As filed with the Securities and Exchange Commission on September 25, 2000
                                                    Registration No. 333-_______
________________________________________________________________________________

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                           ---------------------------
                                    FORM S-1
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                           ---------------------------

                         CANADA SOUTHERN PETROLEUM LTD.
             (Exact Name of Registrant as Specified in its Charter)

         NOVA SCOTIA, CANADA            1330                     98-0085412
         -------------------            ----                     ----------
(State or other Jurisdiction of (Primary Standard Industrial  (I.R.S. Employer
 Incorporation or Organization)   Classification Number)  Identification Number)

             Suite 505, 706 Seventh Avenue, S.W., Calgary, Alberta,
                         Canada T2P 0Z1, (403) 269-7741
 -------------------------------------------------------------------------------
    (Address, including Zip Code, and Telephone Number, including Area Code,
                  of Registrant's Principal Executive Offices)

                                    Copy to:
                                Timothy L. Largay
                               Murtha Cullina LLP
                   CityPlace I, 185 Asylum Street, 29th Floor
                        Hartford, Connecticut 06103-3469
                                 (860) 240-6017

            (Name, Address, including Zip Code, and Telephone Number,
                   including Area Code, of Agent for Service)
                           ---------------------------
Approximate date of the start of proposed sale to the public:  As soon after the
effective date as practicable.

If any of the  securities  being  registered on this Form are to be offered on a
delayed or continuous  basis  pursuant to Rule 415 under the  Securities  Act of
1933 check the following box. [X]

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the  Securities  Act  registration  statement  number of the  earlier  effective
registration statement for the same offering. [ ]

If this Form is a  post-effective  amendment filed pursuant to Rule 462(c) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registrations  statement number of the earlier effective  registration statement
for the same offering. [ ]

If this Form is a  post-effective  amendment filed pursuant to Rule 462(d) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. [ ]

If delivery  of the  prospectus  is  expected  to be made  pursuant to Rule 434,
please check the following box. [ ]
<TABLE>

                         CALCULATION OF REGISTRATION FEE

---------------------------------------------- ---------------- ----------------- ----------------- -----------------
   Title of each class of securities to be      Amount to be        Proposed          Proposed         Amount of
                 registered                      registered         maximum           maximum       registration fee
                                                                 offering price      aggregate
                                                                   per share       offering price
---------------------------------------------- ---------------- ----------------- ----------------- -----------------
Limited Voting Shares, par value $1 Canadian
<S>                                             <C>                <C>             <C>                 <C>
per share                                       3,000,000(1)       $ 5.00(1)       $15,000,000(1)      $3,960.00
Rights to Purchase Limited Voting Shares        3,000,000            $0.00            $0.00                $0.00
---------------------------------------------- ---------------- ----------------- ----------------- -----------------
</TABLE>

(1) Estimated in accordance  with Rule 457(c) under the  Securities Act of 1933,
solely for the purpose of calculating the registration fee.

The registrant amends this  registration  statement on such date or dates as may
be  necessary  to delay its  effective  date until the  registrant  shall file a
further amendment which  specifically  states that this  registration  statement
shall  thereafter  become  effective  in  accordance  with  Section  8(a) of the
Securities  Act of  1933  or  until  the  registration  statement  shall  become
effective on the date as the  Commission,  acting pursuant to said Section 8(a),
may determine.


<PAGE>


The  information in this  prospectus is not complete and may be changed.  These
securities  may not be sold  until the  registration  statement  filed  with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell nor does it seek an offer to buy these  securities  in any  jurisdiction
where the offer or sale is not permitted.

                                   PROSPECTUS

                     [______________] LIMITED VOTING SHARES

              [_________] RIGHTS TO PURCHASE LIMITED VOTING SHARES

                         Canada Southern Petroleum Ltd.

         This prospectus relates to the sale by us of a total of [______] of our
limited voting shares by subscription right to our existing shareholders.  See "
Description of our Limited Voting Shares" at page __.

         For every one (1) share held as of _______, 2000, each shareholder will
receive  one  transferable  right.  For  every  ___  transferable  rights,  each
shareholder will be entitled to purchase from us one (1) limited voting share at
a price of $ [____] Canadian or $ [__] U.S. dollars per share. In addition, each
shareholder  who  purchases  his/her  full  allotment  of shares is  entitled to
purchase additional shares which are unsubscribed by other shareholders.
                                                  Per Share            Total
Price to shareholders                            $_________         $_________
Proceeds, before expenses, to us                 $_________         $_________

Our shares are traded on The Toronto Stock  Exchange,  the Boston Stock Exchange
and the Pacific  Exchange,  Inc.  (symbol CSW) and in the NASDAQ SmallCap Market
(symbol  CSPLF).  On  __________  __, 2000,  the last reported sale price of our
common stock as reported on The Toronto Stock  Exchange was Can. $____ per share
and U.S. $ per share on the NASDAQ SmallCap Market.

         The shares  offered  hereby  involve a high degree of risk.  You should
purchase  shares  only if you can afford a  complete  loss.  See "Risk  Factors"
beginning on page 7 for a discussion of certain factors that you should consider
before you purchase any of our shares.

         Neither  the  Securities  and  Exchange  Commission  nor any  state  or
provincial securities commission has approved or disapproved of these securities
or determined if this prospectus is truthful or complete.  Any representation to
the contrary is a criminal offense.

            The date of this prospectus is __________________, 2000.


<PAGE>


                                TABLE OF CONTENTS
                                                                           PAGE

Prospectus Summary............................................................3
Selected Financial Data.......................................................5
About Canada Southern Petroleum Ltd...........................................6
Risk Factors..................................................................7
Cautionary Statement about Forward-Looking Statements........................12
Management's Discussion and Analysis of Financial
Condition And Results of Operations..........................................13
Use of Proceeds..............................................................23
Dilution.....................................................................23
Terms of Offering and Selling Arrangements...................................24
United States Tax Consequences of the Offering...............................26
Canadian Tax Consequences of the Offering....................................27
Capitalization...............................................................30
Market Information...........................................................31
Performance Graph............................................................33
Our Business.................................................................34
Properties...................................................................41
Legal Proceedings............................................................48
Our Management...............................................................51
Principal Stockholders.......................................................55
Certain Business Relationships...............................................56
Description of Our Limited Voting Shares.....................................56
Legal Matters................................................................57
Experts......................................................................57
Where You Can Find More Information..........................................58
Index to Consolidated Financial Statements..................................F-1
Supplemental Information on Oil and Gas Activities.........................F-21



<PAGE>


                               PROSPECTUS SUMMARY

This summary highlights some of the information in this prospectus.  The summary
may not contain all of the information that is important to you. This prospectus
and the documents we incorporate by reference contain forward-looking statements
which  involve risks and  uncertainties.  You should  carefully  read the entire
prospectus,  including  the risk factors which begin on page 7 and the financial
statements  which begin at page F-2,  before  deciding  whether to invest in our
shares.

The Company      o   We are a Nova Scotia company engaged in the exploration for
                     and development of oil and gas reserves,  primarily in
                     Canada.  Our principal  asset is our 30% carried  interest
                     in the  Kotaneelee  gas field in the Yukon  territory
                     which has been the subject of  prolonged  and costly
                     litigation  against a number of defendants.  Our producing
                     properties  are located  primarily in British  Columbia
                     and Alberta.  We also have interests in exploratory
                     ventures on properties located in the Northwest Territories
                     and the Arctic Islands.


Our Operating    o   We  have  been  engaged  in the oil and  gas  exploration
History              and  development business  since  1954.  We  incurred a net
                     loss of $1,790,000 for the six months ended June 30, 2000,
                     a net loss of  $3,001,000  for the year 1999, a net loss of
                     $2,328,000 for the year 1998 and a net loss of $1,588,000
                     for the year 1997. We had a deficit of $ 27,332,000 at June
                     30, 2000.


The Offering     o   [       ] limited voting shares, par value $1.00 Canadian
                     per share.


Subscription     o   Each shareholder will receive one right for every one (1)
Privilege            share held on the record date.  For every  ___rights,  each
                     shareholder  will be entitled to purchase  one (1) limited
                     voting share from us at a price of $[____] Canadian or
                     $[____] U.S. dollars per share.


Transferability  o   You should complete Form ___ of the Rights Certificate if
of Rights            you wish to transfer your Rights to a third party. The
                     Rights will not be listed on any U.S. national securities
                     exchange and will not be admitted for quotation in any
                     automated, inter-dealer quotation system, but may be traded
                     on whatever market may develop for them, if any.  The
                     Rights are listed on The Toronto Stock Exchange.


Record Date      o   _____________, 2000.


Expiration Date  o   Rights  must be  exercised  prior to 4:30 PM,  Eastern
                     Standard  Time,  on _______, 2000. All rights unexercised
                     at such time will become void.


Oversubscription o   Each shareholder who purchases the entire  guaranteed
Privilege            subscription amount will be permitted to subscribe pro rata
                     for additional shares not purchased by other shareholders
                     prior to the expiration date.


How to Exercise  o   If you wish to purchase shares, you should complete Form 1
                     on the Rights Certificate and deliver it, accompanied by
                     full payment of the purchase price,  prior to the
                     expiration date to either one of our subscription agents.


Agent in Canada  o   Montreal Trust Company, 15 King Street West, Toronto,
                     Ontario, Canada, M5H 1B4, telephone (416) 860-5555.


Agent in United  o   American Stock Transfer & Trust Co., 40 Wall Street,
States               46th Floor, New York, NY 10005, Telephone: (800) 937-5449.


Limited Voting   o   14,284,940 limited voting shares were outstanding at
Shares               September 20, 2000. If all shares offered are sold, there
Outstanding          will be [________] shares outstanding.


Dividends        o   We have never paid a dividend and we do not intend to pay a
                     dividend until our deficit ($27,332,000 at June 30, 2000)
                     is eliminated.


Use of Proceeds  o   The proceeds of the offering will be used for general
                     corporate purposes, including working capital, exploration
                     and development and to continue the Kotaneelee litigation.


Litigation       o   We are currently involved in litigation regarding our 30%
                     carried interest against the operator and working  interest
                     partners of the Kotaneelee gas field. We contend that the
                     defendants failed to meet their obligations to market gas
                     from the field.  We also contend that the defendants have
                     improperly charged certain expenses to our carried interest
                     account.  The trial, which commenced in 1996, has been
                     lengthy, complex and costly. We do not expect a  decision
                     in the litigation before 2001.  We are unable to determine
                     whether we will prevail in the litigation, or whether an
                     award of costs,  assessable against a non-prevailing party
                     under Canadian law, will be assessed against us.



<PAGE>


                             SELECTED FINANCIAL DATA

         The following selected consolidated financial information (in thousands
except per share and  exchange  rate data)  insofar as it relates to each of the
fiscal  periods  shown  has  been  extracted  from  our  consolidated  financial
statements.  Financial  data for the years  prior to 1999 have been  restated to
reflect a change from the deferral  method of tax  allocation  accounting to the
liability method of accounting for income taxes. (See Note 1 to the Consolidated
Financial  Statements,  at page F-9). The  information for the six month periods
ended June 30, 2000 and 1999 is unaudited  but includes  all  adjustments  which
Canada Southern  considers  necessary for a fair  presentation of the results of
operations for those periods.

<TABLE>

                                      Six months
                                     ended June 30,                                 Year ended December 31,
                                 ____________________          ______________________________________________________________

                                 2000            1999          1999         1998          1997          1996          1995
                                 ----            ----          ----         ----          ----          ----          ----
                                  ($)            ($)           ($)          ($)           ($)            ($)           ($)
                               (Unaudited)   (Unaudited)                 (Restated)    (Restated)    (Restated)    (Restated)

<S>                                 <C>             <C>         <C>         <C>           <C>            <C>          <C>
Operating revenues                  602             220         777         1,810         2,120          1,755        1,657
                                    ===             ===         ===         =====         =====          =====        =====

Total revenues                      683             365       1,030         3,409         2,515          2,228        1,793
                                    ===             ===       =====         =====         =====          =====        =====

Net loss                         (1,790)         (1,784)     (3,001)       (2,328)       (1,588)        (1,236)      (1,001)
                                 =======         =======     =======       =======       =======        =======      =======

Net loss per share                 (.13)           (.13)       (.21)         (.16)         (.11)          (.09)        (.08)
                                   =====           =====       =====         =====         =====          =====        =====

Working capital                    2,412           4,758       3,629         6,876         5,573          8,403        1,510
                                   =====           =====       =====         =====         =====          =====        =====

Total assets                      14,302          15,799      16,073        18,854        22,772         22,021       13,801
                                  ======          ======      ======        ======        ======         ======       ======

Shareholders' Equity:
     Capital stock                40,787          40,787      40,787        40,489        40,489         38,888       29,635
     Deficit                    (27,332)        (24,324)    (25,542)      (22,540)      (18,625)       (17,037)     (15,801)
                                --------        --------    --------      --------      --------       --------     --------
                                  13,455          16,463      15,245        17,949        21,864         21,851       13,834
                                  ======          ======      ======        ======        ======         ======       ======
Average number of
shares outstanding                14,285          14,234      14,253        14,253        14,084         13,362       12,622
                                  ======          ======      ======        ======        ======         ======       ======
Exchange rates:
     Period-end                    .6759           .6789       .6924         .6535         .6992          .7297        .7300
                                   =====           =====       =====         =====         =====          =====        =====

Average for the period             .6821           .6704       .6733         .6749         .7224          .7335        .7289
                                   =====           =====       =====         =====         =====          =====        =====

     Range                       .66-.70         .66-.69     .67-.69       .63-.67       .69-.75        .72-.75      .70-.75
                                 =======         =======     =======       =======       =======        =======      =======
</TABLE>


<PAGE>


                      About Canada Southern Petroleum Ltd.

         We  are a Nova  Scotia  company  engaged  in the  exploration  for  and
development  of oil and gas reserves,  primarily in Canada.  We were  originally
incorporated  in 1954  under the Canada  Corporations  Act.  In 1979,  we became
subject to the Canadian Business  Corporations Act and, in 1980, continued under
the Nova Scotia Companies Act.

         We  are  engaged,  directly  or  indirectly,  in  the  exploration  and
development of properties  containing or believed to contain recoverable oil and
gas reserves and the sale of oil and gas from these  properties.  Our  principal
asset is a 30% carried interest in the Kotaneelee  field, a partially  developed
field, producing gas (See "Our Business" and "Properties"). Substantially all of
our  assets  are  in  Canada.  Our  interests  in  exploratory  ventures  are on
properties  located in Alberta,  British Columbia,  Saskatchewan,  the Northwest
Territories,  the Yukon Territory and the Arctic Islands in Canada. We also have
producing properties in the Yukon Territory, British Columbia and Alberta.

         Our principal executive offices are located at Suite 505, 706 - Seventh
Avenue S.W.,  Calgary,  Alberta,  Canada T2P 0Z1. Our  telephone  number at that
address is (403) 269-7741. Our internet web address is http: //www.cansopet.com.
The  contents of our web site are not  incorporated  into this  prospectus.  Our
limited  voting  shares are traded on the Boston  Stock  Exchange,  the  Pacific
Exchange and The Toronto Stock  Exchange  under the symbol CSW and in the NASDAQ
SmallCap  Market under the symbol CSPLF.  We have two full time  employees,  one
part-time employee and rely heavily on outside consultants for technical, legal,
accounting and administrative services.

         In this prospectus,  "Canada  Southern," "we," "us," and "our" refer to
Canada  Southern  Petroleum  Ltd.  and  its  subsidiaries,  unless  the  context
otherwise  dictates.   Unless  otherwise  indicated,   all  references  in  this
prospectus  to "dollars" or "$" are to Canadian  dollars.  The exchange  rate on
____________,  2000 as reported by the Wall  Street  Journal was $1.00  Canadian
equals U.S. $----.




<PAGE>


                                  RISK FACTORS

         An  investment in our limited  voting shares  involves a high degree of
risk.  You should  carefully  consider  the  following  risk  factors  and other
information in this  prospectus and the documents we incorporate by reference in
evaluating  our company  before you purchase any shares of our common stock.  If
any of the following risks actually occur, our business,  financial condition or
results of operations could be materially adversely affected.  In this case, the
trading  price of our shares could  decline and you may lose all or part of your
investment.

RISKS RELATED TO OUR BUSINESS
         We have a deficit and anticipate further losses, which could jeopardize
         our business.

         We have been  engaged in the oil and gas  exploration  and  development
business  since  1954 and have a deficit of  $27,332,000  at June 30,  2000.  We
incurred a net loss of $1,790,000  for the six months ended June 30, 2000, a net
loss of $3,001,000 for the year 1999, a net loss of $2,328,000 for the year 1998
and a net loss of  $1,588,000  for the year  1997.  We  cannot  assure  you that
hereafter we will be able to achieve or sustain revenue growth, profitability or
positive cash flow. If we are unable to achieve or sustain profitability, we may
not be  financially  viable in the  future and may have to  curtail,  suspend or
cease operations.

         Our  principal  asset has been the  subject  of costly  and  protracted
         litigation. If we do not prevail in the litigation,  our business could
         suffer significant harm.

         Our principal  asset is a 30% carried  interest in the  Kotaneelee  gas
field  (located in the Yukon  Territory,  Canada)  which has been the subject of
prolonged and costly  litigation  which  commenced in 1990. We cannot assure you
that  we will  be  successful  on the  merits  of our  claims  which  have  been
vigorously  defended by the working  interest  partners  in the  Kotaneelee  gas
field.  If we do not  prevail  on our  claims,  we will not  receive an award of
damages.

         Even if we are awarded damages against the defendants, we cannot assure
you that the court  will  apply a measure  of  damages  that we claim  should be
applied.  In such a case,  the recovery on our claims may not be  sufficient  to
cover our costs of  prosecuting  the  litigation.  The market price of our stock
could be significantly  affected by any adverse  judgment in the litigation.  In
addition,  our stock  price  could be  adversely  affected  if we are  awarded a
judgment in the litigation in an amount below our claimed damages amount.

         If we do not prevail in the Kotaneelee  litigation,  we could be forced
         to pay some or all of the defendants' litigation costs.

         Under Canadian law,  certain costs of litigation  are assessed  against
the losing party.  These costs consist  primarily of attorney and expert witness
fees incurred  during the action which has been ongoing for  approximately  four
years.  If the court  determines  to assess  the  defendants'  litigation  costs
against us, we may be required to sell company assets or raise  additional funds
through the  issuance of debt or equity  securities  to fund the award of costs,
which  could be  substantial.  We can give no  assurances  that in such event we
would be able to sell assets at other than distress  prices or raise  additional
funds on favorable terms.

         Even if we prevail in the  Kotaneelee  litigation  at trial,  we expect
         that the defendants will appeal.

         If we are awarded a judgment in the Kotaneelee  litigation,  we expect
that the defendants  will appeal.  The appeal period is estimated to be at least
one year and could result in any judgment in our favor being reversed.

         Our  limited  cash  and  cash  equivalents  could  be  depleted  by our
         operating and  litigation  expenses which could cause us to discontinue
         our efforts to enforce our contractual rights through litigation.

         At June  30,  2000 we had  cash and  cash  equivalents  and  marketable
securities  of  $2,477,000.  We incurred  net losses of  $1,790,000  for the six
months  ended  June 30,  2000,  a net  loss of  $3,001,000  for the  year  1999,
$2,328,000  for the year 1998 and a net loss of  $1,588,000  for the year  1997,
primarily  as a  result  of  substantial  litigation  expenses.  If  our  losses
continue,  we may have insufficient funds to continue our efforts to enforce our
contractual rights in the Kotaneelee litigation.

         The  Kotaneelee  litigation  continues to be a costly cash drain on our
operations.  During the years 1997 to 1999, we expended approximately $6,364,000
on legal expenses  incurred  primarily in the Kotaneelee  litigation.  Our other
general and administrative  expenses and rent have totaled $3,805,000 during the
same three year period. Although the Kotaneelee gas field reached pay out status
in November  1999,  the  defendants  have refused to pay us our share of the net
revenues from the field. We currently estimate that we will continue to spend at
least $4,000,000 annually on such operating and litigation expenses.

         If we  continue  to  incur  operating  and  litigation  expenses  which
         significantly exceed our revenues,  we may never achieve  profitability
         and may be forced to curtail, suspend or cease operations.

         Based on our ongoing litigation and operating expenses, we will need to
generate significant revenues in the future to achieve profitability.  We cannot
assure you that we will be able to achieve or sustain revenues, profitability or
positive cash flow on either a quarterly or annual basis or that  profitability,
if achieved,  will be  sustained.  Continuing  losses and our current  financial
condition could also adversely impact our ability to obtain future financing and
may force us to curtail, suspend or cease operations.

         We may never receive any share of the net revenues from the  Kotaneelee
         gas field.

         The  operator  of the  Kotaneelee  gas  field has  advised  us that the
carried interest account reached pay out status in November 1999. However, Amoco
Canada claims that there should be a processing fee on the gas produced and that
the carried  interest account balance as of December 31, 1999 was $58,711,000 or
$19,235,000 depending on inclusion of interest. None of the defendants is paying
us our  share of net  revenues  from the  field and they may never pay us in the
future if the Court  determines  that the processing fee claimed by Amoco Canada
is appropriate.

         Further  development  of the Kotaneelee gas field may be impeded by the
         working interest partners.

         We believe that the Kotaneelee  gas field should be further  developed.
The  cooperation of the working  interest  partners may be necessary for further
development to take place.  Based upon our experience with the working  interest
partners in the  Kotaneelee  litigation,  we do not  believe  that they would be
cooperative in any further development efforts. If the working interest partners
fail to further  develop the  resources  which we believe are  contained  in the
Kotaneelee  gas field,  we may never receive any revenues that might result from
such further  development of the field.  We have filed a lawsuit in the Court of
Queen's Bench of Alberta,  Canada against the working interest  partners seeking
damages  for their  failure  to  develop  the  field  beyond  the two  currently
producing wells.

         Despite recent  encouraging  market trends,  our Canadian Arctic Island
         properties may never generate any significant revenues.

         We continue to retain our  interest in more than  175,000  acres of the
Canadian Arctic Islands which have not, to date,  generated any revenues.  Major
gas  operators  and  industry  investors  have  recently  indicated  interest in
exploring the Canadian Arctic Islands region to develop  additional gas reserves
and productive  capacity.  If the major operators do not explore and develop the
natural  gas  fields of the  Canadian  Arctic  Island  region,  or are unable to
develop gas reserves from such properties in commercially viable amounts, we may
never receive any significant revenues from our interests in these properties.

RISKS RELATED TO OUR INDUSTRY

         We face strong  competition from larger oil and gas companies which may
         negatively affect our ability to continue our operations.

         We operate in the highly  competitive areas of oil and gas exploration,
development  and  production.  Our  competitors  include  major  integrated  oil
companies,   substantial  independent  energy  companies,  affiliates  of  major
interstate and intrastate  pipelines and national and local gas gatherers,  many
of which possess  greater  financial and other  resources  than we do. If we are
unable to compete  successfully,  we may face increased  losses and be forced to
curtail, suspend or cease operations.

         We cannot  assure  you that we will be able to compete  with,  or enter
into cooperative  relationships  with, any such firms.  Factors which affect our
ability to successfully compete in the marketplace include:

       o  the financial resources of our competitors;

       o  the availability of alternate fuel sources; and

       o  the costs related to the extraction and transportation of oil and gas.

         In addition,  our  ability  to  exploit  an oil or  gas  discovery  is
dependent upon  considerations such as the ability to finance development costs,
the  availability  of equipment,  and engineering  and  construction  delays and
difficulties. Because the majority of our interests are located in remote areas,
transportation of oil and gas is difficult and costly. Furthermore,  competitive
conditions may be substantially  affected by various forms of energy legislation
that may be considered in the United States and Canada.  However,  we are unable
to predict the nature of any such legislation which may ultimately be adopted or
its effects upon our future operations.

         Any  violations by us of existing  environmental  laws and  regulations
         could be costly and could negatively impact our business.

         The  Canadian  oil  and  gas   industry  is   continually   subject  to
environmental  regulation pursuant to local, provincial and federal legislation.
A breach of such legislation may result in the imposition of fines or penalties.
If any such fines or penalties are assessed  against us or the working  interest
partners on properties in which we hold an interest,  our losses could  increase
and our business could be harmed.

         Environmental  laws  and  regulations   provide  for  restrictions  and
prohibitions on spills,  releases or emissions of various substances produced in
association   with  certain  oil  and  natural  gas  industry   operations.   An
environmental  assessment  and  review  may  be  required  prior  to  initiating
exploration  or  development  projects  or  undertaking  significant  changes to
existing  projects.  In addition,  legislation  requires  that well and facility
sites  be  abandoned  and  reclaimed  to the  satisfaction  of  the  appropriate
authorities.  Federal  environmental  regulations  also  apply  to the  use  and
transport of certain restricted and prohibited substances.  We cannot assure you
that we can avoid being  assessed  any costs or  penalties on account of any (1)
spills, releases or emissions, (2) assessment reviews, (3) necessary abandonment
or reclamation  efforts or (4) problems associated with the use and transport of
restricted or prohibited substances.

         If the  current  deregulatory  trend in Canada does not  continue,  our
         losses could increase.

         The  Canadian   federal   government   over  the  past  few  years  has
substantially deregulated the Canadian gas and oil industry.  Although the trend
seems likely to continue,  no assurance can be given that such will be the case,
and the Canadian federal government could increase regulation of our oil and gas
industry at any time.  If the Canadian  government  increases  regulation of our
business,  our  costs may be  increased  and our  prospects  of  generating  any
significant revenues may be significantly harmed.

         All  of our  operations  are  conducted  in  Canada,  and  most  of our
         shareholders   are   residents   outside  of  Canada   which   subjects
         shareholders  to risks  attendant to  operations  outside of the United
         States.

         The properties in which we have interests are located in Canada and are
subject to certain  risks  involved in the  ownership  and  development  of such
foreign  property  interests.  Thus, an  investment in our shares  represents an
exposure  to risks  in  addition  to those  inherent  in  petroleum  exploratory
ventures.  If any of theses risks occur, we could suffer losses and be forced to
curtail, suspend or cease our operations. These risks include:

       o   nationalization or expropriation of our assets by the Canadian
           federal or provincial governments;

       o   confiscatory taxation;

       o   the assertion of land ownership or use rights relating to properties
           in which we have an interest;

       o   changes in foreign exchange controls applicable in Canada;

       o   currency fluctuations;

       o   burdensome royalty terms imposed by the Canadian federal or
           provincial governments;

       o   export sales restrictions imposed by the Canadian federal or
           provincial governments;

       o   limitations on the transfer of interests in exploration licenses; and

       o   and other  laws and  regulations  which may  adversely  affect our
           properties,  such as those  providing for  conversion,  proration,
           curtailment,  cessation  or other forms of limited or  controlling
           production of, or exploration for, hydrocarbons.

RISKS RELATED TO THE OFFERING

         If you are unable to bring actions under the federal  securities  laws
         of the United States  against our  directors,  officers and experts who
         are not  citizens or  residents  of the United  States,  you may suffer
         losses which you may not be able to recover.

         We are incorporated  under the laws of Nova Scotia and our officers and
two of our  directors are residents of Canada and are not citizens of the United
States. In addition, our petroleum engineers named under "Experts" are residents
of Canada and not of the United States. As a result, it may be difficult for our
U.S. shareholders to effect service of process on those directors,  officers, or
experts  within  the  United  States  or to  enforce  against  those  directors,
officers,   or  experts  judgments  of  U.S.  courts  predicated  on  the  civil
liabilities  provided  to  investors  under the  Securities  Act of 1933 and the
Securities Exchange Act of 1934.

         We have been advised by the law firm of Blake, Cassels & Graydon LLP of
Toronto,  Canada  that there is no  assurance  that the  courts in Canada  would
enforce civil liabilities,  whether in original actions in Canada or in the form
of final judgments of U.S. courts,  arising under the federal securities laws of
the  United  States.  against  us us or the  persons  signing  the  registration
statement, or the experts.

         Our shares carry limited  voting rights.  As a result,  if you own more
         than 1,000  shares you will not be  entitled  to a vote that equals the
         economic interest of your investment.

         Article 8 of our Articles of  Continuance  provides that no person,  as
defined,  shall vote more than 1,000 shares of our limited voting  shares.  As a
consequence,  an owner of a substantial  number of our limited  voting shares is
unable to materially influence our policies through shareholder votes. The 1,000
share voting limitation also may make it less likely a takeover not supported by
management could occur.

         Our dividend policy could depress our stock price.

          We have never  declared or paid dividends on our limited voting shares
We do not intend to pay  dividends  until our deficit  ($27,332,000  at June 30,
2000) is eliminated.  As a result,  our dividend policy could depress the market
price for our  common  stock and  cause  investors  to lose some or all of their
investment. We plan to retain any future earnings to reduce our deficit

         You will  experience an immediate  dilution in net book value per share
         after this offering.

         By purchasing  limited  voting shares offered by this  prospectus,  you
will experience an immediate dilution in net book value per share of $[____] per
share on your purchase price of $[____] per share.  This is because the tangible
net book  value per share  prior to the  offering  is $.[__]  per share and this
amount will be  increased  to only  $[____] per share  after the  offering.  See
"Dilution" at page __.

                           CAUTIONARY STATEMENT ABOUT
                           FORWARD-LOOKING STATEMENTS

         In this  prospectus and the documents that we incorporate by reference,
we make statements that relate to our future plans, objectives, expectations and
intentions that involve risks and uncertainties.  We have based these statements
on  our  current   expectations  and  projections  about  future  events.  These
statements may be identified by the use of words such as "expect," "anticipate,"
"intend,"  "plan,"  "believe"  and  "estimate"  and  similar  expressions.   Any
statements that refer to expectations, projections or other characterizations of
future events or circumstances are forward-looking statements within the meaning
of the Private Securities  Litigation Reform Act of 1995, and are subject to the
safe harbor created by that Act.

         Forward-looking statements necessarily involve risks and uncertainties.
Our actual results could differ  materially  from those discussed in, or implied
by, these  forward-looking  statements.  Factors that could  contribute  to such
differences  include,  but are not  limited  to,  those  discussed  in the "Risk
Factors"  section  beginning  at page 7 and  elsewhere in this  prospectus.  The
factors set forth in the Risk Factors  section and other  cautionary  statements
made in this prospectus should be read and understood as being applicable to all
related forward-looking statements wherever they appear in this prospectus.

         All subsequent written and oral forward-looking statements attributable
to us are expressly  qualified in their entirety by the  cautionary  statements.
You  are  cautioned  not  to  place  undue  reliance  on  these  forward-looking
statements,  which speak only as of their dates.  We undertake no obligations to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.


                Management's Discussion and Analysis of Financial
                       Condition And Results of Operations

Liquidity and Capital Resources

         At June 30,  2000,  we had  approximately  $2,477,000  of cash and cash
equivalents  and  marketable  securities on hand. Of this amount,  approximately
$875,000 are held in U.S.  marketable  securities  which are subject to exchange
fluctuations.  These  funds  are  expected  to be  used  for  general  corporate
purposes,  including  exploration and development and to continue the Kotaneelee
field  litigation.  We estimate that we currently have adequate  working capital
for the year 2000. However, we may be required to raise additional funds through
the sale of  properties  or other  means in  order to  complete  the  Kotaneelee
litigation.

         Net cash used in  operations  during the six months ended June 30, 2000
decreased  by $396,000  compared  to the six months  ended June 30, 1999 and net
cash used in operations  during the year 1999 increased by $379,000  compared to
the year 1998. The differences  between the periods was caused  primarily by the
following:
<TABLE>

                                                                 Six months ended        Year ended
                                                                  June 30, 2000      December 31, 1999
                                                                 ----------------    -----------------
<S>                                                                 <C>                 <C>
Decrease (Increase) in loss from operations                         $ 360,000           $ (125,000)
Changes in accounts receivable and other                              (11,000)            (965,000)
Net change in current liabilities                                      47,000              711,000
                                                                      -------              -------
Decrease (Increase) in net cash used in operations                  $ 396,000           $ (379,000)
                                                                    =========           ===========
</TABLE>

         In  December  1999,  the  Company  filed a motion  to have the Court of
Queen's  Bench  direct the operator of the  Kotaneelee  gas field to make timely
payments of all current and future  amounts due from its share of the Kotaneelee
gas field revenues.  The motion was  subsequently  amended to include all of the
defendants.  On April 10, 2000, the trial court  dismissed the Company's  motion
pending  the  Court's  ultimate  determination  of the  issues  surrounding  the
Kotaneelee  field  carried-interest  account.  The Company has filed a notice of
appeal of the dismissal with the Alberta Court of Appeal.

         In view of the trial  court's  dismissal of the Company's  motion,  the
Company  will not  accrue  any  revenues  from the  Kotaneelee  gas field  until
collection of the amounts due is reasonably assured.

         Since  March  2000,  the  operator  of the  Kotaneelee  field  has been
reporting the amount of the Company's  share of net revenues being  deposited in
escrow. The September 2000 report provided information for production during the
month of June 2000.  Based on the reported data, the Company  believes the total
amount due the Company is $5,526,365 of which  $1,832,335  has been deposited in
escrow. None of these amounts have been recognized as revenue by the Company.

         A  significant  proportion  of our  property  interests  are covered by
carried  interest  agreements,  which  provide  that  expenditures  made  by the
operator are recouped  solely out of revenues  from  production.  Major  capital
expenditures  made by the  operators  have  an  impact  on our  cash  flow  from
operations as no revenues are reported or received  until the capital costs have
been recovered by the operator.  The Kotaneelee gas field and certain properties
in the Fort St. John,  British Columbia area in which we have carried  interests
have reached pay out status.  Proceeds from these carried interests plus oil and
gas royalties are our major sources of working capital.

         We are currently  evaluating and expect to continue to evaluate oil and
gas properties and may make  investments  in such  properties  utilizing cash on
hand. We anticipate  that our capital  expenditures  for land  acquisitions  and
drilling  for the year  2000  will be  approximately  $600,000  ($246,000  spent
through  June 30,  2000).  In  addition,  substantial  continuing  expenses  are
expected to be incurred in connection  with the  Kotaneelee  litigation.  During
1999, we expended  approximately  $2.1 million in connection with the Kotaneelee
litigation which has been the principal cause of our losses since 1991.

         We have  established a provision for our potential share of future site
restoration  costs which totaled $146,000 at June 30, 2000. The estimated amount
of these costs at June 30, 2000,  which total  $147,000,  is being provided on a
unit of production  basis in accordance  with existing  legislation and industry
practice.

 Results of Operations

         Accounting policy changes

         In  1999,  under  new  recommendations  of the  Canadian  Institute  of
Chartered  Accountants,   we  retroactively  adopted  the  liability  method  of
accounting for income taxes.  Under this method,  we record income taxes to give
effect to temporary differences between the carrying amount and the tax basis of
our assets and liabilities.  Temporary differences arise when the realization of
an asset or the settlement of a liability  would give rise to either an increase
or decrease in our income  taxes  payable for the year or later  period.  Future
income taxes are  recorded at the enacted  income tax rates that are expected to
apply  when the  future  tax  liability  is  settled  or the future tax asset is
realized.  Income tax  expense is the tax  payable for the period and the change
during the period in future  income tax and  liabilities.  The  adoption of this
standard has resulted in the recognition of future tax assets and a reduction of
the  deficit at December  31,  1999 of  $1,583,475  (1998 -  $1,308,505;  1997 -
$930,138) and a reduction in the net loss for 1999 of $274,970 (1998 - $378,367;
1997 - $170,158). This new standard is consistent with the accounting principles
generally accepted in the United States.


<PAGE>


Six month period ended June 30, 2000 vs. June 30, 1999

         The net  loss  for  the six  month  period  ended  June  30,  2000  was
$1,790,143  ($.13 per  share)  compared  to a net loss of  $1,783,598  ($.13 per
share) for the 1999 period. A summary of revenue and expenses during the periods
is as follows:
<TABLE>
                                                       2000                         1999                   Net Change
                                                       ----                         ----                   ----------
<S>                                               <C>                          <C>                          <C>
Revenues                                          $ 683,462                    $ 364,826                    $ 318,636
Costs and expenses                              (2,716,130)                  (2,221,620)                    (494,510)
Income tax recovery                                 242,525                       73,196                      169,329
                                                    -------                       ------                      -------
Net loss                                       $(1,790,143)                $ (1,783,598)                    $ (6,545)
                                               ============                =============                    =========
</TABLE>

         Oil sales  decreased  by 87% due  primarily  to a 97%  decrease  in the
number of units  sold  which was  partially  offset  by a 156%  increase  in the
average  prices of crude oil sold.  There was also a  corresponding  decrease in
royalties paid by the Company.  In 2000,  royalty  income  increased from nil in
1999 to  $2,000.  The  Company  sold the  majority  of its crude  oil  producing
properties in 1998 and also sold its remaining  heavy oil production in February
2000. Since the Company has disposed of most of its producing properties, future
oil sales are expected to be minimal unless additional  producing properties are
drilled or purchased. Crude oil unit sales in barrels ("bbls") (before deducting
royalties)  and the average  price per barrel sold during the periods  indicated
were as follows:
<TABLE>
                                                       Six month period ended June 30,
                                             2000                                            1999
                                        Average price                                   Average price
                             bbls          per bbl               Total       Bbls          per bbl               Total
                             ----          -------               -----       ----          -------               -----
<S>                           <C>           <C>                 <C>         <C>             <C>                <C>
Oil sales                     178           $34.34              $6,000      5,093           $13.44             $68,000
Royalty income                                                   2,000
Royalties paid                                                       -                                         (4,000)
                                                               -------                                         -------
Total                                                          $ 8,000                                         $64,000
                                                               =======                                         =======
</TABLE>


         Gas  sales  increased  56% in 2000.  There  was a 13%  increase  in the
average price for gas. Gas sales include  royalty income which  increased 30% in
2000.  The volumes in million  cubic feet  ("mmcf") and the average price of gas
per  thousand  cubic feet  ("mcf")  sold  during the periods  indicated  were as
follows:
<TABLE>
                                                         Six month period ended June 30,
                                              2000                                             1999
                                         Average price                                     Average price
                             mmcf           per mcf                Total       mmcf           per mcf               Total
                             ----           -------                -----       ----           -------               -----
<S>                           <C>            <C>                <C>            <C>             <C>                <C>
Gas sales                     5.0            $2.32              $ 11,000       5.0             $2.06              $ 9,000
Royalty income                                                    35,000                                           27,000
Royalties paid                                                   (2,000)                                          (8,000)
                                                                 -------                                          -------
Total                                                            $44,000                                          $28,000
                                                                 =======                                          =======
</TABLE>

         Proceeds from carried interests  increased 330% to $550,000 during 2000
compared  to  $128,000  in  1999  because  gas  prices  increased  38%.  Capital
expenditures  decreased 93% in 2000 to $15,000 from $222,000  during 1999.  Unit
sales  decreased 1% and  partially  offset the increase in revenues  above.  The
volumes in million cubic feet ("mmcf") and the average price of gas per thousand
cubic feet ("mcf") sold during the periods indicated were as follows:
<TABLE>
                                                      Six month period ended June 30,
                                            2000                                           1999
                                      Average price                                   Average price
                            mmcf         per mcf               Total       mmcf          per mcf               Total
                            ----         -------               -----       ----          -------               -----

<S>                         <C>           <C>              <C>             <C>            <C>               <C>
Gas sales                   281           $3.51            $ 979,000       285            $2.55             $708,000
Oil Sales                                                      5,000                                          20,000
Royalty paid                                               (218,000)                                       (155,000)
Operating costs                                            (201,000)                                       (223,000)
Capital costs                                               (15,000)                                       (222,000)
                                                            --------                                       ---------
Total                                                      $ 550,000                                        $128,000
                                                           =========                                        ========
</TABLE>

         Interest  and  other  income  was 44%  lower in 2000.  Interest  income
decreased 42% from  $132,000 in 1999 to $76,000 in the 2000 period  because less
funds were  available  for  investment.  In addition,  the 2000 period  includes
proceeds  from  the  sale of  seismic  data in the  amount  of  $6,000  which is
unchanged from 1999.

         General and administrative costs increased 16% in 2000 to $844,000 from
$725,000 in 1999.  The Company hired a new executive  vice  president  effective
January 1, 2000 which  increased  salary expense by  approximately  $66,000.  In
addition  the 2000  period  includes a $38,000  severance  payment to the former
Secretary-Treasurer.  The costs of printing and mailing in  connection  with the
annual meeting also increased by $45,000 during the 2000 period.

         Legal expenses  decreased 1% during 2000 to $1,109,000  from $1,119,000
during 1999. These expenses are related  primarily to the cost of the Kotaneelee
litigation.  During the 2000 period, the Company presented its rebuttal evidence
and completed and filed its written closing argument.

         Lease  operating costs decreased 69% from $68,000 in 1999 to $21,000 in
the 2000 period. The Company sold its remaining heavy oil production  properties
during February 2000.

         Depletion,  depreciation and amortization expense decreased 37% in 2000
to $119,000 from $188,000 in 1999.  The depletion  rate in 2000 decreased by 32%
from the 1999 rate. Also, the capital asset base in 2000 decreased 6% from 1999.

     A foreign exchange gain of $40,000 was recorded in 2000, compared to a loss
of $92,000 in 1999 on the Company's U.S. investments.  The value of the Canadian
dollar was U.S.  $.6924 at December 31, 1999 compared to U.S. $.6759 at June 30,
2000.

         Abandonments  and write downs  increased  to  $635,000  during the 2000
period.  The  Company's  investment  in the Texas  project was written down to a
nominal  value  during the second  quarter  because the project was deemed to be
uneconomic.

         Income tax recovery  increased by 231% to $ 243,000 in 2000 compared to
$73,000 in 1999. The largest  component of the increased  income tax recovery is
due to adjustments in finalizing the 1999 income tax return.

1999 vs. 1998

         The net loss for the year 1999 was $3,001,424 ($.21 per share) compared
to a net loss of $2,328,170  ($.16 per share) for 1998. A summary of revenue and
expenses during the periods is as follows:
<TABLE>
                                                           1999                     1998               Net Change
                                                           ----                     ----               ----------
<S>                                                 <C>                       <C>                    <C>
Revenues                                            $ 1,029,899               $3,409,361             $(2,379,462)
Costs and expenses                                  (4,306,293)              (6,115,898)                1,809,605
Income tax recovery                                     274,970                  378,367                (103,397)
                                                        -------                  -------                ---------
Net loss                                           $(3,001,424)             $(2,328,170)              $ (673,254)
                                                   ============             ============              ===========
</TABLE>

         Oil  sales  decreased  by  83%  due  primarily  to a  86%  decrease  in
production which was partially offset by a 17% increase in the average prices of
crude oil sold. There was also a corresponding decrease in royalties paid by us.
We sold the  majority  of our crude oil  producing  properties  in two  separate
transactions  effective  July 1,  1998  and  September  1,  1998.  Since we have
disposed of most of our producing  properties,  future oil sales are expected to
be minimal unless additional  producing properties are acquired through drilling
or purchase.  The 1999 royalties paid amount  includes a provincial  royalty tax
credit in the amount of $4,782. Crude oil unit sales in barrels ("bbls") (before
deducting  royalties)  and the average  price per barrel sold during the periods
indicated were as follows:
<TABLE>
                                             1999                                              1998
                                          Average price                                    Average price
                                   Bbls         per bbl           Total             bbls         per bbl            Total
                                   ----         -------           -----             ----         -------            -----

<S>                               <C>            <C>           <C>                <C>             <C>            <C>
Crude oil sales                   9,171          $17.38        $159,000           64,954          $14.84         $964,000
Royalties paid                                                  (8,000)                                          (66,000)
                                                                -------                                          --------
Total                                                         $ 151,000                                          $898,000
                                                              =========                                          ========
</TABLE>

         Gas sales  decreased  95% because of a 93%  decrease in number of units
sold and a 16%  decrease in the average  price for gas. In  addition,  gas sales
include  royalty income which decreased 49% in 1999. We sold the majority of our
working  interest gas properties  effective July 1, 1998, which accounts for the
decrease  in gas sales.  Royalties  paid  include a $59,000  amount as part of a
settlement for royalties due for the 1991 to 1998 period. The volumes in million
cubic feet ("mmcf") and the average price of gas per thousand cubic feet ("mcf")
sold during the periods indicated were as follows:

<TABLE>
                                               1999                                           1998
                                           Average price                                  Average price
                            Mmcf              per mcf           Total            mmcf         per mcf          Total
                            ----              -------           -----            ----         -------          -----

<S>                          <C>                <C>          <C>                  <C>           <C>         <C>
Gas sales                    21                 $1.83        $ 37,000             304           $2.17       $660,000
Royalty income                                                 64,000                                        127,000
Royalties paid                                               (63,000)                                       (82,000)
                                                             --------                                       --------
Total                                                        $ 38,000                                       $705,000
                                                             ========                                       ========
</TABLE>

         Proceeds from carried interests  increased 184% to $587,000 during 1999
compared  to  $207,000  in 1998  primarily  because  gas prices  increased  58%.
Operating  costs also  decreased  20% during 1999.  The volumes in million cubic
feet ("mmcf") and the average price of gas per thousand  cubic feet ("mcf") sold
during the periods indicated were as follows:

<TABLE>
                                             1999                                           1998
                                          Average price                                  Average price
                               mmcf          per mcf             Total         mmcf           per mcf          Total
                               ----          -------             -----         ----           -------          -----
<S>                             <C>            <C>         <C>                  <C>             <C>       <C>
Gas sales                       563            $2.79       $ 1,572,000          575             $1.77     $1,016,000
Royalty paid                                                 (327,000)                                     (238,000)
Operating costs                                              (417,000)                                     (522,000)
Capital costs                                                (241,000)                                      (49,000)
                                                             ---------                                      --------
Total                                                        $ 587,000                                      $207,000
                                                             =========                                      ========
</TABLE>

         Share of Kotaneelee net revenues for 1999.  Although,  according to the
reports of the operator of the  Kotaneelee  gas field,  the Kotaneelee gas field
carried  interest  reached pay out status during  November  1999, no revenue has
been accrued for 1999. In order to bring its billing  practices in line with the
industry  standard,  the  operator  of the field  changed  the  prior  method of
reporting the revenue and expenditures of the field. This resulted in two months
of capital  expenditures and operating expenses (December 1999 and January 2000)
being charged against a single month of revenue  (November 1999). This change in
reporting is consistent with the reporting of other carried interests  currently
held by us. In the future,  we expect that the reporting of Kotaneelee gas sales
will  continue to lag two months behind  actual  operating  expenses and capital
expenditures.  In addition,  the production  revenue from the two last months of
each quarter is accrued  during the  following  quarter  because the data is not
usually available.

