May 2010

Dear Fellow Shareholders,

Building on our achievements last year, 2010 will mark a move towards an accelerated pace of exploration and development in our Farrell Creek lands.

We invite and encourage you to attend our upcoming Annual General and Special Meeting of Shareholders on Thursday, June 10, 2010 at 2:30 p.m. The meeting will be held at the Calgary Petroleum Club, Cardium A and B, 319 5th Avenue S.W., Calgary, Alberta, Canada.

CSRI has set a goal of meaningful production, revenue and reserves from our Montney play by the end of 2010. A $49 million (gross) drilling and development program has been approved and is proceeding. The location of our program is in close proximity to a Talisman Energy gas facility that is already in commercial production from the Montney shales, and is expected to reach 40-60 mmcf/d by year end. In the greater Farrell Creek area, we view the ongoing activities and success associated with other operators’ Montney projects to be very positive for CSRI.

As you will recall, in 2008, CSRI entered into joint venture agreements with Canbriam Energy and Shell Canada for exploration targeting the Montney and Gething Formations respectively. Shell has fulfilled their commitment for an initial $50 million investment in the Gething play. First production of gas from our Gething joint venture Pilot Project has been achieved, with seven wells currently tied-in. Canbriam’s continued drilling and completions in the Montney play will fulfill their original $29 million commitment by the summer. Canbriam will inform us in the near future as to their decision on whether to increase their working interest from 65% to 70% and carry CSRI for additional investment in the project. Details and the progress that has been made on these two joint ventures can be found in the Management Discussion and Analysis (please refer to our website under the headings Investor Information/Financials/2009 Financial Information).

Working with well data provided by CSRI, Sproule Unconventional Limited determined in their resource report that there was a range of 3.6 to 8.4 tcf (gross) of discovered and undiscovered natural gas resource in the Montney Formation on CSRI lands. This resource range converts to 77-178 bcf per section. We are very pleased with the results of this report.

The Montney joint venture began with a vertical well (b-17-I) and a horizontal well (c-A48-I) being drilled into the lower half of the Montney Formation; Talisman’s drilling activity on the western portion of their Montney lands had already delivered impressive results from the upper half of the Montney Formation. We are encouraged with the results from our evaluation of the lower Montney Formation (see News Release dated March 4, 2010).

Following the completion of our first horizontal well into the lower Montney this summer, the joint venture plans to target the upper half of the Montney Formation with two horizontal wells from our c-18-I location and a horizontal leg from the c-A48-I well. This drilling would be accompanied by the construction of a sweet gas facility. Engineering has already begun on the facility with a capacity between 10-20 mmcf/d that may be easily expanded up to 50 mmcf/d. We expect to be selling gas through this facility by late fall. As a next step, CSRI intends to use the production and reserve data of the Montney play to apply for a listing on the Toronto Stock Exchange in early to mid 2011.

Sproule continues to confirm that there is 1.8 tcf of natural gas resource in our 55 sections of Gething/Moosebar/Gates Formations. Shell remains as the operator of the Pilot Project facility on the Gething play and we expect Shell’s decision by mid-year as to whether they will elect to move to the development stage. This development stage would include a pooling of each company’s Gething rights to create a 150 section play (96,000 acres) with additional funding from Shell to follow.

The Corporation is in a strong financial position with $12.8 million working capital, no debt and low G&A costs. CSRI raised $4.5 million through the full exercise of warrants that expired in February and has the potential to raise an additional $1.7 million through the exercise of warrants expiring in July 2010.

CSRI recently implemented a Normal Course Issuers Bid which offers the advantage of providing shareholders with an additional source of liquidity and is a demonstration of our continued confidence in the Corporation’s prospects. We believe that the current trading price of CSRI shares does not reasonably reflect the strong working capital position of the Corporation; the planned 2010 capital spending on the Montney play; nor the value of our material land position in the Farrell Creek area.

CSRI looks forward to advancing its Montney joint venture project to commercial production over the next year. Your investment and interest is appreciated as we continue to build shareholder value through the development of our Farrell Creek property.

On behalf of
CANADIAN SPIRIT RESOURCES INC.




Phillip D.C. Geiger, P.Eng.
President & Chief Operating Officer