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TWST: Have you identified other compelling values?

Mrs. Guntz Hedoin: Anderson Exploration (TSE:AXL.TO) is among the largest natural gas and oil producers in Canada. AXL’s current western Canadian operations are divided into five main regions of exploration and development, which stretch from the southeast tip of the Yukon Territory to Manitoba. These regions present the opportunity to participate in most types of geological plays and produce all types of hydrocarbons. As one of the largest net undeveloped landholders at 1.3 million acres, Anderson provides the best exposure to long-term deliverability from this future supply basin. This is significant as the Government of Canada is not expected to sell any further substantial licenses in this area for another five to 10 years. AXL’s strong underlying reserves and mature producing units give the company the flexibility to pursue long-term objectives without having to sacrifice short-term growth. AXL’s production remains 70% levered to natural gas, with approximately 75% of its drilling budget targeting natural gas prospects. Light oil represents 62% of the liquids sales versus 14% for medium and heavy oil, which immunize AXL from the price differential problems between light and heavy oil. AXL’s gas reserve life indices are around nine years on a proven basis and around 13 years on a proven plus probable basis. The oil and NGL reserve life indices are around 12 years and 18 years on a proven plus probable basis. AXL generates its exploration prospects internally. Moreover, extensive geological, geophysical, engineering and environmental analyses are performed before committing to the drilling of new prospects. This strategy ensures a suitable balance between risk and reward. In fiscal 2001, Anderson plans to spend a total of $69 million in the Northwest Territories, which includes the Kurk well and several 3–D-seismic programs. This amount represents 8% of 2001 cap ex. Over the next several years, AXL plans to spend 8%-10% of its total annual drilling expenditures in the far north. The Geological Survey of Canada estimates 9 Tcf of total discovered gas to-date in the Mackenzie Delta/Beaufort Sea area, with an ultimate potential of 65 Tcf. On February 10, AXL announced the start of the Mackenzie Delta drilling program at the Petro-Canada (TSE:PCA.TO) operated 2,500-metre exploration test at Kurk M-15. Anderson has a 40% working interest in this well, which has a gross drilling cost of $23.6 million. In 2001, AXL expects to average approximately 800 million cubic feet per day in natural gas sales and 57,500 barrels per day in liquids sales. On a risk/reward basis, I continue to see little downside and significant upside, in a commodity price environment that is expected to remain strong.

TWST: Stephanie, how do you see it?

Mrs. Guntz Hedoin: I share Gordon’s opinion regarding the positive sentiment investors have about the energy sector. This sector isn’t one that you can buy and hold. Because the industry outlook is mainly related to macro issues, you have to trade your holdings more aggressively than you usually do in other sectors. The main risk factors for 2001 are the scale of the economic slowdown in the US and the evolution of the oil prices. I reckon that oil will average at US$25/bbl in 2001. Oil companies need to increase prospecting efforts in order to maintain satisfactory reserve/production ratios given the strong hydrocarbon production recorded over the last couple of years. Consequently, oil companies are expected to increase E&P investments in FY2001 and 2002. A too strong correction in terms of oil prices could lead to a further slowdown in crucial investments.