         As of December 31, 1999, based on the operator's reports,  our share of
net revenues due to us by all the defendants  totaled $412,374.  This amount was
computed as follows:



<PAGE>

<TABLE>

Net Revenues (after royalties):
<S>                                                                                               <C>
    November 1999 (after pay out)                                                                 $864,506
    December 1999                                                                                1,212,821
                                                                                                 ---------
Total Revenues                                                                                   2,077,327
                                                                                                 ---------

Operating Expenses:
    November 1999 (after pay out)                                                                  264,848
    December 1999                                                                                  393,389
    January 2000                                                                                    54,889
                                                                                                    ------
Total Operating Expenses                                                                           713,126
                                                                                                   -------

Capital Expenditures:
    December 1999                                                                                  368,963
    January 2000                                                                                   539,899
    February 2000                                                                                   42,965
                                                                                                    ------
Total Capital Expenditures                                                                         951,827
                                                                                                   -------
Company share of net revenues                                                                    $ 412,374
                                                                                                 =========
</TABLE>

         The operator reported that it deposited during March 2000 the amount of
$136,728 in an escrow  account for our  benefit.  This  deposit  represents  the
operator's share of the $412,374 amount due.

         The  Kotaneelee  field  working  interest  partners  have  approved the
expenditure of an estimated $4.1 million for the  installation  of a compression
unit in the field to maintain  current  production  levels.  The schedule  above
reflects a charge of $951,827  against  our share of  revenues  for our share of
these costs which total  $1,372,000.  The remaining  balance of $420,173 will be
deducted from our share of the year 2000  production  revenues.  Therefore,  the
share of  Kotaneelee  net revenues  may  fluctuate  each year  depending on both
capital  expenditures and any audit  adjustments which are attributable to prior
years.

         Interest  and  other  income  increased  14% in 1999.  Interest  income
increased  from  $194,000  to  $230,000  in 1999  due to an  increase  in  funds
available  for  investment  during 1999  because of the  proceeds of sale of the
crude oil and gas  properties  in 1998.  In addition,  the 1999 period  includes
proceeds  from the sale of seismic  data in the amount of  $16,000  compared  to
$27,000  from such sales in 1998.  It is not  possible  for us to  estimate  the
amount of future  seismic data sales which are dependent on a  purchaser's  need
for the seismic data that we own.

         Gain on the sale of properties in 1999.  There were no properties  sold
in 1999.  In 1998,  there  was a gain of  $1,378,000  from the sale of our heavy
crude  oil  properties  in  Alberta  and the sale of  certain  working  interest
properties in British Columbia.

         General and  administrative  costs  decreased 7% in 1999 to  $1,209,000
from $1,301,000 in 1998.

         Legal  expenses  decreased  11% during 1999 to  $2,108,000  compared to
$2,358,000  during 1998. These expenses are related primarily to the cost of the
Kotaneelee  litigation.  During 1998, we completed the  presentation of our case
against the working interest partners.  The 1998 costs represent both legal fees
and the cost of our  various  experts who  testified,  were being  prepared  for
testimony,  or assisted in the  cross-examination  of defense witnesses.  During
1999, we continued our cross-examination of defense witnesses.

         Lease  operating  costs decreased 85% from $976,000 in 1998 to $147,000
in the 1999 period. We sold the majority of our oil and gas producing properties
during the second half of 1998.

         Depletion,  depreciation and amortization expense decreased 19% in 1999
to $707,000 from $870,000 in 1998.  Although we sold the majority of our oil and
gas producing  properties during 1998, the increased production from the pay out
of the  Kotaneelee  carried  interest  increased the 1999  depletion  expense by
approximately $420,000.

         A foreign exchange loss of $77,000 was recorded in 1999, contrasted
with a gain of $179,000 on our U.S. investments in 1998.  In 1999 the value of
the Canadian dollar increased from U.S. $.65 to U.S. $.69. In 1998, the gain was
attributable to the continuing  strengthening  of the U.S. dollar as compared to
the Canadian dollar on our U.S. investments.

         Abandonments  and write  downs.  There were no  abandonments  and write
downs in 1999. The 1998 amount of $685,000 resulted from a write down of certain
of our properties in California and Texas.

         Income tax recovery  decreased  by 27% to $275,000 in 1999  compared to
$378,000 in 1998. The income tax recovery in 1999 decreased  because the loss in
1999 was less than the loss in 1998 after giving effect to the  $1,378,000  gain
on sale of assets in 1998 which was not recognized for income tax purposes.

1998 vs. 1997

         The net loss for the year 1998 was $2,328,170 ($.16 per share) compared
to a net loss of $1,587,506  ($.11 per share) for the 1997 period.  A summary of
revenue and expenses during the periods is as follows:

<TABLE>
                                                       1998                         1997                   Net Change
                                                       ----                         ----                   ----------
<S>                                             <C>                          <C>                            <C>
Revenues                                        $ 3,409,361                  $ 2,514,978                    $ 894,383
Costs and expenses                              (5,737,531)                  (4,102,484)                  (1,635,047)
                                                -----------                  -----------                  -----------
Net loss                                       $(2,328,170)                 $(1,587,506)                  $ (740,664)
                                               ============                 ============                  ===========
</TABLE>

         Crude oil sales decreased by 20% due primarily to a 34% decrease in the
average prices of crude oil sold which was partially  offset by a 2% increase in
production.  There  was also a  decrease  in  royalties  paid by us. We sold the
majority of our oil producing properties in two separate transactions  effective
July 1, 1998 and September 1, 1998. The 1998  royalties  paid amount  includes a
provincial  royalty tax credit in the amount of $117,000.  Our oil unit sales in
barrels ("bbls") (before  deducting  royalties) and the average price per barrel
sold during the periods indicated were as follows:
<TABLE>
                                             1998                                            1997
                                         Average price                                     Average price
                              bbls          per bbl           Total            bbls           per bbl          Total
                              ----          -------           -----            ----           -------          -----

<S>                         <C>              <C>           <C>               <C>               <C>        <C>
Crude oil sales             64,954           $14.84        $964,000          63,783            $22.50     $1,436,000
Royalties paid                                             (66,000)                                        (315,000)
                                                           --------                                        ---------
Total                                                      $898,000                                       $1,121,000
                                                           ========                                       ==========
</TABLE>

         Gas sales  increased  35% because of a 52%  increase in number of units
sold which was  partially  offset by a 6% decrease in the average price for gas.
In addition,  gas sales include  royalty income which  decreased 13% in 1998. We
sold the majority of our working interest gas properties effective July 1, 1998.
The  primary  increase in gas  production  was the pay out of two wells that had
been in a penalty  position.  These wells were included in the properties  sold.
The volumes in million  cubic feet  ("mmcf")  and the  average  price of gas per
thousand cubic feet ("mcf") sold during the periods indicated were as follows:
<TABLE>

                                              1998                                           1997
                                          Average price                                   Average price
                               mmcf          per mcf           Total           mmcf           per mcf          Total
                               ----          -------           -----           ----           -------          -----
<S>                             <C>            <C>          <C>                 <C>             <C>         <C>
Gas sales                       304            $2.17        $660,000            200             $2.31       $462,000
Royalty income                                               127,000                                         146,000
Royalties paid                                              (82,000)                                        (85,000)
                                                            --------                                        --------
Total                                                       $705,000                                        $523,000
                                                            ========                                        ========
</TABLE>

         Proceeds from carried  interests  decreased 57% to $207,000 during 1998
compared to $476,000 in 1997.  During 1998, there were significant  expenditures
made by the operators of the carried interest properties.

         Interest  and  other  income  decreased  44% in 1998.  Interest  income
decreased  from  $336,000  to  $194,000  in 1998  due to the  decrease  in funds
available for investment and lower interest rates. In addition,  the 1998 period
includes  proceeds  from the  sale of  seismic  data in the  amount  of  $27,000
compared to $59,000 from such sales in 1997.

         Gain on the sale of properties in 1998 amounted to $1,378,000 primarily
representing  the sale of our heavy crude oil properties in Alberta and the sale
of certain working interest properties in British Columbia.

         General and  administrative  costs  increased 18% in 1998 to $1,301,000
from  $1,105,000  in 1997  primarily  as a result of our  increased  activity in
connection  with the  Kotaneelee  litigation  and our  exploration  program.  In
addition, the expenses increased in the United States because of the 7% increase
in the value of the U.S. dollar compared to the Canadian dollar during 1998.

         Legal  expenses  increased  24% during 1998 to  $2,358,000  compared to
$1,898,000  during 1997. These expenses are related primarily to the cost of the
Kotaneelee  litigation.  During 1998, we continued the  presentation  of a major
part of our case against the working interest  partners.  Our case was completed
on  September  16,  1998 and the  defendants'  case  proceeded.  The 1998  costs
represent  both legal fees and the cost of our various  experts  who  testified,
were being  prepared  for  testimony,  or assisted in the  cross-examination  of
defense witnesses.

         Lease  operating  costs increased 22% from $799,000 in 1997 to $976,000
in the 1998 period. The increase  represents the charges by the operators of our
properties which is related to the increased production.  In addition, our share
of production costs in producing Alberta heavy crude oil increased.

         Depletion,  depreciation and amortization expense increased 39% in 1998
to $870,000  from  $624,000 in 1997.  The  increase in  depletion in 1998 is the
result  of  increased  production  and the  amount  of  additional  costs  being
depleted.

         A foreign exchange gain of $179,000 was recorded in 1998, contrasted
with a gain of $231,000 on our U.S. investments in 1997.  In 1998,  the gain was
attributable to the continuing  strengthening  of the U.S. dollar as compared to
the Canadian dollar on our U.S. investments.

         Abandonments  and write downs were $685,000 which resulted from a write
down of  certain  of our  properties  in  California  and  Texas.  There were no
abandonments and write downs in 1997.

         Income tax  recovery  increased  122% to $378,000  in 1998  compared to
$170,000  in 1997.  The  increase  in the 1998  income tax  recovery  reflects a
similar  increase in the loss in 1998 after giving effect to the $1,378,000 gain
on sale of assets in 1998 which was not recognized for income tax purposes.

         Quantitative and Qualitative Disclosure About Market Risk

         We do not have any  significant  exposure  to  market  risk as the only
market risk sensitive instruments are our investments in marketable  securities.
At June 30,  2000,  the  carrying  value of such  investments  (including  those
classified as cash and cash  equivalents) was  approximately  $2.2 million which
was  approximately  equal to the fair value and face  value of the  investments.
Since we expect to hold the  investments to maturity,  the maturity value should
be realized.  In addition,  our  investments in marketable  securities  included
investments  held in the United  States  which are  subject to foreign  exchange
fluctuations.  At June 30, 2000,  our  investments  in the United States totaled
$875,000.


<PAGE>


                                 USE OF PROCEEDS

         The proceeds  will be used for general  corporate  purposes,  including
 working capital, exploration and development and continuation of the Kotaneelee
 litigation.  See "Legal  Proceedings"  and "Our Business."  Currently,  we have
 sufficient  funds  and a line of  credit to meet our  current  working  capital
 needs.  Assuming  all of the shares  offered by this  prospectus  are sold at a
 price of $_____ U.S. per share, we would realize net proceeds (after  estimated
 expenses of the offering of $______) of approximately $______. The net proceeds
 of the offering  would be added to our general funds and would not be expressly
 designated for any particular  purpose.  However,  we currently expect that the
 net proceeds would be used for the following purposes:
<TABLE>
                                                                   United States                      Canada
<S>                                                                 <C>                            <C>
Working capital to operate the company                              $__________                    $__________
Costs of Kotaneelee litigation                                      $__________                    $__________
Exploration and development                                         $__________                    $__________
                                                Total:              $__________                    $__________
</TABLE>

         Litigation  expenses may vary depending on the progress of the cases in
which we are  involved.  If the net proceeds of the  offering are  substantially
less than the  estimated  amounts,  and if we are  unable  to obtain  additional
funds, we will be unable to pursue exploration and development activities or the
Kotaneelee  litigation.  If the gross proceeds of the offering do not exceed the
costs of this offering, the excess costs over gross proceeds would be paid by us
from our current assets.

                                    DILUTION
         You will experience  immediate and substantial dilution in net tangible
book value of your  shares as a result of this  offering.  The  following  table
illustrates  the per share dilution to purchasers of shares giving effect to the
sale of all of the shares in the offering at a price of $____ per share.

<TABLE>
<S>                                                                                                        <C>
Offering price attributable to each limited voting share                                                   ______
Net tangible book value per share before the offering(1)                                                   ______
Increase attributable to payments for limited voting shares                                                ______
Pro forma net tangible book value per share after the offering                                             ______
Dilution to purchasers of the shares (2)(3)                                                                ______
</TABLE>

(1) We  calculate  net  tangible  book value per share by dividing the number of
limited voting shares  outstanding  into our tangible net worth (tangible assets
less liabilities) at June 30, 2000.

(2) We calculate  dilution to new  investors by  subtracting  net tangible  book
value per share of our limited  voting  shares after the  offering  from the per
share price attributable to each limited voting share purchased.

(3) This estimate of dilution  does not reflect the results of operations  since
June 30, 2000 nor does it give any effect to the outstanding options to purchase
our limited voting shares.  There are _______ shares  reserved for share options
granted to our officers,  directors and  consultants.  If the options to acquire
the _________  shares had been exercised at June 30, 2000,  then the dilution to
purchasers would be $.___ per share.

                   TERMS OF OFFERING AND SELLING ARRANGEMENTS

Issuance of the Rights; Guaranteed Amount

         We are offering a total of [____________]  limited voting shares to our
existing  shareholders.  For every one (1) share  held of record at the close of
business on __________,  2000, shareholders will receive one transferable right.
For every  transferable  rights,  each  shareholder will be entitled to purchase
from us at a price of $ U.S.  _________  or $ Canadian  ______,  one  additional
share.

How the Contingent Right Operates

         If you purchase all of the shares that you are  guaranteed the right to
buy,  you will also  have the  right to  purchase  additional  shares  which are
contingent  on the  number  of  shares  that  are  not  purchased  by the  other
shareholders.  This contingent right to purchase additional shares is limited to
times the  guaranteed  number of shares that you are entitled to  purchase.  The
shares being offered for sale will first be allocated to satisfy your guaranteed
right to  purchase  shares.  If there are unsold  shares  remaining  after these
allocations,  then any unsold shares will be allocated proportionately among the
shareholders who exercised their contingent right to purchase the unsold shares.

         To  illustrate  how the  offering  works,  assume a  shareholder  owned
[_____]  shares of limited  voting shares as of the record date. He will receive
_______  rights and is  guaranteed  the right to  purchase  [_____]  shares.  In
addition,  if he purchases the total [_____]  shares,  then he may also exercise
his contingent right for up to [_____]  additional shares. In the event that the
offering is oversubscribed, we will accept subscriptions by shareholders for the
guaranteed  shares  first.  Any  remaining  shares unsold will then be allocated
proportionately among the shareholders who subscribed for the purchase of shares
on a contingent basis.

         For example,  assume in the aggregate that our  shareholders  subscribe
for  a  total  of  [___________]  shares,  [___________]  shares  of  which  are
guaranteed. Under the terms of the offering [_________] shares are being offered
for sale,  [_____________]  shares would be issued to shareholders who purchased
their guaranteed  shares. The remaining shares offered for sale (_________ minus
[________])  would  be  available  for  the  shareholders  who  exercised  their
contingent  right to purchase shares on a pro rata basis.  Each  shareholder who
exercised his contingent right would receive ____% (_________  available divided
by  [____________]  contingent  right) of the  contingent  amount  of  available
shares.

Transferability and Listing of the Rights

         Rights will be evidenced by a Rights  Certificate  in registered  form.
You may  transfer  the rights you  receive to third  parties by  delivering  the
Rights  Certificate to them,  provided that the Right has been properly executed
and assigned by the registered holder to the third party. The Rights will not be
listed on any U.S.  national  securities  exchange  and will not be admitted for
quotation in any automated,  inter-dealer  quotation  system,  but may be traded
through  any  registered  investment  dealer or broker on  whatever  market  may
develop for them, if any. The Rights are listed on the Toronto Stock Exchange.

Expiration of the Rights

          The  offering  will  end  at  4:30  P.M.  Eastern  Standard  Time,  on
_________,  2000. The date and time when the offering  expires is referred to in
this prospectus as the expiration date.

How to Subscribe for Shares and/or How to Revoke Your Subscription

          The Rights Certificate which indicates the number of your rights, will
be issued in the name and  address of the  holders of limited  voting  shares of
record on _______,  2000 and mailed to shareholders as soon as practicable after
the record date. All rights  certificates  received prior to the expiration date
will be  held  by our  subscription  agents  in the  United  States  and  Canada
identified in the accompanying Rights Certificate and instructions. Prior to the
formal acceptance of any or all of such subscriptions, all payments will be held
by the agent(s).

          Subscriptions  may  be  revoked  by  delivery  of  written  notice  of
revocation to us prior to the expiration  date.  Subscriptions  will be accepted
promptly after the expiration  date by our delivery of written  confirmation  of
acceptance  to our agents.  They will then be authorized to issue the shares and
make  any  refunds,  without  interest,  to the  extent  that  the  offering  is
oversubscribed.  A three-day period is necessary to permit the agents to process
all  subscriptions  received by the expiration date, so that the total number of
guaranteed and contingent shares to be issued can be determined.  We reserve the
right to reject any  subscription,  absent  proof in  writing  from you that all
terms of the offering have been complied with on a timely basis.  We will notify
you promptly of any rejection.

Determination of Purchase Price; How to Purchase Shares

         In establishing the purchase price,  our board of directors  considered
recent  market  prices for our  shares.  The  purchase  price is intended by the
directors  to  be  attractive  to  our  shareholders  and  result  in  a  higher
subscription  rate.  The purchase  price does not reflect our  assessment of the
actual  value of our  assets.  All  interpretations  of matters  relating to the
offering will be made by our management and will be final.

         You may pay the purchase  price  either in Canadian or U.S.  dollars at
the rates  indicated  above. We are permitting the payment of the purchase price
in either of these currencies solely for shareholders' convenience. The exchange
rate on  ______________,  2000 as reported by the Wall Street  Journal was $1.00
Canadian equals U.S. $_____.  You may not purchase  fractional  shares, and only
whole shares will be issued.

         Shares may be purchased by surrendering  the Rights  Certificate to the
agent, along with a signed subscription agreement, together with full payment of
the purchase price for both the shareholder's guaranteed and contingent amounts.
Payment of the purchase  price must be made by check,  bank draft or money order
payable  to the  order  of one of our  subscription  agents.  Any  subscriptions
satisfying these conditions will be accepted;  however,  subscriptions  received
after the expiration date will not be honored and we will not be responsible for
subscriptions  not delivered by that time.  You are advised to choose a reliable
method  (e.g.,  such as  overnight  courier  service)  for the  delivery of your
subscriptions to the agents.

         You  may  also  purchase  your  shares  by  delivering  to  one  of the
subscription agents before the expiration date each of the following:

        o         the full purchase price together with a signature guarantee in
                  writing  or by  facsimile  from a bank or trust  company  or a
                  member  firm of any  U.S.  registered  stock  exchange  that a
                  Rights  Certificate with respect to shares  subscribed for has
                  been or will be promptly  delivered  to the agent within three
                  business days, and

        o         information  setting forth the name of the  subscriber and the
                  serial  number  of  the  Rights   Certificate.   Subscriptions
                  satisfying these conditions will be accepted subject to prompt
                  receipt by the agent of the duly executed Rights  Certificate,
                  within three business days.

Issuance and Delivery of the Shares

         As soon as  practicable  after the  expiration  date, we will issue the
limited voting shares to be issued with respect to all accepted subscriptions to
you, together with any applicable  refund.  The shares will be registered in the
name and manner set forth on the subscription agreement which you provide to us.

                 UNITED STATES TAX CONSEQUENCES OF THE OFFERING

         Your  receipt of the  subscription  rights  will have  certain  federal
income tax consequences for U.S. resident shareholders. The following discussion
is the  likely  position  of the  Internal  Revenue  Service  regarding  the tax
consequences of the receipt of your subscription  rights. This discussion is not
intended to serve as tax advice to you, and you should consult your personal tax
advisor for advice relating to your personal tax situation.

         The  mere  receipt  of  these  rights  alone  will  not  result  in the
recognition  of taxable income under the Internal  Revenue Code.  While you will
not have to report taxable income upon the receipt of your subscription  rights,
you may have to allocate a portion of the adjusted basis of your original shares
to any shares that you purchase in the offering.

         If you do not  exercise  your  subscription  rights,  you  will  not be
allowed to claim a loss, and no adjustment will be made to the tax basis of your
shares.  If the  subscription  rights  are  exercised,  you may be  required  to
allocate a portion of the basis of your  original  shares to the shares that you
purchase in the  offering,  depending  on whether  the fair market  value of the
rights equals or exceeds 15% of the fair market value of your original shares at
the time of receipt of your rights.

         If the fair market value of your subscription  rights is 15% or more of
the fair market value of the shares you currently  own, you must allocate to the
purchased  shares  part  of the  basis  of  your  original  stock,  in the  same
proportion which the fair market value of the  subscription  rights bears to the
total of the fair market value of your original shares and the fair market value
of the subscription  rights.  The total tax basis of your newly purchased shares
will equal the allocated basis attributable to the subscription  rights plus the
purchase price of the purchased  shares.  The holding period for shares acquired
by exercise of the subscription rights will begin from the date the subscription
rights are exercised.

         If the fair market value of the subscription rights is less than 15% of
the fair market value of the shares you currently own, you may elect to allocate
a portion of your current tax basis to the shares that you purchase as discussed
above.  If you do not elect to allocate  your tax basis,  then your tax basis in
the purchased shares will be your purchase price of the offered stock.

         The above  discussion is not applicable to a rights holder who is not a
shareholder when the rights are received. Such right holders who purchase rights
and purchase  shares of our limited voting shares should apply the general rules
that are applicable to the purchase and sale of such securities.

                    CANADIAN TAX CONSEQUENCES OF THE OFFERING

     The following is a summary of the  principal  Canadian  federal  income tax
considerations generally applicable to the rights being distributed to you. This
discussion applies to shareholders who at all relevant times for purposes of the
Canadian  Income Tax Act deal at arm's length with us, are not  affiliated  with
us, hold their  rights and shares as capital  property  and do not,  and are not
deemed to, use or hold their rights or shares in or in the course of carrying on
business in Canada.  This summary  does not apply to an insurer  whose rights or
shares are designated  insurance  property  within the meaning of the Income Tax
Act.  The summary is based on the current  provisions  of the Income Tax Act and
the  regulations,  all  specific  proposals  to amend the Income Tax Act and the
regulations  publicly  announced by the Minister of Finance as of September  21,
2000,  and  Canadian  counsel's  understanding  of  the  current  administrative
policies and assessing  practices of the Canada Customs and Revenue Agency. This
summary  does  not  consider  or  anticipate  any  changes  in  law  whether  by
legislative,  governmental or judicial decision or action,  nor does it consider
the  tax  legislation  or   considerations  of  any  province  or  territory  or
jurisdiction  outside Canada. This summary does not apply to a non-resident that
is an insurer carrying on business in Canada and elsewhere. This summary assumes
that the shares are listed on a  prescribed  stock  exchange for purposes of the
Income Tax Act at all relevant times.  The Toronto Stock  Exchange,  the Pacific
Stock Exchange and Nasdaq are prescribed stock exchanges.

Issuance of Rights

     If you are a resident of Canada for the purposes of the Income Tax Act, you
will not be  required  to include any amount in income upon the  issuance of the
rights to you. If you are not  resident (or deemed to be resident) in Canada for
purposes  of the Income Tax Act,  you will not be  subject to  Canadian  federal
income  tax  on the  issuance  of the  rights  and  there  will  be no  Canadian
non-resident withholding tax applicable on the issuance of the rights to you.

     The rights  distributed to you will have a "nil" cost to the initial holder
for the purposes of the Income Tax Act. The cost of the rights  acquired must be
averaged with the adjusted cost base to the  shareholder of all other  identical
rights  held as capital  property  by that  shareholder  immediately  before the
acquisition  in order to determine the adjusted cost base to the  shareholder of
each right held by the shareholder.

Exercise of Rights

     You will not  realize  any  capital  gain or loss  when you  exercise  your
rights. Each limited voting share acquired by you as a result of the exercise of
rights will have a cost to you equal to the aggregate of the subscription  price
paid for such share and the adjusted  cost base to you of the rights  exercised.
This cost will then  generally be averaged with the adjusted cost base of all of
our other limited  voting shares owned by you as capital  property and acquired
after December 31, 1971 for the purpose of determining the adjusted cost base to
you of each such share held by you.

Disposition of Rights

     Upon the  disposition  or deemed  disposition  of a right by you, a capital
gain (or capital  loss) will be  realized  to the extent  that your  proceeds of
disposition  of the right  exceed (or are  exceeded  by) the  aggregate  of your
adjusted cost base of the right and any reasonable costs of disposition.

     If you are a resident in Canada for  purposes of the Income Tax Act,  based
on proposed  amendments to the Income Tax Act,  two-thirds of a capital gain
must be  included  in  computing  your  income  under the  Income  Tax Act,  and
two-thirds of a capital loss may be deducted  against  taxable  capital gains in
accordance  with the detailed  provisions of the Income Tax Act and the proposed
amendments.  If you are a  Canadian-controlled  private corporation,  you may be
liable to pay an additional  refundable tax of 6 2/3% on taxable  capital gains.
If you are an individual,  other than certain  trusts,  you may be subject to an
alternative minimum tax for realized capital gains.

     If you are not  resident  (or deemed to be resident) in Canada for purposes
of the Income Tax Act, you will  generally not be subject to Canadian tax on the
disposition of rights unless,  the rights constitute  taxable Canadian property.
In general,  a right will not be taxable Canadian property to you unless, at any
time during the 60 month period immediately before the disposition, you, persons
with whom you did not deal at arm's  length,  or you and such persons  owned (or
had the right to acquire through the offering or otherwise) not less than 25% of
the  issued  shares  of any class or series of our  capital  stock.  In  certain
circumstances,  rights may be deemed to be taxable Canadian property. In certain
circumstances,  you may be entitled to relief under an applicable  international
tax treaty between Canada and your country of residence.

     Upon the  expiration  of an  unexercised  right,  if you are a resident  of
Canada for purposes of the Income Tax Act, you will realize a capital loss equal
to the adjusted cost base of the right to you. If you hold an unexercised  right
and have not received any right other than  through  this  offering,  your right
will have an adjusted cost base of nil and the  expiration of the right will not
give rise to a capital loss.

THE FOREGOING  DISCUSSIONS RELATING TO UNITED STATES AND CANADIAN TAXES
ARE NOT INTENDED TO SERVE AS LEGAL OR TAX ADVICE TO ANY PARTICULAR  SHAREHOLDER.
TO DETERMINE  THE TAX  CONSIDERATIONS  APPLICABLE TO THEM,  SHAREHOLDERS  SHOULD
CONSULT THEIR OWN TAX ADVISORS.



<PAGE>


                                 CAPITALIZATION

         The following  table shows our cash and cash  equivalents,  investments
and total capitalization:

        o         on an actual basis as of June 30, 2000; and

        o         as adjusted to reflect the sale of [__________] shares offered
                  by this  prospectus  at an assumed  public  offering  price of
                  $[____] per share,  after  deducting  the  estimated  offering
                  expenses payable by us.

         You should read this information together with our financial statements
and the notes  relating to those  statements  and  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations" and "Use of Proceeds"
appearing elsewhere in this prospectus.
<TABLE>
                                                                                  As of June 30, 2000


                                                                              Actual               As adjusted
<S>                                                                         <C>                   <C>
Cash and cash equivalents                                                   $2,185,918            $____________
Marketable securities                                                          291,342
Short-Term Debt                                                                 -                       -
Long-Term Debt                                                                  -                       -
Stockholders' Equity (Deficit):
 Limited Voting Shares, par value $1.00 per share:
 Limited Voting Shares                                                    $ 14,284,970            $____________
 Contributed surplus                                                        26,502,342            $____________
 Deficit                                                                   (27,332,063)           $____________
                                                                           ------------
Total Shareholders' Equity                                                $ 13,455,249            $____________
                                                                           ============
</TABLE>

The number of shares as  adjusted  for this  offering  excludes  598,500  shares
issuable  upon  the  exercise  of  outstanding  options  held by our  directors,
officers and consultants as of June 30, 2000.



<PAGE>


                               MARKET INFORMATION

     Our limited  voting  shares are traded on The  Toronto,  Pacific and Boston
Stock  Exchanges  [Symbol:  CSW],  and in the NASDAQ  SmallCap  Market  [Symbol:
CSPLF].

         The quarterly  high and low closing  prices in Canadian  dollars on The
Toronto Stock Exchange during the calendar periods indicated were as follows:



<PAGE>

<TABLE>

         1998                 1st quarter            2nd quarter            3rd quarter            4th quarter
         ----                 -----------            -----------            -----------            -----------

<S>                              <C>                    <C>                    <C>                    <C>
         High                    11.75                  10.50                  9.00                   10.00
          Low                     9.00                   8.00                  5.50                    6.25

         1999                 1st quarter            2nd quarter            3rd quarter            4th quarter
         ----                 -----------            -----------            -----------            -----------

         High                    11.00                  11.00                    16.00                12.35
          Low                     6.00                   7.50                    10.75                 8.00

         2000                 1st quarter           2nd quarter            3rd quarter*
         ----                 -----------           ------------           ------------

         High                    12.50                  10.50                  10.50
          Low                     8.25                  6.30                   8.00
---------------------------
*   Through August 31, 2000
</TABLE>

<PAGE>



     The  quarterly  high and low closing  prices in U. S. dollars on the NASDAQ
SmallCap Market during the calendar periods indicated were as follows:
<TABLE>
         1998                 1st quarter            2nd quarter            3rd quarter            4th quarter
         ----                 -----------            -----------            -----------            -----------

<S>                              <C>                    <C>                    <C>                    <C>
         High                    8.50                   7.88                   6.63                   6.75
          Low                    6.25                   5.63                   3.31                   3.94

         1999                 1st quarter            2nd quarter            3rd quarter            4th quarter
         ----                 -----------            -----------            -----------            -----------

         High                    7.63                   7.50                   11.50                  8.50
          Low                    4.50                   5.38                     6.50                 5.09

         2000                 1st quarter           2nd quarter            3rd quarter*
         ----                 -----------           ------------           ------------

         High                    8.44                   7.50                   7.06
          Low                    5.63                   4.25                   5.13
------------------------------
*   Through September 19, 2000
</TABLE>

<PAGE>


<TABLE>

                                                                       Trading Volume Shares
                                                       2000                 1999                1998                 1997
                                                       -----                ----                ----                 ----
<S>                                                <C>                 <C>                 <C>                  <C>
NASDAQ SmallCap Market *                           9,476,820           6,359,187           4,868,392            5,744,756
Pacific Exchange, Inc. **                              8,300             156,300             876,100            1,674,600
Toronto Stock Exchange **                            138,426             177,576              71,218              131,131
*   Through September 19, 2000
**  Through August 31, 2000
</TABLE>

         As of September 1, 2000, we had  approximately  4,400 record holders of
our limited voting  shares.  We have never paid a dividend on our limited voting
shares.  Any future  dividends  will be  dependent  on our  earnings,  financial
condition,  and business  prospects.  We are legally  restricted from paying any
dividend or making any other payment to shareholders (except by way of return of
capital) on the limited voting shares until our accumulated deficit ($27,332,000
at June 30,  2000) is  eliminated.  Current  Canadian  law does not restrict the
payment of dividends to persons not resident of Canada.  Under current  Canadian
tax law and the Canada-United States Income Tax Convention (1980), any dividends
paid to U.S. resident shareholders under the Convention are generally subject to
a 15% Canadian withholding tax.



<PAGE>


                                PERFORMANCE GRAPH

         The graph  below  compares  the  cumulative  total  returns,  including
reinvestment  of dividends,  if applicable,  of our shares with companies in the
NASDAQ Market Index and an Industry Group Index.  (Media  General's  Independent
Oil and  Gas  Industry  Group).  The  chart  displayed  below  is  presented  in
accordance with SEC requirements. Shareholders are cautioned against drawing any
conclusions from the data contained therein, as past results are not necessarily
indicative of future performance.
<TABLE>

                      COMPARISON OF CUMULATIVE TOTAL RETURN
                        January 1, 1995 to June 30, 2000

---------------------------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
                                                                                                                       June
                                       1994         1995         1996          1997         1998         1999          2000
---------------------------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
<S>                                    <C>            <C>          <C>           <C>          <C>          <C>           <C>
Canada Southern                        100            144.32       151.35        179.73       105.41       127.03        140.54
---------------------------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
Independent Oil & Gas                  100            109.42       141.00        131.27        85.03       119.12        149.24
---------------------------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
NASDAQ Market Index                    100            129.71       161.18        197.16       278.08       490.46        479.98
---------------------------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
</TABLE>


<PAGE>


                                  OUR BUSINESS
General

         We incorporated in 1954 under the Canada  Corporations Act. In 1979, we
became  subject  to the  Canada  Business  Corporations  Act,  and in  1980,  we
continued under the Nova Scotia Companies Act.

         We are, either in our own right, or through other entities,  engaged in
the exploration and development of properties  containing or believed to contain
recoverable  oil  and gas  reserves  and the  sale  of oil  and gas  from  these
properties.  Although  many of the  properties  in which we have  interests  are
undeveloped,  all  properties  with  proved  reserves  are  partially  or  fully
developed.  Our interests in exploratory  ventures are on properties  located in
Alberta, British Columbia, Saskatchewan, the Northwest and Yukon Territories and
the Arctic Islands in Canada. Our principal asset is our 30% carried interest in
the Kotaneelee field, a partially  developed gas field (See "Legal  Proceedings"
at page 47). We also have interests in producing  properties in British Columbia
and Alberta.

         The  majority  of our oil  and  gas  interests  are  carried  interests
pursuant to  agreements  which provide that revenues are not payable to us until
expenditures by the carrying  partners have been recouped from  production,  and
that operating decisions are made by the carrying partners.  Generally,  we may,
at any time, as to each block or economic unit,  elect to convert from a carried
interest  position  to a working  interest  position  by paying our share of the
unrecouped  expenditures  for the unit (i.e.,  expenditures  not  recouped  from
production  revenues).  If we convert to a working interest, we will receive our
share of production  revenues  currently,  but we must also pay for our share of
operating and capital  expenditures  currently.  At June 30, 2000,  our share of
unrecouped expenditures was as follows:

         British Columbia:
           Ex-permit 149                                            $4,009,000
           Ex-permit 102 (Siphon)                                      980,000
         Yukon and Northwest Territories:
            Ex-permit 2713 (Celibeta)                                  321,000


         We currently  have two full-time  employee and one part-time  employee,
all of whom are located in Canada. We also rely to a great extent on consultants
(approximately 7) for technical,  legal, accounting and administrative services.
We use  consultants  because it is more cost  effective  than employing a larger
full time staff.

Yukon Territory - The Kotaneelee Field

         Our principal asset is a 30% carried interest in the Kotaneelee natural
gas field located on Exploration Permit 1007 in the Yukon Territory, Canada. The
permit  consists of 31,888  gross  acres  (9,566 net acres)  which is  partially
developed by two natural gas wells that had combined gross productive capability
at June 30, 2000 of 65 million  cubic feet per day (19.2  million cubic feet per
day net).  Gross natural gas sales were  approximately 45 million cubic feet per
day (net  13.5  million  cubic  feet per  day) at June 30,  2000 as a result  of
shrinkage and fuel gas  requirements.  Anderson  Exploration  Ltd.  operates the
Kotaneelee  field.  See "Legal  Proceedings"  at page 47 for a discussion of the
Kotaneelee litigation concerning this asset.

         Production  at  Kotaneelee  commenced  in February  1991.  According to
reports filed with the Yukon government,  total production in billion cubic feet
("bcf") from the Kotaneelee gas field since 1991 has been as follows:


                Calendar Year                             Production (bcf)
                -------------                             ----------------
                    1991                                         8.1
                    1992                                        18.0
                    1993                                        17.5
                    1994                                        16.7
                    1995                                        15.7
                    1996                                        15.2
                    1997                                        14.4
                    1998                                        16.0
                    1999                                        22.3
                    2000 (6 months)                             10.6
                                                                ----
       Total through June 30, 2000                             154.5
                                                               =====

         As a carried  interest  owner,  we are entitled to receive our share of
field revenues after the working  interest  parties  recover their operating and
capital costs.  The operator  reported that as of November 30, 1999  development
costs  totaling  $96.7 million had been incurred and repaid.  As of December 31,
1999,  the  operator  also  reported  that our share of net  revenues  due to us
totaled  $412,374.  The amount of  recoverable  costs is one of the issues being
contested in the Kotaneelee litigation.  We claim, and the defendants deny, that
the defendants have made improper  charges to the carried  interest  account and
one defendant (Amoco Canada)  maintains that the carried interest account should
be charged  additional amounts for gas processing fees. Amoco Canada claims that
the remaining costs to be recovered at December 31, 1999 were either $58,711,000
or  $19,235,000  depending on inclusion  of  interest.  At this time,  it is not
possible to determine  whether Amoco Canada will be successful in its claim that
gas processing fees should be charged to the carried interest account.

         Although, according to the operator's reports, the Kotaneelee gas field
reached pay out status on November 10,  1999,  the operator has notified us that
it will not make any  payments to the carried  interest  owners,  including  us,
until the issue of the amount of  recoverable  costs under the carried  interest
account has been resolved by the Court of Queen's Bench of Alberta,  Canada. The
operator has stated that it will deposit our share of net production proceeds in
an interest bearing account with an escrow agent. A motion was filed in December
1999 by us to  direct  all of the  defendants  to make  timely  payments  of all
current and future  amounts due from our share of field  revenues.  On April 10,
2000,  the Court  dismissed the motion.  We have filed a notice of appeal of the
dismissal with the Alberta Court of Appeal. Net production proceeds are unlikely
to be paid to us until final resolution of the Kotaneelee litigation.

          Since  March  2000,  the  operator  of the  Kotaneelee  field has been
reporting the amount of our share of net revenues being deposited in escrow. The
September 2000 report provided  information  for production  during the month of
June 2000.  Based on the reported data, we believe the total amount due to us is
$5,526,365 of which $1,832,335 has been deposited in escrow.

         British Columbia

         Our  major  source  of  income  has been from the sale of crude oil and
natural gas from our properties  located in northeast  British Columbia where we
have royalties and carried interests.  In addition to our producing  properties,
we have various  petroleum and natural gas leases in northeast British Columbia.
As a result of the  geological and  geophysical  work performed on these leases,
various drilling  prospects have been identified.  The cumulative dry hole costs
to drill these  prospects  are  estimated  to be  approximately  $2 million.  We
continue to evaluate and attempt to acquire additional petroleum and natural gas
leases in  British  Columbia.  Presently,  we have  interests  in  49,013  gross
developed acres (7,977 net acres) and 28,820 gross undeveloped acres (15,091 net
acres). We believe that these prospects will be drilled by us or others.

         Canadian Arctic Islands

         As of June 30, 2000,  we held  working  interests in 45,100 gross acres
(1,817 net acres) and  carried  interests  in 133,260  gross  acres  (37,257 net
acres)  in the  Sverdrup  Basin,  located  in the  Arctic  Islands.  The  Hecla,
Whitefish,  Drake Point, Roche Point,  Kristoffer,  Romulus and Bent Horn fields
have  been  designated  Significant  Discovery  Lands  by the  Canadian  Federal
Government.  There  interests are being  retained  under  Significant  Discovery
Licenses pending development.

         Panarctic  Oils Ltd.  ("Panarctic"),  the  operator,  received  Federal
government  regulatory  approvals for a pilot project to move shipments of crude
oil from the Bent Horn field by tanker through the Northwest Passage to southern
Canada in 1985. Through December 31, 1996,  approximately 2.7 million barrels of
Bent Horn crude had been sold. In 1996, the operator shut down  production  from
the  field  and  dismantled  the  production   facilities  because  of  economic
uncertainties.  We have a 5%  carried  interest  in the area  which  has not yet
reached pay out status. The timing of any pay out is uncertain.

         Major operators and industry investors have recently indicated interest
in exploring  the  Canadian  Arctic  Islands  region to develop  additional  gas
reserves  and  productive  capacity.  Recent  statements  by  major  oil and gas
producers  indicate that  technological  developments  and the  sustained  world
prices for natural gas may lead to expanded  exploration and production  efforts
in the Canadian Arctic Islands, as well as advance the construction of a natural
gas pipeline to the region in the future.




<PAGE>


         Northwest Territories Properties

         We have a 45% carried  interest  in the  Northwest  Territories  in the
Celibeta  field,  designated  as  Significant  Discovery  Lands  by the  Federal
Government  (1,594  gross acres and 717 net acres).  The gas field is  presently
shut-in.  Because of the recent  activity in the Northwest  Territories,  we are
reviewing  our  holdings  in  the  area  to  take  advantage  of  any  potential
opportunities.

         Alberta

         During 1999, our primary Alberta asset and revenue  producing  property
was our heavy crude oil  production and related  facilities at Kitscoty.  Due to
the requirement of significant additional investment, the prospect of low prices
for heavy  oil and a shift in our  business  strategy,  we sold our 10 % working
interest to the operator for $336,000 effective October 1, 1999. The transaction
was completed during February 2000 and the proceeds of sale were credited to oil
and gas  properties in fiscal 2000.  In 1999,  the Company  participated  in the
drilling of 4 gross (.7 net) wells. Two wells were productive and two wells were
dry and  abandoned.  All of these  wells were  drilled on  shallow  natural  gas
prospects.

         We  continue to invest in  petroleum  and natural gas leases in Alberta
and have a current land  inventory  of 21,477 gross acres (7,349 net acres).  We
are presently  performing  geological  and  geophysical  work on these leases to
determine the prospects for commercial petroleum and natural gas production.  As
prospects are identified, we may participate in drilling or, alternatively, farm
out the prospects to other operators for drilling commitments.

         Saskatchewan

         We have a 3.75%  working  interest in five  sections  in  Saskatchewan.
During  1999,  there was no activity on these  properties  and the lands  remain
undeveloped.

         Texas

         In 1999, we participated in the drilling and completion of two wells in
Stephens  County,  Texas.  This  resulted in one dry hole and one nominal  crude
oil/natural  gas  producer.  Our  efforts  to farm out our  remaining  undrilled
acreage have been  unsuccessful  and we expect to spend a minimal  amount on the
investment  during the year 2000.  During the second quarter of fiscal 2000, the
carrying  costs  ($635,000)  of the project on our books were  written down to a
nominal value of $1.00

         California

         During  1999,  we sold our  investment  in our heavy crude oil recovery
project  in  California  because of  dissatisfaction  with the  progress  of the
program to develop the field reserves.  The  consideration  received for our 30%
interest  was  the  purchaser's  common  stock  (presently  unmarketable)  and a
promissory note which together approximated the carrying costs ($196,000) of the
property prior to the costs being written down in 1998 to a nominal value of $1.


         Patents, Licenses, Franchises and Concessions Held

         Permits and  concessions  are important to our  operations,  since they
allow the search for and  extraction of any crude oil and natural gas discovered
on the areas covered. See "Properties" at page 40.

