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Four analysts and top management from sixteen sector firms examine the canadian energy sector in this special 74-page Canadian Energy issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info503.htm

TWST: Phil, who are the strong performers in the group?

Mr. Skolnick: In our Canadian coverage universe, the strong performers year to date have been Canadian Natural Resources (NYSE:CED) and Nexen (NYSE:NXY). Both stocks are up 18% and 15%, respectively.

TWST: Phil, what are the commonalties for the energy group? What are the macro trends and issues that these companies faced over the last 12 months?

Mr. Skolnick: One commonality for the E&P group is that commodity prices are the key drivers for the business and the stocks. That leads us to the main issue that the group has faced over the last 12 months — falling commodity prices, particularly on the natural gas side. If there is one thing that I can say we have learned over the past year with respect to natural gas prices, it is that natural gas demand is highly elastic. To illustrate this, looking back at late 2000 and early 2001, we saw historically high natural gas prices that peaked at around US10 per MMBtu. This environment provided the incentive for companies to rapidly increase drilling in an effort to add more production into the market. However, at the same time, US natural gas demand fell sharply, by as much as eight to 10 Bcf as users either switched to cheaper competing fuels or simply reduced consumption. As a result of this lost demand and increased supply, natural gas prices declined sharply and are currently trading in the US2.3 to US2.5 per MMBtu range. Today, due to the strong storage injections encountered last summer, a weak economy, the aforementioned lost demand from dual fuel and other users, and the warm winter weather that we are experiencing now, a large storage overhang exists in both Canada and the US. In Canada, the overhang is currently around 187 Bcf or 3.4% of full-year 2001 Canadian natural gas production, while in the US the overhang is around 1 Tcf, or almost 6% of annual US natural gas production. We don’t think that declining production and a recovering economy will be enough to quickly reduce storage levels back down to normal levels. We feel that lost demand from dual fuel users needs to be recaptured as well, and this could require natural gas prices to remain below the US2.5 per MMBtu level for a while.

TWST: Phil, what are your favorite names in the group today?

Mr. Skolnick: We have the same top picks as May, Canadian Natural Resources and Talisman Energy. We believe Canadian Natural Resources is the best kept secret in the Oil Patch. The company has generated top-tier results in every measurement when compared to its North American peers, yet the shares trade at roughly a 25% discount to group average multiples. While part of this could be due to its heavy oil asset base, which accounts for 25% of estimated 2002 production, it can also be attributed to its very low non-Canadian ownership, which accounts for only 12% of shares outstanding. The company recently initiated an IR effort, which includes regular client visits throughout the US and Europe. As the company continues with its aggressive marketing schedule, we believe the shares should enjoy multiple expansion.

This special issue includes:

1) Canadian Energy - In an in-depth (9,400 words) Analyst Roundtable, May Shen Chiliton, Vice President of Oil and Gas Equity Research at J.P. Morgan Chase, Gordon Currie, Oil and Gas Analyst at Canaccord Capital Corporation, Matt Janisch, Managing Director, Head of North American Energy Research at BMO Nesbitt Burns, Inc. and Philip R. Skolnick, Equity Research Analyst at Lehman Brothers, examine the outlook for the sector including investment approach, future outlook and share specific stock recommendations.

2) The TWST confidential Off-The-Record survey of management performance of twelve sector firms asked market insiders about the ability of management teams to create shareholder value.

3) CEO interviews (average 2,500 words). Top management of sixteen sector firms examine the outlook for their firm and the sector.