Despite the recent topsy-turvy events that have plagued the energy industry over the past couple of months, AEC’s board of directors said Monday that it has approved the company’s 2002 capital budget and confirmed that AEC is on course to achieve its strategic growth plans through 2004.

The Calgary-based company said it expects a total gross capital investment of approximately $2.1 billion in 2002, while divesting at least $400 million in non-core assets, resulting in net capital investment of $1.7 billion next year. AEC said that it is anticipated that a similar range of capital investment, internally funded in 2003 and 2004, will achieve its production growth targets.

“For the past seven years we’ve proven our ability to create value and grow through the drill bit and opportunistic acquisitions. Our philosophy has been to build growth upon a foundation of high-quality, world-class assets,” said Gwyn Morgan, AEC’s CEO. “This asset base is so strong that we are able to identify for shareholders continued strong per share growth through 2004. Major exploration success would only enhance this performance, as our Ladyfern discovery did this past year. Our 2004 production target of 545,000 boe/d will mark a decade of growth at a compound average rate of 21%.”

AEC said it expects daily sales in 2002 to increase by an estimated 12% per share to approximately 405,000 boe. The company said it plans to invest $880 million in these projects, which would achieve rates of return exceeding 20%, after tax, based on the current weak futures strip pricing for 2002 and beyond.

Daily natural gas sales in 2002 are expected to average between 1.525-to-1.575 Bcf, up about 15% per share from 2001. Oil production is forecast to be between 142,000 and 153,000 b/d, up about 8% per share. AEC said it has chosen to defer development of approximately 10,000 b/d of Canadian heavy oil due to the current weakness in prices.

AEC said its 2002 capital program provides for a continuation of previously announced medium-term oil growth initiatives, including $370 million in Ecuador and $240 million in Syncrude. An additional $290 million investment is planned for exploration activities in the company’s three growth platforms, Western Canada, the U.S. Rockies and Ecuador. AEC said it also plans to invest $205 million in new ventures in the Gulf of Mexico, the Mackenzie Delta, Alaska and overseas.

“AEC’s track record is one of doing the right thing at the right time,” Morgan said. “Given the continued economic and commodity price weakness, we are tempering our production growth in 2002. However, we will continue to invest in key oil development projects that are expected to create large production growth in 2003 and 2004. The natural gas story will inevitably strengthen, and AEC’s combination of high internal growth, quality reserves and a North American storage network will make us the best positioned producer to respond. We are successfully executing our growth, value, performance business strategy – sustained, visible, per share growth from existing assets with further upside potential from new ventures exploration success.”

Looking past 2002, the company said it sees an improved economic picture in 2003. AEC plans to take daily production to about 480,000 boe, up 18% per share over forecast production in 2002. Natural gas daily sales are expected to reach between 1.65-to-1.75 Bcf and oil sales are expected to rise to 188,000-to-205,000 b/d. In 2004, AEC said it plans to increase daily production to approximately 545,000 boe, up an additional 14% per share, while daily sales are expected to reach between 1.8-to-1.9 Bcf of gas and between 227,000 and 248,000 barrels of oil.

As for the company’s midstream segment in 2002, AEC said it expects to invest about $120 million to enhance current operations and position Express Pipeline, AECO gas storage facilities in Western Canada and the Wild Goose facility in California for expansion. AEC is forecasting Midstream operating cash flow of about $250 million in 2002 and $275 million in 2003.

Regarding North American projects, AEC said its assets in northwest Alberta, northeast British Columbia and the U.S. Rockies are achieving substantial increases in gas production and reserves. In the Greater Sierra in BC and the Rockies region of the United States, the company said it anticipates daily gas production will double over the next three years, reaching a combined production of 700 MMcf/d. Production from AEC’s Ladyfern discovery in northeast BC has averaged 150 MMcf/d since start-up last May. AEC said it plans to drill eight delineation and exploratory wells at Ladyfern this winter.

The company said its balance sheet has been strengthened further by the recent sale of the Jonah Gas Gathering System, and the Alberta Oil Sands Pipeline, which is expected to close on Dec. 31. Using recent transaction values for midstream assets, AEC’s Midstream assets are believed to be worth at least $2.5 billion, about 60% of the company’s total debt.

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