AEC said it has locked in fixed prices for the first nine months of 2002 on 600 MMcf/d of its gas production, or about 30% of its forecasted gas sales. In Canada, 370 MMcf/d was locked in at an average AECO equivalent price of C$3.80/Mcf, and in the U.S. Rockies, 230 MMcf/d was sold forward at an average Opal equivalent price of US$2.61/Mcf.

“Our natural gas sales are forecast to grow 15% next year, to between 1.525 Bcf/d and 1.575 Bcf/d. This price hedge on a portion of our gas sales provides cash flow insurance for our recently announced 2002 capital program,” said AEC CEO Gwyn Morgan.

Despite the recent topsy-turvy events that have plagued the energy industry over the past couple of months, AEC’s board of directors said earlier in the week that it had approved the company’s 2002 capital budget and confirmed that AEC is on course to achieve its strategic growth plans through 2004 (see Daily GPI, Dec. 18).

“One of the warmest-ever starts to winter and continued weakness in the North American economy make gas prices difficult to predict,” he noted. “This price hedge will help ensure solid financial returns in the event of further near-term price weakness. If prices improve, AEC is well positioned to capture price upside with its remaining 900 MMcf of forecast daily sales that can be sold at market prices. Also, with our 28 Bcf of AECO storage capacity dedicated to produced gas, AEC still has the flexibility to capture pricing opportunities created by pricing volatility,” Morgan said.

“We remain bullish on the medium- and long-term outlook for North American natural gas,” he added. “Over the next several months, we believe the gas market’s supply and demand fundamentals will rebalance, and that will lead to higher gas prices.”

This gas hedge complements AEC’s existing oil hedging program — 100,000 b/d sold at about US$27 per barrel — which has proven beneficial during the last four months of 2001, the company said. AEC’s 2002 oil hedge covers about 55% of forecast daily production at an average WTI floor price of about US$21 per barrel. Approximately 34% of 2002 forecast production is also subject to a WTI ceiling price of US$27.72 per barrel.

The company expects to increase total production from existing assets by more than 50% over the next three years. AEC’s daily production is expected to exceed 360,000 boe in 2001. The company also is looking to establish additional growth platforms through new exploration ventures in Alaska, the Mackenzie Delta, the Gulf of Mexico, Australia and Azerbaijan. Midstream natural gas storage and oil pipeline assets comprise approximately 20% of AEC’s asset base and provide a stable source of cash flow. Currently, AEC’s enterprise value is about $13 billion.

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