         Seasonality of Business

         Our  business  is not  seasonal,  except that sales of natural gas peak
during the winter heating season.  Exploration  and  development  activities are
restricted  in  certain  areas  on a  seasonal  basis  because  extreme  weather
conditions affect transportation and the ability to pursue these activities.

         Customers

         Most of the natural gas produced from our carried  interest  properties
is being sold by the operators,  Anderson  Exploration Ltd. and Petro-Canada Oil
and Gas, to various gas marketers.  The production from the Kotaneelee gas field
is being sold by the working  interest  partners.  They have not  disclosed  the
purchasers.

         Supplemental Information on Oil & Gas Activities

         For additional  information  regarding our business,  see "Supplemental
Information on Oil and Gas Activities at page F-21."

         Competitive Conditions in Our Business

         The  exploration  for and  production  of crude oil and gas are  highly
competitive  operations,  both  internally  within the oil and gas  industry and
externally  with  producers  of other types of energy.  The ability to exploit a
discovery  of crude  oil or gas is  dependent  upon  considerations  such as the
ability to finance  development  costs, the  availability of equipment,  and the
ability to overcome  engineering and construction  delays and  difficulties.  We
must compete with companies which have substantially greater resources available
to them. Because the majority of our interests are in remote areas, operation of
our properties is more difficult and costly than those in more accessible areas.

         Furthermore,  competitive  conditions may be substantially  affected by
various  forms of energy  legislation  which may have been or may be proposed in
the United States and Canada;  however, it is not possible to predict the nature
of any such legislation  which may ultimately be adopted or its effects upon our
future operations.



<PAGE>


Financial Information about Foreign and Domestic Operations and Export Sales

         Revenues, Operating Losses and Identifiable Assets

         Substantially all of our operating assets and revenues are attributable
to our operations in Canada. Operating losses are substantially  attributable to
the ongoing Kotaneelee litigation.

         Risks Attendant to Foreign Operations

         The  properties  in which we have  interests  are located  primarily in
Canada  and  are  subject  to  certain  risks  involved  in  the  ownership  and
development of such foreign property interests.  These risks include but are not
limited  to those of:  nationalization;  expropriation;  confiscatory  taxation;
native rights;  changes in foreign  exchange  controls;  currency  fluctuations;
burdensome royalty terms; export sales restrictions; limitations on the transfer
of interests in exploration  licenses;  and other laws and regulations which may
adversely affect our interests in these properties,  such as those providing for
conversion,  proration,  curtailment,  cessation  or other  forms of limiting or
controlling production of, or exploration for, hydrocarbons. Thus, an investment
in our shares  represents an exposure to risks in addition to those  inherent in
petroleum exploratory ventures.

Governmental Regulation of the Canadian Oil and Natural Gas Industry

         The oil and  natural  gas  industry  in Canada is subject to  extensive
controls and  regulations  imposed by various  levels of government  relating to
land  tenure,   production,   production  facilities,   pricing  and  marketing,
royalties,  environmental protection and other matters.  Outlined below are some
of the more significant  aspects of the legislation,  regulations and agreements
governing the oil and natural gas industry in Canada. All current legislation is
a matter of public  record and we are unable to predict  whether any  additional
legislation or amendments may be enacted.

         Land Tenure

         Crude oil and natural gas  located in the  western  provinces  is owned
predominantly by the respective provincial  governments.  Provincial governments
grant  rights to explore for and produce  crude oil and natural gas  pursuant to
leases,  licenses and permits for varying terms and on terms and  conditions set
forth in provincial  legislation including requirements to perform specific work
or make  payments.  Crude oil and natural gas located in such provinces can also
be  privately  owned and rights to explore  for and  produce  such crude oil and
natural  gas are  granted  by  lease  on such  terms  and  conditions  as may be
negotiated.  The term of both  provincial  and  freehold  leases will  generally
continue as long as crude oil or natural gas is produced from the property.

         Crude  oil and  natural  gas  rights  on  federal  lands  is  generally
regulated by the  Government  of Canada unless  authority has been  delegated by
agreement  to the  territorial  government  or the  government  of the  province
adjacent to the federal offshore area. In May 1993, the Canada Yukon Oil and Gas
Accord was signed  which  allowed for the  transfer to the Yukon of authority to
administer and control crude oil and natural gas resources within that territory
and for the establishment of an Oil and Gas Management  Regime. The transfer has
been completed and the lands are now administered by the Yukon Government.

         Production and Production Facilities

         The Governments of Canada,  Alberta,  British Columbia and Saskatchewan
have enacted  statutory  provisions  regulating  the production of crude oil and
natural gas. These  regulations  may restrict the maximum  allowable  production
from a well based on reservoir  engineering and/or conservation  practices.  The
construction  and  operation of  facilities to recover and process crude oil and
natural gas are also subject to regulation.

         Pricing and Marketing - Crude oil

         In Canada,  producers of crude oil negotiate sales  contracts  directly
with crude oil purchasers,  with the result that the market determines the price
of crude oil. Certain purchasers periodically advertise for volumes of crude oil
they are prepared to purchase and the price being offered for such volumes.  The
price depends in part on crude oil quality,  prices of competing fuels, distance
to market and the value of refined products.

         Pricing and Marketing - Natural Gas

         In  Canada,  the price of  natural  gas is  determined  by  negotiation
between buyers and sellers, with the result that the market determines the price
of natural gas. Natural gas exported from Canada is subject to regulation by the
National  Energy Board ("NEB") and the Government of Canada.  Exporters are free
to negotiate  prices and other terms with  purchasers,  provided that the export
contracts must continue to meet certain  criteria  prescribed by the NEB and the
Government of Canada.  As is the case with crude oil,  natural gas exports for a
term of less than two years must be made  pursuant  to an NEB order,  or, in the
case of exports for a longer  duration,  pursuant to an NEB license and Governor
in Council approval.

         The  Governments of Alberta,  British  Columbia and  Saskatchewan  also
regulate the volume of natural gas which may be removed from those provinces for
consumption   elsewhere   based  on  such   factors  as  reserve   availability,
transportation arrangements and market considerations.

         Royalties and Incentives

         The royalty  regime is a  significant  factor in the  profitability  of
crude oil and natural gas production. Royalties payable on production from lands
other than Crown lands are determined by negotiations  between the mineral owner
and the  lessee,  although  production  from such  lands may also be  subject to
provincial taxes and  regulations.  Crown royalties are determined by government
regulation  and are  generally  calculated  as a percentage  of the value of the
gross production, and the rate of royalties payable generally depends in part on
prescribed  reference prices, well productivity,  geographical  location,  field
discovery date and the type or quality of the product produced. The value of the
gross  production  for royalty  purposes  may be based on a deemed value for the
product rather than the actual value received by the interest holder.

         From time to time the Governments of Canada, Alberta,  British Columbia
and Saskatchewan have established incentive programs which have included royalty
rate reductions, royalty holidays and tax credits for the purpose of encouraging
natural gas and crude oil exploration or enhanced recovery projects.  Incentives
are intended to enhance the existing  cash flow of the crude oil and natural gas
industry  and to improve the  economics of finding and  developing  new and more
costly  crude oil and  natural gas  reserves.  Crude oil  royalty  holidays  for
specific wells and royalty  reductions reduce the amount of Crown royalties paid
by the interest holder to the respective government. Tax credit programs provide
a rebate on Crown royalties paid.

         Environmental Regulation

         The oil and natural gas industry is subject to environmental regulation
pursuant to local, provincial and federal legislation. Environmental legislation
provides for restrictions  and prohibitions on spills,  releases or emissions of
various  substances  produced in association  with certain crude oil and natural
gas industry operations.  An environmental assessment and review may be required
prior  to  initiating   exploration  or  development   projects  or  undertaking
significant changes to existing projects. In addition, legislation requires that
well and facility  sites be abandoned and reclaimed to the  satisfaction  of the
appropriate  authorities.  A  breach  of  such  legislation  may  result  in the
imposition of fines or penalties.  Federal environmental  regulations also apply
to the use and transport of certain restricted and prohibited substances. We are
committed to meeting our responsibilities to protect the environment wherever we
operate  and  believe  that  we  are  in  material  compliance  with  applicable
environmental  laws  and  regulations.  We  have  not  been  required  to  spend
significant sums to comply with clean up laws and regulations.  Compliance by us
with  governmental  provisions  regulating  the  discharge  of  materials to the
environment or otherwise  relating to the  protection of the  environment is not
expected  to have a material  effect on our  capital  expenditures,  earnings or
competitive position.

                                   PROPERTIES

         Our  principal  asset is our 30%  carried  interest  in the  Kotaneelee
field,  a  partially  developed  gas field in the Yukon  Territory.  See  "Legal
Proceedings"  at page 47. We also have  interests  in  producing  properties  in
British  Columbia  and  Alberta  and  in  several  exploration  prospects.   The
exploratory  ventures  are  properties  located  in British  Columbia,  Alberta,
Saskatchewan,  the Yukon and  Northwest  Territories  and the Arctic  Islands in
Canada. Geophysical, geological and drilling work on our properties is conducted
by the operators under various  agreements with us. The results of this work are
reviewed by our personnel and consultants retained by us. Information  regarding
reserves, costs of oil and gas activities,  capitalized costs, discounted future
net cash flows and results of operations is set forth in "Consolidated Financial
Statements" beginning at page F-21.







<PAGE>









The following  graphic  presentation  has been  omitted,  but the following is a
description of the omitted material:




                 Map of Canada showing Company Areas of Interest


<PAGE>











The following  graphic  presentation  has been  omitted,  but the following is a
description of the omitted material:




          Map of N.E. British Columbia and Yukon, Northwest Territories
                            showing Kotaneelee field.


<PAGE>











The following  graphic  presentation  has been  omitted,  but the following is a
description of the omitted material:




                   Map showing the Kotaneelee Permit Structure


<PAGE>











The following  graphic  presentation  has been  omitted,  but the following is a
description of the omitted material:




                       Map of the Canadian Arctic Islands
                       showing the Company Lease Holdings


<PAGE>


         Production

         Average  sales price per unit and average  production  cost for oil and
gas produced during the periods are shown below.  Production costs are allocated
based on the weighted  average of oil and gas sales. In 1999, oil production was
primarily  heavy  crude  oil  with  high  lifting  costs.  In prior  years,  oil
production consisted of a mix of light and heavy crude oil. We sold the majority
of our  crude  oil  producing  properties  in  1998.  The  remaining  heavy  oil
production was sold in February 2000.

<TABLE>

                                                      Average Sales Price                   Average Production Costs
                  Period                       Oil (per bbl)     Gas (per mcf)       Oil (per bbl)       Gas (per mcf)
                  ------                       -------------     -------------       -------------       -------------
      <S>                                    <C>                 <C>                 <C>                 <C>
      Six months ended June 30, 2000         ($)   34.34         ($)    2.32         ($)   54.87         ($)    2.33
                Year 1999                          17.38                1.83               12.82                1.45
                Year 1998                          14.84                2.17                8.41                1.41
                Year 1997                          22.50                2.31                8.70                1.30
</TABLE>

         Productive Wells and Acreage

         Productive wells and acreage on working and carried interest properties
as of June 30, 2000 are as follows:

                  Gross Wells                                 Net Wells
           ---------------------                       --------------------
           Oil               Gas                       Oil              Gas
             1                65                       .55             11.39

                          Gross and Net Developed Acres
                     Gross Acres                   Net Acres
                     -----------                   ---------
Alberta                  4,780                           605
British Columbia        49,013                         7,977
Yukon Territory          3,350                         1,005
Arctic Islands           3,060                           153
Texas, USA                  40                            16
                      --------                       -------
                        60,243                          9,756
                        ======                          =====



<PAGE>


         Undeveloped Acreage

         Total developed and  undeveloped  acreage in which we have interests is
summarized by geographic area in the table below:
<TABLE>

                                          Gross and Net Petroleum Acreage as of June 30, 2000
                                                       Developed Acres                    Undeveloped Acres
                                                --------------------------------     -------------------------------
                                                Gross          Net                   Gross          Net
                                                Acres         Acres         %        Acres         Acres        %
                                                -----         -----         -        -----         -----        -
Canada:
  British Columbia:
<S>                                            <C>            <C>        <C>          <C>           <C>      <C>
    Carried Interests                          30,130         6,410      21.3         5,708         1,213    21.3
    Working Interests                           5,622           910      16.2        18,473        13,804    74.7
    Overriding royalty interest                13,261           657       5.0         4,639            74     1.6
                                               ------         -----      ----        ------        ------
  Total British Columbia                       49,013         7,977                  28,820        15,091
                                               ------         -----                  ------        ------

  Saskatchewan:
    Working Interests                                                                 3,200           120     3.8
                                                                                      -----           ---

  Alberta:
    Working Interests                           2,871           581     18.4        21,477         7,349     34.2
    Overriding Royalty Interest                 1,909            24      1.3           160             5      3.1
                                                -----            --                 ------         -----
  Total Alberta                                 4,780           605                 21,637         7,354
                                                -----           ---                 ------         -----

  Yukon & Northwest Territories:
    Carried Interests                           3,350         1,005     30.0        31,726         9,757     30.8

  Arctic Islands:
    Carried Interests                           3,060           153      5.0       130,200        37,104     28.5
    Working Interests                               -             -                 45,100         1,817      4.0
                                                -----           ---                -------        ------
  Total Arctic Islands                          3,060           153                175,300        38,921
                                                -----           ---                -------        ------

  Total Canada                                 60,203         9,740                260,683        71,243

Texas, USA                                         40            16     40.0           460           245     53.3
                                                -----         -----                 ------         -----

               TOTAL                           60,243         9,756                261,143        71,488
                                               ======         =====                =======        ======
</TABLE>

         Drilling activity

         Productive and dry net wells drilled during the following periods:
<TABLE>

                   Period                                    Gross                                Net
                   ------                         ------------------------            ------------------------
                                                  Productive           Dry            Productive           Dry
       <S>                                            <C>              <C>              <C>                <C>
       Six months ended June 30, 2000                  -                1                                  .333
                  Year 1999                            4                2               1.127              .798
                  Year 1998                            9                2               1.440              .200
                  Year 1997                           25                2               3.606              .250
</TABLE>

         There were no wells drilling at June 30, 2000.

                                LEGAL PROCEEDINGS

     We  believe  that  the  working  interest  owners  in the  field  have  not
adequately  pursued the attainment of contracts for the sale of Kotaneelee  gas.
In October 1989 and in March 1990, we filed  statements of claim in the Court of
Queen's  Bench of Alberta,  Judicial  District of Calgary,  Canada,  against the
working interest partners in the Kotaneelee gas field. The named defendants were
Amoco Canada  Petroleum  Corporation,  Ltd.,  Dome Petroleum  Limited (now Amoco
Canada Resources Ltd.), and Amoco Production  Company,  Columbia Gas Development
of Canada Ltd.,  Mobil Oil Canada Ltd. and Esso Resource of Canada Ltd. In 1991,
Anderson Exploration Ltd. acquired all of the shares in Columbia and changed its
name to Anderson Oil & Gas Inc.  Anderson is now the sole  operator of the field
and is a direct defendant in the Canadian lawsuit.  Columbia's  previous parent,
The Columbia Gas System, Inc., which was reorganized in a bankruptcy  proceeding
in the  United  States,  is  contractually  liable  to  Anderson  in  the  legal
proceedings currently at trial.

         We claim that the defendants breached a contractual obligation and/or a
fiduciary  duty owed to us to market gas from the  Kotaneelee  gas field when it
was possible to so do. We assert that  marketing the Kotaneelee gas was possible
in 1984 and that the  defendants  deliberately  failed to do so.  We seek  money
damages and the forfeiture of the Kotaneelee gas field. We presented evidence at
trial that the money damages sustained by us were approximately $100 million.

         In addition,  we have claimed that our carried  interest account should
be reduced because of improper  charges to the carried  interest  account by the
defendants.  We claim that when the defendants in 1980 suspended production from
the field's gas wells, they failed to take  precautionary  measures necessary to
protect and maintain the wells in good operating condition. The wells thereafter
deteriorated,  which caused unnecessary  expenditures to be incurred,  including
expenditures to redrill one well. In addition,  we claim that  expenditures made
to repair  and  rebuild  the  field's  dehydration  plant  should  not have been
necessary had the  facilities  been properly  constructed  and maintained by the
defendants.  The  expenditures,  we claim, were  inappropriately  charged to the
field's carried interest  account.  The effect of an increased  carried interest
account is to extend the period  before pay out begins to the  carried  interest
account owners.

         We claim that  production from the field should have commenced in 1984.
At that time the field's carried interest account was approximately $63 million.
We claim that by 1993 at least $34  million  of  unnecessary  expenses  had been
wrongfully  charged  to the  carried  interest  account.  Our 30% share of these
expenses  would  be  approximately  $10.2  million.  We  further  claim  that if
production had commenced in 1984, the carried  interest  account would have been
paid out in approximately  two years and we would have begun to receive revenues
from the field in 1986.

         The amount of recoverable costs is one of the issues being contested in
the  Kotaneelee  litigation.  We  claim,  and  the  defendants  deny,  that  the
defendants have made improper  charges to the carried  interest  account and one
defendant  (Amoco Canada)  maintains that the carried interest account should be
charged additional amounts for gas processing fees. Amoco Canada claims that the
remaining costs to be recovered at December 31, 1999 were either  $58,711,000 or
$19,325,000  depending on inclusion of interest. It is not possible to determine
whether Amoco Canada will be successful  in its claim that gas  processing  fees
should be charged to the carried interest account.

         Although, according to the operator's reports, the Kotaneelee gas field
reached pay out status on November 10,  1999,  the operator has notified us that
it will not make any  payments to the carried  interest  owners,  including  us,
until the issue of the amount of  recoverable  costs under the carried  interest
account has been resolved by the Court of Queen's Bench of Alberta,  Canada. The
operator has stated that it will deposit our share of net production proceeds in
an interest bearing account with an escrow agent. A motion was filed in December
1999 by the  plaintiffs in Canada to direct all of the defendants to make timely
payments of all current and future amounts due from our share of field revenues.
On April 10,  2000,  the trial court  dismissed  our motion  pending the Court's
ultimate   determination   of  the  issues   surrounding  the  Kotaneelee  field
carried-interest account. We have filed a notice of appeal of the dismissal with
the Alberta Court of Appeal. Net production  proceeds are unlikely to be paid to
us until final resolution by the Courts of the Kotaneelee litigation.

         Since  March  2000,  the  operator  of the  Kotaneelee  field  has been
reporting the amount of the Company's  share of net revenues being  deposited in
escrow. The September 2000 report provided information for production during the
month of June 2000.  Based on the reported data, we believe the total amount due
to us is $5,526,365 of which $1,832,335 has been deposited in escrow.

         The parties to the litigation  conducted  extensive discovery since the
filing of the claims.  The trial began on September 3, 1996 and we completed the
presentation  of our case  against the  defendants  during  September  1998.  We
completed  our  rebuttal  evidence on April 24, 2000.  On June 26, 2000,  the we
filed our written closing  argument with the court.  The defendants  filed their
written  argument on August 28, 2000.  Oral closing  arguments  will probably be
held in late  December  2000 or early 2001. A decision in the  litigation is not
expected before late 2001.

         Columbia  has  filed  a  counterclaim  against  us  seeking,  if we are
successful in our claim for the  forfeiture of the field,  repayment  from us of
all unrecovered sums Columbia has expended on the Kotaneelee lands before we are
entitled to our interest.

         Based upon newly discovered  evidence,  we filed a new claim during May
1998 that the defendants  failed to develop the field in a timely manner. We are
unable to estimate the time necessary to conclude this litigation.


Matters Ancillary to Kotaneelee Litigation

         In our 1989  statement  of  claim,  we  sought a  declaratory  judgment
regarding two issues:

         (1)      whether interest accrued on the carried interest account; and

         (2)      whether  expenditures  for  gathering  lines  and  dehydration
                  equipment are expenditures  chargeable to the carried interest
                  account or whether we will be assessed a processing fee on gas
                  throughput.

         With respect to the first issue,  we maintain  that no interest  should
accrue on the account and the defendants have not contested this position.  With
regard to the second issue, we maintain that the  expenditures are chargeable to
the carried interest account.  Mobil, Esso and Columbia have essentially  agreed
to our  position  in the  original  pleadings  to the court while the Amoco Dome
Group continues to contest this issue.

         On January 22, 1996,  we settled two claims  outstanding  against us in
the Court of Queen's Bench of Alberta,  which related to a suit brought  against
AlliedSignal  Inc. in Florida  which was  dismissed on the basis that Canada was
the appropriate  forum for the litigation.  AlliedSignal  had sought  additional
relief  against  us in  Canada  to  preclude  other  types of suits by us and to
recover the costs of the  defense of the initial  action.  The  settlement  bars
AlliedSignal from making a claim against us for any costs in connection with the
Kotaneelee Litigation. We agreed not to bring any action against AlliedSignal in
connection  with the  Kotaneelee  gas field.  Neither  party  made any  monetary
payment to the other party.

         Under  Canadian law,  certain  costs (known as "taxable  costs") of the
litigation may be assessed against the non-prevailing party. Effective September
1,  1998,  the  Alberta  Rules of Court were  amended to provide  for a material
increase  in the costs which may be awarded to the  prevailing  party in matters
before the Court.

         The trial has been lengthy,  complicated  and costly to all parties and
we believe that the prevailing party or parties in the litigation will argue for
a substantial  assessment of costs against the non-prevailing  party or parties.
The  Court  has  very  broad  discretion  as  to  whether  to  award  costs  and
disbursements  and  as  to  the  calculation  of  any  amounts  to  be  awarded.
Accordingly,  we are unable to  determine  whether,  in the event that we do not
prevail on our claims in the litigation, costs will be assessed against us or in
what amounts.  However,  since the costs  incurred by the  defendants  have been
substantial,  and since the Court has broad discretion in the awarding of costs,
an award to the defendants  potentially could be material.  A cost award against
us could be of  sufficient  magnitude to  necessitate  a sale of our assets or a
debt or equity financing to fund such an award. There are no assurances that any
such sale or financing would be consummated.

         There is no  assurance  whatsoever  that we will be  successful  on the
merits of our claims,  which have been  vigorously  defended by the  defendants.
There is also no  assurance  that we will be awarded any  damages,  or that,  if
damages are awarded, the Court will apply the measure of damages we claim should
be applied.


<PAGE>


                                 OUR MANAGEMENT

Our Directors and Executive Officers

         Our board of directors  includes five members,  one of whom also serves
as our president  and chief  executive  officer.  Each director is elected for a
term of five years.

<TABLE>
                                                                                                               Other Offices
                          Date Present Term                                                       Director       Held with
         Name             of Office Expires                Biographical Information                 Since         Company
         ----             -----------------                ------------------------                 -----         -------


<S>                       <C>                  <C>                                                  <C>       <C>
Arthur B. O'Donnell       2001 Annual Meeting  Mr.  O'Donnell,  a CPA,  served as an officer of     1997      Audit Committee
                                               the   Company   for  many  years  prior  to  his
                                               retirement in 1994.  Age seventy-six.

Ben A. Anderson           2002 Annual Meeting  Mr.  Ben  A.  Anderson  was  elected  President,     2000         President
                                               Chief  Executive  Officer and a director of the
                                               Company on April 1, 2000.  Mr.  Anderson,  a
                                               petroleum  engineer,  has been  involved in
                                               operations,  reservoir  engineering,  reserve
                                               evaluation, venture analyses, and marketing  in
                                               Western  Canada as well as the  United  States
                                               for the past 19 years. He has been  associated
                                               with Ranger Oil,  Hillcrest  Resources,  and
                                               Triumph Energy Corp. Most recently,  he had been
                                               President and Chief Executive Officer of
                                               International  Gryphon  Resources Inc., a
                                               Calgary-based  publicly held petroleum exploration
                                               and development company.  Age forty-three.


Benjamin W. Heath         2003 Annual Meeting  Mr.  Heath  is  President   and  a  director  of     1956      Audit Committee
                                               Coastal  Caribbean  Oils & Minerals,  Ltd.,  and
                                               a director of Magellan Petroleum Corporation.
                                               Age eighty-six.

Timothy L. Largay         2004 Annual Meeting  Mr. Largay  has been a  partner  in the law firm     1997         Assistant
                                               of Murtha  Cullina  LLP,  Hartford,  Connecticut                  Secretary
                                               since  1974.  Mr. Largay is also a director of
                                               Magellan Petroleum Corporation.  Age fifty-seven.

M. Anthony Ashton         2005 Annual Meeting  Mr.   Ashton   served  as  President  and  Chief     1989
                                               Executive  Officer  from  June  1997  until  his
                                               retirement  on June 30,  2000.  He had been Vice
                                               President-Exploration  since  December  1988 and
                                               was  elected a director in 1989.  Mr.  Ashton is
                                               a  professional  petroleum  geologist  with more
                                               than  thirty  years  experience  in  exploration
                                               projects  in  western   Canada  and  the  United
                                               States.  Age sixty-five.
</TABLE>



<PAGE>


        Our other executive officer is the Chief Financial Officer, David Blain.
<TABLE>

<S>                                            <C>                                                               <C>
David Blain                                    Mr.  Blain,  a  Canadian  Chartered  Accountant,                  Secretary,
                                               was  elected  Secretary,   Treasurer  and  Chief                Treasurer and
                                               Financial and Accounting  Officer of the Company               Chief Financial
                                               on August 1, 2000.  Mr. Blain has been  involved                and Accounting
                                               with   accounting,   income   taxes,   corporate                   Officer
                                               planning and finance  matters in Western  Canada
                                               for  the  past  30  years.   Mr.   Blain  is  an
                                               independent  consultant to oil and gas companies
                                               in the  Calgary  area and will serve the Company
                                               on a  part-time  basis.  He has been  associated
                                               with Clarkson  Gordon & Co. and Hudson's Bay Oil
                                               & Gas Ltd.  He served  with Star Oil & Gas Ltd.,
                                               a Calgary based oil and gas company,  in various
                                               capacities  from 1979 to 1997 and most  recently
                                               was Vice  President,  Finance  of that  company.
                                               Age fifty-five.
</TABLE>

         All  of the  named  companies  are  engaged  in  oil,  gas  or  mineral
exploration  and/or development except where noted. There are no arrangements or
understandings  between any director and any other person or persons pursuant to
which such director was or is to be selected as a director.  There are no family
relationships  between any director,  executive officer,  or person nominated or
chosen by the Company to become a director.

Committees of the Board of Directors:  Attendance at Meetings

         During 1999, we adopted an Audit Committee Charter. The Audit Committee
was comprised of Mr.  O'Donnell  and Mr.  Eugene C. Pendery  (until his death on
October  19,  1999).  The  principal  duties of the  Audit  Committee  are:  the
engagement  and discharge of auditors,  reviewing with the auditors the plan and
results of the auditing  engagement,  reviewing the independence of the auditors
and  reviewing  the  adequacy of the  Company's  system of  internal  accounting
controls.  The Audit  Committee met two times during the year ended December 31,
1999. Mr. Heath was elected to the Audit Committee on January 27, 2000.

         We  have  no  standing  nominating  or  compensation  committees.   The
functions  that would be performed by such  committees are performed by the full
Board of  Directors.  During  the  year  ended  December  31,  1999,  all of the
directors attended at least 75% of the aggregate number of meetings of the Board
of Directors and Committees on which they serve (a total of 10 meetings).

Executive Compensation

     The following table sets forth certain summary  information  concerning the
compensation of Mr. M. Anthony Ashton, who was our President and Chief Executive
Officer until his retirement on March 31, 2000. No executive officer received or
earned any compensation in excess of U.S.  $100,000 or Can.  $100,000 during the
year 1999. Unless otherwise  indicated,  all dollar figures set forth herein are
expressed in Canadian currency.


<PAGE>


<TABLE>
---------------------------------------------------------------------------------------------------------------------
                                             Summary Compensation Table
---------------------------------------------------------------------------------------------------------------------
                                                           Annual Compensation                    Long Term
                    Name and                                                                  Compensation Award
               Principal Position                        Year             Salary ($)           Options/SARs(#)
------------------------------------------------- ------------------- ------------------- ---------------------------
<S>                                                      <C>                <C>                     <C>
M. Anthony Ashton                                        1999               50,000                  60,000
President and Chief Executive Officer                    1998               75,000                    -
                                                         1997               50,000                    -
------------------------------------------------- ------------------- ------------------- ---------------------------
</TABLE>

Stock Options

         The following  tables provide  information  about stock options granted
and  exercised  during  1999 and  unexercised  stock  options  held by the Named
Executive Officers at December 31, 1999.
<TABLE>

=======================================================================================================================
                                              Options/SAR Grants in 1999
---------------------------------------------------------------------------------- ------------------------------------
                                Individual Grants                                  Potential Realized Value at Assumed
                                                                                          Annual Rates of Stock
                                                                                   Price Appreciation for Option Terms
------------------------ ------------ -------------- ------------- --------------- ------------------ -----------------
         Name             Options/     % of Total      Exercise      Expiration         5% ($)            10% ($)
                            SARs      Options/SARs     or Base          Date
                           Granted     Granted to    Price ($/Sh)
                             (#)      Employees in
                                          1999
------------------------ ------------ -------------- ------------- --------------- ------------------ -----------------
<S>                        <C>             <C>           <C>       <C>                  <C>               <C>
M. Anthony Ashton          60,000          13            7.00      Jan. 28, 2004        146,000           256,000
=======================================================================================================================
</TABLE>

<TABLE>
-----------------------------------------------------------------------------------------------------------------------
                           Aggregated Option/SAR Exercises in 1999 and at December 31, 1999
                                                  Option/SAR Values
-----------------------------------------------------------------------------------------------------------------------
                           Shares                          Number of Unexercised            Value of Unexercised
                          Acquired         Value             Options/SARs (#)                   In-The-Money
                        On Exercise    Realized ($)        at December 31, 1999               Options/SARs ($)
                            (#)                                                             at December 31, 1999
-----------------------------------------------------------------------------------------------------------------------
         Name                                           Exercisable    Unexercisable    Exercisable    Unexercisable
-----------------------------------------------------------------------------------------------------------------------
<S>                         <C>             <C>           <C>               <C>           <C>               <C>
M. A. Ashton                -0-             -0-           70,000             -            116,000            -
-----------------------------------------------------------------------------------------------------------------------
M. A. Ashton                -0-             -0-           60,000             -            192,000            -
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

Stock Incentive Plans

         Under  the  terms  of our  1992 and 1998  stock  option  plans,  we are
authorized to grant certain  employees,  directors  and  consultants  options to
purchase limited voting shares at prices based on the market price of the shares
as  determined  on the date of the grant.  The options are normally  exercisable
immediately and issued for a period of five years from the date of grant.

         During  1998,  we adopted a stock option plan that permits the granting
of both stock options and stock appreciation  rights. A total of 700,000 limited
voting  shares are reserved for issuance  under the 1998 plan.  The plan permits
the granting of both stock options and stock  appreciation  rights (SARs) to our
directors,  officers, key employees and consultants,  those of our subsidiaries,
and  any  business  in  which  we  have a  substantial  interest.  The  plan  is
administered by the Board of Directors  acting as a committee of the whole.  The
Committee  will determine the persons to whom options or SARs are to be granted,
the number of shares  which may be acquired  upon the exercise of each option or
SAR, the purchase  price at which the options or SARs shall be granted,  and the
time or times at which  options or SARs can be exercised and whether in whole or
installments.

         The plan  provides for the grant of stock  options  subject to terms as
determined by the  Committee.  The purchase price of each option may not be less
than the greater of 1) the par value of the stock  underlying  the option  grant
and 2) the  fair  market  value  of the  stock  on the  date  of  grant.  Unless
determined  otherwise by the Committee or in an option  agreement,  options will
vest over a three year period. The options,  which are nontransferable except as
specified in the plan,  can have a maximum  period of ten years,  and may expire
earlier  in the  event  that the  optionee  dies or,  in the case of  employees,
employment  with us is  terminated.  The plan also includes  provisions  for the
cashless exercise of options and, at the Committee's discretion, the granting of
reload  options when an optionee  exercises an option granted under the plan and
makes payment using previously owned shares of stock.

         The  plan  also  provides  for the  grant of SARs  subject  to terms as
determined  by the  Committee  and  evidenced in a form also  determined  by the
Committee.  SARs may be granted  alone,  simultaneously  with a grant of options
under the Plan, or subsequent to a grant of options under the plan. The exercise
price of each SAR granted  alone may not be less than the fair  market  value of
one share of the stock on the date of grant. SARs granted simultaneously with or
subsequent  to a grant of options  have the same  exercise  price as the related
option,  but are exercisable only when the fair market value of stock subject to
the SAR and related option exceeds the exercise price thereof. Unless determined
otherwise by the Committee or in an SAR  agreement,  SARs vest over a three year
period and are nontransferable  except as specified in the plan. SARs can have a
maximum period of ten years, and are deemed exercised at the end of ten years if
the fair market value of the stock exceeds the exercise  price.  SARs may expire
earlier  in the  event  that the  optionee  dies or,  in the case of  employees,
employment with us is terminated.

         We are subject to Canadian tax laws and will  generally not be entitled
to an income tax deduction upon either the grant or the exercise of an Option or
SAR.

Compensation of Directors

         Each of our directors  receive an annual  director's fee of $30,000,  a
fee of $250 for each conference call meeting and $500 for each meeting requiring
travel.  On January 29, 1999, the named directors were granted five year options
to purchase  limited voting shares at a price of $7.00. The total directors fees
received and stock options granted in 1999 were as follows:

Director                                 Fee ($)          Stock Options Grants
--------                                 -------          --------------------
Benjamin W. Heath                         33,000                 20,000
Timothy L. Largay                         33,500                 75,000
Arthur B. O'Donnell                       33,500                 60,000
Eugene C. Pendery                         27,500                 60,000



<PAGE>


Compensation Agreements

     Effective  January 3, 2000,  Ben A. Anderson was employed as Executive Vice
President  for a two year period at an annual salary of $120,000.  Mr.  Anderson
also received  75,000 options to purchase  limited voting shares with 1/3 of the
total vesting immediately,  1/3 vesting after one year and 1/3 vesting after two
years.  Mr.  Anderson will also receive an annual vehicle  allowance  payment of
$12,000.  Mr.  Anderson  succeeded Mr.  Ashton as President and Chief  Executive
Officer on April 1, 2000.

Compensation Committee Interlocks and Insider Participation in Compensation
Committee

     The entire  board of directors  serves as the  compensation  committee.  M.
Anthony  Ashton is a director and served as our  President  and Chief  Executive
Officer until March 31, 2000.

                             PRINCIPAL STOCKHOLDERS

Security Ownership of Certain Beneficial Owners

         We know of no person or group  that owns  beneficially  more than 5% of
our outstanding limited voting shares.

Security Ownership of Management

         The following  table sets forth  information as to the number of shares
of our limited  voting  shares  owned  beneficially  on September 1, 2000 by our
directors and by all our executive officers and directors as a group:
<TABLE>
                                                              Amount and Nature of
                                                              Beneficial Ownership
           Name of                                    -------------------------------------
          Individual                                            Shares Held                           Percent of
           or Group                                Directly                  Options                    Class
------------------------------------           ---------------            ---------------             ----------

<S>                                                    <C>                   <C>                          <C>
M. Anthony Ashton                                      3,000                 130,000                      *
Benjamin W. Heath                                     20,000                  75,000                      *
Timothy L. Largay                                      3,615                  75,000                      *
Arthur B. O'Donnell                                    1,654                  60,000                      *
Ben A. Anderson                                            -                  75,000                      *
Directors and Officers as a
  Group (a total of 5)                               28,269                  415,000                    2.90%
------------------------
* The percent of class owned is less than 1%.
</TABLE>





<PAGE>


                         CERTAIN BUSINESS RELATIONSHIPS

         Mr. Timothy L. Largay,  a director of Canada  Southern since October 1,
1997,  is a member of the law firm of Murtha  Cullina  LLP,  which firm has been
retained by us for more than five years and is being retained during the current
year.

         On January 29, 1991,  we granted  interests to certain of our officers,
employees,  directors, counsel and consultants amounting to an aggregate of 7.8%
of any and all benefits to Canada Southern after expenses from the litigation in
Canada  relating to the  Kotaneelee  field.  We have reserved a 2.2% interest in
such net  recoveries  for possible  future grants to persons who may include our
officers  and  directors.  The  following  interests  were  granted  directly or
indirectly to our directors:

         Party                                           Interest Granted (%)
         -----                                           --------------------

         Murtha Cullina LLP                                    1.00
         Arthur B. O'Donnell                                    .33 1/3
         Benjamin W. Heath                                      .25

Royalty Interests

         The following  director has royalty interests in certain of our oil and
gas properties (present or past) which were received directly or indirectly from
us:  Benjamin W.  Heath,  interests  ranging  from 1.772% to 2%; and a trust (in
which Mr. Heath has a 54.4% beneficial interest),  interests ranging from 7.603%
to 7.8%.  In each case,  the  applicable  percentage  depends on the property on
which the royalty is paid.

         During 1999, we and third-party operators and/or owners of properties
made payments to Mr. Heath in the amount of U.S. $15,435. During the six month
period ended June 30, 2000, Mr. Heath was paid $8,435.

                    DESCRIPTION OF OUR LIMITED VOTING SHARES

         The following is a brief  description of our limited voting shares (par
value $1.00 per share).  All rights of our  shareholders  are  determined by the
laws of Nova  Scotia,  Canada.  Nova Scotia law does not, nor do our Articles of
Continuance  or  By-Laws,  impose  any  limitations  on the  rights  of  persons
nonresident  of Nova Scotia to vote and hold shares of our limited voting shares
by virtue of such nonresident status.

Voting Rights

         Each  shareholder  is  entitled  to one vote for each  share of limited
voting shares  registered in his name on the books of Canada Southern,  subject,
however,  to a provision  in our Articles of  Continuance  to the effect that no
person shall vote more than 1,000 shares beneficially owned by him or her.

Liquidation and Dividend Rights

         Subject to the rights of creditors,  all rights to the assets of Canada
Southern  available for distribution upon liquidation or upon the payment of any
dividend are vested in the holders of the limited  voting  shares and each share
is entitled  to  participate  equally  with every  other  share.  We are legally
restricted  from paying any dividend or making any other payment to shareholders
(except by way of return of  capital)  on the limited  voting  shares  until our
accumulated deficit ($27,332,000 at June 30, 2000) is eliminated.

         Current  Canadian  law does not  restrict  the payment of  dividends to
persons  not  resident  of  Canada.  Under  current  Canadian  tax  law  and the
Canada-United  States  Income  Tax  Convention,   any  dividends  paid  to  U.S.
resudent  shareholders  under the  convention  are  generally  subject  to a 15%
Canadian withholding tax.

Pre-emptive Rights, Conversion Rights, Redemption Provisions. Assessments

         The holders of the limited  voting  shares have no  preemptive  rights.
There are no conversion  rights  attached to our limited voting shares and there
are no provisions  for sinking  funds or  redemption  of shares.  The holders of
outstanding  shares of the limited  voting  shares are not liable to any further
calls or assessments by us.

                                  LEGAL MATTERS

         Legal matters  relating to United  States law in  connection  with this
offering have been passed upon by Murtha Cullina LLP, Hartford, Connecticut. All
matters  relating to Nova Scotia  Companies law in connection  with the offering
have been passed upon by the firm of Patterson Palmer Hunt Murphy,  Nova Scotia.
Blake Cassels & Graydon LLP, Toronto, Canada has passed upon the availability of
prospectus  exemptions in Canada for this offering,  Canadian federal income tax
consequences  and the  statement  under  "Risk  Factors - Risks  Related  to the
Offering" attributed to them.

                                     EXPERTS

         The consolidated financial statements of Canada Southern Petroleum Ltd.
at  December  31,  1999 and 1998 and for each of the three  years in the  period
ended December 31, 1999, appearing in this prospectus and registration statement
have been  audited by Ernst & Young LLP,  independent  auditors  as set forth in
their  report  included  herein.  See page  F-2.  These  consolidated  financial
statements are included in reliance upon such report given on their authority as
experts in auditing and accounting.

         Paddock Lindstrom & Associates Ltd. has served from time to time as our
independent  engineering  consultants.  We  have  relied  on  reports  by  these
consultants in the preparation of portions of this prospectus.

         See "Risk  Factors" at page 7  regarding  the  enforceability  of civil
liabilities  against  foreign  directors  and  officers of Canada  Southern  and
experts.


<PAGE>


                       WHERE YOU CAN FIND MORE INFORMATION

         We are a public company and file annual,  quarterly and special reports
and other  information with the SEC. You may read and copy any documents we file
at the SEC's Public  Reference Room, 450 Fifth Street,  N.W.,  Washington,  D.C.
20549.  You may  obtain  further  information  on the  operation  of the  Public
Reference  Room by calling the SEC at  1-800-SEC-0330.  You can obtain copies of
this material from the Public  Reference  Section of the SEC,  Washington,  D.C.
20549, at prescribed  rates. Our reports,  proxy and information  statements and
other  information  are also  available to the public at the SEC's web site. The
Internet address of that site is http://www.sec.gov.  You may also obtain copies
of our reports,  proxy and information statements and other information from our
web page at http:/www.cansopet.com.

         Our limited voting shares are listed on the Boston Stock Exchange,  the
Pacific Exchange,  The Toronto Stock Exchange and in the NASDAQ SmallCap Market.
Copies  of our  reports,  proxy  statements  and other  information  can also be
examined  at  each  of  these  exchanges  and at  the  offices  of the  National
Association of Securities Dealers, Inc.

         This  prospectus is only part of a  registration  statement on Form S-1
that we have filed with the SEC under the  Securities  Act and  therefore  omits
certain information contained in the registration  statement. We have also filed
exhibits and schedules  with the  registration  statement that are excluded from
this prospectus,  and you should refer to the applicable exhibit or schedule for
a complete  description  of any  statement  referring  to any  contract or other
document.  You may inspect a copy of the registration  statement,  including the
exhibits and  schedules,  without  charge at the SEC's public  reference room or
through its web site.


<PAGE>




                              INDEX TO CONSOLIDATED
                              FINANCIAL STATEMENTS
<TABLE>
                                                                                                   Page
                                                                                                 Reference

<S>                                                                                                <C>
Report of Independent Auditors                                                                     F-2

Consolidated balance sheets at June 30, 2000 (unaudited), December 31, 1999
and 1998.                                                                                          F-3

Consolidated statements of operations and deficit for the
six months ended June 30, 2000 and 1999 (unaudited) and for each
of the three years in the period ended December 31, 1999.                                          F-4

Consolidated statements of cash flows for the six months ended
June 30, 2000 and 1999 (unaudited) and for each of the three years in
the period ended December 31, 1999.                                                                F-5

Consolidated statement of Limited Voting Shares and Contributed Surplus for each
of the three years in the period ended
December 31, 1999 and the six months ended June 30, 2000 (unaudited)                               F-6

Notes to consolidated financial statements.                                                        F-7

Supplementary information on oil and gas activities                                               F-21
</TABLE>



<PAGE>


                                AUDITORS' REPORT


To the Shareholders of
Canada Southern Petroleum Ltd.


         We have  audited the  consolidated  balance  sheets of Canada  Southern
Petroleum Ltd. as at December 31, 1999 and 1998, and the consolidated statements
of operations and deficit,  cash flows and limited voting shares and contributed
surplus for each of the years in the three year period ended  December 31, 1999.
These  financial   statements  are  the   responsibility  of  Canada  Southern's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform an audit to
obtain  reasonable  assurance  whether  the  financial  statements  are  free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.

         In our opinion,  the consolidated  financial statements present fairly,
in all material  respects,  the financial  position of Canada Southern Petroleum
Ltd. as at December 31, 1999 and 1998 and the results of its  operations and its
cash flows for each of the years in the three year  period  ended  December  31,
1999, in accordance with accounting principles generally accepted in Canada.




