The alliance provides for proportional ownership of seven leases containing approximately 28,504 acres offshore Prudhoe Bay in the proposed McCovey unit in the Beaufort Sea. Under the agreement, AEC Oil & Gas will earn a 33.3 percent interest in the area leases through a farmout agreement in the initial well. In addition, Phillips Alaska and Chevron will each hold a 33.3 percent interest in the proposed unit.

Phillips Alaska is the exploration and development operators. The companies plan to file permits to drill the exploration prospect from an ice island this winter.

The second part of the alignment agreement includes approximately 114,262 acres in the Grizzly Gomo prospect area south of the Kuparuk oil field. AEC Oil & Gas will earn a 20 percent interest in the area and Phillips Alaska and Chevron will each hold a 40 percent interest. Prospective exploration drilling could occur in this area in the 2001-02 winter season.

Phillips Alaska is the largest Alaska oil producer (365,000 barrels per day) and the largest state and federal leaseholder in Alaska with 1.2 million acres.

Chevron U.S.A. is a non-operating interest owner in the major producing fields on the North Slope and a co-owner with other oil and gas companies in leases covering more than a million acres of exploratory land in Alaska.

AEC Oil & Gas (USA) Inc. is a subsidiary of Alberta Energy Co. Ltd., one of North America's largest independent oil and gas companies with an enterprise value of approximately C$12 billion. AEC ranks first in natural gas production in Canada and forecasts gas sales of 1.08 billion cubic feet per day and liquids sales of 125,000 barrels per day. Alberta Energy Co. is also a major gas storage developer and a pipeliner of conventional, synthetic and heavy oil in North America.