, regulatory and business conditions as well as production, development and operating performance and other risks associated with oil and gas operations. There is no guarantee made by the Company that the actual results achieved will be the same as those forecasted herein.

Barrel of oil equivalent ("boe") amounts may be misleading, particularly if used in isolation. A boe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil and is based on an energy equivalent conversion method application at the burner tip and does not necessarily represent an economic value equivalent at the wellhead.

This news release does not constitute an offer of securities for sale in the United States. These securities may not be offered or sold in the United States absent registration or an available exemption from registration under the United States Securities Act of 1933, as amended.

FOR FURTHER INFORMATION PLEASE CONTACT:

Questerre Energy Corporation
Anela Dido
Investor Relations
(403) 777-1185
(403) 777-1578 (FAX)
Email: info@questerre.com
Website: www.questerre.com