         /s Ernst & Young LLP

Chartered Accountants
Calgary, Canada
March 10, 2000     (except for note 8, which is as of April 10, 2000)


<PAGE>


                         CANADA SOUTHERN PETROLEUM LTD.
                  (Incorporated under the laws of Nova Scotia)

                           CONSOLIDATED BALANCE SHEETS
                         (Expressed in Canadian dollars)

<TABLE>
                                                                      June 30,               As at December 31,
                                                                       2000              1999               1998
                                                                    ----------           -------------------------
           Assets                                                  (Unaudited)                           (Restated)
 Current assets
<S>                                                                <C>                <C>                 <C>
   Cash and cash equivalents (Note 2)                              $ 2,185,918        $ 3,045,530         $6,208,634
   Marketable securities (Note 3)                                      291,342            568,374            751,511
   Accounts receivable (Notes 4 and 7)                                 346,398            360,752            266,116
   Other assets                                                        289,155            307,519            319,697
                                                                       -------            -------            -------
 Total current assets                                                3,112,813          4,282,175          7,545,958
                                                                     ---------          ---------          ---------

 Oil and gas properties and equipment
 (full cost method) (Note 4)                                         9,363,434         10,207,294         10,000,010

 Future tax asset (Note 6)                                           1,826,000          1,583,475          1,308,505
                                                                     ---------          ---------          ---------
 Total assets                                                      $14,302,247        $16,072,944        $18,854,473
                                                                   ===========        ===========        ===========

           Liabilities and Shareholders' Equity

 Current liabilities
   Accounts payable                                                  $ 520,464          $ 634,600          $ 375,554
   Accrued liabilities (Note 10)                                       180,600             18,256            294,491
                                                                       -------             ------            -------
 Total current liabilities                                             701,064            652,856            670,045
                                                                       -------            -------            -------

 Future site restoration costs                                         145,934            174,696            236,045

 Contingencies (Note 8)                                                      -                  -                  -

 Shareholders' Equity
   Limited Voting Shares, par value
     $1 per share (Note 5)
   Authorized -100,000,000 shares
   Outstanding -14,284,970 (2000) and (1999)
   14,234,740 (1998) shares                                         14,284,970         14,284,970         14,234,740
   Contributed surplus                                              26,502,342         26,502,342         26,254,139
                                                                    ----------         ----------         ----------
 Total capital                                                      40,787,312         40,787,312         40,488,879
 Deficit                                                          (27,332,063)       (25,541,920)       (22,540,496)
                                                                  ------------       ------------       ------------
 Total shareholders' equity                                         13,455,249         15,245,392         17,948,383
                                                                    ----------         ----------         ----------
 Total liabilities and shareholders' equity                        $14,302,247        $16,072,944        $18,854,473
                                                                   ===========        ===========        ===========

                             See accompanying notes.
</TABLE>



<PAGE>


                         CANADA SOUTHERN PETROLEUM LTD.

                CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
                         (Expressed in Canadian dollars)


<TABLE>
                                                       Six months ended
                                                           June 30,                          Year ended December 31,
                                                  -----------------------------       ------------------------------------------
                                                       2000             1999             1999            1998             1997
                                                   (Unaudited)      (Unaudited)                       (Restated)       (Restated)
Revenues:
<S>                                                  <C>              <C>             <C>             <C>             <C>
  Oil sales (Notes 4 and 10)                         $   8,154        $  63,675       $ 151,137       $  897,878      $1,120,789
  Gas sales (Notes 4 and 10)                            44,215           28,358          38,324          705,277         523,433
  Proceeds from carried interests                      549,554          127,695         587,073          206,503         475,697
  Interest and other income                             81,539          145,098         253,365          221,523         395,059
  Gain on sale of assets                                     -                -               -        1,378,180               -
                                               ---------------  ---------------  --------------        ---------  --------------
    Total revenues                                     683,462          364,826       1,029,899        3,409,361       2,514,978
                                               ---------------  ---------------  --------------        ---------  --------------

Costs and expenses:
  General and administrative                           843,627          725,095       1,209,325        1,300,595       1,104,535
  Legal (Note 8)                                     1,109,488        1,119,213       2,108,521        2,357,707       1,897,506
  Lease operating costs                                 21,331           68,116         147,332          975,899         799,372
  Depletion, depreciation and amortization             119,000          188,200         707,200          869,600         623,600
  Foreign exchange (gains) losses                     (39,973)           92,245          77,475        (178,850)       (231,457)
  Provision for future site restoration costs                -                -             600           29,500          21,500
  Rent (Note 11)                                        28,075           28,751          55,840           76,812          57,586
  Abandonments and write downs                         634,582                -               -          684,635               -
                                               ---------------  ---------------  --------------        ---------  --------------
    Total costs and expenses                         2,716,130        2,221,620       4,306,293        6,115,898       4,272,642
                                               ---------------  ---------------  --------------        ---------  --------------

  Loss before income taxes                         (2,032,668)      (1,856,794)     (3,276,394)      (2,706,537)     (1,757,664)
  Income tax recovery (Note 6)                        242,525           73,196         274,970           378,367        170,158
                                               --------------   ---------------  -------------      ------------  --------------
Net loss                                           (1,790,143)      (1,783,598)     (3,001,424)      (2,328,170)     (1,587,506)
  Deficit - beginning of period                   (25,541,920)     (22,540,496)    (22,540,496)     (20,212,326)    (18,624,820)
                                                  ------------  -- ------------  --------------  -- ------------  --------------
  Deficit - end of period                        $(27,332,063)    $(24,324,094)   $(25,541,920)    $(22,540,496)   $(20,212,326)
                                                 =============    =============   =============    =============   =============

Net loss per share (Basic & Fully Diluted)              $(.13)           $(.13)          $(.21)           $(.16)          $(.11)
                                                        ======           ======          ======           ======          ======

Average number of shares
Outstanding (Basic & Fully Diluted)                 14,284,970       14,236,740      14,252,574       14,234,740      14,084,294
                                                    ==========       ==========      ==========       ==========      ==========

                             See accompanying notes.
</TABLE>



<PAGE>


                         CANADA SOUTHERN PETROLEUM LTD.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (Expressed in Canadian dollars)
<TABLE>

                                                               Six months ended
                                                                  June 30,                          Year ended December 31,
                                                       ---------------------------   -----------------------------------------------
                                                          2000             1999             1999           1998            1997
                                                       (Unaudited)      (Unaudited)                      (Restated)     (Restated)
Cash flows from operating activities:
<S>                                                  <C>             <C>              <C>              <C>             <C>
   Net loss                                          $ (1,790,143)   $ (1,783,598)    $(3,001,424)     $(2,328,170)    $(1,587,506)
    Adjustments to reconcile net loss
     to net cash provided by
     (used in) operating activities:
    Depreciation, depletion and amortization              119,000         188,200         707,200          869,600         623,600
    Future site restoration costs (net)                   (28,762)              -         (61,349)          25,071         (39,300)
    Gain on sale of assets                                      -               -               -       (1,378,180)              -
    Abandonments and write downs                          634,582         (73,196)              -          684,635               -
    Future tax recovery                                  (242,525)              -        (274,970)        (378,367)       (170,158)
  Change in assets and liabilities:
    Accounts receivable                                    14,354         (26,715)        (94,636)         959,970        (590,863)
    Other assets                                           18,364          70,736          12,178          (77,419)        (14,910)
    Accounts payable                                     (114,136)         46,862         259,045         (744,967)        680,684
    Accrued liabilities                                   162,344         (45,532)       (276,235)          16,776          95,611
                                                       -----------      -----------   ------------     --------------  ------------
Net cash used in operations                            (1,226,922)      (1,623,243)    (2,730,191)        (2,351,051)   (1,002,842)
                                                       -----------      -----------   ------------     --------------  ------------

Cash flows from investing activities:
  Additions to oil and gas properties and
  equipment                                              (245,722)        (484,186)        (914,483)      (1,942,474)   (3,258,426)
  Sale of marketable securities                           277,032          751,511          183,137        2,621,823     2,079,452
  Proceeds from the sale of properties                    336,000                -                -        5,751,180             -
                                                       -----------      -----------   --------------   --------------  ------------
Net cash provided by (used in) investing activities       367,310          267,325         (731,346)       6,430,529    (1,178,974)
                                                       -----------      -----------   --------------   --------------  ------------

Cash flows from financing activities:
  Exercise of stock options                                     -           35,000          298,433                -     1,601,375
                                                       -----------      ----------    --------------   --------------    ----------
Net cash from financing activities                              -           35,000          298,433                -     1,601,375
                                                       -----------      -----------   --------------   --------------    ----------

Increase (decrease) in cash
  and cash equivalents                                   (859,612)      (1,320,918)      (3,163,104)       4,079,478      (580,441)
Cash and cash equivalents at the
  beginning of period                                   3,045,530        6,208,634        6,208,634        2,129,156     2,709,597
                                                       -----------      -----------   --------------   -------------     ----------
Cash and cash equivalents at the
  end of period (Note 2)                                $2,185,918      $4,887,716       $3,045,530       $6,208,634    $2,129,156
                                                        ==========      ==========       ==========       ==========    ==========

                             See accompanying notes.
</TABLE>

<PAGE>


                         CANADA SOUTHERN PETROLEUM LTD.

                CONSOLIDATED STATEMENTS OF LIMITED VOTING SHARES
                             AND CONTRIBUTED SURPLUS
                         (Expressed in Canadian dollars)


<TABLE>

                                                                        Limited
                                                      Number          Voting Shares        Contributed
                                                    of shares         $1 par value          surplus             Total
                                                    ---------         ------------          -------             -----

<S>                                                 <C>                <C>                <C>                <C>
Balance as at December 31, 1996                     13,956,540         $13,956,540        $24,930,964        $38,887,504

Exercise of stock options                              278,200             278,200          1,323,175          1,601,375
                                                    ----------         -----------        -----------        -----------

Balance as at December 31, 1997 and 1998            14,234,740          14,234,740         26,254,139         40,488,879

Exercise of stock options and other sales               50,230              50,230            248,203            298,433
                                                    ----------         -----------         ----------         ----------

Balance as at December 31, 1999 and
June 30, 2000 (unaudited)                           14,284,970         $14,284,970        $26,502,342        $40,787,312
                                                    ==========         ===========        ===========        ===========
</TABLE>

                             See accompanying notes.



<PAGE>


                         CANADA SOUTHERN PETROLEUM LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         (Expressed in Canadian dollars)
                        December 31, 1999, 1998 and 1997
               (Information at June 30, 2000 and 1999 and for the
                       six months then ended is unaudited)


1.       Summary of significant accounting policies

Accounting principles

         The  Company  prepares  its  accounts  in  accordance  with  accounting
principles  generally  accepted in Canada which conform in all material respects
with United States generally accepted accounting principles ("U.S. GAAP").

Consolidation

         The consolidated  financial  statements  include the accounts of Canada
Southern Petroleum Ltd. and its wholly-owned subsidiaries, Canpet Inc. and
C.S. Petroleum Limited.

Use of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying  notes.   Specifically   estimates  were  utilized  in  calculating
depletion,   depreciation  and   amortization,   site  restoration   costs,  and
abandonments and write downs. Actual results could differ from those estimates.

Cash and cash equivalents

         For the purposes of the statement of cash flows, the Company  considers
all highly  liquid  investments  with a maturity of three  months or less at the
date of acquisition to be cash equivalents.

Oil and gas properties and equipment

         The  Company,   which  is  engaged  primarily  in  one  industry,   the
exploration for and the  development of oil and gas  properties,  principally in
Canada,  follows the full cost method of accounting for oil and gas  properties,
whereby all costs associated with the exploration for and the development of oil
and gas reserves are capitalized. Such costs include land acquisition, drilling,
geological,  geophysical and overhead  expenses.  The Company's cost centers are
Canada and the United States.

         The Company  periodically reviews the costs associated with undeveloped
properties  and  mineral  rights  to  determine  whether  they are  likely to be
recovered.  When such  costs  are not  likely to be  recovered,  such  costs are
transferred to the depletable pool of oil and gas costs.


<PAGE>


1.       Summary of significant accounting policies (Cont'd)

         The net  carrying  cost of the  Company's  oil  and gas  properties  in
producing  cost  centers is limited to an  estimated  recoverable  amount.  This
amount is the  aggregate  of future net  revenues  from proved  reserves and the
costs of  undeveloped  properties,  net of  impairment  allowances,  less future
general and administrative  costs,  financing costs and income taxes. Future net
revenues  are  calculated  using  year  end  prices  that are not  escalated  or
discounted. For Canadian GAAP future net revenues are undiscounted, whereas, for
U.S. GAAP future net revenues are discounted at 10%.

         The costs of the Company's 30% carried  interest in the  Kotaneelee gas
field are  included  in oil and gas  properties  and in the cost  center for the
purpose of computing  depletion.  In addition,  the Company's share of estimated
net reserves  after pay out are also included in the proved oil and gas reserves
base for the purpose of computing  depletion.  During  November  1999, the field
achieved pay out status.

         Gains or losses  are not  recognized  upon  disposition  of oil and gas
properties unless crediting the proceeds against  accumulated costs would result
in a change in the rate of depletion of 20% or more.

         Depletion is provided on costs  accumulated  in producing  cost centers
including production equipment using the unit of production method. For purposes
of the depletion calculation, gross proved oil and gas reserves as determined by
outside  consultants  are  converted to a common unit of measure on the basis of
their approximate relative energy content.

         Depreciation  has been computed for  equipment,  other than  production
equipment,  on the straight-line  method based on estimated useful lives of four
to ten years.

         Substantially   all  of  the  Company's   exploration  and  development
activities  related  to oil  and gas  are  conducted  jointly  with  others  and
accordingly the  consolidated  financial  statements  reflect only the Company's
proportionate interest in such activities.

Revenue recognition

         The Company recognizes revenue on its working interest  properties from
the production of oil and gas in the period the oil and gas are sold.


<PAGE>


1.       Summary of significant accounting policies (Cont'd)

         Revenue  under  carried  interest  agreements is recorded in the period
when the proceeds become  receivable and collection is reasonably  assured.  The
Company  is  entitled  to  participate  in oil and gas net  revenues  after  the
repayment  of  exploration,  drilling  and  completion  expenses to the party or
parties  bearing  these costs.  Each carried  interest  account is subject to an
independent  audit. In the past, these audits have resulted in both positive and
negative  adjustments  which are  attributable to prior year periods.  For these
reasons,  the proceeds under carried interest agreements may fluctuate each year
depending on both capital expenditures and any audit adjustments.

         The Company  follows the industry  practice of  reporting  its revenues
from carried  interest  agreements,  whereby one month of revenues is charged in
advance  for the  next  two  months'  operating  and  capital  expenditures.  In
addition,  the production  revenues from the last two months of each quarter are
reported  during  the  following  quarter  because  the  data  are  not  usually
available.

Earnings per share

         Earnings  per common share  ("EPS") is based upon the weighted  average
number of common and common equivalent shares outstanding during the period. The
Company's  basic and diluted  calculations of EPS are the same for both U.S. and
Canadian GAAP.

Future site restoration costs

         Total future site  restoration  costs are  estimated to be $ 146,000 at
June 30,  ($228,000 at December  31,  1999) and are being  provided on a unit of
production  basis.  The  provision is based on current  costs of complying  with
existing legislation and industry practice for site restoration and abandonment.
At June 30,  2000,  all of such costs had been  accrued.  At December  31, 1999,
approximately $53,000 of such costs had not been accrued. The estimated costs of
abandoning the two producing  wells in the Kotaneelee  field are not included in
future site restoration costs. These costs would be paid by the working interest
partners and charged to the carried interest account.

Future income taxes

         In  1999,  under  new  recommendations  of the  Canadian  Institute  of
Chartered Accountants, the Company retroactively adopted the liability method of
accounting for income taxes. Under this method, the Company records income taxes
to give effect to temporary  differences between the carrying amount and the tax
basis of the Company's assets and liabilities.  Temporary differences arise when
the  realization of an asset or the settlement of a liability would give rise to
either an increase or decrease in the  Company's  income  taxes  payable for the
year or later period. Future income taxes are recorded at the enacted income tax
rates that are expected to apply when the future tax liability is settled or the
future tax asset is  realized.  Income tax  expense is the tax  payable  for the
period and the change during the period in future income tax and liabilities.



<PAGE>



1.         Summary of significant accounting policies (Cont'd)

           Adoption  of the  liability  method of  accounting  for income  taxes
resulted in changes to previously  reported net income, net income per share and
the balance sheet accounts, as follows:

<TABLE>
                                                                                        1998                1997
                                                                                        ----                ----
<S>                                                                              <C>                 <C>
Net loss previously reported                                                     $(2,706,537)        $(1,757,664)
Adjustment for the effect of the change in accounting method                          378,367             170,158
                                                                                 ------------        ------------
           Net loss as restated                                                  $(2,328,170)        $(1,587,506)
                                                                                 ============        ============

Net loss per share previously reported                                                 $(.19)             $(.12)
Adjustment for the effect of the change in accounting method                             .03                .01
                                                                                       ------              ------
           Net loss per share as restated                                              $(.16)             $(.11)
                                                                                       ======              ======

Future tax asset previously reported                                                  $     -              $    -
Adjustment for the effect of the change in accounting method                        1,308,505             930,138
                                                                                    ---------             -------
           Future tax asset as restated                                            $1,308,505           $ 930,138
                                                                                   ==========           =========

Deficit previously reported                                                     $(23,849,001)       $(21,142,464)
Adjustment for the effect of the change in accounting method                        1,308,505             930,138
                                                                                -------------       -------------
           Deficit as restated                                                  $(22,540,496)       $(20,212,326)
                                                                                =============       =============
</TABLE>


         If the tax  allocation  method of accounting  for income taxes had been
retained,  the Company would have reported a net loss of  $(3,276,394) or $(.23)
per share for 1999.

Foreign currency translation

         Transactions  for  settlement in U.S.  dollars have been  translated at
average monthly exchange rates.  Monetary assets and liabilities in U.S. dollars
have been  translated at the year end exchange  rates.  Exchange gains or losses
resulting from these adjustments are included in costs and expenses.

Financial instruments

         The carrying value for cash and cash equivalents,  accounts  receivable
and accounts payable approximates fair value based on anticipated cash flows and
current market conditions.

 Comprehensive income

         The Company has no items of other comprehensive income for U.S. GAAP.
Comprehensive loss for all periods presented is equal to the net loss.



<PAGE>


2.       Cash and cash equivalents

         The Company  considers  all highly liquid short term  investments  with
maturities  of  three  months  or  less  at  date  of  acquisition  to  be  cash
equivalents.  Cash  equivalents  are carried at cost which  approximates  market
value.
<TABLE>
                                                                    Six months                    Year ended
                                                                  ended June 30,                  December 31,
                                                                  --------------           ---------------------------
                                                                       2000                    1999            1998
                                                                  --------------           ---------------------------
<S>                                                                  <C>                     <C>             <C>
Cash                                                                 $ 255,778               $ 398,884       $ 269,918
Canadian and U.S. bankers acceptances and mortgage notes
(Yield:2000-5.5%, 1999-5.0%, 1998-4.9%)                              1,346,610               2,076,663       4,880,833
U.S. marketable securities (Yield: 2000-6%, 1999-5.4%,
1998-4.8%)                                                             583,530                 569,983       1,057,883
                                                                    ----------              ----------      ----------
                                                                    $2,185,918              $3,045,530      $6,208,634
                                                                    ==========              ==========      ==========
</TABLE>

3.       Marketable Securities

         At June 30,  2000,  December  31, 1999 and 1998,  the Company  held the
following marketable securities which were expected to be held until maturity:

<TABLE>
                   Security                    Par value           Maturity Date Amortized Cost      Fair value
                   --------                    ---------           ------------- --------------      ----------
2000
<S>                                             <C>                 <C>               <C>              <C>
U.S. Federal Home Loan                          $295,900            Aug. 3, 2000      $291,342         $294,113
Bank Disc. Note                                 --------                              ========         ========

1999
U.S. Federal Home Loan
Bank Disc. Note                                 $577,700           Jan. 18, 2000      $568,374         $576,300
                                                ========                              ========         ========

1998
U.S. Federal National
  Mortgage Assoc.                               $765,100            Apr. 7, 1999      $751,511         $751,700
                                                ========                              ========         ========
</TABLE>



<PAGE>

<TABLE>

4.       Oil and gas properties and equipment

                                                                              Less Accumulated
                                                                                Depreciation
                                                                               Depletion and,        Net Book
                                                                Cost             Writedowns            Value
Balance June 30, 2000                                     -----------------   -----------------      -------------
<S>                                                             <C>                  <C>                <C>
Oil and gas properties - developed                              $18,864,542          $9,538,063         $9,326,479
Oil and gas properties (U.S.) - undeveloped                       1,319,220           1,319,219                  1
Seismic data                                                        112,000             112,000                  -
                                                                -----------          ----------         ----------
Total oil and gas properties                                     20,295,762          10,969,282          9,326,480
Equipment                                                            91,838              54,884             36,954
                                                                -----------          ----------         ----------
Total oil and gas properties and equipment                      $20,387,600         $11,024,166         $9,363,434
                                                                ===========         ===========         ==========

Balance December 31, 1999
Oil and gas properties - developed                              $19,009,974          $9,422,066         $9,587,908
Oil and gas properties (U.S.) - undeveloped                       1,266,334             684,635            581,699
Seismic data                                                        112,000             112,000                  -
                                                                -----------         -----------         ----------
Total oil and gas properties                                     20,388,308          10,218,701         10,169,607
Equipment                                                            89,567              51,880             37,687
                                                                -----------         -----------        -----------
Total oil and gas properties and equipment                      $20,477,875         $10,270,581        $10,207,294
                                                                ===========         ===========        ===========

Balance December 31, 1998
Oil and gas properties-developed                                $18,524,670          $8,720,066         $9,804,605
Oil and gas properties (U.S.) - undeveloped                         851,651             684,635            167,016
Seismic data                                                        112,000             112,000                  -
                                                                -----------          ----------         ----------
Total oil and gas properties                                     19,488,321           9,516,701          9,971,621
Equipment                                                            75,073              46,684             28,389
                                                                -----------          ----------         ----------
Total oil and gas properties and equipment                      $19,563,394          $9,563,385        $10,000,010
                                                                ===========          ==========        ===========
</TABLE>

        Substantially all gas sales were made to CanWest Gas Supply Inc. and oil
sales were made to Probe Exploration, Inc. ("Probe").  The gain on sale of
assets and the amount of abandonments and write downs are same under both
Canadian and U.S. GAAP.  During 1999, a total of $73,000 ($95,000 in 1998 and
$91,000 in 1997) of general and administrative expenses were capitalized.

         Included  in the  amount of  accounts  receivable  at June 30,  2000 is
$233,000 and $269,000 at December  31, 1999 due from various  industry  partners
which include Berkley Petroleum Ltd., PetroCanada, Oil For America - Exploration
and Farries Engineering.

         During 1999, the Company's  primary Alberta asset and revenue producing
property was its heavy crude oil production and related  facilities at Kitscoty.
The  Company  sold  its 10 %  working  interest  to the  operator  for  $336,000
effective  October 1, 1999. The transaction  was completed  during February 2000
and the proceeds of sale were  credited to oil and gas  properties  in the first
quarter of fiscal 2000.



<PAGE>


5.       Limited Voting Shares and stock options

         The Memorandum of Association  (Articles of Continuance) of the Company
provides that no person (as defined) shall vote more than 1,000 shares.

         Under the terms of the Company's 1992 and 1998 stock option plans,  the
Company is  authorized  to grant certain  employees,  directors and  consultants
options to purchase Limited Voting Shares at prices based on the market price of
the shares as  determined  on the date of the grant.  The options  are  normally
exercisable  immediately  and issued for a period of five years from the date of
grant.

         During 1998,  the Company  adopted a stock option plan that permits the
granting of both stock options and stock appreciation rights. A total of 700,000
Limited Voting Shares are reserved for issuance under the plan.

         Following  is  a  summary  of  option   transactions   which   reflects
adjustments of the stock option prices and the number of shares subject to stock
options as discussed above:

<TABLE>
Options Outstanding                     Expiration Dates            Number of Shares            Option Prices ($)
-------------------                     ----------------            ----------------            -----------------
<S>                                  <C>                                 <C>                        <C>
December 31, 1996                    Oct. 1999 - Jun. 2001               445,700
  Exercised                                                             (278,200)                   3.70 - 8.75
  Granted                                                                 35,000                      13.50
                                                                          ------
December 31, 1997                    Aug. 1999 - Oct. 2002               202,500                  6.37 - 13.50
  Granted                                                                  7,500                     10.25
                                                                           -----
December 31, 1998                    Aug. 1999 - Apr. 2003               210,000            ($7.94 weighted average)
  Granted                                                                362,500                      7.02
  Exercised                                                              (49,000)                    6.37-7.00
                                                                        --------
December 31, 1999                    Nov. 2000 - Jan. 2004               523,500            ($6.92 weighted average)
  Granted                                                                 75,000                      8.36
                                                                          ------
June 30, 2000                                                            598,500            ($7.10 weighted average)
                                                                         =======

Summary of Options Outstanding at June 30, 2000
Granted 1994                               Nov. 2000                      80,000                      7.00
Granted 1996                               Nov. 2000                      62,500                      6.37
Granted 1999                               Jan. 2004                     381,000                      7.00
Granted 2000                               Jan. 2005                      75,000                      8.36
                                                                          ------
Total - June 30, 2000                                                    598,500
                                                                         =======

Options reserved for future grants                                       432,134
----------------------------------                                       =======
</TABLE>

         For U.S. GAAP, the Company has elected to follow Accounting  Principles
Board Opinion No. 25,  "Accounting  for Stock Issued to Employees"  (APB No. 25)
and related  interpretations  in accounting for its stock options.  This method,
which is consistent with the Company's  accounting under Canadian GAAP, has been
chosen  because  the  alternative  fair  value  accounting  provided  under FASB
Statement No. 123,  "Accounting for Stock Based  Compensation,"  requires use of
option  valuation  models  that  were not  developed  for use in  valuing  stock
options. Under APB No.

Limited Voting Shares and stock options (Cont'd)

25, because the exercise price of the Company's  stock options equals the market
price of the underlying  stock on the date of grant, no compensation  expense is
recognized.

         Pro forma  information  regarding  net income and earnings per share is
required by FASB  Statement  No. 123, and has been  determined as if the Company
had  accounted  for its  stock  options  under  the fair  value  method  of that
Statement.  The fair value for these  options was estimated at the date of grant
using a Black-Scholes option pricing model. Option valuation models require that
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.  All of the valuations assumed no expected dividend. The assumptions
used in the 1997 valuation model were: risk free interest rate - 5.7%,  expected
life - 5 years and expected  volatility - .459. The assumptions used in the 1998
valuation model were:  risk free interest rate - 4.45%,  expected life - 5 years
and expected volatility - .328. The assumptions used in the 1999 valuation model
were:  risk free  interest  rate - 4.65%,  expected  life - 5 years and expected
volatility - .503.

         Because the Company's stock options have characteristics  significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its stock options.

         For the purpose of pro forma  disclosures,  the estimated fair value of
the  stock  options  is  expensed  in the year of grant  since the  options  are
immediately exercisable. The Company's pro forma information is as follows:
<TABLE>

         Amount Per Share
         ----------------
<S>                        <C>                                 <C>                   <C>
Net loss as reported       December 31, 1997                  $(1,587,506)          $(.11)
Stock option expense                                              225,400            (.02)
                                                              ------------          ------
Pro forma net loss         December 31, 1997                  $(1,812,906)          $(.13)
                                                              ============          ======

Net loss as reported       December 31, 1998                  $(2,328,170)          $(.16)
Stock option expense                                               29,600               -
                                                              ------------           -----
Pro forma net loss         December 31, 1998                  $(2,357,770)          $(.16)
                                                              ============          ======

Net loss as reported       December 31, 1999                  $(3,001,424)          $(.21)
Stock option expense                                            1,247,000            (.09)
                                                              ------------           -----
Pro forma net loss         December 31, 1999                  $(4,248,424)          $(.30)
                                                              ============          ======
</TABLE>



<PAGE>


6.       Income taxes

         Income  taxes vary from the amounts  that would be computed by applying
the Canadian federal and provincial income tax rates as follows:
<TABLE>

                                                      June 30
                                               2000             1999            1999             1998            1997
                                              ------           ------          ------           ------          -----
<S>                                           <C>              <C>             <C>              <C>             <C>
                                              44.84%           44.84%          44.84%           44.84%          44.84%
                                              ======           ======          ======           ======          ======
Recovery for income taxes based
on combined basic Canadian federal            $(911,448)       $(832,586)    $(1,469,135)     $(1,213,611)      $(788,137)
and provincial income tax
Nondeductible crown charges                         821            5,908          11,249          104,663         154,463
Resource allowance                              159,376          189,828         383,663          403,270         232,922
Other                                          (205,038)          12,617         (47,601)          24,919          21,106
Nontaxable portion of capital gain                    -                -               -          (20,049)        (20,743)
Unrealized tax loss                             713,764          551,037         846,854          322,441         170,158
                                                -------          -------      -----------      -----------     ----------
Actual income tax recovery                    $(242,525)        $(73,196)     $ (274,970)      $ (378,367)     $ (230,231)
                                              ==========        =========     ===========      ===========     ===========
</TABLE>

         At June 30, 2000 and December 31, 1999,  the Company had net  operating
losses for income tax  purposes  of  approximately  $5,981,000  and  $5,027,000,
respectively which are available to be carried forward to future periods.  These
losses expire in the following years: 2000 - $294,000,  2001 - $545,000,  2002 -
$569,000,  2003 -  $1,077,000,  2004 -  $545,000,  2005 -  $1,407,000  ,  2006 -
$590,000 and 2007 - $954,000.

         At June 30, 2000 and December 31, 2000,  the Company has the  following
oil and gas tax deductions available to reduce future taxable income, subject to
a final determination by taxation authorities.
<TABLE>
                                                                           June 30, 2000           December 31, 1999
       Canada
<S>                                                                          <C>                        <C>
       Drilling, exploration and lease acquisition costs                     $10,852,000                $ 10,570,000
       Drilling and exploration costs-successored                              1,926,000                   1,926,000
       Earned depletion                                                        1,975,000                   1,975,000
       Earned depletion-successored                                              208,000                     208,000
       Undepreciated capital costs                                             2,262,000                   2,336,000
       Cumulative eligible capital losses                                        407,000                     407,000
       Share issue costs                                                          38,000                      99,000

       United States
       Exploration and lease acquisition costs                                $1,234,000                  $1,234,000
</TABLE>


         As a result of these  deductions,  the  Company  has a future tax asset
which  primarily  represents  the excess of available  resource  deductions  for
income tax purposes over the recorded value of oil and gas  properties  together
with  operating  and capital  income tax loss  carryforwards.  These amounts are
expected to be recovered from the production of current oil and gas reserves. As
certain  of the  resource  deductions  are  restricted  and the  operating  loss
carryforwards are

6.       Income taxes (Cont'd)

subject  to  expiration,  there  is  considerable  risk  that  certain  of these
deductions  will not be utilized.  Accordingly,  the Company has  established  a
valuation allowance to recognize this uncertainty.
<TABLE>
                                 June 30,
                                   2000                 1999                  1998                  1997
                                ----------           -----------          -----------           -----------
<S>                             <C>                  <C>                   <C>                  <C>
Future tax asset                $6,304,941           $6,749,358            $5,728,699           $ 4,642,765
Valuation reserve               (4,478,941)          (5,165,883)          (4,420,194)           (3,712,627)
                                ----------           -----------          -----------           -----------
Net future tax asset            $1,826,000           $1,583,475            $1,308,505            $ 930,138
                                ==========           ==========            ==========            =========

Future tax recovery              $242,525             $ 274,970            $ 378,367             $ 170,158
                                 ========             =========            =========             =========
</TABLE>

7.       Line of credit

         The Company has an operating  line of credit with a Canadian  chartered
bank which provides for a loan of $500,000. The interest rate on borrowing is at
3/4%  above the  bank's  prime  lending  rate.  The line of credit is subject to
annual review and is secured by a general assignment of accounts  receivable and
an undertaking  to provide  security in the form of assignment of future working
interest proceeds. No drawings were made under this line during 1999 or 1998.

8.         Litigation

         The Company, which has a 30% interest in the Kotaneelee gas field,
believes that the working interest owners in the field have not adequately
pursued the attainment of contracts for the sale of Kotaneelee gas.  In October
1989 and in March 1990, the Company filed statements of claim in the Court of
Queen's Bench of Alberta, Judicial District of Calgary, Canada, against the
working interest partners in the Kotaneelee gas field.  The named defendants
were Amoco Canada Petroleum Corporation, Ltd., Dome Petroleum
Limited (now Amoco Canada Resources Ltd.), and Amoco Production Company
(collectively the "Amoco Dome Group"), Columbia Gas Development of Canada Ltd.
("Columbia"), Mobil Oil Canada Ltd. ("Mobil") and Esso Resource of Canada Ltd.
("Esso") (collectively the "Defendants"). In 1991, Anderson Exploration Ltd.
acquired all of the shares in Columbia and changed its name to Anderson Oil &
Gas Inc. ("Anderson").  Anderson is now the sole operator (the "Operator") of
the field and is a direct defendant in the Canadian lawsuit.  Columbia's
previous parent, The Columbia Gas System, Inc., which was reorganized in a
bankruptcy proceeding in the United States, is contractually liable to Anderson
in the legal proceedings currently at trial.

         The Company claims that the Defendants  breached a contract  obligation
and/or a fiduciary  duty owed to the  Company to market gas from the  Kotaneelee
gas field when it was possible to so do. The Company  asserts that marketing the
Kotaneelee gas was possible in 1984 and that the Defendants  deliberately failed
to do so. The Company seeks money damages and

8.       Litigation (Cont'd)

the forfeiture of the Kotaneelee gas field.  The Company  presented  evidence at
trial that the money damages  sustained by the Company were  approximately  $100
million.

         In  addition,  the  Company  has  claimed  that the  Company's  carried
interest  account should be reduced  because of improper  charges to the carried
interest account by the Defendants.  The Company claims that when the Defendants
in 1980  suspended  production  from the field's gas wells,  they failed to take
precautionary  measures  necessary  to protect  and  maintain  the wells in good
operating condition. The wells thereafter deteriorated, which caused unnecessary
expenditures  to be incurred,  including  expenditures  to redrill one well.  In
addition,  the Company claims that  expenditures  made to repair and rebuild the
field's dehydration plant should not have been necessary had the facilities been
properly  constructed and maintained by the Defendants.  The  expenditures,  the
Company claims,  were  inappropriately  charged to the field's carried  interest
account.  The effect of an increased  carried  interest account is to extend the
period before pay out begins to the carried interest account owners.

         The Company claims that production from the field should have commenced
in 1984. At that time the field's carried interest account was approximately $63
million.  The Company  claims  that by 1993 at least $34 million of  unnecessary
expenses  had been  wrongfully  charged to the  carried  interest  account.  The
Company's 30% share of these expenses would be approximately $10.2 million.  The
Company  further  claims that if production  had commenced in 1984,  the carried
interest  account  would have been paid out in  approximately  two years and the
Company  would  have  begun to  receive  revenues  from the  field in 1986.  The
operator  reported that as of November 30, 1999 development costs totaling $96.7
million had been incurred and repaid.

         The amount of recoverable costs is one of the issues being contested in
the Kotaneelee litigation. The Company claims, and the Defendants deny, that the
Defendants have made improper  charges to the carried  interest  account and one
defendant  (Amoco Canada)  maintains that the carried interest account should be
charged additional amounts for gas processing fees. Amoco Canada claims that the
remaining costs to be recovered at December 31, 1999 were either  $58,711,000 or
$19,325,000  depending on inclusion of interest. It is not possible to determine
whether Amoco Canada will be successful  in its claim that gas  processing  fees
should be charged to the carried interest account.

         Although, according to the Operator's reports, the Kotaneelee gas field
reached pay out status on November  10,  1999,  the  Operator  has  notified the
Company  that it will not make any  payments  to the  carried  interest  owners,
including the Company,  until the issue of the amount of recoverable costs under
the carried  interest account has been resolved by the Court of Queen's Bench of
Alberta,  Canada.  The Operator  has stated that it will  deposit the  Company's
share of net production  proceeds in an interest  bearing account with an escrow
agent. A motion was filed in December 1999 by the plaintiffs in Canada to direct
all of the Defendants to make timely payments

8.       Litigation (Cont'd)

of all  current  and  future  amounts  due  from  the  Company's  share of field
revenues.  The motion was subsequently amended to include all of the Defendants.
On April 10, 2000,  the trial court  dismissed the Company's  motion pending the
Court's ultimate  determination  of the issues  surrounding the Kotaneelee field
carried-interest  account.  The  Company  has  filed a notice  of  appeal of the
dismissal with the Alberta Court of Appeal. Net production proceeds are unlikely
to be paid to the Company until final resolution by the Courts of the Kotaneelee
litigation.

         Since  March  2000,  the  Operator  of the  Kotaneelee  field  has been
reporting the amount of the Company's  share of net revenues being  deposited in
escrow.  The July 2000 report  provided  information  for production  during the
month of April 2000.  Based on the reported data, the Company believes the total
amount due the Company is  $2,702,470  of which  $896,038 has been  deposited in
escrow.

         Columbia has filed a counterclaim  against the Company seeking,  if the
Company is  successful in its claim for the  forfeiture of the field,  repayment
from the Company of all unrecovered sums Columbia has expended on the Kotaneelee
lands before the Company is entitled to its interest.

         Based upon newly  discovered  evidence,  the Company  filed a new claim
during  May 1998 that the  Defendants  failed to  develop  the field in a timely
manner.  The Company is unable to estimate the time  necessary to conclude  this
litigation.

Matters Ancillary to Kotaneelee Litigation

         In its 1989  statement  of  claim,  the  Company  sought a  declaratory
judgment regarding two issues:

         (1)      whether interest accrued on the carried interest account; and

         (2)      whether  expenditures  for  gathering  lines  and  dehydration
                  equipment are expenditures  chargeable to the carried interest
                  account or whether the Company  will be assessed a  processing
                  fee on gas throughput.

         With respect to the first issue, the Company maintains that no interest
should  accrue  on the  account  and the  Defendants  have  not  contested  this
position.  With  regard to the second  issue,  the  Company  maintains  that the
expenditures are chargeable to the carried  interest  account.  Mobil,  Esso and
Columbia  have  essentially  agreed to the  Company's  position in the  original
pleadings  to the Court  while the Amoco Dome Group  continues  to contest  this
issue.

         On January 22, 1996, the Company settled two claims outstanding against
the Company in the Court of Queen's Bench of Alberta, Canada, which related to a
suit brought against

8.       Litigation (Cont'd)

AlliedSignal Inc.  ("AlliedSignal")  in Florida which was dismissed on the basis
that  Canada was the  appropriate  forum for the  litigation.  AlliedSignal  had
sought  additional  relief against the Company in Canada to preclude other types
of suits by the  Company  and to recover the costs of the defense of the initial
action. The settlement bars AlliedSignal from making a claim against the Company
for any costs in connection with the Kotaneelee  Litigation.  The Company agreed
not to bring any action against  AlliedSignal  in connection with the Kotaneelee
gas field. Neither party made any monetary payment to the other party.

         Under  Canadian law,  certain  costs (known as "taxable  costs") of the
litigation may be assessed against the non-prevailing party. Effective September
1,  1998,  the  Alberta  Rules of Court were  amended to provide  for a material
increase  in the costs which may be awarded to the  prevailing  party in matters
before the Court.

         The trial has been lengthy,  complicated  and costly to all parties and
the Company believes that the prevailing party or parties in the litigation will
argue for a substantial  assessment of costs against the non-prevailing party or
parties.  The Court has very broad  discretion  as to whether to award costs and
disbursements  and  as  to  the  calculation  of  any  amounts  to  be  awarded.
Accordingly,  the Company is unable to determine  whether,  in the event that it
does not prevail on its claims in the litigation, costs will be assessed against
it or in what amounts.  However, since the costs incurred by the Defendants have
been  substantial,  and since the Court has broad  discretion in the awarding of
costs, an award to the Defendants  potentially  could be material.  A cost award
against the Company  could be of sufficient  magnitude to  necessitate a sale of
Company assets or a debt or equity financing to fund such an award. There are no
assurances that any such sale or financing would be consummated.

         There is no assurance whatsoever that the Company will be successful on
the merits of its claims, which have been vigorously defended by the Defendants.
There is also no  assurance  that the Company  will be awarded any  damages,  or
that,  if damages are  awarded,  the Court will apply the measure of damages the
Company claims should be applied.

9.       Related party transactions

         In 1991,  the Company  granted  interests  to certain of its  officers,
employees,  directors, counsel and consultants amounting to an aggregate of 7.8%
of any and all benefits to the Company  after  expenses  from the  litigation in
Canada  relating to the  Kotaneelee  gas field.  The Company has reserved a 2.2%
interest in such net  benefits  for  possible  future  grants to persons who may
include officers and directors of the Company.

         Mr. Heath, a director of the Company,  has royalty interests in certain
of the Company's oil and gas properties,  (present and past) which were received
directly  or  indirectly  through  the  Company.  The  Company  and  third-party
operators and/or owners of properties made payments  pursuant to these royalties
for the benefit of Mr. Heath totaling U.S. $15,435,  $8,324 and $11,158 in 1999,
1998 and 1997,  respectively.  During the six month  period ended June 30, 2000,
Mr. Heath was paid $8,435.

10.      Other financial information
<TABLE>
                                                                   June 30,                  December 31,
Accrued liabilities
                                                                     2000               1999              1998
                                                                     ----               ----              ----
<S>                                                              <C>                <C>               <C>
Accrued accounting and legal expenses                            $ 142,535          $ 18,256          $ 69,890
Accrued royalties                                                        -                 -           141,575
Other                                                               38,065                 -            83,026
                                                                 ---------          --------          --------
                                                                 $ 180,600          $ 18,256          $294,491
                                                                 =========          ========          ========
</TABLE>


<TABLE>
                                           Six months ended
                                               June 30,                          Year ended December 31,
                                        ----------------------            -------------------------------------
                                         2000             1999            1999             1998            1997
                                        ------          -------         --------         --------        --------
<S>                                     <C>             <C>             <C>              <C>             <C>
Royalty payments (1)                    $1,877          $12,992         $ 71,838         $146,161        $366,661
                                        ======          =======         ========         ========        ========

Interest payments (2)                     $212               $53         $ 2,600         $ 1,625          $ 1,775
                                        ======          ========        ========         =======          =======

Large corporation tax payments          $5,772           $9,336         $ 15,108         $ 22,837        $ 27,388
                                        ======           ======         ========         ========        ========
--------------------
(1)      Oil and gas sales are reported net of royalties paid.
(2)      Bank line of credit charges.
</TABLE>

11.      Leases

         At June 30, 2000,  the future  minimum  rental  payments and  estimated
operating costs  applicable to the Company's  noncancelable  five year operating
(office) lease which was effective June 1, 2000 are as follows:
                                Fiscal Year                               Amount
                                -----------                               ------
                                    2000                                 $23,061
                                    2001                                  39,534
                                    2002                                  40,943
                                    2003                                  41,949
                                    2004                                  41,949
                                    2005                                  17,478
                                                                          ------
                                   Total                                $204,914
                                                                        ========




<PAGE>


                         CANADA SOUTHERN PETROLEUM LTD.
                         (Expressed in Canadian dollars)
                                December 31, 1999
                        SUPPLEMENTARY INFORMATION ON OIL
                               AND GAS ACTIVITIES
                                   (unaudited)


         The following information includes estimates which are subject to rapid
and unanticipated change. Therefore,  these estimates may not accurately reflect
future net income to the Company.

         All amounts below except for costs, acreage,  wells drilled and present
activities  relate  to  Canada.  Oil and gas  reserve  data and the  information
relating to cash flows were  provided by Paddock  Lindstrom &  Associates  Ltd.,
independent consultants.

