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AEC Gains Anchor in Northwest Territories

March 6, 2000
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AEC Gains Anchor in Northwest Territories

Calgary-based AEC Oil & Gas secured an anchor land position in the gas exploration fairway of the Mackenzie Delta in the Northwest Territories. The lands, which were acquired through a property swap with Husky Oil, give the partnership of AEC West Ltd. and Alberta Energy Company Ltd. rights to more than 400,000 net acres.

"While a new area for AEC, this land complements AEC's earlier initiatives into the Northwest Territories. It gives us tremendous exploration upside that ensures AEC has a significant presence in Canada's new natural gas frontier," said Randy Eresman, AEC Oil & Gas president.

The AEC lands are within the area where the Inuvialuit Regional Corp. recently announced plans to offer development concessions on more than one million acres in six blocks near Inuvik and Tuktoyaktuk where the Mackenzie River enters the Beaufort Sea.

"The timing for taking this land position is excellent, at the forefront of renewed interest in the Mackenzie Delta. Our new position is in an area where land claims have been settled and it enables us to pursue our interests in concert with Northern residents who have signaled a desire to join with energy producers in responsibly developing the resources of the North. There is also growing consensus on pipeline infrastructure, and we know the markets exist for these northern resources, all of which is integral to that development objective."

The increased ability to move western Canadian gas to U.S. markets is what makes the Mackenzie Delta an attractive play, Eresman said. "We believe that there is a fundamental change in gas pricing in North America, but also there is an excess of pipe leading out of western Canada. So that creates the opportunity to bring gas into western Canada from the Northwest Territories, and that opportunity really hasn't existed before."

Eresman cited figures that say between 5 and 10 Tcf of gas has been found in the Mackenzie Delta. He said the company believes that generally a gas price of $3/Mcf or more at Chicago is necessary to make development work. Timing to bring the gas south falls in the five- to 10-year range, he said. "We believe that the fundamentals for gas in North America, especially in western Canada, are great into the future. We see growth in markets exceeding supply, and there is evidence of that in most of the major basins around North America.

"What makes this really exciting for us is this is one of the highest reward areas that we've entered into in North America in a long time. Pool sizes here are measured in Tcf. We believe this to be a great opportunity to build the future of our company with reserve growth in that five- to 10-year period. This is a rare opportunity in North America."

Eresman said the new land position in the northern portion of the Territories complements AEC's current oil exploration program in the central Territories where the partnership has acquired rights to more than 400,000 net acres in two exploration licenses in the Sahtu region close to Norman Wells. AEC has two rigs drilling in this region and plans up to five wells this year. AEC owns 60% and Renaissance owns the remaining 40% interest.

Joe Fisher, Houston

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