Estimated net quantities of proved oil and gas reserves:

<TABLE>
                                                                                                  Oil             Gas
                                                                                               (bbls)           (bcf)
                                                                                               ------           -----
Proved reserves:
<S>                                                                                           <C>              <C>
December 31, 1996                                                                             425,800          29.031
  Revisions of previous estimates                                                             179,333         (3.802)
  Production*                                                                                (71,333)          (.838)
                                                                                             --------          ------
December 31, 1997                                                                             533,800          24.391
  Sale of properties                                                                        (350,800)         (2.632)
  Revisions of previous estimates                                                            (73,419)         (2.088)
  Production*                                                                                (73,381)         (1.263)
                                                                                             --------         -------
December 31, 1998                                                                              36,200          18.408
  Revisions of previous estimates                                                               5,050           6.786
  Production*                                                                                (11,650)         (1.710)
                                                                                             --------         -------
December 31,1999                                                                               29,600          23.484
                                                                                               ======          ======

Proved developed reserves:
December 31, 1996                                                                             358,400          28.265
                                                                                              =======          ======
December 31, 1997                                                                             508,200          24.391
                                                                                              =======          ======
December 31, 1998                                                                              36,200          18.408
                                                                                               ======          ======
December 31, 1999                                                                              29,600          23.484
                                                                                               ======          ======

-----------------
*     Production  data  includes  oil and gas  sales and the  proceeds  from the
      carried interest properties.
</TABLE>


<PAGE>


Results of oil and gas operations:

<TABLE>
                                                                      1999                  1998                 1997
                                                                                      (Restated)           (Restated)
Income:
<S>                                                               <C>                 <C>                  <C>
  Oil and gas sales                                               $189,461            $1,603,155           $1,644,222
  Proceeds from carried interests                                  587,073               206,503              475,697
  Gain on sale of assets                                                 -             1,378,180                    -
                                                                  --------             ---------            ---------
                                                                   776,534             3,187,838            2,119,919
                                                                  --------             ---------            ---------
Costs and expenses:
  Production costs                                                 147,332               975,899              799,372
  Depletion depreciation, and amortization                         707,200               869,600              623,600
  Provision for future site restoration costs                          600                29,500               21,500
  Abandonments and write downs                                           -               684,635                    -
  Income tax expense (recovery)                                   (35,243)               281,687              302,870
                                                                  --------             ---------            ---------
                                                                   819,889             2,841,321            1,747,342
                                                                   -------             ---------            ---------
Net income (loss) from operations                               $ (43,355)              $346,517             $372,577
                                                                ==========              ========             ========
</TABLE>


Capitalized costs of oil and gas activities:

<TABLE>
                                                                      1999                  1998                 1997
                                                                  --------              --------            ---------
<S>                                                               <C>                   <C>                 <C>
Acquisition costs                                                 $241,000              $ 11,000            $ 399,000
Exploration                                                        514,000               174,000              546,000
Development                                                        145,000             1,758,000            2,313,000
</TABLE>

Standardized  measure of discounted future net cash flows relating to proved oil
and gas  reserve  quantities  during  the  following  period  (in  thousands  of
dollars):

<TABLE>
                                                                      1999                  1998                 1997

<S>                                                                <C>                   <C>                  <C>
Future cash inflows                                                $70,491               $28,052              $46,435
Future development and production costs                            (24,364)              (14,030)             (22,517)
                                                                   --------              --------             --------
                                                                    46,127                14,022               23,918
Future income tax expense*                                          (6,331)                    -               (1,573)
                                                                    -------              --------              -------
Future net cash flows                                               39,796                14,022               22,345
10% annual discount                                                 (8,758)               (4,781)              (7,836)
                                                                    -------              --------              -------
Standardized measure of discounted
  future net cash flows                                            $31,038                $9,241              $14,509
                                                                   =======                ======              ========
</TABLE>
------
* Reflects tax benefit for the years 1999,  1998 and 1997, from carry forward of
exploration,  development and lease  acquisition  costs,  undepreciated  capital
costs and book earned depletion of $18,940,000, $16,381,000 and $18,065,000.

         Current  prices  used in the above  estimates  were based upon  selling
prices at the  wellhead at December of each year.  The actual  price  ($2.83) of
Kotaneelee gas at December 31, 1999, was used in these estimates.  Current costs
were based upon estimates made by consulting engineers at the end of each year.


<PAGE>


Changes in the standardized  measure during the following  periods (in thousands
of dollars):
<TABLE>
                                                                    Year ended December 31,
                                                        -----------------------------------------------------
                                                           1999                   1998                  1997
Changes due to:                                         --------------        ------------            -------
<S>                                                       <C>                   <C>                   <C>
Sale of properties                                        $     -               $(4,374)              $     -
Prices and production costs                                17,776                  (402)                 (579)
Future development costs                                     (116)               (1,204)               (2,350)
Sales net of production costs                                (619)                 (906)               (1,562)
Development costs incurred
  during the year                                             145                 1,758                 2,313
Net change due to extensions,
  discoveries and improved recovery                             -                     -                 1,692
Revisions of quantity estimates                             7,256                  (872)               (3,642)
Accretion of discount                                         924                 1,045                 1,723
Net change in income taxes                                 (3,569)                 (313)                  939
                                                           -------              --------              --------
Net change                                                $21,797               $(5,268)              $(1,466)
                                                          ========              ========              ========
</TABLE>


<PAGE>

























--------------------------------------------------------------------------------
You should rely only on the  information  contained or incorporated by reference
in this  prospectus.  We have not  authorized  anyone  (including  any broker or
salesman) to provide you with different or inconsistent  information.  If anyone
provides you with different or inconsistent information,  you should not rely on
it. This  document may be used only where it is legal to sell these  securities.
You should assume that the information  contained in this prospectus is accurate
only as of _______, 2000. You should not assume that this prospectus is accurate
as of any other date.
--------------------------------------------------------------------------------








                         Canada Southern Petroleum Ltd.










                               __________ LIMITED
                                  VOTING SHARES

                              ___________ RIGHTS TO
                                PURCHASE LIMITED
                                  VOTING SHARES








                                                          ------------------
                                                             PROSPECTUS
                                                          ------------------






                                                            __________, 2000



<PAGE>



                                      II-5
                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

         The following  table sets forth our estimates of the expenses  incurred
in connection with the sale of common stock being registered,  all of which will
be paid by us.

SEC registration fee                                                  $[______]
Stock exchange listing fees                                           $[______]
Printing expenses                                                     $[______]
Transfer agent's and registrar's fees                                 $[______]
Legal fees and expenses                                               $[______]
Accounting fees and expenses                                          $[______]
Blue sky qualification fees and expenses                              $[______]
Miscellaneous fees and expenses                                       $[______]


                                                TOTAL:

Item 14. Indemnification of Directors and Officers.

          Paragraph  177 of the  Company's  Articles  of  Association  (By-Laws)
provides as follows:

         177. (a) Each of the  Directors  and officers for the time being of the
         Company and his heirs, executors and administrators,  in the absence of
         any dishonesty on his part,  shall be indemnified and secured  harmless
         by the Company from and against all claims,  actions,  costs,  charges,
         losses,  damages and  expenses  incurred or  sustained by reason of any
         action or thing done, concurred in or omitted in or about the execution
         of his duty or supposed duty as a result of the breach of his fiduciary
         duty.

         (b) No  Director  or officer  for the time being of the Company and his
         heirs,  executors and administrators,  in the absence of any dishonesty
         on his part,  shall be liable  for:  the acts,  receipts,  neglects  or
         defaults of any other person;  or for joining in any receipt or act for
         conformity; or for any loss, damage or expense happening to the Company
         through  the  insufficiency  or  deficiency  of title  to any  property
         acquired by, for or on behalf of the Company;  or for the insufficiency
         or  deficiency  of any  security  in or upon  which  any  moneys of the
         Company  are  invested;  or for any loss or  damages  arising  from the
         bankruptcy,  insolvency  or  tortious  act of any person  with whom any
         moneys,  securities  or other  property  of the  Company  are lodged or
         deposited;  or for any other loss, damage or misfortune  whatever which
         may arise out of the  execution  of his duty or  supposed  duty or as a
         result of the breach of his fiduciary duty or in relation thereto.

         (c) The Company shall indemnify a director or officer of the Company, a
         former director or officer of the Company or a person who acts or acted
         at the Company's  request as a director or officer of a body  corporate
         of which the Company is or was a shareholder or creditor, and his heirs
         and legal  representatives,  against  all  claims,  costs,  charges and
         expenses,  including  an amount  paid to settle an action or  satisfy a
         judgment, penalty or fine, reasonably incurred by him in respect of any
         civil,  criminal or administrative  action or proceeding to which he is
         made a party by reason of being or having been a director or officer of
         such corporation or body corporate if:

                  (1)   He acted honestly and in good faith with a view to the
                        best interests of the Company; or

                  (2)   In the case of a criminal  or  administrative  action or
                        proceeding  that is enforced by a monetary  penalty,  he
                        had  reasonable  grounds for believing  that his conduct
                        was lawful; or

                  (3)   He was substantially successful on the merits in this
                        defense of the action or proceeding.

         (d) The foregoing  provisions of this article shall be in amplification
         of and in addition to and not by way of limitation  of or  substitution
         for any rights, immunities or protection conferred upon any director or
         officer by any statute, law, matter or thing whatsoever.

         The Company has entered  into  expense  agreements  with its  executive
officers and each of its directors.  These  agreements  provide that the Company
shall advance such persons the costs,  including reasonable  attorneys' fees, of
defending any litigation  brought against them by reason of such person being or
having been a director or executive officer of the Company.  The agreements also
obligate the directors and executive  officer to repay any such amounts advanced
should a final decision by a court having  jurisdiction in the matter  determine
that the  director  or  executive  officer in  question  is not  entitled  to be
indemnified.

         In 1987,  we  purchased  U.S.  $150,000  of  directors'  and  officers'
liability  insurance coverage from an unaffiliated  Bermuda company at a cost of
U.S.  $150,000 plus an annual U.S.  $7,500  service fee during the period of the
policy.  We are credited with  investment  income from the policy premium during
the term of the policy and all or a portion of such  premium will be refunded at
the end of the policy  term to the extent  that no claims are made.  We had been
unable to obtain any other  liability  coverage for the Company's  directors and
officers.

         In recent years, we have been able to purchase directors' and officers'
insurance coverage.  The current amount of D&O coverage is Can. $15 million
(including the above policy) at an annual cost of Can. $122,000.

Item 15. Recent Sales of Unregistered Securities

                  None.

Item 16. Exhibits and Financial Statement Schedules.

         (a)      Exhibits

      Exhibit No.                           Exhibit
      -----------                           -------
          3.1       Memorandum of  Association  as amended on June 30, 1982, May
                    14,  1985 and April 7, 1988  filed as Exhibit 4B to Form S-8
                    as filed on November 25, 1998 is incorporated by reference.

          3.2       By-laws, as amended, filed as Exhibit 4C to Form S-8 as
                    filed on November 25, 1998 are

           5        Form of Opinion of Counsel - Patterson Palmer Hunt Murphy
                    (filed herewith).

          10.1      Agreement dated May 28, 1959 between the Company et al. and
                    Home Oil Company Limited et

          10.2      Copies of Supplementary Documents to May 28, 1959 Agreement
                    (see Exhibit 10.1 above),

          10.3      Copy of Modification to Agreement dated May 28, 1959
                    (see Exhibit 10.1 above), made as of

          10.4      Copy of Agreement dated April 1, 1966 among the Company et
                    al. and Dome Petroleum Limited

          10.5      Copy of Letter Agreement dated February 1, 1977 between the
                    Company and Columbia Gas

          10.6      Copy of Agreement dated January 28, 1972 between the Company
                    and Panarctic Oils Ltd. for

          10.7      Stock Option Plan adopted December 9, 1992 filed as Exhibit
                    10(c) to Annual Report on Form

          10.8      Stock Option Plan effective July 1, 1998 filed as Exhibit A
                    to Schedule 14A Information

          23.1      Consent of Ernst & Young LLP (filed herewith).

          23.2      Consent of Patterson Palmer Hunt Murphy (filed herewith).

          23.3      Consent of Murtha Cullina LLP (filed herewith).

          23.4      Consent of Blake, Cassels & Graydon LLP (filed herewith).

          23.5      Consent of Paddock Lindstrom & Associates, Ltd.
                    (filed herewith).

           24       Powers of Attorney of Ben A. Anderson, M. Anthony Ashton,
                    Timothy L. Largay, Arthur B.

           27       Financial Data Schedule.

          99.1      Form of rights certificate/subscription card (filed
                    herewith).

          99.2      Instructions for Purchasing Stock (filed herewith).

          99.3      Offering cover letter to stockholders  (filed herewith).

Item 17. Undertakings

         The undersigned registrant hereby undertakes:

         (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

         (i)  To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

         (ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration  statement (or the most recent post-effective
amendment  thereof)  which,  individually  or  in  the  aggregate,  represent  a
fundamental change in the information set forth in the registration statement;

         (iii) To include any material  information  with respect to the plan of
distribution  not  previously  disclosed  in the  registration  statement or any
material change to such information in the registration statement;

         Provided,  however,  that paragraphs (1)(i) and (1)(ii) do not apply if
the  registration  statement  is on Form S-3 or Form  S-8,  and the  information
required to be included in a  post-effective  amendment by those  paragraphs  is
contained in periodic reports filed by either registrant  pursuant to section 13
or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.

         (2) That,  for the  purpose  of  determining  any  liability  under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such  securities at that time shall be deemed to be the initial bona
fide offering thereof.

         (3) To remove from registration by means of a post-effective  amendment
any of the securities being registered which remain unsold at the termination of
the offering.

         (4) To file a post-effective amendment to the registration statement to
include any financial  statements required by Rule 3-19 of Regulation S-X at the
start of any delayed offering or throughout a continuous offering.




<PAGE>


         Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors,  officers and controlling  persons of
the  registrants  pursuant  to  the  foregoing  provisions,  or  otherwise,  the
registrants have been advised that in the opinion of the Securities and Exchange
Commission  such  indemnification  is against  public policy as expressed in the
Securities Act and is, therefore,  unenforceable.  In the event that a claim for
indemnification  against  such  liabilities  (other  than  the  payment  by  the
registrants of expenses  incurred or paid by a director,  officer or controlling
person of the  registrants  in the  successful  defense of any  action,  suit or
proceeding)  is  asserted by such  director,  officer or  controlling  person in
connection with the securities being registered, the registrants will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit  to a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification  is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.


<PAGE>



                                   SIGNATURES

         Pursuant  to the  requirements  of the  Securities  Act  of  1933,  the
registrant has duly caused this amendment to this  registration  statement to be
signed on its behalf by the  undersigned,  thereunto duly authorized in the city
of Calgary, Alberta, Canada, on the 22nd day of September, 2000.

                         CANADA SOUTHERN PETROLEUM LTD.
                                  (Registrant)

                             By: /s/ Ben A. Anderson
                                     Ben A. Anderson, President

         Pursuant  to the  requirements  of the  Securities  Act of  1933,  this
amendment to this registration  statement has been signed below by the following
persons in the capacities and o the date indicated.
<TABLE>
               Signature                              Title                              Date
               ---------                              -----                              ----

Principal executive officer:


<S>                                       <C>                                     <C>
/s/Ben A. Anderson                                   President                    September 22, 2000
------------------
Ben A. Anderson

Principal financial officer:

/s/David Blain                            Secretary/Treasurer and Chief           September 22, 2000
--------------                                  Financial Officer
David Blain

A majority of the Board of
Directors:

/s/ James R. Joyce                                                                September 22, 2000
------------------
James R. Joyce
Attorney-in-Fact for:

Ben A. Anderson                                      Director

M. Anthony Ashton                                    Director

Benjamin W. Heath                                    Director

Timothy L. Largay                                    Director

Arthur B. O'Donnell                                  Director
</TABLE>


         Pursuant  to the  requirements  of the  Securities  Act  of  1933,  the
undersigned has signed this registration statement on September 22, 2000.

                               /s/James R. Joyce
                                  James R. Joyce
                            Authorized Representative
                               in the United States


<PAGE>


                                INDEX OF EXHIBITS

              Item Number                       Description

                   5           Form of Opinion of Counsel - Patterson Palmer
                               Hunt Murphy

                 23.1          Consent of Ernst & Young LLP

                 23.2          Consent of Patterson Palmer Hunt Murphy

                 23.3          Consent of Murtha Cullina LLP

                 23.4          Consent of Blake, Cassels & Graydon LLP

                 23.5          Consent of Paddock Lindstrom & Associates, Ltd.

                  24           Powers of Attorney of Ben A. Anderson,
                               M. Anthony Ashton, Benjamin W. Heath,

                  27           Financial Data Schedule

                 99.1          Form of rights certificate/subscription card

                 99.2          Instructions for Purchasing Stock

                 99.3          Offering cover letter to stockholders




<PAGE>
[{"type": "S-1", "sequence": "1", "filename": "0001.txt", "description": "PRELIMINARY REGISTRATION STATEMENT", "secsgml_size_bytes": 280042}]
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As filed with the Securities and Exchange Commission on September 25, 2000
                                                    Registration No. 333-_______
________________________________________________________________________________

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                           ---------------------------
                                    FORM S-1
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                           ---------------------------

                         CANADA SOUTHERN PETROLEUM LTD.
             (Exact Name of Registrant as Specified in its Charter)

         NOVA SCOTIA, CANADA            1330                     98-0085412
         -------------------            ----                     ----------
(State or other Jurisdiction of (Primary Standard Industrial  (I.R.S. Employer
 Incorporation or Organization)   Classification Number)  Identification Number)

             Suite 505, 706 Seventh Avenue, S.W., Calgary, Alberta,
                         Canada T2P 0Z1, (403) 269-7741
 -------------------------------------------------------------------------------
    (Address, including Zip Code, and Telephone Number, including Area Code,
                  of Registrant's Principal Executive Offices)

                                    Copy to:
                                Timothy L. Largay
                               Murtha Cullina LLP
                   CityPlace I, 185 Asylum Street, 29th Floor
                        Hartford, Connecticut 06103-3469
                                 (860) 240-6017

            (Name, Address, including Zip Code, and Telephone Number,
                   including Area Code, of Agent for Service)
                           ---------------------------
Approximate date of the start of proposed sale to the public:  As soon after the
effective date as practicable.

If any of the  securities  being  registered on this Form are to be offered on a
delayed or continuous  basis  pursuant to Rule 415 under the  Securities  Act of
1933 check the following box. [X]

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the  Securities  Act  registration  statement  number of the  earlier  effective
registration statement for the same offering. [ ]

If this Form is a  post-effective  amendment filed pursuant to Rule 462(c) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registrations  statement number of the earlier effective  registration statement
for the same offering. [ ]

If this Form is a  post-effective  amendment filed pursuant to Rule 462(d) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. [ ]

If delivery  of the  prospectus  is  expected  to be made  pursuant to Rule 434,
please check the following box. [ ]

                         CALCULATION OF REGISTRATION FEE

---------------------------------------------- ---------------- ----------------- ----------------- -----------------
   Title of each class of securities to be      Amount to be        Proposed          Proposed         Amount of
                 registered                      registered         maximum           maximum       registration fee
                                                                 offering price      aggregate
                                                                   per share       offering price
---------------------------------------------- ---------------- ----------------- ----------------- -----------------
Limited Voting Shares, par value $1 Canadian
per share                                       3,000,000(1)       $ 5.00(1)       $15,000,000(1)      $3,960.00
Rights to Purchase Limited Voting Shares        3,000,000            $0.00            $0.00                $0.00
---------------------------------------------- ---------------- ----------------- ----------------- -----------------
(1) Estimated in accordance  with Rule 457(c) under the  Securities Act of 1933,
solely for the purpose of calculating the registration fee.

The registrant amends this  registration  statement on such date or dates as may
be  necessary  to delay its  effective  date until the  registrant  shall file a
further amendment which  specifically  states that this  registration  statement
shall  thereafter  become  effective  in  accordance  with  Section  8(a) of the
Securities  Act of  1933  or  until  the  registration  statement  shall  become
effective on the date as the  Commission,  acting pursuant to said Section 8(a),
may determine.
The  information in this  prospectus is not complete and may be changed.  These
securities  may not be sold  until the  registration  statement  filed  with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell nor does it seek an offer to buy these  securities  in any  jurisdiction
where the offer or sale is not permitted.

                                   PROSPECTUS

                     [______________] LIMITED VOTING SHARES

              [_________] RIGHTS TO PURCHASE LIMITED VOTING SHARES

                         Canada Southern Petroleum Ltd.

         This prospectus relates to the sale by us of a total of [______] of our
limited voting shares by subscription right to our existing shareholders.  See "
Description of our Limited Voting Shares" at page __.

         For every one (1) share held as of _______, 2000, each shareholder will
receive  one  transferable  right.  For  every  ___  transferable  rights,  each
shareholder will be entitled to purchase from us one (1) limited voting share at
a price of $ [____] Canadian or $ [__] U.S. dollars per share. In addition, each
shareholder  who  purchases  his/her  full  allotment  of shares is  entitled to
purchase additional shares which are unsubscribed by other shareholders.
                                                  Per Share            Total
Price to shareholders                            $_________         $_________
Proceeds, before expenses, to us                 $_________         $_________

Our shares are traded on The Toronto Stock  Exchange,  the Boston Stock Exchange
and the Pacific  Exchange,  Inc.  (symbol CSW) and in the NASDAQ SmallCap Market
(symbol  CSPLF).  On  __________  __, 2000,  the last reported sale price of our
common stock as reported on The Toronto Stock  Exchange was Can. $____ per share
and U.S. $ per share on the NASDAQ SmallCap Market.

         The shares  offered  hereby  involve a high degree of risk.  You should
purchase  shares  only if you can afford a  complete  loss.  See "Risk  Factors"
beginning on page 7 for a discussion of certain factors that you should consider
before you purchase any of our shares.

         Neither  the  Securities  and  Exchange  Commission  nor any  state  or
provincial securities commission has approved or disapproved of these securities
or determined if this prospectus is truthful or complete.  Any representation to
the contrary is a criminal offense.

            The date of this prospectus is __________________, 2000.
TABLE OF CONTENTS
                                                                           PAGE

Prospectus Summary............................................................3
Selected Financial Data.......................................................5
About Canada Southern Petroleum Ltd...........................................6
Risk Factors..................................................................7
Cautionary Statement about Forward-Looking Statements........................12
Management's Discussion and Analysis of Financial
Condition And Results of Operations..........................................13
Use of Proceeds..............................................................23
Dilution.....................................................................23
Terms of Offering and Selling Arrangements...................................24
United States Tax Consequences of the Offering...............................26
Canadian Tax Consequences of the Offering....................................27
Capitalization...............................................................30
Market Information...........................................................31
Performance Graph............................................................33
Our Business.................................................................34
Properties...................................................................41
Legal Proceedings............................................................48
Our Management...............................................................51
Principal Stockholders.......................................................55
Certain Business Relationships...............................................56
Description of Our Limited Voting Shares.....................................56
Legal Matters................................................................57
Experts......................................................................57
Where You Can Find More Information..........................................58
Index to Consolidated Financial Statements..................................F-1
Supplemental Information on Oil and Gas Activities.........................F-21
PROSPECTUS SUMMARY

This summary highlights some of the information in this prospectus.  The summary
may not contain all of the information that is important to you. This prospectus
and the documents we incorporate by reference contain forward-looking statements
which  involve risks and  uncertainties.  You should  carefully  read the entire
prospectus,  including  the risk factors which begin on page 7 and the financial
statements  which begin at page F-2,  before  deciding  whether to invest in our
shares.

The Company      o   We are a Nova Scotia company engaged in the exploration for
                     and development of oil and gas reserves,  primarily in
                     Canada.  Our principal  asset is our 30% carried  interest
                     in the  Kotaneelee  gas field in the Yukon  territory
                     which has been the subject of  prolonged  and costly
                     litigation  against a number of defendants.  Our producing
                     properties  are located  primarily in British  Columbia
                     and Alberta.  We also have interests in exploratory
                     ventures on properties located in the Northwest Territories
                     and the Arctic Islands.

Our Operating    o   We  have  been  engaged  in the oil and  gas  exploration
History              and  development business  since  1954.  We  incurred a net
                     loss of $1,790,000 for the six months ended June 30, 2000,
                     a net loss of  $3,001,000  for the year 1999, a net loss of
                     $2,328,000 for the year 1998 and a net loss of $1,588,000
                     for the year 1997. We had a deficit of $ 27,332,000 at June
                     30, 2000.

The Offering     o   [       ] limited voting shares, par value $1.00 Canadian
                     per share.

Subscription     o   Each shareholder will receive one right for every one (1)
Privilege            share held on the record date.  For every  ___rights,  each
                     shareholder  will be entitled to purchase  one (1) limited
                     voting share from us at a price of $[____] Canadian or
                     $[____] U.S. dollars per share.

Transferability  o   You should complete Form ___ of the Rights Certificate if
of Rights            you wish to transfer your Rights to a third party. The
                     Rights will not be listed on any U.S. national securities
                     exchange and will not be admitted for quotation in any
                     automated, inter-dealer quotation system, but may be traded
                     on whatever market may develop for them, if any.  The
                     Rights are listed on The Toronto Stock Exchange.

Record Date      o   _____________, 2000.

Expiration Date  o   Rights  must be  exercised  prior to 4:30 PM,  Eastern
                     Standard  Time,  on _______, 2000. All rights unexercised
                     at such time will become void.

Oversubscription o   Each shareholder who purchases the entire  guaranteed
Privilege            subscription amount will be permitted to subscribe pro rata
                     for additional shares not purchased by other shareholders
                     prior to the expiration date.

How to Exercise  o   If you wish to purchase shares, you should complete Form 1
                     on the Rights Certificate and deliver it, accompanied by
                     full payment of the purchase price,  prior to the
                     expiration date to either one of our subscription agents.

Agent in Canada  o   Montreal Trust Company, 15 King Street West, Toronto,
                     Ontario, Canada, M5H 1B4, telephone (416) 860-5555.

Agent in United  o   American Stock Transfer & Trust Co., 40 Wall Street,
States               46th Floor, New York, NY 10005, Telephone: (800) 937-5449.

Limited Voting   o   14,284,940 limited voting shares were outstanding at
Shares               September 20, 2000. If all shares offered are sold, there
Outstanding          will be [________] shares outstanding.

Dividends        o   We have never paid a dividend and we do not intend to pay a
                     dividend until our deficit ($27,332,000 at June 30, 2000)
                     is eliminated.

Use of Proceeds  o   The proceeds of the offering will be used for general
                     corporate purposes, including working capital, exploration
                     and development and to continue the Kotaneelee litigation.

Litigation       o   We are currently involved in litigation regarding our 30%
                     carried interest against the operator and working  interest
                     partners of the Kotaneelee gas field. We contend that the
                     defendants failed to meet their obligations to market gas
                     from the field.  We also contend that the defendants have
                     improperly charged certain expenses to our carried interest
                     account.  The trial, which commenced in 1996, has been
                     lengthy, complex and costly. We do not expect a  decision
                     in the litigation before 2001.  We are unable to determine
                     whether we will prevail in the litigation, or whether an
                     award of costs,  assessable against a non-prevailing party
                     under Canadian law, will be assessed against us.
SELECTED FINANCIAL DATA

         The following selected consolidated financial information (in thousands
except per share and  exchange  rate data)  insofar as it relates to each of the
fiscal  periods  shown  has  been  extracted  from  our  consolidated  financial
statements.  Financial  data for the years  prior to 1999 have been  restated to
reflect a change from the deferral  method of tax  allocation  accounting to the
liability method of accounting for income taxes. (See Note 1 to the Consolidated
Financial  Statements,  at page F-9). The  information for the six month periods
ended June 30, 2000 and 1999 is unaudited  but includes  all  adjustments  which
Canada Southern  considers  necessary for a fair  presentation of the results of
operations for those periods.

                                      Six months
                                     ended June 30,                                 Year ended December 31,
                                 ____________________          ______________________________________________________________

                                 2000            1999          1999         1998          1997          1996          1995
                                 ----            ----          ----         ----          ----          ----          ----
                                  ($)            ($)           ($)          ($)           ($)            ($)           ($)
                               (Unaudited)   (Unaudited)                 (Restated)    (Restated)    (Restated)    (Restated)
Operating revenues                  602             220         777         1,810         2,120          1,755        1,657
                                    ===             ===         ===         =====         =====          =====        =====

Total revenues                      683             365       1,030         3,409         2,515          2,228        1,793
                                    ===             ===       =====         =====         =====          =====        =====

Net loss                         (1,790)         (1,784)     (3,001)       (2,328)       (1,588)        (1,236)      (1,001)
                                 =======         =======     =======       =======       =======        =======      =======

Net loss per share                 (.13)           (.13)       (.21)         (.16)         (.11)          (.09)        (.08)
                                   =====           =====       =====         =====         =====          =====        =====

Working capital                    2,412           4,758       3,629         6,876         5,573          8,403        1,510
                                   =====           =====       =====         =====         =====          =====        =====

Total assets                      14,302          15,799      16,073        18,854        22,772         22,021       13,801
                                  ======          ======      ======        ======        ======         ======       ======

Shareholders' Equity:
     Capital stock                40,787          40,787      40,787        40,489        40,489         38,888       29,635
     Deficit                    (27,332)        (24,324)    (25,542)      (22,540)      (18,625)       (17,037)     (15,801)
                                --------        --------    --------      --------      --------       --------     --------
                                  13,455          16,463      15,245        17,949        21,864         21,851       13,834
                                  ======          ======      ======        ======        ======         ======       ======
Average number of
shares outstanding                14,285          14,234      14,253        14,253        14,084         13,362       12,622
                                  ======          ======      ======        ======        ======         ======       ======
Exchange rates:
     Period-end                    .6759           .6789       .6924         .6535         .6992          .7297        .7300
                                   =====           =====       =====         =====         =====          =====        =====

Average for the period             .6821           .6704       .6733         .6749         .7224          .7335        .7289
                                   =====           =====       =====         =====         =====          =====        =====

     Range                       .66-.70         .66-.69     .67-.69       .63-.67       .69-.75        .72-.75      .70-.75
                                 =======         =======     =======       =======       =======        =======      =======
About Canada Southern Petroleum Ltd.

         We  are a Nova  Scotia  company  engaged  in the  exploration  for  and
development  of oil and gas reserves,  primarily in Canada.  We were  originally
incorporated  in 1954  under the Canada  Corporations  Act.  In 1979,  we became
subject to the Canadian Business  Corporations Act and, in 1980, continued under
the Nova Scotia Companies Act.

         We  are  engaged,  directly  or  indirectly,  in  the  exploration  and
development of properties  containing or believed to contain recoverable oil and
gas reserves and the sale of oil and gas from these  properties.  Our  principal
asset is a 30% carried interest in the Kotaneelee  field, a partially  developed
field, producing gas (See "Our Business" and "Properties"). Substantially all of
our  assets  are  in  Canada.  Our  interests  in  exploratory  ventures  are on
properties  located in Alberta,  British Columbia,  Saskatchewan,  the Northwest
Territories,  the Yukon Territory and the Arctic Islands in Canada. We also have
producing properties in the Yukon Territory, British Columbia and Alberta.

         Our principal executive offices are located at Suite 505, 706 - Seventh
Avenue S.W.,  Calgary,  Alberta,  Canada T2P 0Z1. Our  telephone  number at that
address is (403) 269-7741. Our internet web address is http: //www.cansopet.com.
The  contents of our web site are not  incorporated  into this  prospectus.  Our
limited  voting  shares are traded on the Boston  Stock  Exchange,  the  Pacific
Exchange and The Toronto Stock  Exchange  under the symbol CSW and in the NASDAQ
SmallCap  Market under the symbol CSPLF.  We have two full time  employees,  one
part-time employee and rely heavily on outside consultants for technical, legal,
accounting and administrative services.

         In this prospectus,  "Canada  Southern," "we," "us," and "our" refer to
Canada  Southern  Petroleum  Ltd.  and  its  subsidiaries,  unless  the  context
otherwise  dictates.   Unless  otherwise  indicated,   all  references  in  this
prospectus  to "dollars" or "$" are to Canadian  dollars.  The exchange  rate on
____________,  2000 as reported by the Wall  Street  Journal was $1.00  Canadian
equals U.S. $----.
RISK FACTORS

         An  investment in our limited  voting shares  involves a high degree of
risk.  You should  carefully  consider  the  following  risk  factors  and other
information in this  prospectus and the documents we incorporate by reference in
evaluating  our company  before you purchase any shares of our common stock.  If
any of the following risks actually occur, our business,  financial condition or
results of operations could be materially adversely affected.  In this case, the
trading  price of our shares could  decline and you may lose all or part of your
investment.

RISKS RELATED TO OUR BUSINESS
         We have a deficit and anticipate further losses, which could jeopardize
         our business.

         We have been  engaged in the oil and gas  exploration  and  development
business  since  1954 and have a deficit of  $27,332,000  at June 30,  2000.  We
incurred a net loss of $1,790,000  for the six months ended June 30, 2000, a net
loss of $3,001,000 for the year 1999, a net loss of $2,328,000 for the year 1998
and a net loss of  $1,588,000  for the year  1997.  We  cannot  assure  you that
hereafter we will be able to achieve or sustain revenue growth, profitability or
positive cash flow. If we are unable to achieve or sustain profitability, we may
not be  financially  viable in the  future and may have to  curtail,  suspend or
cease operations.

         Our  principal  asset has been the  subject  of costly  and  protracted
         litigation. If we do not prevail in the litigation,  our business could
         suffer significant harm.

         Our principal  asset is a 30% carried  interest in the  Kotaneelee  gas
field  (located in the Yukon  Territory,  Canada)  which has been the subject of
prolonged and costly  litigation  which  commenced in 1990. We cannot assure you
that  we will  be  successful  on the  merits  of our  claims  which  have  been
vigorously  defended by the working  interest  partners  in the  Kotaneelee  gas
field.  If we do not  prevail  on our  claims,  we will not  receive an award of
damages.

         Even if we are awarded damages against the defendants, we cannot assure
you that the court  will  apply a measure  of  damages  that we claim  should be
applied.  In such a case,  the recovery on our claims may not be  sufficient  to
cover our costs of  prosecuting  the  litigation.  The market price of our stock
could be significantly  affected by any adverse  judgment in the litigation.  In
addition,  our stock  price  could be  adversely  affected  if we are  awarded a
judgment in the litigation in an amount below our claimed damages amount.

         If we do not prevail in the Kotaneelee  litigation,  we could be forced
         to pay some or all of the defendants' litigation costs.

         Under Canadian law,  certain costs of litigation  are assessed  against
the losing party.  These costs consist  primarily of attorney and expert witness
fees incurred  during the action which has been ongoing for  approximately  four
years.  If the court  determines  to assess  the  defendants'  litigation  costs
against us, we may be required to sell company assets or raise  additional funds
through the  issuance of debt or equity  securities  to fund the award of costs,
which  could be  substantial.  We can give no  assurances  that in such event we
would be able to sell assets at other than distress  prices or raise  additional
funds on favorable terms.

         Even if we prevail in the  Kotaneelee  litigation  at trial,  we expect
         that the defendants will appeal.

         If we are awarded a judgment in the Kotaneelee  litigation,  we expect
that the defendants  will appeal.  The appeal period is estimated to be at least
one year and could result in any judgment in our favor being reversed.

         Our  limited  cash  and  cash  equivalents  could  be  depleted  by our
         operating and  litigation  expenses which could cause us to discontinue
         our efforts to enforce our contractual rights through litigation.

         At June  30,  2000 we had  cash and  cash  equivalents  and  marketable
securities  of  $2,477,000.  We incurred  net losses of  $1,790,000  for the six
months  ended  June 30,  2000,  a net  loss of  $3,001,000  for the  year  1999,
$2,328,000  for the year 1998 and a net loss of  $1,588,000  for the year  1997,
primarily  as a  result  of  substantial  litigation  expenses.  If  our  losses
continue,  we may have insufficient funds to continue our efforts to enforce our
contractual rights in the Kotaneelee litigation.

         The  Kotaneelee  litigation  continues to be a costly cash drain on our
operations.  During the years 1997 to 1999, we expended approximately $6,364,000
on legal expenses  incurred  primarily in the Kotaneelee  litigation.  Our other
general and administrative  expenses and rent have totaled $3,805,000 during the
same three year period. Although the Kotaneelee gas field reached pay out status
in November  1999,  the  defendants  have refused to pay us our share of the net
revenues from the field. We currently estimate that we will continue to spend at
least $4,000,000 annually on such operating and litigation expenses.

         If we  continue  to  incur  operating  and  litigation  expenses  which
         significantly exceed our revenues,  we may never achieve  profitability
         and may be forced to curtail, suspend or cease operations.

         Based on our ongoing litigation and operating expenses, we will need to
generate significant revenues in the future to achieve profitability.  We cannot
assure you that we will be able to achieve or sustain revenues, profitability or
positive cash flow on either a quarterly or annual basis or that  profitability,
if achieved,  will be  sustained.  Continuing  losses and our current  financial
condition could also adversely impact our ability to obtain future financing and
may force us to curtail, suspend or cease operations.

         We may never receive any share of the net revenues from the  Kotaneelee
         gas field.

         The  operator  of the  Kotaneelee  gas  field has  advised  us that the
carried interest account reached pay out status in November 1999. However, Amoco
Canada claims that there should be a processing fee on the gas produced and that
the carried  interest account balance as of December 31, 1999 was $58,711,000 or
$19,235,000 depending on inclusion of interest. None of the defendants is paying
us our  share of net  revenues  from the  field and they may never pay us in the
future if the Court  determines  that the processing fee claimed by Amoco Canada
is appropriate.

         Further  development  of the Kotaneelee gas field may be impeded by the
         working interest partners.

         We believe that the Kotaneelee  gas field should be further  developed.
The  cooperation of the working  interest  partners may be necessary for further
development to take place.  Based upon our experience with the working  interest
partners in the  Kotaneelee  litigation,  we do not  believe  that they would be
cooperative in any further development efforts. If the working interest partners
fail to further  develop the  resources  which we believe are  contained  in the
Kotaneelee  gas field,  we may never receive any revenues that might result from
such further  development of the field.  We have filed a lawsuit in the Court of
Queen's Bench of Alberta,  Canada against the working interest  partners seeking
damages  for their  failure  to  develop  the  field  beyond  the two  currently
producing wells.

         Despite recent  encouraging  market trends,  our Canadian Arctic Island
         properties may never generate any significant revenues.

         We continue to retain our  interest in more than  175,000  acres of the
Canadian Arctic Islands which have not, to date,  generated any revenues.  Major
gas  operators  and  industry  investors  have  recently  indicated  interest in
exploring the Canadian Arctic Islands region to develop  additional gas reserves
and productive  capacity.  If the major operators do not explore and develop the
natural  gas  fields of the  Canadian  Arctic  Island  region,  or are unable to
develop gas reserves from such properties in commercially viable amounts, we may
never receive any significant revenues from our interests in these properties.

RISKS RELATED TO OUR INDUSTRY

         We face strong  competition from larger oil and gas companies which may
         negatively affect our ability to continue our operations.

         We operate in the highly  competitive areas of oil and gas exploration,
development  and  production.  Our  competitors  include  major  integrated  oil
companies,   substantial  independent  energy  companies,  affiliates  of  major
interstate and intrastate  pipelines and national and local gas gatherers,  many
of which possess  greater  financial and other  resources  than we do. If we are
unable to compete  successfully,  we may face increased  losses and be forced to
curtail, suspend or cease operations.

         We cannot  assure  you that we will be able to compete  with,  or enter
into cooperative  relationships  with, any such firms.  Factors which affect our
ability to successfully compete in the marketplace include:

       o  the financial resources of our competitors;

       o  the availability of alternate fuel sources; and

       o  the costs related to the extraction and transportation of oil and gas.

         In addition,  our  ability  to  exploit  an oil or  gas  discovery  is
dependent upon  considerations such as the ability to finance development costs,
the  availability  of equipment,  and engineering  and  construction  delays and
difficulties. Because the majority of our interests are located in remote areas,
transportation of oil and gas is difficult and costly. Furthermore,  competitive
conditions may be substantially  affected by various forms of energy legislation
that may be considered in the United States and Canada.  However,  we are unable
to predict the nature of any such legislation which may ultimately be adopted or
its effects upon our future operations.

         Any  violations by us of existing  environmental  laws and  regulations
         could be costly and could negatively impact our business.

         The  Canadian  oil  and  gas   industry  is   continually   subject  to
environmental  regulation pursuant to local, provincial and federal legislation.
A breach of such legislation may result in the imposition of fines or penalties.
If any such fines or penalties are assessed  against us or the working  interest
partners on properties in which we hold an interest,  our losses could  increase
and our business could be harmed.

         Environmental  laws  and  regulations   provide  for  restrictions  and
prohibitions on spills,  releases or emissions of various substances produced in
association   with  certain  oil  and  natural  gas  industry   operations.   An
environmental  assessment  and  review  may  be  required  prior  to  initiating
exploration  or  development  projects  or  undertaking  significant  changes to
existing  projects.  In addition,  legislation  requires  that well and facility
sites  be  abandoned  and  reclaimed  to the  satisfaction  of  the  appropriate
authorities.  Federal  environmental  regulations  also  apply  to the  use  and
transport of certain restricted and prohibited substances.  We cannot assure you
that we can avoid being  assessed  any costs or  penalties on account of any (1)
spills, releases or emissions, (2) assessment reviews, (3) necessary abandonment
or reclamation  efforts or (4) problems associated with the use and transport of
restricted or prohibited substances.

         If the  current  deregulatory  trend in Canada does not  continue,  our
         losses could increase.

         The  Canadian   federal   government   over  the  past  few  years  has
substantially deregulated the Canadian gas and oil industry.  Although the trend
seems likely to continue,  no assurance can be given that such will be the case,
and the Canadian federal government could increase regulation of our oil and gas
industry at any time.  If the Canadian  government  increases  regulation of our
business,  our  costs may be  increased  and our  prospects  of  generating  any
significant revenues may be significantly harmed.

         All  of our  operations  are  conducted  in  Canada,  and  most  of our
         shareholders   are   residents   outside  of  Canada   which   subjects
         shareholders  to risks  attendant to  operations  outside of the United
         States.

         The properties in which we have interests are located in Canada and are
subject to certain  risks  involved in the  ownership  and  development  of such
foreign  property  interests.  Thus, an  investment in our shares  represents an
exposure  to risks  in  addition  to those  inherent  in  petroleum  exploratory
ventures.  If any of theses risks occur, we could suffer losses and be forced to
curtail, suspend or cease our operations. These risks include:

       o   nationalization or expropriation of our assets by the Canadian
           federal or provincial governments;

       o   confiscatory taxation;

       o   the assertion of land ownership or use rights relating to properties
           in which we have an interest;

       o   changes in foreign exchange controls applicable in Canada;

       o   currency fluctuations;

       o   burdensome royalty terms imposed by the Canadian federal or
           provincial governments;

       o   export sales restrictions imposed by the Canadian federal or
           provincial governments;

       o   limitations on the transfer of interests in exploration licenses; and

       o   and other  laws and  regulations  which may  adversely  affect our
           properties,  such as those  providing for  conversion,  proration,
           curtailment,  cessation  or other forms of limited or  controlling
           production of, or exploration for, hydrocarbons.

RISKS RELATED TO THE OFFERING

         If you are unable to bring actions under the federal  securities  laws
         of the United States  against our  directors,  officers and experts who
         are not  citizens or  residents  of the United  States,  you may suffer
         losses which you may not be able to recover.

         We are incorporated  under the laws of Nova Scotia and our officers and
two of our  directors are residents of Canada and are not citizens of the United
States. In addition, our petroleum engineers named under "Experts" are residents
of Canada and not of the United States. As a result, it may be difficult for our
U.S. shareholders to effect service of process on those directors,  officers, or
experts  within  the  United  States  or to  enforce  against  those  directors,
officers,   or  experts  judgments  of  U.S.  courts  predicated  on  the  civil
liabilities  provided  to  investors  under the  Securities  Act of 1933 and the
Securities Exchange Act of 1934.

         We have been advised by the law firm of Blake, Cassels & Graydon LLP of
Toronto,  Canada  that there is no  assurance  that the  courts in Canada  would
enforce civil liabilities,  whether in original actions in Canada or in the form
of final judgments of U.S. courts,  arising under the federal securities laws of
the  United  States.  against  us us or the  persons  signing  the  registration
statement, or the experts.

         Our shares carry limited  voting rights.  As a result,  if you own more
         than 1,000  shares you will not be  entitled  to a vote that equals the
         economic interest of your investment.

         Article 8 of our Articles of  Continuance  provides that no person,  as
defined,  shall vote more than 1,000 shares of our limited voting  shares.  As a
consequence,  an owner of a substantial  number of our limited  voting shares is
unable to materially influence our policies through shareholder votes. The 1,000
share voting limitation also may make it less likely a takeover not supported by
management could occur.

         Our dividend policy could depress our stock price.

          We have never  declared or paid dividends on our limited voting shares
We do not intend to pay  dividends  until our deficit  ($27,332,000  at June 30,
2000) is eliminated.  As a result,  our dividend policy could depress the market
price for our  common  stock and  cause  investors  to lose some or all of their
investment. We plan to retain any future earnings to reduce our deficit

         You will  experience an immediate  dilution in net book value per share
         after this offering.

         By purchasing  limited  voting shares offered by this  prospectus,  you
will experience an immediate dilution in net book value per share of $[____] per
share on your purchase price of $[____] per share.  This is because the tangible
net book  value per share  prior to the  offering  is $.[__]  per share and this
amount will be  increased  to only  $[____] per share  after the  offering.  See
"Dilution" at page __.

                           CAUTIONARY STATEMENT ABOUT
                           FORWARD-LOOKING STATEMENTS

         In this  prospectus and the documents that we incorporate by reference,
we make statements that relate to our future plans, objectives, expectations and
intentions that involve risks and uncertainties.  We have based these statements
on  our  current   expectations  and  projections  about  future  events.  These
statements may be identified by the use of words such as "expect," "anticipate,"
"intend,"  "plan,"  "believe"  and  "estimate"  and  similar  expressions.   Any
statements that refer to expectations, projections or other characterizations of
future events or circumstances are forward-looking statements within the meaning
of the Private Securities  Litigation Reform Act of 1995, and are subject to the
safe harbor created by that Act.

         Forward-looking statements necessarily involve risks and uncertainties.
Our actual results could differ  materially  from those discussed in, or implied
by, these  forward-looking  statements.  Factors that could  contribute  to such
differences  include,  but are not  limited  to,  those  discussed  in the "Risk
Factors"  section  beginning  at page 7 and  elsewhere in this  prospectus.  The
factors set forth in the Risk Factors  section and other  cautionary  statements
made in this prospectus should be read and understood as being applicable to all
related forward-looking statements wherever they appear in this prospectus.

         All subsequent written and oral forward-looking statements attributable
to us are expressly  qualified in their entirety by the  cautionary  statements.
You  are  cautioned  not  to  place  undue  reliance  on  these  forward-looking
statements,  which speak only as of their dates.  We undertake no obligations to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.

                Management's Discussion and Analysis of Financial
                       Condition And Results of Operations

Liquidity and Capital Resources

         At June 30,  2000,  we had  approximately  $2,477,000  of cash and cash
equivalents  and  marketable  securities on hand. Of this amount,  approximately
$875,000 are held in U.S.  marketable  securities  which are subject to exchange
fluctuations.  These  funds  are  expected  to be  used  for  general  corporate
purposes,  including  exploration and development and to continue the Kotaneelee
field  litigation.  We estimate that we currently have adequate  working capital
for the year 2000. However, we may be required to raise additional funds through
the sale of  properties  or other  means in  order to  complete  the  Kotaneelee
litigation.

         Net cash used in  operations  during the six months ended June 30, 2000
decreased  by $396,000  compared  to the six months  ended June 30, 1999 and net
cash used in operations  during the year 1999 increased by $379,000  compared to
the year 1998. The differences  between the periods was caused  primarily by the
following:

                                                                 Six months ended        Year ended
                                                                  June 30, 2000      December 31, 1999
                                                                 ----------------    -----------------
Decrease (Increase) in loss from operations                         $ 360,000           $ (125,000)
Changes in accounts receivable and other                              (11,000)            (965,000)
Net change in current liabilities                                      47,000              711,000
                                                                      -------              -------
Decrease (Increase) in net cash used in operations                  $ 396,000           $ (379,000)
                                                                    =========           ===========
In  December  1999,  the  Company  filed a motion  to have the Court of
Queen's  Bench  direct the operator of the  Kotaneelee  gas field to make timely
payments of all current and future  amounts due from its share of the Kotaneelee
gas field revenues.  The motion was  subsequently  amended to include all of the
defendants.  On April 10, 2000, the trial court  dismissed the Company's  motion
pending  the  Court's  ultimate  determination  of the  issues  surrounding  the
Kotaneelee  field  carried-interest  account.  The Company has filed a notice of
appeal of the dismissal with the Alberta Court of Appeal.

         In view of the trial  court's  dismissal of the Company's  motion,  the
Company  will not  accrue  any  revenues  from the  Kotaneelee  gas field  until
collection of the amounts due is reasonably assured.

         Since  March  2000,  the  operator  of the  Kotaneelee  field  has been
reporting the amount of the Company's  share of net revenues being  deposited in
escrow. The September 2000 report provided information for production during the
month of June 2000.  Based on the reported data, the Company  believes the total
amount due the Company is $5,526,365 of which  $1,832,335  has been deposited in
escrow. None of these amounts have been recognized as revenue by the Company.

         A  significant  proportion  of our  property  interests  are covered by
carried  interest  agreements,  which  provide  that  expenditures  made  by the
operator are recouped  solely out of revenues  from  production.  Major  capital
expenditures  made by the  operators  have  an  impact  on our  cash  flow  from
operations as no revenues are reported or received  until the capital costs have
been recovered by the operator.  The Kotaneelee gas field and certain properties
in the Fort St. John,  British Columbia area in which we have carried  interests
have reached pay out status.  Proceeds from these carried interests plus oil and
gas royalties are our major sources of working capital.

         We are currently  evaluating and expect to continue to evaluate oil and
gas properties and may make  investments  in such  properties  utilizing cash on
hand. We anticipate  that our capital  expenditures  for land  acquisitions  and
drilling  for the year  2000  will be  approximately  $600,000  ($246,000  spent
through  June 30,  2000).  In  addition,  substantial  continuing  expenses  are
expected to be incurred in connection  with the  Kotaneelee  litigation.  During
1999, we expended  approximately  $2.1 million in connection with the Kotaneelee
litigation which has been the principal cause of our losses since 1991.

         We have  established a provision for our potential share of future site
restoration  costs which totaled $146,000 at June 30, 2000. The estimated amount
of these costs at June 30, 2000,  which total  $147,000,  is being provided on a
unit of production  basis in accordance  with existing  legislation and industry
practice.

 Results of Operations

         Accounting policy changes

         In  1999,  under  new  recommendations  of the  Canadian  Institute  of
Chartered  Accountants,   we  retroactively  adopted  the  liability  method  of
accounting for income taxes.  Under this method,  we record income taxes to give
effect to temporary differences between the carrying amount and the tax basis of
our assets and liabilities.  Temporary differences arise when the realization of
an asset or the settlement of a liability  would give rise to either an increase
or decrease in our income  taxes  payable for the year or later  period.  Future
income taxes are  recorded at the enacted  income tax rates that are expected to
apply  when the  future  tax  liability  is  settled  or the future tax asset is
realized.  Income tax  expense is the tax  payable for the period and the change
during the period in future  income tax and  liabilities.  The  adoption of this
standard has resulted in the recognition of future tax assets and a reduction of
the  deficit at December  31,  1999 of  $1,583,475  (1998 -  $1,308,505;  1997 -
$930,138) and a reduction in the net loss for 1999 of $274,970 (1998 - $378,367;
1997 - $170,158). This new standard is consistent with the accounting principles
generally accepted in the United States.
Six month period ended June 30, 2000 vs. June 30, 1999

         The net  loss  for  the six  month  period  ended  June  30,  2000  was
$1,790,143  ($.13 per  share)  compared  to a net loss of  $1,783,598  ($.13 per
share) for the 1999 period. A summary of revenue and expenses during the periods
is as follows:

                                                       2000                         1999                   Net Change
                                                       ----                         ----                   ----------
Revenues                                          $ 683,462                    $ 364,826                    $ 318,636
Costs and expenses                              (2,716,130)                  (2,221,620)                    (494,510)
Income tax recovery                                 242,525                       73,196                      169,329
                                                    -------                       ------                      -------
Net loss                                       $(1,790,143)                $ (1,783,598)                    $ (6,545)
                                               ============                =============                    =========
Oil sales  decreased  by 87% due  primarily  to a 97%  decrease  in the
number of units  sold  which was  partially  offset  by a 156%  increase  in the
average  prices of crude oil sold.  There was also a  corresponding  decrease in
royalties paid by the Company.  In 2000,  royalty  income  increased from nil in
1999 to  $2,000.  The  Company  sold the  majority  of its crude  oil  producing
properties in 1998 and also sold its remaining  heavy oil production in February
2000. Since the Company has disposed of most of its producing properties, future
oil sales are expected to be minimal unless additional  producing properties are
drilled or purchased. Crude oil unit sales in barrels ("bbls") (before deducting
royalties)  and the average  price per barrel sold during the periods  indicated
were as follows:

                                                       Six month period ended June 30,
                                             2000                                            1999
                                        Average price                                   Average price
                             bbls          per bbl               Total       Bbls          per bbl               Total
                             ----          -------               -----       ----          -------               -----
Oil sales                     178           $34.34              $6,000      5,093           $13.44             $68,000
Royalty income                                                   2,000
Royalties paid                                                       -                                         (4,000)
                                                               -------                                         -------
Total                                                          $ 8,000                                         $64,000
                                                               =======                                         =======
Gas  sales  increased  56% in 2000.  There  was a 13%  increase  in the
average price for gas. Gas sales include  royalty income which  increased 30% in
2000.  The volumes in million  cubic feet  ("mmcf") and the average price of gas
per  thousand  cubic feet  ("mcf")  sold  during the periods  indicated  were as
follows:

                                                         Six month period ended June 30,
                                              2000                                             1999
                                         Average price                                     Average price
                             mmcf           per mcf                Total       mmcf           per mcf               Total
                             ----           -------                -----       ----           -------               -----
Gas sales                     5.0            $2.32              $ 11,000       5.0             $2.06              $ 9,000
Royalty income                                                    35,000                                           27,000
Royalties paid                                                   (2,000)                                          (8,000)
                                                                 -------                                          -------
Total                                                            $44,000                                          $28,000
                                                                 =======                                          =======
Proceeds from carried interests  increased 330% to $550,000 during 2000
compared  to  $128,000  in  1999  because  gas  prices  increased  38%.  Capital
expenditures  decreased 93% in 2000 to $15,000 from $222,000  during 1999.  Unit
sales  decreased 1% and  partially  offset the increase in revenues  above.  The
volumes in million cubic feet ("mmcf") and the average price of gas per thousand
cubic feet ("mcf") sold during the periods indicated were as follows:

                                                      Six month period ended June 30,
                                            2000                                           1999
                                      Average price                                   Average price
                            mmcf         per mcf               Total       mmcf          per mcf               Total
                            ----         -------               -----       ----          -------               -----
Gas sales                   281           $3.51            $ 979,000       285            $2.55             $708,000
Oil Sales                                                      5,000                                          20,000
Royalty paid                                               (218,000)                                       (155,000)
Operating costs                                            (201,000)                                       (223,000)
Capital costs                                               (15,000)                                       (222,000)
                                                            --------                                       ---------
Total                                                      $ 550,000                                        $128,000
                                                           =========                                        ========
Interest  and  other  income  was 44%  lower in 2000.  Interest  income
decreased 42% from  $132,000 in 1999 to $76,000 in the 2000 period  because less
funds were  available  for  investment.  In addition,  the 2000 period  includes
proceeds  from  the  sale of  seismic  data in the  amount  of  $6,000  which is
unchanged from 1999.

         General and administrative costs increased 16% in 2000 to $844,000 from
$725,000 in 1999.  The Company hired a new executive  vice  president  effective
January 1, 2000 which  increased  salary expense by  approximately  $66,000.  In
addition  the 2000  period  includes a $38,000  severance  payment to the former
Secretary-Treasurer.  The costs of printing and mailing in  connection  with the
annual meeting also increased by $45,000 during the 2000 period.

         Legal expenses  decreased 1% during 2000 to $1,109,000  from $1,119,000
during 1999. These expenses are related  primarily to the cost of the Kotaneelee
litigation.  During the 2000 period, the Company presented its rebuttal evidence
and completed and filed its written closing argument.

         Lease  operating costs decreased 69% from $68,000 in 1999 to $21,000 in
the 2000 period. The Company sold its remaining heavy oil production  properties
during February 2000.

         Depletion,  depreciation and amortization expense decreased 37% in 2000
to $119,000 from $188,000 in 1999.  The depletion  rate in 2000 decreased by 32%
from the 1999 rate. Also, the capital asset base in 2000 decreased 6% from 1999.

     A foreign exchange gain of $40,000 was recorded in 2000, compared to a loss
of $92,000 in 1999 on the Company's U.S. investments.  The value of the Canadian
dollar was U.S.  $.6924 at December 31, 1999 compared to U.S. $.6759 at June 30,
2000.

         Abandonments  and write downs  increased  to  $635,000  during the 2000
period.  The  Company's  investment  in the Texas  project was written down to a
nominal  value  during the second  quarter  because the project was deemed to be
uneconomic.

         Income tax recovery  increased by 231% to $ 243,000 in 2000 compared to
$73,000 in 1999. The largest  component of the increased  income tax recovery is
due to adjustments in finalizing the 1999 income tax return.

1999 vs. 1998

         The net loss for the year 1999 was $3,001,424 ($.21 per share) compared
to a net loss of $2,328,170  ($.16 per share) for 1998. A summary of revenue and
expenses during the periods is as follows:

                                                           1999                     1998               Net Change
                                                           ----                     ----               ----------
Revenues                                            $ 1,029,899               $3,409,361             $(2,379,462)
Costs and expenses                                  (4,306,293)              (6,115,898)                1,809,605
Income tax recovery                                     274,970                  378,367                (103,397)
                                                        -------                  -------                ---------
Net loss                                           $(3,001,424)             $(2,328,170)              $ (673,254)
                                                   ============             ============              ===========
Oil  sales  decreased  by  83%  due  primarily  to a  86%  decrease  in
production which was partially offset by a 17% increase in the average prices of
crude oil sold. There was also a corresponding decrease in royalties paid by us.
We sold the  majority  of our crude oil  producing  properties  in two  separate
transactions  effective  July 1,  1998  and  September  1,  1998.  Since we have
disposed of most of our producing  properties,  future oil sales are expected to
be minimal unless additional  producing properties are acquired through drilling
or purchase.  The 1999 royalties paid amount  includes a provincial  royalty tax
credit in the amount of $4,782. Crude oil unit sales in barrels ("bbls") (before
deducting  royalties)  and the average  price per barrel sold during the periods
indicated were as follows:

                                             1999                                              1998
                                          Average price                                    Average price
                                   Bbls         per bbl           Total             bbls         per bbl            Total
                                   ----         -------           -----             ----         -------            -----
Crude oil sales                   9,171          $17.38        $159,000           64,954          $14.84         $964,000
Royalties paid                                                  (8,000)                                          (66,000)
                                                                -------                                          --------
Total                                                         $ 151,000                                          $898,000
                                                              =========                                          ========
Gas sales  decreased  95% because of a 93%  decrease in number of units
sold and a 16%  decrease in the average  price for gas. In  addition,  gas sales
include  royalty income which decreased 49% in 1999. We sold the majority of our
working  interest gas properties  effective July 1, 1998, which accounts for the
decrease  in gas sales.  Royalties  paid  include a $59,000  amount as part of a
settlement for royalties due for the 1991 to 1998 period. The volumes in million
cubic feet ("mmcf") and the average price of gas per thousand cubic feet ("mcf")
sold during the periods indicated were as follows:

                                               1999                                           1998
                                           Average price                                  Average price
                            Mmcf              per mcf           Total            mmcf         per mcf          Total
                            ----              -------           -----            ----         -------          -----
Gas sales                    21                 $1.83        $ 37,000             304           $2.17       $660,000
Royalty income                                                 64,000                                        127,000
Royalties paid                                               (63,000)                                       (82,000)
                                                             --------                                       --------
Total                                                        $ 38,000                                       $705,000
                                                             ========                                       ========
Proceeds from carried interests  increased 184% to $587,000 during 1999
compared  to  $207,000  in 1998  primarily  because  gas prices  increased  58%.
Operating  costs also  decreased  20% during 1999.  The volumes in million cubic
feet ("mmcf") and the average price of gas per thousand  cubic feet ("mcf") sold
during the periods indicated were as follows:

                                             1999                                           1998
                                          Average price                                  Average price
                               mmcf          per mcf             Total         mmcf           per mcf          Total
                               ----          -------             -----         ----           -------          -----
Gas sales                       563            $2.79       $ 1,572,000          575             $1.77     $1,016,000
Royalty paid                                                 (327,000)                                     (238,000)
Operating costs                                              (417,000)                                     (522,000)
Capital costs                                                (241,000)                                      (49,000)
                                                             ---------                                      --------
Total                                                        $ 587,000                                      $207,000
                                                             =========                                      ========
Share of Kotaneelee net revenues for 1999.  Although,  according to the
reports of the operator of the  Kotaneelee  gas field,  the Kotaneelee gas field
carried  interest  reached pay out status during  November  1999, no revenue has
been accrued for 1999. In order to bring its billing  practices in line with the
industry  standard,  the  operator  of the field  changed  the  prior  method of
reporting the revenue and expenditures of the field. This resulted in two months
of capital  expenditures and operating expenses (December 1999 and January 2000)
being charged against a single month of revenue  (November 1999). This change in
reporting is consistent with the reporting of other carried interests  currently
held by us. In the future,  we expect that the reporting of Kotaneelee gas sales
will  continue to lag two months behind  actual  operating  expenses and capital
expenditures.  In addition,  the production  revenue from the two last months of
each quarter is accrued  during the  following  quarter  because the data is not
usually available.

         As of December 31, 1999, based on the operator's reports,  our share of
net revenues due to us by all the defendants  totaled $412,374.  This amount was
computed as follows:
Net Revenues (after royalties):
November 1999 (after pay out)                                                                 $864,506
    December 1999                                                                                1,212,821
                                                                                                 ---------
Total Revenues                                                                                   2,077,327
                                                                                                 ---------

Operating Expenses:
    November 1999 (after pay out)                                                                  264,848
    December 1999                                                                                  393,389
    January 2000                                                                                    54,889
                                                                                                    ------
Total Operating Expenses                                                                           713,126
                                                                                                   -------

Capital Expenditures:
    December 1999                                                                                  368,963
    January 2000                                                                                   539,899
    February 2000                                                                                   42,965
                                                                                                    ------
Total Capital Expenditures                                                                         951,827
                                                                                                   -------
Company share of net revenues                                                                    $ 412,374
                                                                                                 =========
The operator reported that it deposited during March 2000 the amount of
$136,728 in an escrow  account for our  benefit.  This  deposit  represents  the
operator's share of the $412,374 amount due.

         The  Kotaneelee  field  working  interest  partners  have  approved the
expenditure of an estimated $4.1 million for the  installation  of a compression
unit in the field to maintain  current  production  levels.  The schedule  above
reflects a charge of $951,827  against  our share of  revenues  for our share of
these costs which total  $1,372,000.  The remaining  balance of $420,173 will be
deducted from our share of the year 2000  production  revenues.  Therefore,  the
share of  Kotaneelee  net revenues  may  fluctuate  each year  depending on both
capital  expenditures and any audit  adjustments which are attributable to prior
years.

         Interest  and  other  income  increased  14% in 1999.  Interest  income
increased  from  $194,000  to  $230,000  in 1999  due to an  increase  in  funds
available  for  investment  during 1999  because of the  proceeds of sale of the
crude oil and gas  properties  in 1998.  In addition,  the 1999 period  includes
proceeds  from the sale of seismic  data in the amount of  $16,000  compared  to
$27,000  from such sales in 1998.  It is not  possible  for us to  estimate  the
amount of future  seismic data sales which are dependent on a  purchaser's  need
for the seismic data that we own.

         Gain on the sale of properties in 1999.  There were no properties  sold
in 1999.  In 1998,  there  was a gain of  $1,378,000  from the sale of our heavy
crude  oil  properties  in  Alberta  and the sale of  certain  working  interest
properties in British Columbia.

         General and  administrative  costs  decreased 7% in 1999 to  $1,209,000
from $1,301,000 in 1998.

         Legal  expenses  decreased  11% during 1999 to  $2,108,000  compared to
$2,358,000  during 1998. These expenses are related primarily to the cost of the
Kotaneelee  litigation.  During 1998, we completed the  presentation of our case
against the working interest partners.  The 1998 costs represent both legal fees
and the cost of our  various  experts who  testified,  were being  prepared  for
testimony,  or assisted in the  cross-examination  of defense witnesses.  During
1999, we continued our cross-examination of defense witnesses.

         Lease  operating  costs decreased 85% from $976,000 in 1998 to $147,000
in the 1999 period. We sold the majority of our oil and gas producing properties
during the second half of 1998.

         Depletion,  depreciation and amortization expense decreased 19% in 1999
to $707,000 from $870,000 in 1998.  Although we sold the majority of our oil and
gas producing  properties during 1998, the increased production from the pay out
of the  Kotaneelee  carried  interest  increased the 1999  depletion  expense by
approximately $420,000.

         A foreign exchange loss of $77,000 was recorded in 1999, contrasted
with a gain of $179,000 on our U.S. investments in 1998.  In 1999 the value of
the Canadian dollar increased from U.S. $.65 to U.S. $.69. In 1998, the gain was
attributable to the continuing  strengthening  of the U.S. dollar as compared to
the Canadian dollar on our U.S. investments.

         Abandonments  and write  downs.  There were no  abandonments  and write
downs in 1999. The 1998 amount of $685,000 resulted from a write down of certain
of our properties in California and Texas.

         Income tax recovery  decreased  by 27% to $275,000 in 1999  compared to
$378,000 in 1998. The income tax recovery in 1999 decreased  because the loss in
1999 was less than the loss in 1998 after giving effect to the  $1,378,000  gain
on sale of assets in 1998 which was not recognized for income tax purposes.

1998 vs. 1997

         The net loss for the year 1998 was $2,328,170 ($.16 per share) compared
to a net loss of $1,587,506  ($.11 per share) for the 1997 period.  A summary of
revenue and expenses during the periods is as follows:

                                                       1998                         1997                   Net Change
                                                       ----                         ----                   ----------
Revenues                                        $ 3,409,361                  $ 2,514,978                    $ 894,383
Costs and expenses                              (5,737,531)                  (4,102,484)                  (1,635,047)
                                                -----------                  -----------                  -----------
Net loss                                       $(2,328,170)                 $(1,587,506)                  $ (740,664)
                                               ============                 ============                  ===========
Crude oil sales decreased by 20% due primarily to a 34% decrease in the
average prices of crude oil sold which was partially  offset by a 2% increase in
production.  There  was also a  decrease  in  royalties  paid by us. We sold the
majority of our oil producing properties in two separate transactions  effective
July 1, 1998 and September 1, 1998. The 1998  royalties  paid amount  includes a
provincial  royalty tax credit in the amount of $117,000.  Our oil unit sales in
barrels ("bbls") (before  deducting  royalties) and the average price per barrel
sold during the periods indicated were as follows:

                                             1998                                            1997
                                         Average price                                     Average price
                              bbls          per bbl           Total            bbls           per bbl          Total
                              ----          -------           -----            ----           -------          -----
Crude oil sales             64,954           $14.84        $964,000          63,783            $22.50     $1,436,000
Royalties paid                                             (66,000)                                        (315,000)
                                                           --------                                        ---------
Total                                                      $898,000                                       $1,121,000
                                                           ========                                       ==========
Gas sales  increased  35% because of a 52%  increase in number of units
sold which was  partially  offset by a 6% decrease in the average price for gas.
In addition,  gas sales include  royalty income which  decreased 13% in 1998. We
sold the majority of our working interest gas properties effective July 1, 1998.
The  primary  increase in gas  production  was the pay out of two wells that had
been in a penalty  position.  These wells were included in the properties  sold.
The volumes in million  cubic feet  ("mmcf")  and the  average  price of gas per
thousand cubic feet ("mcf") sold during the periods indicated were as follows:

                                              1998                                           1997
                                          Average price                                   Average price
                               mmcf          per mcf           Total           mmcf           per mcf          Total
                               ----          -------           -----           ----           -------          -----
Gas sales                       304            $2.17        $660,000            200             $2.31       $462,000
Royalty income                                               127,000                                         146,000
Royalties paid                                              (82,000)                                        (85,000)
                                                            --------                                        --------
Total                                                       $705,000                                        $523,000
                                                            ========                                        ========
Proceeds from carried  interests  decreased 57% to $207,000 during 1998
compared to $476,000 in 1997.  During 1998, there were significant  expenditures
made by the operators of the carried interest properties.

         Interest  and  other  income  decreased  44% in 1998.  Interest  income
decreased  from  $336,000  to  $194,000  in 1998  due to the  decrease  in funds
available for investment and lower interest rates. In addition,  the 1998 period
includes  proceeds  from the  sale of  seismic  data in the  amount  of  $27,000
compared to $59,000 from such sales in 1997.

         Gain on the sale of properties in 1998 amounted to $1,378,000 primarily
representing  the sale of our heavy crude oil properties in Alberta and the sale
of certain working interest properties in British Columbia.

         General and  administrative  costs  increased 18% in 1998 to $1,301,000
from  $1,105,000  in 1997  primarily  as a result of our  increased  activity in
connection  with the  Kotaneelee  litigation  and our  exploration  program.  In
addition, the expenses increased in the United States because of the 7% increase
in the value of the U.S. dollar compared to the Canadian dollar during 1998.

         Legal  expenses  increased  24% during 1998 to  $2,358,000  compared to
$1,898,000  during 1997. These expenses are related primarily to the cost of the
Kotaneelee  litigation.  During 1998, we continued the  presentation  of a major
part of our case against the working interest  partners.  Our case was completed
on  September  16,  1998 and the  defendants'  case  proceeded.  The 1998  costs
represent  both legal fees and the cost of our various  experts  who  testified,
were being  prepared  for  testimony,  or assisted in the  cross-examination  of
defense witnesses.

         Lease  operating  costs increased 22% from $799,000 in 1997 to $976,000
in the 1998 period. The increase  represents the charges by the operators of our
properties which is related to the increased production.  In addition, our share
of production costs in producing Alberta heavy crude oil increased.

         Depletion,  depreciation and amortization expense increased 39% in 1998
to $870,000  from  $624,000 in 1997.  The  increase in  depletion in 1998 is the
result  of  increased  production  and the  amount  of  additional  costs  being
depleted.

         A foreign exchange gain of $179,000 was recorded in 1998, contrasted
with a gain of $231,000 on our U.S. investments in 1997.  In 1998,  the gain was
attributable to the continuing  strengthening  of the U.S. dollar as compared to
the Canadian dollar on our U.S. investments.

         Abandonments  and write downs were $685,000 which resulted from a write
down of  certain  of our  properties  in  California  and  Texas.  There were no
abandonments and write downs in 1997.

         Income tax  recovery  increased  122% to $378,000  in 1998  compared to
$170,000  in 1997.  The  increase  in the 1998  income tax  recovery  reflects a
similar  increase in the loss in 1998 after giving effect to the $1,378,000 gain
on sale of assets in 1998 which was not recognized for income tax purposes.

         Quantitative and Qualitative Disclosure About Market Risk

         We do not have any  significant  exposure  to  market  risk as the only
market risk sensitive instruments are our investments in marketable  securities.
At June 30,  2000,  the  carrying  value of such  investments  (including  those
classified as cash and cash  equivalents) was  approximately  $2.2 million which
was  approximately  equal to the fair value and face  value of the  investments.
Since we expect to hold the  investments to maturity,  the maturity value should
be realized.  In addition,  our  investments in marketable  securities  included
investments  held in the United  States  which are  subject to foreign  exchange
fluctuations.  At June 30, 2000,  our  investments  in the United States totaled
$875,000.
USE OF PROCEEDS

         The proceeds  will be used for general  corporate  purposes,  including
 working capital, exploration and development and continuation of the Kotaneelee
 litigation.  See "Legal  Proceedings"  and "Our Business."  Currently,  we have
 sufficient  funds  and a line of  credit to meet our  current  working  capital
 needs.  Assuming  all of the shares  offered by this  prospectus  are sold at a
 price of $_____ U.S. per share, we would realize net proceeds (after  estimated
 expenses of the offering of $______) of approximately $______. The net proceeds
 of the offering  would be added to our general funds and would not be expressly
 designated for any particular  purpose.  However,  we currently expect that the
 net proceeds would be used for the following purposes:

                                                                   United States                      Canada
Working capital to operate the company                              $__________                    $__________
Costs of Kotaneelee litigation                                      $__________                    $__________
Exploration and development                                         $__________                    $__________
                                                Total:              $__________                    $__________
Litigation  expenses may vary depending on the progress of the cases in
which we are  involved.  If the net proceeds of the  offering are  substantially
less than the  estimated  amounts,  and if we are  unable  to obtain  additional
funds, we will be unable to pursue exploration and development activities or the
Kotaneelee  litigation.  If the gross proceeds of the offering do not exceed the
costs of this offering, the excess costs over gross proceeds would be paid by us
from our current assets.

                                    DILUTION
         You will experience  immediate and substantial dilution in net tangible
book value of your  shares as a result of this  offering.  The  following  table
illustrates  the per share dilution to purchasers of shares giving effect to the
sale of all of the shares in the offering at a price of $____ per share.
Offering price attributable to each limited voting share                                                   ______
Net tangible book value per share before the offering(1)                                                   ______
Increase attributable to payments for limited voting shares                                                ______
Pro forma net tangible book value per share after the offering                                             ______
Dilution to purchasers of the shares (2)(3)                                                                ______
(1) We  calculate  net  tangible  book value per share by dividing the number of
limited voting shares  outstanding  into our tangible net worth (tangible assets
less liabilities) at June 30, 2000.

(2) We calculate  dilution to new  investors by  subtracting  net tangible  book
value per share of our limited  voting  shares after the  offering  from the per
share price attributable to each limited voting share purchased.

(3) This estimate of dilution  does not reflect the results of operations  since
June 30, 2000 nor does it give any effect to the outstanding options to purchase
our limited voting shares.  There are _______ shares  reserved for share options
granted to our officers,  directors and  consultants.  If the options to acquire
the _________  shares had been exercised at June 30, 2000,  then the dilution to
purchasers would be $.___ per share.

                   TERMS OF OFFERING AND SELLING ARRANGEMENTS

Issuance of the Rights; Guaranteed Amount

         We are offering a total of [____________]  limited voting shares to our
existing  shareholders.  For every one (1) share  held of record at the close of
business on __________,  2000, shareholders will receive one transferable right.
For every  transferable  rights,  each  shareholder will be entitled to purchase
from us at a price of $ U.S.  _________  or $ Canadian  ______,  one  additional
share.

How the Contingent Right Operates

         If you purchase all of the shares that you are  guaranteed the right to
buy,  you will also  have the  right to  purchase  additional  shares  which are
contingent  on the  number  of  shares  that  are  not  purchased  by the  other
shareholders.  This contingent right to purchase additional shares is limited to
times the  guaranteed  number of shares that you are entitled to  purchase.  The
shares being offered for sale will first be allocated to satisfy your guaranteed
right to  purchase  shares.  If there are unsold  shares  remaining  after these
allocations,  then any unsold shares will be allocated proportionately among the
shareholders who exercised their contingent right to purchase the unsold shares.

         To  illustrate  how the  offering  works,  assume a  shareholder  owned
[_____]  shares of limited  voting shares as of the record date. He will receive
_______  rights and is  guaranteed  the right to  purchase  [_____]  shares.  In
addition,  if he purchases the total [_____]  shares,  then he may also exercise
his contingent right for up to [_____]  additional shares. In the event that the
offering is oversubscribed, we will accept subscriptions by shareholders for the
guaranteed  shares  first.  Any  remaining  shares unsold will then be allocated
proportionately among the shareholders who subscribed for the purchase of shares
on a contingent basis.

         For example,  assume in the aggregate that our  shareholders  subscribe
for  a  total  of  [___________]  shares,  [___________]  shares  of  which  are
guaranteed. Under the terms of the offering [_________] shares are being offered
for sale,  [_____________]  shares would be issued to shareholders who purchased
their guaranteed  shares. The remaining shares offered for sale (_________ minus
[________])  would  be  available  for  the  shareholders  who  exercised  their
contingent  right to purchase shares on a pro rata basis.  Each  shareholder who
exercised his contingent right would receive ____% (_________  available divided
by  [____________]  contingent  right) of the  contingent  amount  of  available
shares.

Transferability and Listing of the Rights

         Rights will be evidenced by a Rights  Certificate  in registered  form.
You may  transfer  the rights you  receive to third  parties by  delivering  the
Rights  Certificate to them,  provided that the Right has been properly executed
and assigned by the registered holder to the third party. The Rights will not be
listed on any U.S.  national  securities  exchange  and will not be admitted for
quotation in any automated,  inter-dealer  quotation  system,  but may be traded
through  any  registered  investment  dealer or broker on  whatever  market  may
develop for them, if any. The Rights are listed on the Toronto Stock Exchange.

Expiration of the Rights

          The  offering  will  end  at  4:30  P.M.  Eastern  Standard  Time,  on
_________,  2000. The date and time when the offering  expires is referred to in
this prospectus as the expiration date.

How to Subscribe for Shares and/or How to Revoke Your Subscription

          The Rights Certificate which indicates the number of your rights, will
be issued in the name and  address of the  holders of limited  voting  shares of
record on _______,  2000 and mailed to shareholders as soon as practicable after
the record date. All rights  certificates  received prior to the expiration date
will be  held  by our  subscription  agents  in the  United  States  and  Canada
identified in the accompanying Rights Certificate and instructions. Prior to the
formal acceptance of any or all of such subscriptions, all payments will be held
by the agent(s).

          Subscriptions  may  be  revoked  by  delivery  of  written  notice  of
revocation to us prior to the expiration  date.  Subscriptions  will be accepted
promptly after the expiration  date by our delivery of written  confirmation  of
acceptance  to our agents.  They will then be authorized to issue the shares and
make  any  refunds,  without  interest,  to the  extent  that  the  offering  is
oversubscribed.  A three-day period is necessary to permit the agents to process
all  subscriptions  received by the expiration date, so that the total number of
guaranteed and contingent shares to be issued can be determined.  We reserve the
right to reject any  subscription,  absent  proof in  writing  from you that all
terms of the offering have been complied with on a timely basis.  We will notify
you promptly of any rejection.

Determination of Purchase Price; How to Purchase Shares

         In establishing the purchase price,  our board of directors  considered
recent  market  prices for our  shares.  The  purchase  price is intended by the
directors  to  be  attractive  to  our  shareholders  and  result  in  a  higher
subscription  rate.  The purchase  price does not reflect our  assessment of the
actual  value of our  assets.  All  interpretations  of matters  relating to the
offering will be made by our management and will be final.

         You may pay the purchase  price  either in Canadian or U.S.  dollars at
the rates  indicated  above. We are permitting the payment of the purchase price
in either of these currencies solely for shareholders' convenience. The exchange
rate on  ______________,  2000 as reported by the Wall Street  Journal was $1.00
Canadian equals U.S. $_____.  You may not purchase  fractional  shares, and only
whole shares will be issued.

         Shares may be purchased by surrendering  the Rights  Certificate to the
agent, along with a signed subscription agreement, together with full payment of
the purchase price for both the shareholder's guaranteed and contingent amounts.
Payment of the purchase  price must be made by check,  bank draft or money order
payable  to the  order  of one of our  subscription  agents.  Any  subscriptions
satisfying these conditions will be accepted;  however,  subscriptions  received
after the expiration date will not be honored and we will not be responsible for
subscriptions  not delivered by that time.  You are advised to choose a reliable
method  (e.g.,  such as  overnight  courier  service)  for the  delivery of your
subscriptions to the agents.

         You  may  also  purchase  your  shares  by  delivering  to  one  of the
subscription agents before the expiration date each of the following:

        o         the full purchase price together with a signature guarantee in
                  writing  or by  facsimile  from a bank or trust  company  or a
                  member  firm of any  U.S.  registered  stock  exchange  that a
                  Rights  Certificate with respect to shares  subscribed for has
                  been or will be promptly  delivered  to the agent within three
                  business days, and

        o         information  setting forth the name of the  subscriber and the
                  serial  number  of  the  Rights   Certificate.   Subscriptions
                  satisfying these conditions will be accepted subject to prompt
                  receipt by the agent of the duly executed Rights  Certificate,
                  within three business days.

Issuance and Delivery of the Shares

         As soon as  practicable  after the  expiration  date, we will issue the
limited voting shares to be issued with respect to all accepted subscriptions to
you, together with any applicable  refund.  The shares will be registered in the
name and manner set forth on the subscription agreement which you provide to us.

                 UNITED STATES TAX CONSEQUENCES OF THE OFFERING

         Your  receipt of the  subscription  rights  will have  certain  federal
income tax consequences for U.S. resident shareholders. The following discussion
is the  likely  position  of the  Internal  Revenue  Service  regarding  the tax
consequences of the receipt of your subscription  rights. This discussion is not
intended to serve as tax advice to you, and you should consult your personal tax
advisor for advice relating to your personal tax situation.

         The  mere  receipt  of  these  rights  alone  will  not  result  in the
recognition  of taxable income under the Internal  Revenue Code.  While you will
not have to report taxable income upon the receipt of your subscription  rights,
you may have to allocate a portion of the adjusted basis of your original shares
to any shares that you purchase in the offering.

         If you do not  exercise  your  subscription  rights,  you  will  not be
allowed to claim a loss, and no adjustment will be made to the tax basis of your
shares.  If the  subscription  rights  are  exercised,  you may be  required  to
allocate a portion of the basis of your  original  shares to the shares that you
purchase in the  offering,  depending  on whether  the fair market  value of the
rights equals or exceeds 15% of the fair market value of your original shares at
the time of receipt of your rights.

         If the fair market value of your subscription  rights is 15% or more of
the fair market value of the shares you currently  own, you must allocate to the
purchased  shares  part  of the  basis  of  your  original  stock,  in the  same
proportion which the fair market value of the  subscription  rights bears to the
total of the fair market value of your original shares and the fair market value
of the subscription  rights.  The total tax basis of your newly purchased shares
will equal the allocated basis attributable to the subscription  rights plus the
purchase price of the purchased  shares.  The holding period for shares acquired
by exercise of the subscription rights will begin from the date the subscription
rights are exercised.

         If the fair market value of the subscription rights is less than 15% of
the fair market value of the shares you currently own, you may elect to allocate
a portion of your current tax basis to the shares that you purchase as discussed
above.  If you do not elect to allocate  your tax basis,  then your tax basis in
the purchased shares will be your purchase price of the offered stock.

         The above  discussion is not applicable to a rights holder who is not a
shareholder when the rights are received. Such right holders who purchase rights
and purchase  shares of our limited voting shares should apply the general rules
that are applicable to the purchase and sale of such securities.

                    CANADIAN TAX CONSEQUENCES OF THE OFFERING

     The following is a summary of the  principal  Canadian  federal  income tax
considerations generally applicable to the rights being distributed to you. This
discussion applies to shareholders who at all relevant times for purposes of the
Canadian  Income Tax Act deal at arm's length with us, are not  affiliated  with
us, hold their  rights and shares as capital  property  and do not,  and are not
deemed to, use or hold their rights or shares in or in the course of carrying on
business in Canada.  This summary  does not apply to an insurer  whose rights or
shares are designated  insurance  property  within the meaning of the Income Tax
Act.  The summary is based on the current  provisions  of the Income Tax Act and
the  regulations,  all  specific  proposals  to amend the Income Tax Act and the
regulations  publicly  announced by the Minister of Finance as of September  21,
2000,  and  Canadian  counsel's  understanding  of  the  current  administrative
policies and assessing  practices of the Canada Customs and Revenue Agency. This
summary  does  not  consider  or  anticipate  any  changes  in  law  whether  by
legislative,  governmental or judicial decision or action,  nor does it consider
the  tax  legislation  or   considerations  of  any  province  or  territory  or
jurisdiction  outside Canada. This summary does not apply to a non-resident that
is an insurer carrying on business in Canada and elsewhere. This summary assumes
that the shares are listed on a  prescribed  stock  exchange for purposes of the
Income Tax Act at all relevant times.  The Toronto Stock  Exchange,  the Pacific
Stock Exchange and Nasdaq are prescribed stock exchanges.

Issuance of Rights

     If you are a resident of Canada for the purposes of the Income Tax Act, you
will not be  required  to include any amount in income upon the  issuance of the
rights to you. If you are not  resident (or deemed to be resident) in Canada for
purposes  of the Income Tax Act,  you will not be  subject to  Canadian  federal
income  tax  on the  issuance  of the  rights  and  there  will  be no  Canadian
non-resident withholding tax applicable on the issuance of the rights to you.

     The rights  distributed to you will have a "nil" cost to the initial holder
for the purposes of the Income Tax Act. The cost of the rights  acquired must be
averaged with the adjusted cost base to the  shareholder of all other  identical
rights  held as capital  property  by that  shareholder  immediately  before the
acquisition  in order to determine the adjusted cost base to the  shareholder of
each right held by the shareholder.

Exercise of Rights

     You will not  realize  any  capital  gain or loss  when you  exercise  your
rights. Each limited voting share acquired by you as a result of the exercise of
rights will have a cost to you equal to the aggregate of the subscription  price
paid for such share and the adjusted  cost base to you of the rights  exercised.
This cost will then  generally be averaged with the adjusted cost base of all of
our other limited  voting shares owned by you as capital  property and acquired
after December 31, 1971 for the purpose of determining the adjusted cost base to
you of each such share held by you.

Disposition of Rights

     Upon the  disposition  or deemed  disposition  of a right by you, a capital
gain (or capital  loss) will be  realized  to the extent  that your  proceeds of
disposition  of the right  exceed (or are  exceeded  by) the  aggregate  of your
adjusted cost base of the right and any reasonable costs of disposition.

     If you are a resident in Canada for  purposes of the Income Tax Act,  based
on proposed  amendments to the Income Tax Act,  two-thirds of a capital gain
must be  included  in  computing  your  income  under the  Income  Tax Act,  and
two-thirds of a capital loss may be deducted  against  taxable  capital gains in
accordance  with the detailed  provisions of the Income Tax Act and the proposed
amendments.  If you are a  Canadian-controlled  private corporation,  you may be
liable to pay an additional  refundable tax of 6 2/3% on taxable  capital gains.
If you are an individual,  other than certain  trusts,  you may be subject to an
alternative minimum tax for realized capital gains.

     If you are not  resident  (or deemed to be resident) in Canada for purposes
of the Income Tax Act, you will  generally not be subject to Canadian tax on the
disposition of rights unless,  the rights constitute  taxable Canadian property.
In general,  a right will not be taxable Canadian property to you unless, at any
time during the 60 month period immediately before the disposition, you, persons
with whom you did not deal at arm's  length,  or you and such persons  owned (or
had the right to acquire through the offering or otherwise) not less than 25% of
the  issued  shares  of any class or series of our  capital  stock.  In  certain
circumstances,  rights may be deemed to be taxable Canadian property. In certain
circumstances,  you may be entitled to relief under an applicable  international
tax treaty between Canada and your country of residence.

     Upon the  expiration  of an  unexercised  right,  if you are a resident  of
Canada for purposes of the Income Tax Act, you will realize a capital loss equal
to the adjusted cost base of the right to you. If you hold an unexercised  right
and have not received any right other than  through  this  offering,  your right
will have an adjusted cost base of nil and the  expiration of the right will not
give rise to a capital loss.

THE FOREGOING  DISCUSSIONS RELATING TO UNITED STATES AND CANADIAN TAXES
ARE NOT INTENDED TO SERVE AS LEGAL OR TAX ADVICE TO ANY PARTICULAR  SHAREHOLDER.
TO DETERMINE  THE TAX  CONSIDERATIONS  APPLICABLE TO THEM,  SHAREHOLDERS  SHOULD
CONSULT THEIR OWN TAX ADVISORS.
CAPITALIZATION

         The following  table shows our cash and cash  equivalents,  investments
and total capitalization:

        o         on an actual basis as of June 30, 2000; and

        o         as adjusted to reflect the sale of [__________] shares offered
                  by this  prospectus  at an assumed  public  offering  price of
                  $[____] per share,  after  deducting  the  estimated  offering
                  expenses payable by us.

         You should read this information together with our financial statements
and the notes  relating to those  statements  and  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations" and "Use of Proceeds"
appearing elsewhere in this prospectus.

                                                                                  As of June 30, 2000

                                                                              Actual               As adjusted
Cash and cash equivalents                                                   $2,185,918            $____________
Marketable securities                                                          291,342
Short-Term Debt                                                                 -                       -
Long-Term Debt                                                                  -                       -
Stockholders' Equity (Deficit):
 Limited Voting Shares, par value $1.00 per share:
 Limited Voting Shares                                                    $ 14,284,970            $____________
 Contributed surplus                                                        26,502,342            $____________
 Deficit                                                                   (27,332,063)           $____________
                                                                           ------------
Total Shareholders' Equity                                                $ 13,455,249            $____________
                                                                           ============
The number of shares as  adjusted  for this  offering  excludes  598,500  shares
issuable  upon  the  exercise  of  outstanding  options  held by our  directors,
officers and consultants as of June 30, 2000.
MARKET INFORMATION

     Our limited  voting  shares are traded on The  Toronto,  Pacific and Boston
Stock  Exchanges  [Symbol:  CSW],  and in the NASDAQ  SmallCap  Market  [Symbol:
CSPLF].

         The quarterly  high and low closing  prices in Canadian  dollars on The
Toronto Stock Exchange during the calendar periods indicated were as follows:
1998                 1st quarter            2nd quarter            3rd quarter            4th quarter
         ----                 -----------            -----------            -----------            -----------
High                    11.75                  10.50                  9.00                   10.00
          Low                     9.00                   8.00                  5.50                    6.25

         1999                 1st quarter            2nd quarter            3rd quarter            4th quarter
         ----                 -----------            -----------            -----------            -----------

         High                    11.00                  11.00                    16.00                12.35
          Low                     6.00                   7.50                    10.75                 8.00

         2000                 1st quarter           2nd quarter            3rd quarter*
         ----                 -----------           ------------           ------------

         High                    12.50                  10.50                  10.50
          Low                     8.25                  6.30                   8.00
---------------------------
*   Through August 31, 2000
The  quarterly  high and low closing  prices in U. S. dollars on the NASDAQ
SmallCap Market during the calendar periods indicated were as follows:

         1998                 1st quarter            2nd quarter            3rd quarter            4th quarter
         ----                 -----------            -----------            -----------            -----------
High                    8.50                   7.88                   6.63                   6.75
          Low                    6.25                   5.63                   3.31                   3.94

         1999                 1st quarter            2nd quarter            3rd quarter            4th quarter
         ----                 -----------            -----------            -----------            -----------

         High                    7.63                   7.50                   11.50                  8.50
          Low                    4.50                   5.38                     6.50                 5.09

         2000                 1st quarter           2nd quarter            3rd quarter*
         ----                 -----------           ------------           ------------

         High                    8.44                   7.50                   7.06
          Low                    5.63                   4.25                   5.13
------------------------------
*   Through September 19, 2000
Trading Volume Shares
                                                       2000                 1999                1998                 1997
                                                       -----                ----                ----                 ----
NASDAQ SmallCap Market *                           9,476,820           6,359,187           4,868,392            5,744,756
Pacific Exchange, Inc. **                              8,300             156,300             876,100            1,674,600
Toronto Stock Exchange **                            138,426             177,576              71,218              131,131
*   Through September 19, 2000
**  Through August 31, 2000
As of September 1, 2000, we had  approximately  4,400 record holders of
our limited voting  shares.  We have never paid a dividend on our limited voting
shares.  Any future  dividends  will be  dependent  on our  earnings,  financial
condition,  and business  prospects.  We are legally  restricted from paying any
dividend or making any other payment to shareholders (except by way of return of
capital) on the limited voting shares until our accumulated deficit ($27,332,000
at June 30,  2000) is  eliminated.  Current  Canadian  law does not restrict the
payment of dividends to persons not resident of Canada.  Under current  Canadian
tax law and the Canada-United States Income Tax Convention (1980), any dividends
paid to U.S. resident shareholders under the Convention are generally subject to
a 15% Canadian withholding tax.
PERFORMANCE GRAPH

         The graph  below  compares  the  cumulative  total  returns,  including
reinvestment  of dividends,  if applicable,  of our shares with companies in the
NASDAQ Market Index and an Industry Group Index.  (Media  General's  Independent
Oil and  Gas  Industry  Group).  The  chart  displayed  below  is  presented  in
accordance with SEC requirements. Shareholders are cautioned against drawing any
conclusions from the data contained therein, as past results are not necessarily
indicative of future performance.

                      COMPARISON OF CUMULATIVE TOTAL RETURN
                        January 1, 1995 to June 30, 2000

---------------------------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
                                                                                                                       June
                                       1994         1995         1996          1997         1998         1999          2000
---------------------------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
Canada Southern                        100            144.32       151.35        179.73       105.41       127.03        140.54
---------------------------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
Independent Oil & Gas                  100            109.42       141.00        131.27        85.03       119.12        149.24
---------------------------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
NASDAQ Market Index                    100            129.71       161.18        197.16       278.08       490.46        479.98
---------------------------------- ------------- ------------ ------------ ------------- ------------ ------------ -------------
OUR BUSINESS
General

         We incorporated in 1954 under the Canada  Corporations Act. In 1979, we
became  subject  to the  Canada  Business  Corporations  Act,  and in  1980,  we
continued under the Nova Scotia Companies Act.

         We are, either in our own right, or through other entities,  engaged in
the exploration and development of properties  containing or believed to contain
recoverable  oil  and gas  reserves  and the  sale  of oil  and gas  from  these
properties.  Although  many of the  properties  in which we have  interests  are
undeveloped,  all  properties  with  proved  reserves  are  partially  or  fully
developed.  Our interests in exploratory  ventures are on properties  located in
Alberta, British Columbia, Saskatchewan, the Northwest and Yukon Territories and
the Arctic Islands in Canada. Our principal asset is our 30% carried interest in
the Kotaneelee field, a partially  developed gas field (See "Legal  Proceedings"
at page 47). We also have interests in producing  properties in British Columbia
and Alberta.

         The  majority  of our oil  and  gas  interests  are  carried  interests
pursuant to  agreements  which provide that revenues are not payable to us until
expenditures by the carrying  partners have been recouped from  production,  and
that operating decisions are made by the carrying partners.  Generally,  we may,
at any time, as to each block or economic unit,  elect to convert from a carried
interest  position  to a working  interest  position  by paying our share of the
unrecouped  expenditures  for the unit (i.e.,  expenditures  not  recouped  from
production  revenues).  If we convert to a working interest, we will receive our
share of production  revenues  currently,  but we must also pay for our share of
operating and capital  expenditures  currently.  At June 30, 2000,  our share of
unrecouped expenditures was as follows:

         British Columbia:
           Ex-permit 149                                            $4,009,000
           Ex-permit 102 (Siphon)                                      980,000
         Yukon and Northwest Territories:
            Ex-permit 2713 (Celibeta)                                  321,000

         We currently  have two full-time  employee and one part-time  employee,
all of whom are located in Canada. We also rely to a great extent on consultants
(approximately 7) for technical,  legal, accounting and administrative services.
We use  consultants  because it is more cost  effective  than employing a larger
full time staff.

Yukon Territory - The Kotaneelee Field

         Our principal asset is a 30% carried interest in the Kotaneelee natural
gas field located on Exploration Permit 1007 in the Yukon Territory, Canada. The
permit  consists of 31,888  gross  acres  (9,566 net acres)  which is  partially
developed by two natural gas wells that had combined gross productive capability
at June 30, 2000 of 65 million  cubic feet per day (19.2  million cubic feet per
day net).  Gross natural gas sales were  approximately 45 million cubic feet per
day (net  13.5  million  cubic  feet per  day) at June 30,  2000 as a result  of
shrinkage and fuel gas  requirements.  Anderson  Exploration  Ltd.  operates the
Kotaneelee  field.  See "Legal  Proceedings"  at page 47 for a discussion of the
Kotaneelee litigation concerning this asset.

         Production  at  Kotaneelee  commenced  in February  1991.  According to
reports filed with the Yukon government,  total production in billion cubic feet
("bcf") from the Kotaneelee gas field since 1991 has been as follows:

                Calendar Year                             Production (bcf)
                -------------                             ----------------
                    1991                                         8.1
                    1992                                        18.0
                    1993                                        17.5
                    1994                                        16.7
                    1995                                        15.7
                    1996                                        15.2
                    1997                                        14.4
                    1998                                        16.0
                    1999                                        22.3
                    2000 (6 months)                             10.6
                                                                ----
       Total through June 30, 2000                             154.5
                                                               =====

         As a carried  interest  owner,  we are entitled to receive our share of
field revenues after the working  interest  parties  recover their operating and
capital costs.  The operator  reported that as of November 30, 1999  development
costs  totaling  $96.7 million had been incurred and repaid.  As of December 31,
1999,  the  operator  also  reported  that our share of net  revenues  due to us
totaled  $412,374.  The amount of  recoverable  costs is one of the issues being
contested in the Kotaneelee litigation.  We claim, and the defendants deny, that
the defendants have made improper  charges to the carried  interest  account and
one defendant (Amoco Canada)  maintains that the carried interest account should
be charged  additional amounts for gas processing fees. Amoco Canada claims that
the remaining costs to be recovered at December 31, 1999 were either $58,711,000
or  $19,235,000  depending on inclusion  of  interest.  At this time,  it is not
possible to determine  whether Amoco Canada will be successful in its claim that
gas processing fees should be charged to the carried interest account.

         Although, according to the operator's reports, the Kotaneelee gas field
reached pay out status on November 10,  1999,  the operator has notified us that
it will not make any  payments to the carried  interest  owners,  including  us,
until the issue of the amount of  recoverable  costs under the carried  interest
account has been resolved by the Court of Queen's Bench of Alberta,  Canada. The
operator has stated that it will deposit our share of net production proceeds in
an interest bearing account with an escrow agent. A motion was filed in December
1999 by us to  direct  all of the  defendants  to make  timely  payments  of all
current and future  amounts due from our share of field  revenues.  On April 10,
2000,  the Court  dismissed the motion.  We have filed a notice of appeal of the
dismissal with the Alberta Court of Appeal. Net production proceeds are unlikely
to be paid to us until final resolution of the Kotaneelee litigation.

          Since  March  2000,  the  operator  of the  Kotaneelee  field has been
reporting the amount of our share of net revenues being deposited in escrow. The
September 2000 report provided  information  for production  during the month of
June 2000.  Based on the reported data, we believe the total amount due to us is
$5,526,365 of which $1,832,335 has been deposited in escrow.

         British Columbia

         Our  major  source  of  income  has been from the sale of crude oil and
natural gas from our properties  located in northeast  British Columbia where we
have royalties and carried interests.  In addition to our producing  properties,
we have various  petroleum and natural gas leases in northeast British Columbia.
As a result of the  geological and  geophysical  work performed on these leases,
various drilling  prospects have been identified.  The cumulative dry hole costs
to drill these  prospects  are  estimated  to be  approximately  $2 million.  We
continue to evaluate and attempt to acquire additional petroleum and natural gas
leases in  British  Columbia.  Presently,  we have  interests  in  49,013  gross
developed acres (7,977 net acres) and 28,820 gross undeveloped acres (15,091 net
acres). We believe that these prospects will be drilled by us or others.

         Canadian Arctic Islands

         As of June 30, 2000,  we held  working  interests in 45,100 gross acres
(1,817 net acres) and  carried  interests  in 133,260  gross  acres  (37,257 net
acres)  in the  Sverdrup  Basin,  located  in the  Arctic  Islands.  The  Hecla,
Whitefish,  Drake Point, Roche Point,  Kristoffer,  Romulus and Bent Horn fields
have  been  designated  Significant  Discovery  Lands  by the  Canadian  Federal
Government.  There  interests are being  retained  under  Significant  Discovery
Licenses pending development.

         Panarctic  Oils Ltd.  ("Panarctic"),  the  operator,  received  Federal
government  regulatory  approvals for a pilot project to move shipments of crude
oil from the Bent Horn field by tanker through the Northwest Passage to southern
Canada in 1985. Through December 31, 1996,  approximately 2.7 million barrels of
Bent Horn crude had been sold. In 1996, the operator shut down  production  from
the  field  and  dismantled  the  production   facilities  because  of  economic
uncertainties.  We have a 5%  carried  interest  in the area  which  has not yet
reached pay out status. The timing of any pay out is uncertain.

         Major operators and industry investors have recently indicated interest
in exploring  the  Canadian  Arctic  Islands  region to develop  additional  gas
reserves  and  productive  capacity.  Recent  statements  by  major  oil and gas
producers  indicate that  technological  developments  and the  sustained  world
prices for natural gas may lead to expanded  exploration and production  efforts
in the Canadian Arctic Islands, as well as advance the construction of a natural
gas pipeline to the region in the future.
Northwest Territories Properties

         We have a 45% carried  interest  in the  Northwest  Territories  in the
Celibeta  field,  designated  as  Significant  Discovery  Lands  by the  Federal
Government  (1,594  gross acres and 717 net acres).  The gas field is  presently
shut-in.  Because of the recent  activity in the Northwest  Territories,  we are
reviewing  our  holdings  in  the  area  to  take  advantage  of  any  potential
opportunities.

         Alberta

         During 1999, our primary Alberta asset and revenue  producing  property
was our heavy crude oil  production and related  facilities at Kitscoty.  Due to
the requirement of significant additional investment, the prospect of low prices
for heavy  oil and a shift in our  business  strategy,  we sold our 10 % working
interest to the operator for $336,000 effective October 1, 1999. The transaction
was completed during February 2000 and the proceeds of sale were credited to oil
and gas  properties in fiscal 2000.  In 1999,  the Company  participated  in the
drilling of 4 gross (.7 net) wells. Two wells were productive and two wells were
dry and  abandoned.  All of these  wells were  drilled on  shallow  natural  gas
prospects.

         We  continue to invest in  petroleum  and natural gas leases in Alberta
and have a current land  inventory  of 21,477 gross acres (7,349 net acres).  We
are presently  performing  geological  and  geophysical  work on these leases to
determine the prospects for commercial petroleum and natural gas production.  As
prospects are identified, we may participate in drilling or, alternatively, farm
out the prospects to other operators for drilling commitments.

         Saskatchewan

         We have a 3.75%  working  interest in five  sections  in  Saskatchewan.
During  1999,  there was no activity on these  properties  and the lands  remain
undeveloped.

         Texas

         In 1999, we participated in the drilling and completion of two wells in
Stephens  County,  Texas.  This  resulted in one dry hole and one nominal  crude
oil/natural  gas  producer.  Our  efforts  to farm out our  remaining  undrilled
acreage have been  unsuccessful  and we expect to spend a minimal  amount on the
investment  during the year 2000.  During the second quarter of fiscal 2000, the
carrying  costs  ($635,000)  of the project on our books were  written down to a
nominal value of $1.00

         California

         During  1999,  we sold our  investment  in our heavy crude oil recovery
project  in  California  because of  dissatisfaction  with the  progress  of the
program to develop the field reserves.  The  consideration  received for our 30%
interest  was  the  purchaser's  common  stock  (presently  unmarketable)  and a
promissory note which together approximated the carrying costs ($196,000) of the
property prior to the costs being written down in 1998 to a nominal value of $1.

         Patents, Licenses, Franchises and Concessions Held

         Permits and  concessions  are important to our  operations,  since they
allow the search for and  extraction of any crude oil and natural gas discovered
on the areas covered. See "Properties" at page 40.

         Seasonality of Business

         Our  business  is not  seasonal,  except that sales of natural gas peak
during the winter heating season.  Exploration  and  development  activities are
restricted  in  certain  areas  on a  seasonal  basis  because  extreme  weather
conditions affect transportation and the ability to pursue these activities.

         Customers

         Most of the natural gas produced from our carried  interest  properties
is being sold by the operators,  Anderson  Exploration Ltd. and Petro-Canada Oil
and Gas, to various gas marketers.  The production from the Kotaneelee gas field
is being sold by the working  interest  partners.  They have not  disclosed  the
purchasers.

         Supplemental Information on Oil & Gas Activities

         For additional  information  regarding our business,  see "Supplemental
Information on Oil and Gas Activities at page F-21."

         Competitive Conditions in Our Business

         The  exploration  for and  production  of crude oil and gas are  highly
competitive  operations,  both  internally  within the oil and gas  industry and
externally  with  producers  of other types of energy.  The ability to exploit a
discovery  of crude  oil or gas is  dependent  upon  considerations  such as the
ability to finance  development  costs, the  availability of equipment,  and the
ability to overcome  engineering and construction  delays and  difficulties.  We
must compete with companies which have substantially greater resources available
to them. Because the majority of our interests are in remote areas, operation of
our properties is more difficult and costly than those in more accessible areas.

         Furthermore,  competitive  conditions may be substantially  affected by
various  forms of energy  legislation  which may have been or may be proposed in
the United States and Canada;  however, it is not possible to predict the nature
of any such legislation  which may ultimately be adopted or its effects upon our
future operations.
Financial Information about Foreign and Domestic Operations and Export Sales

         Revenues, Operating Losses and Identifiable Assets

         Substantially all of our operating assets and revenues are attributable
to our operations in Canada. Operating losses are substantially  attributable to
the ongoing Kotaneelee litigation.

         Risks Attendant to Foreign Operations

         The  properties  in which we have  interests  are located  primarily in
Canada  and  are  subject  to  certain  risks  involved  in  the  ownership  and
development of such foreign property interests.  These risks include but are not
limited  to those of:  nationalization;  expropriation;  confiscatory  taxation;
native rights;  changes in foreign  exchange  controls;  currency  fluctuations;
burdensome royalty terms; export sales restrictions; limitations on the transfer
of interests in exploration  licenses;  and other laws and regulations which may
adversely affect our interests in these properties,  such as those providing for
conversion,  proration,  curtailment,  cessation  or other  forms of limiting or
controlling production of, or exploration for, hydrocarbons. Thus, an investment
in our shares  represents an exposure to risks in addition to those  inherent in
petroleum exploratory ventures.

Governmental Regulation of the Canadian Oil and Natural Gas Industry

         The oil and  natural  gas  industry  in Canada is subject to  extensive
controls and  regulations  imposed by various  levels of government  relating to
land  tenure,   production,   production  facilities,   pricing  and  marketing,
royalties,  environmental protection and other matters.  Outlined below are some
of the more significant  aspects of the legislation,  regulations and agreements
governing the oil and natural gas industry in Canada. All current legislation is
a matter of public  record and we are unable to predict  whether any  additional
legislation or amendments may be enacted.

         Land Tenure

         Crude oil and natural gas  located in the  western  provinces  is owned
predominantly by the respective provincial  governments.  Provincial governments
grant  rights to explore for and produce  crude oil and natural gas  pursuant to
leases,  licenses and permits for varying terms and on terms and  conditions set
forth in provincial  legislation including requirements to perform specific work
or make  payments.  Crude oil and natural gas located in such provinces can also
be  privately  owned and rights to explore  for and  produce  such crude oil and
natural  gas are  granted  by  lease  on such  terms  and  conditions  as may be
negotiated.  The term of both  provincial  and  freehold  leases will  generally
continue as long as crude oil or natural gas is produced from the property.

         Crude  oil and  natural  gas  rights  on  federal  lands  is  generally
regulated by the  Government  of Canada unless  authority has been  delegated by
agreement  to the  territorial  government  or the  government  of the  province
adjacent to the federal offshore area. In May 1993, the Canada Yukon Oil and Gas
Accord was signed  which  allowed for the  transfer to the Yukon of authority to
administer and control crude oil and natural gas resources within that territory
and for the establishment of an Oil and Gas Management  Regime. The transfer has
been completed and the lands are now administered by the Yukon Government.

         Production and Production Facilities

         The Governments of Canada,  Alberta,  British Columbia and Saskatchewan
have enacted  statutory  provisions  regulating  the production of crude oil and
natural gas. These  regulations  may restrict the maximum  allowable  production
from a well based on reservoir  engineering and/or conservation  practices.  The
construction  and  operation of  facilities to recover and process crude oil and
natural gas are also subject to regulation.

         Pricing and Marketing - Crude oil

         In Canada,  producers of crude oil negotiate sales  contracts  directly
with crude oil purchasers,  with the result that the market determines the price
of crude oil. Certain purchasers periodically advertise for volumes of crude oil
they are prepared to purchase and the price being offered for such volumes.  The
price depends in part on crude oil quality,  prices of competing fuels, distance
to market and the value of refined products.

         Pricing and Marketing - Natural Gas

         In  Canada,  the price of  natural  gas is  determined  by  negotiation
between buyers and sellers, with the result that the market determines the price
of natural gas. Natural gas exported from Canada is subject to regulation by the
National  Energy Board ("NEB") and the Government of Canada.  Exporters are free
to negotiate  prices and other terms with  purchasers,  provided that the export
contracts must continue to meet certain  criteria  prescribed by the NEB and the
Government of Canada.  As is the case with crude oil,  natural gas exports for a
term of less than two years must be made  pursuant  to an NEB order,  or, in the
case of exports for a longer  duration,  pursuant to an NEB license and Governor
in Council approval.

         The  Governments of Alberta,  British  Columbia and  Saskatchewan  also
regulate the volume of natural gas which may be removed from those provinces for
consumption   elsewhere   based  on  such   factors  as  reserve   availability,
transportation arrangements and market considerations.

         Royalties and Incentives

         The royalty  regime is a  significant  factor in the  profitability  of
crude oil and natural gas production. Royalties payable on production from lands
other than Crown lands are determined by negotiations  between the mineral owner
and the  lessee,  although  production  from such  lands may also be  subject to
provincial taxes and  regulations.  Crown royalties are determined by government
regulation  and are  generally  calculated  as a percentage  of the value of the
gross production, and the rate of royalties payable generally depends in part on
prescribed  reference prices, well productivity,  geographical  location,  field
discovery date and the type or quality of the product produced. The value of the
gross  production  for royalty  purposes  may be based on a deemed value for the
product rather than the actual value received by the interest holder.

         From time to time the Governments of Canada, Alberta,  British Columbia
and Saskatchewan have established incentive programs which have included royalty
rate reductions, royalty holidays and tax credits for the purpose of encouraging
natural gas and crude oil exploration or enhanced recovery projects.  Incentives
are intended to enhance the existing  cash flow of the crude oil and natural gas
industry  and to improve the  economics of finding and  developing  new and more
costly  crude oil and  natural gas  reserves.  Crude oil  royalty  holidays  for
specific wells and royalty  reductions reduce the amount of Crown royalties paid
by the interest holder to the respective government. Tax credit programs provide
a rebate on Crown royalties paid.

         Environmental Regulation

         The oil and natural gas industry is subject to environmental regulation
pursuant to local, provincial and federal legislation. Environmental legislation
provides for restrictions  and prohibitions on spills,  releases or emissions of
various  substances  produced in association  with certain crude oil and natural
gas industry operations.  An environmental assessment and review may be required
prior  to  initiating   exploration  or  development   projects  or  undertaking
significant changes to existing projects. In addition, legislation requires that
well and facility  sites be abandoned and reclaimed to the  satisfaction  of the
appropriate  authorities.  A  breach  of  such  legislation  may  result  in the
imposition of fines or penalties.  Federal environmental  regulations also apply
to the use and transport of certain restricted and prohibited substances. We are
committed to meeting our responsibilities to protect the environment wherever we
operate  and  believe  that  we  are  in  material  compliance  with  applicable
environmental  laws  and  regulations.  We  have  not  been  required  to  spend
significant sums to comply with clean up laws and regulations.  Compliance by us
with  governmental  provisions  regulating  the  discharge  of  materials to the
environment or otherwise  relating to the  protection of the  environment is not
expected  to have a material  effect on our  capital  expenditures,  earnings or
competitive position.

                                   PROPERTIES

         Our  principal  asset is our 30%  carried  interest  in the  Kotaneelee
field,  a  partially  developed  gas field in the Yukon  Territory.  See  "Legal
Proceedings"  at page 47. We also have  interests  in  producing  properties  in
British  Columbia  and  Alberta  and  in  several  exploration  prospects.   The
exploratory  ventures  are  properties  located  in British  Columbia,  Alberta,
Saskatchewan,  the Yukon and  Northwest  Territories  and the Arctic  Islands in
Canada. Geophysical, geological and drilling work on our properties is conducted
by the operators under various  agreements with us. The results of this work are
reviewed by our personnel and consultants retained by us. Information  regarding
reserves, costs of oil and gas activities,  capitalized costs, discounted future
net cash flows and results of operations is set forth in "Consolidated Financial
Statements" beginning at page F-21.
The following  graphic  presentation  has been  omitted,  but the following is a
description of the omitted material:

                 Map of Canada showing Company Areas of Interest
The following  graphic  presentation  has been  omitted,  but the following is a
description of the omitted material:

          Map of N.E. British Columbia and Yukon, Northwest Territories
                            showing Kotaneelee field.
The following  graphic  presentation  has been  omitted,  but the following is a
description of the omitted material:

                   Map showing the Kotaneelee Permit Structure
The following  graphic  presentation  has been  omitted,  but the following is a
description of the omitted material:

                       Map of the Canadian Arctic Islands
                       showing the Company Lease Holdings
Production

         Average  sales price per unit and average  production  cost for oil and
gas produced during the periods are shown below.  Production costs are allocated
based on the weighted  average of oil and gas sales. In 1999, oil production was
primarily  heavy  crude  oil  with  high  lifting  costs.  In prior  years,  oil
production consisted of a mix of light and heavy crude oil. We sold the majority
of our  crude  oil  producing  properties  in  1998.  The  remaining  heavy  oil
production was sold in February 2000.

                                                      Average Sales Price                   Average Production Costs
                  Period                       Oil (per bbl)     Gas (per mcf)       Oil (per bbl)       Gas (per mcf)
                  ------                       -------------     -------------       -------------       -------------
Six months ended June 30, 2000         ($)   34.34         ($)    2.32         ($)   54.87         ($)    2.33
                Year 1999                          17.38                1.83               12.82                1.45
                Year 1998                          14.84                2.17                8.41                1.41
                Year 1997                          22.50                2.31                8.70                1.30
Productive Wells and Acreage

         Productive wells and acreage on working and carried interest properties
as of June 30, 2000 are as follows:

                  Gross Wells                                 Net Wells
           ---------------------                       --------------------
           Oil               Gas                       Oil              Gas
             1                65                       .55             11.39

                          Gross and Net Developed Acres
                     Gross Acres                   Net Acres
                     -----------                   ---------
Alberta                  4,780                           605
British Columbia        49,013                         7,977
Yukon Territory          3,350                         1,005
Arctic Islands           3,060                           153
Texas, USA                  40                            16
                      --------                       -------
                        60,243                          9,756
                        ======                          =====
Undeveloped Acreage

         Total developed and  undeveloped  acreage in which we have interests is
summarized by geographic area in the table below:

                                          Gross and Net Petroleum Acreage as of June 30, 2000
                                                       Developed Acres                    Undeveloped Acres
                                                --------------------------------     -------------------------------
                                                Gross          Net                   Gross          Net
                                                Acres         Acres         %        Acres         Acres        %
                                                -----         -----         -        -----         -----        -
Canada:
  British Columbia:
Carried Interests                          30,130         6,410      21.3         5,708         1,213    21.3
    Working Interests                           5,622           910      16.2        18,473        13,804    74.7
    Overriding royalty interest                13,261           657       5.0         4,639            74     1.6
                                               ------         -----      ----        ------        ------
  Total British Columbia                       49,013         7,977                  28,820        15,091
                                               ------         -----                  ------        ------

  Saskatchewan:
    Working Interests                                                                 3,200           120     3.8
                                                                                      -----           ---

  Alberta:
    Working Interests                           2,871           581     18.4        21,477         7,349     34.2
    Overriding Royalty Interest                 1,909            24      1.3           160             5      3.1
                                                -----            --                 ------         -----
  Total Alberta                                 4,780           605                 21,637         7,354
                                                -----           ---                 ------         -----

  Yukon & Northwest Territories:
    Carried Interests                           3,350         1,005     30.0        31,726         9,757     30.8

  Arctic Islands:
    Carried Interests                           3,060           153      5.0       130,200        37,104     28.5
    Working Interests                               -             -                 45,100         1,817      4.0
                                                -----           ---                -------        ------
  Total Arctic Islands                          3,060           153                175,300        38,921
                                                -----           ---                -------        ------

  Total Canada                                 60,203         9,740                260,683        71,243

Texas, USA                                         40            16     40.0           460           245     53.3
                                                -----         -----                 ------         -----

               TOTAL                           60,243         9,756                261,143        71,488
                                               ======         =====                =======        ======
Drilling activity

         Productive and dry net wells drilled during the following periods:

                   Period                                    Gross                                Net
                   ------                         ------------------------            ------------------------
                                                  Productive           Dry            Productive           Dry
Six months ended June 30, 2000                  -                1                                  .333
                  Year 1999                            4                2               1.127              .798
                  Year 1998                            9                2               1.440              .200
                  Year 1997                           25                2               3.606              .250
There were no wells drilling at June 30, 2000.

                                LEGAL PROCEEDINGS

     We  believe  that  the  working  interest  owners  in the  field  have  not
adequately  pursued the attainment of contracts for the sale of Kotaneelee  gas.
In October 1989 and in March 1990, we filed  statements of claim in the Court of
Queen's  Bench of Alberta,  Judicial  District of Calgary,  Canada,  against the
working interest partners in the Kotaneelee gas field. The named defendants were
Amoco Canada  Petroleum  Corporation,  Ltd.,  Dome Petroleum  Limited (now Amoco
Canada Resources Ltd.), and Amoco Production  Company,  Columbia Gas Development
of Canada Ltd.,  Mobil Oil Canada Ltd. and Esso Resource of Canada Ltd. In 1991,
Anderson Exploration Ltd. acquired all of the shares in Columbia and changed its
name to Anderson Oil & Gas Inc.  Anderson is now the sole  operator of the field
and is a direct defendant in the Canadian lawsuit.  Columbia's  previous parent,
The Columbia Gas System, Inc., which was reorganized in a bankruptcy  proceeding
in the  United  States,  is  contractually  liable  to  Anderson  in  the  legal
proceedings currently at trial.

         We claim that the defendants breached a contractual obligation and/or a
fiduciary  duty owed to us to market gas from the  Kotaneelee  gas field when it
was possible to so do. We assert that  marketing the Kotaneelee gas was possible
in 1984 and that the  defendants  deliberately  failed to do so.  We seek  money
damages and the forfeiture of the Kotaneelee gas field. We presented evidence at
trial that the money damages sustained by us were approximately $100 million.

         In addition,  we have claimed that our carried  interest account should
be reduced because of improper  charges to the carried  interest  account by the
defendants.  We claim that when the defendants in 1980 suspended production from
the field's gas wells, they failed to take  precautionary  measures necessary to
protect and maintain the wells in good operating condition. The wells thereafter
deteriorated,  which caused unnecessary  expenditures to be incurred,  including
expenditures to redrill one well. In addition,  we claim that  expenditures made
to repair  and  rebuild  the  field's  dehydration  plant  should  not have been
necessary had the  facilities  been properly  constructed  and maintained by the
defendants.  The  expenditures,  we claim, were  inappropriately  charged to the
field's carried interest  account.  The effect of an increased  carried interest
account is to extend the period  before pay out begins to the  carried  interest
account owners.

         We claim that  production from the field should have commenced in 1984.
At that time the field's carried interest account was approximately $63 million.
We claim that by 1993 at least $34  million  of  unnecessary  expenses  had been
wrongfully  charged  to the  carried  interest  account.  Our 30% share of these
expenses  would  be  approximately  $10.2  million.  We  further  claim  that if
production had commenced in 1984, the carried  interest  account would have been
paid out in approximately  two years and we would have begun to receive revenues
from the field in 1986.

         The amount of recoverable costs is one of the issues being contested in
the  Kotaneelee  litigation.  We  claim,  and  the  defendants  deny,  that  the
defendants have made improper  charges to the carried  interest  account and one
defendant  (Amoco Canada)  maintains that the carried interest account should be
charged additional amounts for gas processing fees. Amoco Canada claims that the
remaining costs to be recovered at December 31, 1999 were either  $58,711,000 or
$19,325,000  depending on inclusion of interest. It is not possible to determine
whether Amoco Canada will be successful  in its claim that gas  processing  fees
should be charged to the carried interest account.

         Although, according to the operator's reports, the Kotaneelee gas field
reached pay out status on November 10,  1999,  the operator has notified us that
it will not make any  payments to the carried  interest  owners,  including  us,
until the issue of the amount of  recoverable  costs under the carried  interest
account has been resolved by the Court of Queen's Bench of Alberta,  Canada. The
operator has stated that it will deposit our share of net production proceeds in
an interest bearing account with an escrow agent. A motion was filed in December
1999 by the  plaintiffs in Canada to direct all of the defendants to make timely
payments of all current and future amounts due from our share of field revenues.
On April 10,  2000,  the trial court  dismissed  our motion  pending the Court's
ultimate   determination   of  the  issues   surrounding  the  Kotaneelee  field
carried-interest account. We have filed a notice of appeal of the dismissal with
the Alberta Court of Appeal. Net production  proceeds are unlikely to be paid to
us until final resolution by the Courts of the Kotaneelee litigation.

         Since  March  2000,  the  operator  of the  Kotaneelee  field  has been
reporting the amount of the Company's  share of net revenues being  deposited in
escrow. The September 2000 report provided information for production during the
month of June 2000.  Based on the reported data, we believe the total amount due
to us is $5,526,365 of which $1,832,335 has been deposited in escrow.

         The parties to the litigation  conducted  extensive discovery since the
filing of the claims.  The trial began on September 3, 1996 and we completed the
presentation  of our case  against the  defendants  during  September  1998.  We
completed  our  rebuttal  evidence on April 24, 2000.  On June 26, 2000,  the we
filed our written closing  argument with the court.  The defendants  filed their
written  argument on August 28, 2000.  Oral closing  arguments  will probably be
held in late  December  2000 or early 2001. A decision in the  litigation is not
expected before late 2001.

         Columbia  has  filed  a  counterclaim  against  us  seeking,  if we are
successful in our claim for the  forfeiture of the field,  repayment  from us of
all unrecovered sums Columbia has expended on the Kotaneelee lands before we are
entitled to our interest.

         Based upon newly discovered  evidence,  we filed a new claim during May
1998 that the defendants  failed to develop the field in a timely manner. We are
unable to estimate the time necessary to conclude this litigation.

Matters Ancillary to Kotaneelee Litigation

         In our 1989  statement  of  claim,  we  sought a  declaratory  judgment
regarding two issues:

         (1)      whether interest accrued on the carried interest account; and

         (2)      whether  expenditures  for  gathering  lines  and  dehydration
                  equipment are expenditures  chargeable to the carried interest
                  account or whether we will be assessed a processing fee on gas
                  throughput.

         With respect to the first issue,  we maintain  that no interest  should
accrue on the account and the defendants have not contested this position.  With
regard to the second issue, we maintain that the  expenditures are chargeable to
the carried interest account.  Mobil, Esso and Columbia have essentially  agreed
to our  position  in the  original  pleadings  to the court while the Amoco Dome
Group continues to contest this issue.

         On January 22, 1996,  we settled two claims  outstanding  against us in
the Court of Queen's Bench of Alberta,  which related to a suit brought  against
AlliedSignal  Inc. in Florida  which was  dismissed on the basis that Canada was
the appropriate  forum for the litigation.  AlliedSignal  had sought  additional
relief  against  us in  Canada  to  preclude  other  types of suits by us and to
recover the costs of the  defense of the initial  action.  The  settlement  bars
AlliedSignal from making a claim against us for any costs in connection with the
Kotaneelee Litigation. We agreed not to bring any action against AlliedSignal in
connection  with the  Kotaneelee  gas field.  Neither  party  made any  monetary
payment to the other party.

         Under  Canadian law,  certain  costs (known as "taxable  costs") of the
litigation may be assessed against the non-prevailing party. Effective September
1,  1998,  the  Alberta  Rules of Court were  amended to provide  for a material
increase  in the costs which may be awarded to the  prevailing  party in matters
before the Court.

         The trial has been lengthy,  complicated  and costly to all parties and
we believe that the prevailing party or parties in the litigation will argue for
a substantial  assessment of costs against the non-prevailing  party or parties.
The  Court  has  very  broad  discretion  as  to  whether  to  award  costs  and
disbursements  and  as  to  the  calculation  of  any  amounts  to  be  awarded.
Accordingly,  we are unable to  determine  whether,  in the event that we do not
prevail on our claims in the litigation, costs will be assessed against us or in
what amounts.  However,  since the costs  incurred by the  defendants  have been
substantial,  and since the Court has broad discretion in the awarding of costs,
an award to the defendants  potentially could be material.  A cost award against
us could be of  sufficient  magnitude to  necessitate  a sale of our assets or a
debt or equity financing to fund such an award. There are no assurances that any
such sale or financing would be consummated.

         There is no  assurance  whatsoever  that we will be  successful  on the
merits of our claims,  which have been  vigorously  defended by the  defendants.
There is also no  assurance  that we will be awarded any  damages,  or that,  if
damages are awarded, the Court will apply the measure of damages we claim should
be applied.
OUR MANAGEMENT

Our Directors and Executive Officers

         Our board of directors  includes five members,  one of whom also serves
as our president  and chief  executive  officer.  Each director is elected for a
term of five years.

                                                                                                               Other Offices
                          Date Present Term                                                       Director       Held with
         Name             of Office Expires                Biographical Information                 Since         Company
         ----             -----------------                ------------------------                 -----         -------
Arthur B. O'Donnell       2001 Annual Meeting  Mr.  O'Donnell,  a CPA,  served as an officer of     1997      Audit Committee
                                               the   Company   for  many  years  prior  to  his
                                               retirement in 1994.  Age seventy-six.

Ben A. Anderson           2002 Annual Meeting  Mr.  Ben  A.  Anderson  was  elected  President,     2000         President
                                               Chief  Executive  Officer and a director of the
                                               Company on April 1, 2000.  Mr.  Anderson,  a
                                               petroleum  engineer,  has been  involved in
                                               operations,  reservoir  engineering,  reserve
                                               evaluation, venture analyses, and marketing  in
                                               Western  Canada as well as the  United  States
                                               for the past 19 years. He has been  associated
                                               with Ranger Oil,  Hillcrest  Resources,  and
                                               Triumph Energy Corp. Most recently,  he had been
                                               President and Chief Executive Officer of
                                               International  Gryphon  Resources Inc., a
                                               Calgary-based  publicly held petroleum exploration
                                               and development company.  Age forty-three.

Benjamin W. Heath         2003 Annual Meeting  Mr.  Heath  is  President   and  a  director  of     1956      Audit Committee
                                               Coastal  Caribbean  Oils & Minerals,  Ltd.,  and
                                               a director of Magellan Petroleum Corporation.
                                               Age eighty-six.

Timothy L. Largay         2004 Annual Meeting  Mr. Largay  has been a  partner  in the law firm     1997         Assistant
                                               of Murtha  Cullina  LLP,  Hartford,  Connecticut                  Secretary
                                               since  1974.  Mr. Largay is also a director of
                                               Magellan Petroleum Corporation.  Age fifty-seven.

M. Anthony Ashton         2005 Annual Meeting  Mr.   Ashton   served  as  President  and  Chief     1989
                                               Executive  Officer  from  June  1997  until  his
                                               retirement  on June 30,  2000.  He had been Vice
                                               President-Exploration  since  December  1988 and
                                               was  elected a director in 1989.  Mr.  Ashton is
                                               a  professional  petroleum  geologist  with more
                                               than  thirty  years  experience  in  exploration
                                               projects  in  western   Canada  and  the  United
                                               States.  Age sixty-five.
Our other executive officer is the Chief Financial Officer, David Blain.
David Blain                                    Mr.  Blain,  a  Canadian  Chartered  Accountant,                  Secretary,
                                               was  elected  Secretary,   Treasurer  and  Chief                Treasurer and
                                               Financial and Accounting  Officer of the Company               Chief Financial
                                               on August 1, 2000.  Mr. Blain has been  involved                and Accounting
                                               with   accounting,   income   taxes,   corporate                   Officer
                                               planning and finance  matters in Western  Canada
                                               for  the  past  30  years.   Mr.   Blain  is  an
                                               independent  consultant to oil and gas companies
                                               in the  Calgary  area and will serve the Company
                                               on a  part-time  basis.  He has been  associated
                                               with Clarkson  Gordon & Co. and Hudson's Bay Oil
                                               & Gas Ltd.  He served  with Star Oil & Gas Ltd.,
                                               a Calgary based oil and gas company,  in various
                                               capacities  from 1979 to 1997 and most  recently
                                               was Vice  President,  Finance  of that  company.
                                               Age fifty-five.
All  of the  named  companies  are  engaged  in  oil,  gas  or  mineral
exploration  and/or development except where noted. There are no arrangements or
understandings  between any director and any other person or persons pursuant to
which such director was or is to be selected as a director.  There are no family
relationships  between any director,  executive officer,  or person nominated or
chosen by the Company to become a director.

Committees of the Board of Directors:  Attendance at Meetings

         During 1999, we adopted an Audit Committee Charter. The Audit Committee
was comprised of Mr.  O'Donnell  and Mr.  Eugene C. Pendery  (until his death on
October  19,  1999).  The  principal  duties of the  Audit  Committee  are:  the
engagement  and discharge of auditors,  reviewing with the auditors the plan and
results of the auditing  engagement,  reviewing the independence of the auditors
and  reviewing  the  adequacy of the  Company's  system of  internal  accounting
controls.  The Audit  Committee met two times during the year ended December 31,
1999. Mr. Heath was elected to the Audit Committee on January 27, 2000.

         We  have  no  standing  nominating  or  compensation  committees.   The
functions  that would be performed by such  committees are performed by the full
Board of  Directors.  During  the  year  ended  December  31,  1999,  all of the
directors attended at least 75% of the aggregate number of meetings of the Board
of Directors and Committees on which they serve (a total of 10 meetings).

Executive Compensation

     The following table sets forth certain summary  information  concerning the
compensation of Mr. M. Anthony Ashton, who was our President and Chief Executive
Officer until his retirement on March 31, 2000. No executive officer received or
earned any compensation in excess of U.S.  $100,000 or Can.  $100,000 during the
year 1999. Unless otherwise  indicated,  all dollar figures set forth herein are
expressed in Canadian currency.
---------------------------------------------------------------------------------------------------------------------
                                             Summary Compensation Table
---------------------------------------------------------------------------------------------------------------------
                                                           Annual Compensation                    Long Term
                    Name and                                                                  Compensation Award
               Principal Position                        Year             Salary ($)           Options/SARs(#)
------------------------------------------------- ------------------- ------------------- ---------------------------
M. Anthony Ashton                                        1999               50,000                  60,000
President and Chief Executive Officer                    1998               75,000                    -
                                                         1997               50,000                    -
------------------------------------------------- ------------------- ------------------- ---------------------------
Stock Options

         The following  tables provide  information  about stock options granted
and  exercised  during  1999 and  unexercised  stock  options  held by the Named
Executive Officers at December 31, 1999.

=======================================================================================================================
                                              Options/SAR Grants in 1999
---------------------------------------------------------------------------------- ------------------------------------
                                Individual Grants                                  Potential Realized Value at Assumed
                                                                                          Annual Rates of Stock
                                                                                   Price Appreciation for Option Terms
------------------------ ------------ -------------- ------------- --------------- ------------------ -----------------
         Name             Options/     % of Total      Exercise      Expiration         5% ($)            10% ($)
                            SARs      Options/SARs     or Base          Date
                           Granted     Granted to    Price ($/Sh)
                             (#)      Employees in
                                          1999
------------------------ ------------ -------------- ------------- --------------- ------------------ -----------------
M. Anthony Ashton          60,000          13            7.00      Jan. 28, 2004        146,000           256,000
=======================================================================================================================
-----------------------------------------------------------------------------------------------------------------------
                           Aggregated Option/SAR Exercises in 1999 and at December 31, 1999
                                                  Option/SAR Values
-----------------------------------------------------------------------------------------------------------------------
                           Shares                          Number of Unexercised            Value of Unexercised
                          Acquired         Value             Options/SARs (#)                   In-The-Money
                        On Exercise    Realized ($)        at December 31, 1999               Options/SARs ($)
                            (#)                                                             at December 31, 1999
-----------------------------------------------------------------------------------------------------------------------
         Name                                           Exercisable    Unexercisable    Exercisable    Unexercisable
-----------------------------------------------------------------------------------------------------------------------
M. A. Ashton                -0-             -0-           70,000             -            116,000            -
-----------------------------------------------------------------------------------------------------------------------
M. A. Ashton                -0-             -0-           60,000             -            192,000            -
-----------------------------------------------------------------------------------------------------------------------
Stock Incentive Plans

         Under  the  terms  of our  1992 and 1998  stock  option  plans,  we are
authorized to grant certain  employees,  directors  and  consultants  options to
purchase limited voting shares at prices based on the market price of the shares
as  determined  on the date of the grant.  The options are normally  exercisable
immediately and issued for a period of five years from the date of grant.

         During  1998,  we adopted a stock option plan that permits the granting
of both stock options and stock appreciation  rights. A total of 700,000 limited
voting  shares are reserved for issuance  under the 1998 plan.  The plan permits
the granting of both stock options and stock  appreciation  rights (SARs) to our
directors,  officers, key employees and consultants,  those of our subsidiaries,
and  any  business  in  which  we  have a  substantial  interest.  The  plan  is
administered by the Board of Directors  acting as a committee of the whole.  The
Committee  will determine the persons to whom options or SARs are to be granted,
the number of shares  which may be acquired  upon the exercise of each option or
SAR, the purchase  price at which the options or SARs shall be granted,  and the
time or times at which  options or SARs can be exercised and whether in whole or
installments.

         The plan  provides for the grant of stock  options  subject to terms as
determined by the  Committee.  The purchase price of each option may not be less
than the greater of 1) the par value of the stock  underlying  the option  grant
and 2) the  fair  market  value  of the  stock  on the  date  of  grant.  Unless
determined  otherwise by the Committee or in an option  agreement,  options will
vest over a three year period. The options,  which are nontransferable except as
specified in the plan,  can have a maximum  period of ten years,  and may expire
earlier  in the  event  that the  optionee  dies or,  in the case of  employees,
employment  with us is  terminated.  The plan also includes  provisions  for the
cashless exercise of options and, at the Committee's discretion, the granting of
reload  options when an optionee  exercises an option granted under the plan and
makes payment using previously owned shares of stock.

         The  plan  also  provides  for the  grant of SARs  subject  to terms as
determined  by the  Committee  and  evidenced in a form also  determined  by the
Committee.  SARs may be granted  alone,  simultaneously  with a grant of options
under the Plan, or subsequent to a grant of options under the plan. The exercise
price of each SAR granted  alone may not be less than the fair  market  value of
one share of the stock on the date of grant. SARs granted simultaneously with or
subsequent  to a grant of options  have the same  exercise  price as the related
option,  but are exercisable only when the fair market value of stock subject to
the SAR and related option exceeds the exercise price thereof. Unless determined
otherwise by the Committee or in an SAR  agreement,  SARs vest over a three year
period and are nontransferable  except as specified in the plan. SARs can have a
maximum period of ten years, and are deemed exercised at the end of ten years if
the fair market value of the stock exceeds the exercise  price.  SARs may expire
earlier  in the  event  that the  optionee  dies or,  in the case of  employees,
employment with us is terminated.

         We are subject to Canadian tax laws and will  generally not be entitled
to an income tax deduction upon either the grant or the exercise of an Option or
SAR.

Compensation of Directors

         Each of our directors  receive an annual  director's fee of $30,000,  a
fee of $250 for each conference call meeting and $500 for each meeting requiring
travel.  On January 29, 1999, the named directors were granted five year options
to purchase  limited voting shares at a price of $7.00. The total directors fees
received and stock options granted in 1999 were as follows:

Director                                 Fee ($)          Stock Options Grants
--------                                 -------          --------------------
Benjamin W. Heath                         33,000                 20,000
Timothy L. Largay                         33,500                 75,000
Arthur B. O'Donnell                       33,500                 60,000
Eugene C. Pendery                         27,500                 60,000
Compensation Agreements

     Effective  January 3, 2000,  Ben A. Anderson was employed as Executive Vice
President  for a two year period at an annual salary of $120,000.  Mr.  Anderson
also received  75,000 options to purchase  limited voting shares with 1/3 of the
total vesting immediately,  1/3 vesting after one year and 1/3 vesting after two
years.  Mr.  Anderson will also receive an annual vehicle  allowance  payment of
$12,000.  Mr.  Anderson  succeeded Mr.  Ashton as President and Chief  Executive
Officer on April 1, 2000.

Compensation Committee Interlocks and Insider Participation in Compensation
Committee

     The entire  board of directors  serves as the  compensation  committee.  M.
Anthony  Ashton is a director and served as our  President  and Chief  Executive
Officer until March 31, 2000.

                             PRINCIPAL STOCKHOLDERS

Security Ownership of Certain Beneficial Owners

         We know of no person or group  that owns  beneficially  more than 5% of
our outstanding limited voting shares.

Security Ownership of Management

         The following  table sets forth  information as to the number of shares
of our limited  voting  shares  owned  beneficially  on September 1, 2000 by our
directors and by all our executive officers and directors as a group:

                                                              Amount and Nature of
                                                              Beneficial Ownership
           Name of                                    -------------------------------------
          Individual                                            Shares Held                           Percent of
           or Group                                Directly                  Options                    Class
------------------------------------           ---------------            ---------------             ----------
M. Anthony Ashton                                      3,000                 130,000                      *
Benjamin W. Heath                                     20,000                  75,000                      *
Timothy L. Largay                                      3,615                  75,000                      *
Arthur B. O'Donnell                                    1,654                  60,000                      *
Ben A. Anderson                                            -                  75,000                      *
Directors and Officers as a
  Group (a total of 5)                               28,269                  415,000                    2.90%
------------------------
* The percent of class owned is less than 1%.
CERTAIN BUSINESS RELATIONSHIPS

         Mr. Timothy L. Largay,  a director of Canada  Southern since October 1,
1997,  is a member of the law firm of Murtha  Cullina  LLP,  which firm has been
retained by us for more than five years and is being retained during the current
year.

         On January 29, 1991,  we granted  interests to certain of our officers,
employees,  directors, counsel and consultants amounting to an aggregate of 7.8%
of any and all benefits to Canada Southern after expenses from the litigation in
Canada  relating to the  Kotaneelee  field.  We have reserved a 2.2% interest in
such net  recoveries  for possible  future grants to persons who may include our
officers  and  directors.  The  following  interests  were  granted  directly or
indirectly to our directors:

         Party                                           Interest Granted (%)
         -----                                           --------------------

         Murtha Cullina LLP                                    1.00
         Arthur B. O'Donnell                                    .33 1/3
         Benjamin W. Heath                                      .25

Royalty Interests

         The following  director has royalty interests in certain of our oil and
gas properties (present or past) which were received directly or indirectly from
us:  Benjamin W.  Heath,  interests  ranging  from 1.772% to 2%; and a trust (in
which Mr. Heath has a 54.4% beneficial interest),  interests ranging from 7.603%
to 7.8%.  In each case,  the  applicable  percentage  depends on the property on
which the royalty is paid.

         During 1999, we and third-party operators and/or owners of properties
made payments to Mr. Heath in the amount of U.S. $15,435. During the six month
period ended June 30, 2000, Mr. Heath was paid $8,435.

                    DESCRIPTION OF OUR LIMITED VOTING SHARES

         The following is a brief  description of our limited voting shares (par
value $1.00 per share).  All rights of our  shareholders  are  determined by the
laws of Nova  Scotia,  Canada.  Nova Scotia law does not, nor do our Articles of
Continuance  or  By-Laws,  impose  any  limitations  on the  rights  of  persons
nonresident  of Nova Scotia to vote and hold shares of our limited voting shares
by virtue of such nonresident status.

Voting Rights

         Each  shareholder  is  entitled  to one vote for each  share of limited
voting shares  registered in his name on the books of Canada Southern,  subject,
however,  to a provision  in our Articles of  Continuance  to the effect that no
person shall vote more than 1,000 shares beneficially owned by him or her.

Liquidation and Dividend Rights

         Subject to the rights of creditors,  all rights to the assets of Canada
Southern  available for distribution upon liquidation or upon the payment of any
dividend are vested in the holders of the limited  voting  shares and each share
is entitled  to  participate  equally  with every  other  share.  We are legally
restricted  from paying any dividend or making any other payment to shareholders
(except by way of return of  capital)  on the limited  voting  shares  until our
accumulated deficit ($27,332,000 at June 30, 2000) is eliminated.

         Current  Canadian  law does not  restrict  the payment of  dividends to
persons  not  resident  of  Canada.  Under  current  Canadian  tax  law  and the
Canada-United  States  Income  Tax  Convention,   any  dividends  paid  to  U.S.
resudent  shareholders  under the  convention  are  generally  subject  to a 15%
Canadian withholding tax.

Pre-emptive Rights, Conversion Rights, Redemption Provisions. Assessments

         The holders of the limited  voting  shares have no  preemptive  rights.
There are no conversion  rights  attached to our limited voting shares and there
are no provisions  for sinking  funds or  redemption  of shares.  The holders of
outstanding  shares of the limited  voting  shares are not liable to any further
calls or assessments by us.

                                  LEGAL MATTERS

         Legal matters  relating to United  States law in  connection  with this
offering have been passed upon by Murtha Cullina LLP, Hartford, Connecticut. All
matters  relating to Nova Scotia  Companies law in connection  with the offering
have been passed upon by the firm of Patterson Palmer Hunt Murphy,  Nova Scotia.
Blake Cassels & Graydon LLP, Toronto, Canada has passed upon the availability of
prospectus  exemptions in Canada for this offering,  Canadian federal income tax
consequences  and the  statement  under  "Risk  Factors - Risks  Related  to the
Offering" attributed to them.

                                     EXPERTS

         The consolidated financial statements of Canada Southern Petroleum Ltd.
at  December  31,  1999 and 1998 and for each of the three  years in the  period
ended December 31, 1999, appearing in this prospectus and registration statement
have been  audited by Ernst & Young LLP,  independent  auditors  as set forth in
their  report  included  herein.  See page  F-2.  These  consolidated  financial
statements are included in reliance upon such report given on their authority as
experts in auditing and accounting.

         Paddock Lindstrom & Associates Ltd. has served from time to time as our
independent  engineering  consultants.  We  have  relied  on  reports  by  these
consultants in the preparation of portions of this prospectus.

         See "Risk  Factors" at page 7  regarding  the  enforceability  of civil
liabilities  against  foreign  directors  and  officers of Canada  Southern  and
experts.
WHERE YOU CAN FIND MORE INFORMATION

         We are a public company and file annual,  quarterly and special reports
and other  information with the SEC. You may read and copy any documents we file
at the SEC's Public  Reference Room, 450 Fifth Street,  N.W.,  Washington,  D.C.
20549.  You may  obtain  further  information  on the  operation  of the  Public
Reference  Room by calling the SEC at  1-800-SEC-0330.  You can obtain copies of
this material from the Public  Reference  Section of the SEC,  Washington,  D.C.
20549, at prescribed  rates. Our reports,  proxy and information  statements and
other  information  are also  available to the public at the SEC's web site. The
Internet address of that site is http://www.sec.gov.  You may also obtain copies
of our reports,  proxy and information statements and other information from our
web page at http:/www.cansopet.com.

         Our limited voting shares are listed on the Boston Stock Exchange,  the
Pacific Exchange,  The Toronto Stock Exchange and in the NASDAQ SmallCap Market.
Copies  of our  reports,  proxy  statements  and other  information  can also be
examined  at  each  of  these  exchanges  and at  the  offices  of the  National
Association of Securities Dealers, Inc.

         This  prospectus is only part of a  registration  statement on Form S-1
that we have filed with the SEC under the  Securities  Act and  therefore  omits
certain information contained in the registration  statement. We have also filed
exhibits and schedules  with the  registration  statement that are excluded from
this prospectus,  and you should refer to the applicable exhibit or schedule for
a complete  description  of any  statement  referring  to any  contract or other
document.  You may inspect a copy of the registration  statement,  including the
exhibits and  schedules,  without  charge at the SEC's public  reference room or
through its web site.
INDEX TO CONSOLIDATED
                              FINANCIAL STATEMENTS

                                                                                                   Page
                                                                                                 Reference
Report of Independent Auditors                                                                     F-2

Consolidated balance sheets at June 30, 2000 (unaudited), December 31, 1999
and 1998.                                                                                          F-3

Consolidated statements of operations and deficit for the
six months ended June 30, 2000 and 1999 (unaudited) and for each
of the three years in the period ended December 31, 1999.                                          F-4

Consolidated statements of cash flows for the six months ended
June 30, 2000 and 1999 (unaudited) and for each of the three years in
the period ended December 31, 1999.                                                                F-5

Consolidated statement of Limited Voting Shares and Contributed Surplus for each
of the three years in the period ended
December 31, 1999 and the six months ended June 30, 2000 (unaudited)                               F-6

Notes to consolidated financial statements.                                                        F-7

Supplementary information on oil and gas activities                                               F-21
AUDITORS' REPORT

To the Shareholders of
Canada Southern Petroleum Ltd.

         We have  audited the  consolidated  balance  sheets of Canada  Southern
Petroleum Ltd. as at December 31, 1999 and 1998, and the consolidated statements
of operations and deficit,  cash flows and limited voting shares and contributed
surplus for each of the years in the three year period ended  December 31, 1999.
These  financial   statements  are  the   responsibility  of  Canada  Southern's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform an audit to
obtain  reasonable  assurance  whether  the  financial  statements  are  free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.

         In our opinion,  the consolidated  financial statements present fairly,
in all material  respects,  the financial  position of Canada Southern Petroleum
Ltd. as at December 31, 1999 and 1998 and the results of its  operations and its
cash flows for each of the years in the three year  period  ended  December  31,
1999, in accordance with accounting principles generally accepted in Canada.

         /s Ernst & Young LLP

Chartered Accountants
Calgary, Canada
March 10, 2000     (except for note 8, which is as of April 10, 2000)
CANADA SOUTHERN PETROLEUM LTD.
                  (Incorporated under the laws of Nova Scotia)

                           CONSOLIDATED BALANCE SHEETS
                         (Expressed in Canadian dollars)

                                                                      June 30,               As at December 31,
                                                                       2000              1999               1998
                                                                    ----------           -------------------------
           Assets                                                  (Unaudited)                           (Restated)
 Current assets
Cash and cash equivalents (Note 2)                              $ 2,185,918        $ 3,045,530         $6,208,634
   Marketable securities (Note 3)                                      291,342            568,374            751,511
   Accounts receivable (Notes 4 and 7)                                 346,398            360,752            266,116
   Other assets                                                        289,155            307,519            319,697
                                                                       -------            -------            -------
 Total current assets                                                3,112,813          4,282,175          7,545,958
                                                                     ---------          ---------          ---------

 Oil and gas properties and equipment
 (full cost method) (Note 4)                                         9,363,434         10,207,294         10,000,010

 Future tax asset (Note 6)                                           1,826,000          1,583,475          1,308,505
                                                                     ---------          ---------          ---------
 Total assets                                                      $14,302,247        $16,072,944        $18,854,473
                                                                   ===========        ===========        ===========

           Liabilities and Shareholders' Equity

 Current liabilities
   Accounts payable                                                  $ 520,464          $ 634,600          $ 375,554
   Accrued liabilities (Note 10)                                       180,600             18,256            294,491
                                                                       -------             ------            -------
 Total current liabilities                                             701,064            652,856            670,045
                                                                       -------            -------            -------

 Future site restoration costs                                         145,934            174,696            236,045

 Contingencies (Note 8)                                                      -                  -                  -

 Shareholders' Equity
   Limited Voting Shares, par value
     $1 per share (Note 5)
   Authorized -100,000,000 shares
   Outstanding -14,284,970 (2000) and (1999)
   14,234,740 (1998) shares                                         14,284,970         14,284,970         14,234,740
   Contributed surplus                                              26,502,342         26,502,342         26,254,139
                                                                    ----------         ----------         ----------
 Total capital                                                      40,787,312         40,787,312         40,488,879
 Deficit                                                          (27,332,063)       (25,541,920)       (22,540,496)
                                                                  ------------       ------------       ------------
 Total shareholders' equity                                         13,455,249         15,245,392         17,948,383
                                                                    ----------         ----------         ----------
 Total liabilities and shareholders' equity                        $14,302,247        $16,072,944        $18,854,473
                                                                   ===========        ===========        ===========

                             See accompanying notes.
CANADA SOUTHERN PETROLEUM LTD.

                CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
                         (Expressed in Canadian dollars)

                                                       Six months ended
                                                           June 30,                          Year ended December 31,
                                                  -----------------------------       ------------------------------------------
                                                       2000             1999             1999            1998             1997
                                                   (Unaudited)      (Unaudited)                       (Restated)       (Restated)
Revenues:
Oil sales (Notes 4 and 10)                         $   8,154        $  63,675       $ 151,137       $  897,878      $1,120,789
  Gas sales (Notes 4 and 10)                            44,215           28,358          38,324          705,277         523,433
  Proceeds from carried interests                      549,554          127,695         587,073          206,503         475,697
  Interest and other income                             81,539          145,098         253,365          221,523         395,059
  Gain on sale of assets                                     -                -               -        1,378,180               -
                                               ---------------  ---------------  --------------        ---------  --------------
    Total revenues                                     683,462          364,826       1,029,899        3,409,361       2,514,978
                                               ---------------  ---------------  --------------        ---------  --------------

Costs and expenses:
  General and administrative                           843,627          725,095       1,209,325        1,300,595       1,104,535
  Legal (Note 8)                                     1,109,488        1,119,213       2,108,521        2,357,707       1,897,506
  Lease operating costs                                 21,331           68,116         147,332          975,899         799,372
  Depletion, depreciation and amortization             119,000          188,200         707,200          869,600         623,600
  Foreign exchange (gains) losses                     (39,973)           92,245          77,475        (178,850)       (231,457)
  Provision for future site restoration costs                -                -             600           29,500          21,500
  Rent (Note 11)                                        28,075           28,751          55,840           76,812          57,586
  Abandonments and write downs                         634,582                -               -          684,635               -
                                               ---------------  ---------------  --------------        ---------  --------------
    Total costs and expenses                         2,716,130        2,221,620       4,306,293        6,115,898       4,272,642
                                               ---------------  ---------------  --------------        ---------  --------------

  Loss before income taxes                         (2,032,668)      (1,856,794)     (3,276,394)      (2,706,537)     (1,757,664)
  Income tax recovery (Note 6)                        242,525           73,196         274,970           378,367        170,158
                                               --------------   ---------------  -------------      ------------  --------------
Net loss                                           (1,790,143)      (1,783,598)     (3,001,424)      (2,328,170)     (1,587,506)
  Deficit - beginning of period                   (25,541,920)     (22,540,496)    (22,540,496)     (20,212,326)    (18,624,820)
                                                  ------------  -- ------------  --------------  -- ------------  --------------
  Deficit - end of period                        $(27,332,063)    $(24,324,094)   $(25,541,920)    $(22,540,496)   $(20,212,326)
                                                 =============    =============   =============    =============   =============

Net loss per share (Basic & Fully Diluted)              $(.13)           $(.13)          $(.21)           $(.16)          $(.11)
                                                        ======           ======          ======           ======          ======

Average number of shares
Outstanding (Basic & Fully Diluted)                 14,284,970       14,236,740      14,252,574       14,234,740      14,084,294
                                                    ==========       ==========      ==========       ==========      ==========

                             See accompanying notes.
CANADA SOUTHERN PETROLEUM LTD.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (Expressed in Canadian dollars)

                                                               Six months ended
                                                                  June 30,                          Year ended December 31,
                                                       ---------------------------   -----------------------------------------------
                                                          2000             1999             1999           1998            1997
                                                       (Unaudited)      (Unaudited)                      (Restated)     (Restated)
Cash flows from operating activities:
Net loss                                          $ (1,790,143)   $ (1,783,598)    $(3,001,424)     $(2,328,170)    $(1,587,506)
    Adjustments to reconcile net loss
     to net cash provided by
     (used in) operating activities:
    Depreciation, depletion and amortization              119,000         188,200         707,200          869,600         623,600
    Future site restoration costs (net)                   (28,762)              -         (61,349)          25,071         (39,300)
    Gain on sale of assets                                      -               -               -       (1,378,180)              -
    Abandonments and write downs                          634,582         (73,196)              -          684,635               -
    Future tax recovery                                  (242,525)              -        (274,970)        (378,367)       (170,158)
  Change in assets and liabilities:
    Accounts receivable                                    14,354         (26,715)        (94,636)         959,970        (590,863)
    Other assets                                           18,364          70,736          12,178          (77,419)        (14,910)
    Accounts payable                                     (114,136)         46,862         259,045         (744,967)        680,684
    Accrued liabilities                                   162,344         (45,532)       (276,235)          16,776          95,611
                                                       -----------      -----------   ------------     --------------  ------------
Net cash used in operations                            (1,226,922)      (1,623,243)    (2,730,191)        (2,351,051)   (1,002,842)
                                                       -----------      -----------   ------------     --------------  ------------

Cash flows from investing activities:
  Additions to oil and gas properties and
  equipment                                              (245,722)        (484,186)        (914,483)      (1,942,474)   (3,258,426)
  Sale of marketable securities                           277,032          751,511          183,137        2,621,823     2,079,452
  Proceeds from the sale of properties                    336,000                -                -        5,751,180             -
                                                       -----------      -----------   --------------   --------------  ------------
Net cash provided by (used in) investing activities       367,310          267,325         (731,346)       6,430,529    (1,178,974)
                                                       -----------      -----------   --------------   --------------  ------------

Cash flows from financing activities:
  Exercise of stock options                                     -           35,000          298,433                -     1,601,375
                                                       -----------      ----------    --------------   --------------    ----------
Net cash from financing activities                              -           35,000          298,433                -     1,601,375
                                                       -----------      -----------   --------------   --------------    ----------

Increase (decrease) in cash
  and cash equivalents                                   (859,612)      (1,320,918)      (3,163,104)       4,079,478      (580,441)
Cash and cash equivalents at the
  beginning of period                                   3,045,530        6,208,634        6,208,634        2,129,156     2,709,597
                                                       -----------      -----------   --------------   -------------     ----------
Cash and cash equivalents at the
  end of period (Note 2)                                $2,185,918      $4,887,716       $3,045,530       $6,208,634    $2,129,156
                                                        ==========      ==========       ==========       ==========    ==========

                             See accompanying notes.
CANADA SOUTHERN PETROLEUM LTD.

                CONSOLIDATED STATEMENTS OF LIMITED VOTING SHARES
                             AND CONTRIBUTED SURPLUS
                         (Expressed in Canadian dollars)

                                                                        Limited
                                                      Number          Voting Shares        Contributed
                                                    of shares         $1 par value          surplus             Total
                                                    ---------         ------------          -------             -----
Balance as at December 31, 1996                     13,956,540         $13,956,540        $24,930,964        $38,887,504

Exercise of stock options                              278,200             278,200          1,323,175          1,601,375
                                                    ----------         -----------        -----------        -----------

Balance as at December 31, 1997 and 1998            14,234,740          14,234,740         26,254,139         40,488,879

Exercise of stock options and other sales               50,230              50,230            248,203            298,433
                                                    ----------         -----------         ----------         ----------

Balance as at December 31, 1999 and
June 30, 2000 (unaudited)                           14,284,970         $14,284,970        $26,502,342        $40,787,312
                                                    ==========         ===========        ===========        ===========
See accompanying notes.
CANADA SOUTHERN PETROLEUM LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         (Expressed in Canadian dollars)
                        December 31, 1999, 1998 and 1997
               (Information at June 30, 2000 and 1999 and for the
                       six months then ended is unaudited)

1.       Summary of significant accounting policies

Accounting principles

         The  Company  prepares  its  accounts  in  accordance  with  accounting
principles  generally  accepted in Canada which conform in all material respects
with United States generally accepted accounting principles ("U.S. GAAP").

Consolidation

         The consolidated  financial  statements  include the accounts of Canada
Southern Petroleum Ltd. and its wholly-owned subsidiaries, Canpet Inc. and
C.S. Petroleum Limited.

Use of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying  notes.   Specifically   estimates  were  utilized  in  calculating
depletion,   depreciation  and   amortization,   site  restoration   costs,  and
abandonments and write downs. Actual results could differ from those estimates.

Cash and cash equivalents

         For the purposes of the statement of cash flows, the Company  considers
all highly  liquid  investments  with a maturity of three  months or less at the
date of acquisition to be cash equivalents.

Oil and gas properties and equipment

         The  Company,   which  is  engaged  primarily  in  one  industry,   the
exploration for and the  development of oil and gas  properties,  principally in
Canada,  follows the full cost method of accounting for oil and gas  properties,
whereby all costs associated with the exploration for and the development of oil
and gas reserves are capitalized. Such costs include land acquisition, drilling,
geological,  geophysical and overhead  expenses.  The Company's cost centers are
Canada and the United States.

         The Company  periodically reviews the costs associated with undeveloped
properties  and  mineral  rights  to  determine  whether  they are  likely to be
recovered.  When such  costs  are not  likely to be  recovered,  such  costs are
transferred to the depletable pool of oil and gas costs.
1.       Summary of significant accounting policies (Cont'd)

         The net  carrying  cost of the  Company's  oil  and gas  properties  in
producing  cost  centers is limited to an  estimated  recoverable  amount.  This
amount is the  aggregate  of future net  revenues  from proved  reserves and the
costs of  undeveloped  properties,  net of  impairment  allowances,  less future
general and administrative  costs,  financing costs and income taxes. Future net
revenues  are  calculated  using  year  end  prices  that are not  escalated  or
discounted. For Canadian GAAP future net revenues are undiscounted, whereas, for
U.S. GAAP future net revenues are discounted at 10%.

         The costs of the Company's 30% carried  interest in the  Kotaneelee gas
field are  included  in oil and gas  properties  and in the cost  center for the
purpose of computing  depletion.  In addition,  the Company's share of estimated
net reserves  after pay out are also included in the proved oil and gas reserves
base for the purpose of computing  depletion.  During  November  1999, the field
achieved pay out status.

         Gains or losses  are not  recognized  upon  disposition  of oil and gas
properties unless crediting the proceeds against  accumulated costs would result
in a change in the rate of depletion of 20% or more.

         Depletion is provided on costs  accumulated  in producing  cost centers
including production equipment using the unit of production method. For purposes
of the depletion calculation, gross proved oil and gas reserves as determined by
outside  consultants  are  converted to a common unit of measure on the basis of
their approximate relative energy content.

         Depreciation  has been computed for  equipment,  other than  production
equipment,  on the straight-line  method based on estimated useful lives of four
to ten years.

         Substantially   all  of  the  Company's   exploration  and  development
activities  related  to oil  and gas  are  conducted  jointly  with  others  and
accordingly the  consolidated  financial  statements  reflect only the Company's
proportionate interest in such activities.

Revenue recognition

         The Company recognizes revenue on its working interest  properties from
the production of oil and gas in the period the oil and gas are sold.
1.       Summary of significant accounting policies (Cont'd)

         Revenue  under  carried  interest  agreements is recorded in the period
when the proceeds become  receivable and collection is reasonably  assured.  The
Company  is  entitled  to  participate  in oil and gas net  revenues  after  the
repayment  of  exploration,  drilling  and  completion  expenses to the party or
parties  bearing  these costs.  Each carried  interest  account is subject to an
independent  audit. In the past, these audits have resulted in both positive and
negative  adjustments  which are  attributable to prior year periods.  For these
reasons,  the proceeds under carried interest agreements may fluctuate each year
depending on both capital expenditures and any audit adjustments.

         The Company  follows the industry  practice of  reporting  its revenues
from carried  interest  agreements,  whereby one month of revenues is charged in
advance  for the  next  two  months'  operating  and  capital  expenditures.  In
addition,  the production  revenues from the last two months of each quarter are
reported  during  the  following  quarter  because  the  data  are  not  usually
available.

Earnings per share

         Earnings  per common share  ("EPS") is based upon the weighted  average
number of common and common equivalent shares outstanding during the period. The
Company's  basic and diluted  calculations of EPS are the same for both U.S. and
Canadian GAAP.

Future site restoration costs

         Total future site  restoration  costs are  estimated to be $ 146,000 at
June 30,  ($228,000 at December  31,  1999) and are being  provided on a unit of
production  basis.  The  provision is based on current  costs of complying  with
existing legislation and industry practice for site restoration and abandonment.
At June 30,  2000,  all of such costs had been  accrued.  At December  31, 1999,
approximately $53,000 of such costs had not been accrued. The estimated costs of
abandoning the two producing  wells in the Kotaneelee  field are not included in
future site restoration costs. These costs would be paid by the working interest
partners and charged to the carried interest account.

Future income taxes

         In  1999,  under  new  recommendations  of the  Canadian  Institute  of
Chartered Accountants, the Company retroactively adopted the liability method of
accounting for income taxes. Under this method, the Company records income taxes
to give effect to temporary  differences between the carrying amount and the tax
basis of the Company's assets and liabilities.  Temporary differences arise when
the  realization of an asset or the settlement of a liability would give rise to
either an increase or decrease in the  Company's  income  taxes  payable for the
year or later period. Future income taxes are recorded at the enacted income tax
rates that are expected to apply when the future tax liability is settled or the
future tax asset is  realized.  Income tax  expense is the tax  payable  for the
period and the change during the period in future income tax and liabilities.
1.         Summary of significant accounting policies (Cont'd)

           Adoption  of the  liability  method of  accounting  for income  taxes
resulted in changes to previously  reported net income, net income per share and
the balance sheet accounts, as follows:

                                                                                        1998                1997
                                                                                        ----                ----
Net loss previously reported                                                     $(2,706,537)        $(1,757,664)
Adjustment for the effect of the change in accounting method                          378,367             170,158
                                                                                 ------------        ------------
           Net loss as restated                                                  $(2,328,170)        $(1,587,506)
                                                                                 ============        ============

Net loss per share previously reported                                                 $(.19)             $(.12)
Adjustment for the effect of the change in accounting method                             .03                .01
                                                                                       ------              ------
           Net loss per share as restated                                              $(.16)             $(.11)
                                                                                       ======              ======

Future tax asset previously reported                                                  $     -              $    -
Adjustment for the effect of the change in accounting method                        1,308,505             930,138
                                                                                    ---------             -------
           Future tax asset as restated                                            $1,308,505           $ 930,138
                                                                                   ==========           =========

Deficit previously reported                                                     $(23,849,001)       $(21,142,464)
Adjustment for the effect of the change in accounting method                        1,308,505             930,138
                                                                                -------------       -------------
           Deficit as restated                                                  $(22,540,496)       $(20,212,326)
                                                                                =============       =============
If the tax  allocation  method of accounting  for income taxes had been
retained,  the Company would have reported a net loss of  $(3,276,394) or $(.23)
per share for 1999.

Foreign currency translation

         Transactions  for  settlement in U.S.  dollars have been  translated at
average monthly exchange rates.  Monetary assets and liabilities in U.S. dollars
have been  translated at the year end exchange  rates.  Exchange gains or losses
resulting from these adjustments are included in costs and expenses.

Financial instruments

         The carrying value for cash and cash equivalents,  accounts  receivable
and accounts payable approximates fair value based on anticipated cash flows and
current market conditions.

 Comprehensive income

         The Company has no items of other comprehensive income for U.S. GAAP.
Comprehensive loss for all periods presented is equal to the net loss.
2.       Cash and cash equivalents

         The Company  considers  all highly liquid short term  investments  with
maturities  of  three  months  or  less  at  date  of  acquisition  to  be  cash
equivalents.  Cash  equivalents  are carried at cost which  approximates  market
value.

                                                                    Six months                    Year ended
                                                                  ended June 30,                  December 31,
                                                                  --------------           ---------------------------
                                                                       2000                    1999            1998
                                                                  --------------           ---------------------------
Cash                                                                 $ 255,778               $ 398,884       $ 269,918
Canadian and U.S. bankers acceptances and mortgage notes
(Yield:2000-5.5%, 1999-5.0%, 1998-4.9%)                              1,346,610               2,076,663       4,880,833
U.S. marketable securities (Yield: 2000-6%, 1999-5.4%,
1998-4.8%)                                                             583,530                 569,983       1,057,883
                                                                    ----------              ----------      ----------
                                                                    $2,185,918              $3,045,530      $6,208,634
                                                                    ==========              ==========      ==========
3.       Marketable Securities

         At June 30,  2000,  December  31, 1999 and 1998,  the Company  held the
following marketable securities which were expected to be held until maturity:

                   Security                    Par value           Maturity Date Amortized Cost      Fair value
                   --------                    ---------           ------------- --------------      ----------
2000
U.S. Federal Home Loan                          $295,900            Aug. 3, 2000      $291,342         $294,113
Bank Disc. Note                                 --------                              ========         ========

1999
U.S. Federal Home Loan
Bank Disc. Note                                 $577,700           Jan. 18, 2000      $568,374         $576,300
                                                ========                              ========         ========

1998
U.S. Federal National
  Mortgage Assoc.                               $765,100            Apr. 7, 1999      $751,511         $751,700
                                                ========                              ========         ========
4.       Oil and gas properties and equipment

                                                                              Less Accumulated
                                                                                Depreciation
                                                                               Depletion and,        Net Book
                                                                Cost             Writedowns            Value
Balance June 30, 2000                                     -----------------   -----------------      -------------
Oil and gas properties - developed                              $18,864,542          $9,538,063         $9,326,479
Oil and gas properties (U.S.) - undeveloped                       1,319,220           1,319,219                  1
Seismic data                                                        112,000             112,000                  -
                                                                -----------          ----------         ----------
Total oil and gas properties                                     20,295,762          10,969,282          9,326,480
Equipment                                                            91,838              54,884             36,954
                                                                -----------          ----------         ----------
Total oil and gas properties and equipment                      $20,387,600         $11,024,166         $9,363,434
                                                                ===========         ===========         ==========

Balance December 31, 1999
Oil and gas properties - developed                              $19,009,974          $9,422,066         $9,587,908
Oil and gas properties (U.S.) - undeveloped                       1,266,334             684,635            581,699
Seismic data                                                        112,000             112,000                  -
                                                                -----------         -----------         ----------
Total oil and gas properties                                     20,388,308          10,218,701         10,169,607
Equipment                                                            89,567              51,880             37,687
                                                                -----------         -----------        -----------
Total oil and gas properties and equipment                      $20,477,875         $10,270,581        $10,207,294
                                                                ===========         ===========        ===========

Balance December 31, 1998
Oil and gas properties-developed                                $18,524,670          $8,720,066         $9,804,605
Oil and gas properties (U.S.) - undeveloped                         851,651             684,635            167,016
Seismic data                                                        112,000             112,000                  -
                                                                -----------          ----------         ----------
Total oil and gas properties                                     19,488,321           9,516,701          9,971,621
Equipment                                                            75,073              46,684             28,389
                                                                -----------          ----------         ----------
Total oil and gas properties and equipment                      $19,563,394          $9,563,385        $10,000,010
                                                                ===========          ==========        ===========
Substantially all gas sales were made to CanWest Gas Supply Inc. and oil
sales were made to Probe Exploration, Inc. ("Probe").  The gain on sale of
assets and the amount of abandonments and write downs are same under both
Canadian and U.S. GAAP.  During 1999, a total of $73,000 ($95,000 in 1998 and
$91,000 in 1997) of general and administrative expenses were capitalized.

         Included  in the  amount of  accounts  receivable  at June 30,  2000 is
$233,000 and $269,000 at December  31, 1999 due from various  industry  partners
which include Berkley Petroleum Ltd., PetroCanada, Oil For America - Exploration
and Farries Engineering.

         During 1999, the Company's  primary Alberta asset and revenue producing
property was its heavy crude oil production and related  facilities at Kitscoty.
The  Company  sold  its 10 %  working  interest  to the  operator  for  $336,000
effective  October 1, 1999. The transaction  was completed  during February 2000
and the proceeds of sale were  credited to oil and gas  properties  in the first
quarter of fiscal 2000.
5.       Limited Voting Shares and stock options

         The Memorandum of Association  (Articles of Continuance) of the Company
provides that no person (as defined) shall vote more than 1,000 shares.

         Under the terms of the Company's 1992 and 1998 stock option plans,  the
Company is  authorized  to grant certain  employees,  directors and  consultants
options to purchase Limited Voting Shares at prices based on the market price of
the shares as  determined  on the date of the grant.  The options  are  normally
exercisable  immediately  and issued for a period of five years from the date of
grant.

         During 1998,  the Company  adopted a stock option plan that permits the
granting of both stock options and stock appreciation rights. A total of 700,000
Limited Voting Shares are reserved for issuance under the plan.

         Following  is  a  summary  of  option   transactions   which   reflects
adjustments of the stock option prices and the number of shares subject to stock
options as discussed above:

Options Outstanding                     Expiration Dates            Number of Shares            Option Prices ($)
-------------------                     ----------------            ----------------            -----------------
December 31, 1996                    Oct. 1999 - Jun. 2001               445,700
  Exercised                                                             (278,200)                   3.70 - 8.75
  Granted                                                                 35,000                      13.50
                                                                          ------
December 31, 1997                    Aug. 1999 - Oct. 2002               202,500                  6.37 - 13.50
  Granted                                                                  7,500                     10.25
                                                                           -----
December 31, 1998                    Aug. 1999 - Apr. 2003               210,000            ($7.94 weighted average)
  Granted                                                                362,500                      7.02
  Exercised                                                              (49,000)                    6.37-7.00
                                                                        --------
December 31, 1999                    Nov. 2000 - Jan. 2004               523,500            ($6.92 weighted average)
  Granted                                                                 75,000                      8.36
                                                                          ------
June 30, 2000                                                            598,500            ($7.10 weighted average)
                                                                         =======

Summary of Options Outstanding at June 30, 2000
Granted 1994                               Nov. 2000                      80,000                      7.00
Granted 1996                               Nov. 2000                      62,500                      6.37
Granted 1999                               Jan. 2004                     381,000                      7.00
Granted 2000                               Jan. 2005                      75,000                      8.36
                                                                          ------
Total - June 30, 2000                                                    598,500
                                                                         =======

Options reserved for future grants                                       432,134
----------------------------------                                       =======
For U.S. GAAP, the Company has elected to follow Accounting  Principles
Board Opinion No. 25,  "Accounting  for Stock Issued to Employees"  (APB No. 25)
and related  interpretations  in accounting for its stock options.  This method,
which is consistent with the Company's  accounting under Canadian GAAP, has been
chosen  because  the  alternative  fair  value  accounting  provided  under FASB
Statement No. 123,  "Accounting for Stock Based  Compensation,"  requires use of
option  valuation  models  that  were not  developed  for use in  valuing  stock
options. Under APB No.

Limited Voting Shares and stock options (Cont'd)

25, because the exercise price of the Company's  stock options equals the market
price of the underlying  stock on the date of grant, no compensation  expense is
recognized.

         Pro forma  information  regarding  net income and earnings per share is
required by FASB  Statement  No. 123, and has been  determined as if the Company
had  accounted  for its  stock  options  under  the fair  value  method  of that
Statement.  The fair value for these  options was estimated at the date of grant
using a Black-Scholes option pricing model. Option valuation models require that
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.  All of the valuations assumed no expected dividend. The assumptions
used in the 1997 valuation model were: risk free interest rate - 5.7%,  expected
life - 5 years and expected  volatility - .459. The assumptions used in the 1998
valuation model were:  risk free interest rate - 4.45%,  expected life - 5 years
and expected volatility - .328. The assumptions used in the 1999 valuation model
were:  risk free  interest  rate - 4.65%,  expected  life - 5 years and expected
volatility - .503.

         Because the Company's stock options have characteristics  significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its stock options.

         For the purpose of pro forma  disclosures,  the estimated fair value of
the  stock  options  is  expensed  in the year of grant  since the  options  are
immediately exercisable. The Company's pro forma information is as follows:

         Amount Per Share
         ----------------
Net loss as reported       December 31, 1997                  $(1,587,506)          $(.11)
Stock option expense                                              225,400            (.02)
                                                              ------------          ------
Pro forma net loss         December 31, 1997                  $(1,812,906)          $(.13)
                                                              ============          ======

Net loss as reported       December 31, 1998                  $(2,328,170)          $(.16)
Stock option expense                                               29,600               -
                                                              ------------           -----
Pro forma net loss         December 31, 1998                  $(2,357,770)          $(.16)
                                                              ============          ======

Net loss as reported       December 31, 1999                  $(3,001,424)          $(.21)
Stock option expense                                            1,247,000            (.09)
                                                              ------------           -----
Pro forma net loss         December 31, 1999                  $(4,248,424)          $(.30)
                                                              ============          ======
6.       Income taxes

         Income  taxes vary from the amounts  that would be computed by applying
the Canadian federal and provincial income tax rates as follows:

                                                      June 30
                                               2000             1999            1999             1998            1997
                                              ------           ------          ------           ------          -----
44.84%           44.84%          44.84%           44.84%          44.84%
                                              ======           ======          ======           ======          ======
Recovery for income taxes based
on combined basic Canadian federal            $(911,448)       $(832,586)    $(1,469,135)     $(1,213,611)      $(788,137)
and provincial income tax
Nondeductible crown charges                         821            5,908          11,249          104,663         154,463
Resource allowance                              159,376          189,828         383,663          403,270         232,922
Other                                          (205,038)          12,617         (47,601)          24,919          21,106
Nontaxable portion of capital gain                    -                -               -          (20,049)        (20,743)
Unrealized tax loss                             713,764          551,037         846,854          322,441         170,158
                                                -------          -------      -----------      -----------     ----------
Actual income tax recovery                    $(242,525)        $(73,196)     $ (274,970)      $ (378,367)     $ (230,231)
                                              ==========        =========     ===========      ===========     ===========
At June 30, 2000 and December 31, 1999,  the Company had net  operating
losses for income tax  purposes  of  approximately  $5,981,000  and  $5,027,000,
respectively which are available to be carried forward to future periods.  These
losses expire in the following years: 2000 - $294,000,  2001 - $545,000,  2002 -
$569,000,  2003 -  $1,077,000,  2004 -  $545,000,  2005 -  $1,407,000  ,  2006 -
$590,000 and 2007 - $954,000.

         At June 30, 2000 and December 31, 2000,  the Company has the  following
oil and gas tax deductions available to reduce future taxable income, subject to
a final determination by taxation authorities.

                                                                           June 30, 2000           December 31, 1999
       Canada
Drilling, exploration and lease acquisition costs                     $10,852,000                $ 10,570,000
       Drilling and exploration costs-successored                              1,926,000                   1,926,000
       Earned depletion                                                        1,975,000                   1,975,000
       Earned depletion-successored                                              208,000                     208,000
       Undepreciated capital costs                                             2,262,000                   2,336,000
       Cumulative eligible capital losses                                        407,000                     407,000
       Share issue costs                                                          38,000                      99,000

       United States
       Exploration and lease acquisition costs                                $1,234,000                  $1,234,000
As a result of these  deductions,  the  Company  has a future tax asset
which  primarily  represents  the excess of available  resource  deductions  for
income tax purposes over the recorded value of oil and gas  properties  together
with  operating  and capital  income tax loss  carryforwards.  These amounts are
expected to be recovered from the production of current oil and gas reserves. As
certain  of the  resource  deductions  are  restricted  and the  operating  loss
carryforwards are

6.       Income taxes (Cont'd)

subject  to  expiration,  there  is  considerable  risk  that  certain  of these
deductions  will not be utilized.  Accordingly,  the Company has  established  a
valuation allowance to recognize this uncertainty.

                                 June 30,
                                   2000                 1999                  1998                  1997
                                ----------           -----------          -----------           -----------
Future tax asset                $6,304,941           $6,749,358            $5,728,699           $ 4,642,765
Valuation reserve               (4,478,941)          (5,165,883)          (4,420,194)           (3,712,627)
                                ----------           -----------          -----------           -----------
Net future tax asset            $1,826,000           $1,583,475            $1,308,505            $ 930,138
                                ==========           ==========            ==========            =========

Future tax recovery              $242,525             $ 274,970            $ 378,367             $ 170,158
                                 ========             =========            =========             =========
7.       Line of credit

         The Company has an operating  line of credit with a Canadian  chartered
bank which provides for a loan of $500,000. The interest rate on borrowing is at
3/4%  above the  bank's  prime  lending  rate.  The line of credit is subject to
annual review and is secured by a general assignment of accounts  receivable and
an undertaking  to provide  security in the form of assignment of future working
interest proceeds. No drawings were made under this line during 1999 or 1998.

8.         Litigation

         The Company, which has a 30% interest in the Kotaneelee gas field,
believes that the working interest owners in the field have not adequately
pursued the attainment of contracts for the sale of Kotaneelee gas.  In October
1989 and in March 1990, the Company filed statements of claim in the Court of
Queen's Bench of Alberta, Judicial District of Calgary, Canada, against the
working interest partners in the Kotaneelee gas field.  The named defendants
were Amoco Canada Petroleum Corporation, Ltd., Dome Petroleum
Limited (now Amoco Canada Resources Ltd.), and Amoco Production Company
(collectively the "Amoco Dome Group"), Columbia Gas Development of Canada Ltd.
("Columbia"), Mobil Oil Canada Ltd. ("Mobil") and Esso Resource of Canada Ltd.
("Esso") (collectively the "Defendants"). In 1991, Anderson Exploration Ltd.
acquired all of the shares in Columbia and changed its name to Anderson Oil &
Gas Inc. ("Anderson").  Anderson is now the sole operator (the "Operator") of
the field and is a direct defendant in the Canadian lawsuit.  Columbia's
previous parent, The Columbia Gas System, Inc., which was reorganized in a
bankruptcy proceeding in the United States, is contractually liable to Anderson
in the legal proceedings currently at trial.

         The Company claims that the Defendants  breached a contract  obligation
and/or a fiduciary  duty owed to the  Company to market gas from the  Kotaneelee
gas field when it was possible to so do. The Company  asserts that marketing the
Kotaneelee gas was possible in 1984 and that the Defendants  deliberately failed
to do so. The Company seeks money damages and

8.       Litigation (Cont'd)

the forfeiture of the Kotaneelee gas field.  The Company  presented  evidence at
trial that the money damages  sustained by the Company were  approximately  $100
million.

         In  addition,  the  Company  has  claimed  that the  Company's  carried
interest  account should be reduced  because of improper  charges to the carried
interest account by the Defendants.  The Company claims that when the Defendants
in 1980  suspended  production  from the field's gas wells,  they failed to take
precautionary  measures  necessary  to protect  and  maintain  the wells in good
operating condition. The wells thereafter deteriorated, which caused unnecessary
expenditures  to be incurred,  including  expenditures  to redrill one well.  In
addition,  the Company claims that  expenditures  made to repair and rebuild the
field's dehydration plant should not have been necessary had the facilities been
properly  constructed and maintained by the Defendants.  The  expenditures,  the
Company claims,  were  inappropriately  charged to the field's carried  interest
account.  The effect of an increased  carried  interest account is to extend the
period before pay out begins to the carried interest account owners.

         The Company claims that production from the field should have commenced
in 1984. At that time the field's carried interest account was approximately $63
million.  The Company  claims  that by 1993 at least $34 million of  unnecessary
expenses  had been  wrongfully  charged to the  carried  interest  account.  The
Company's 30% share of these expenses would be approximately $10.2 million.  The
Company  further  claims that if production  had commenced in 1984,  the carried
interest  account  would have been paid out in  approximately  two years and the
Company  would  have  begun to  receive  revenues  from the  field in 1986.  The
operator  reported that as of November 30, 1999 development costs totaling $96.7
million had been incurred and repaid.

         The amount of recoverable costs is one of the issues being contested in
the Kotaneelee litigation. The Company claims, and the Defendants deny, that the
Defendants have made improper  charges to the carried  interest  account and one
defendant  (Amoco Canada)  maintains that the carried interest account should be
charged additional amounts for gas processing fees. Amoco Canada claims that the
remaining costs to be recovered at December 31, 1999 were either  $58,711,000 or
$19,325,000  depending on inclusion of interest. It is not possible to determine
whether Amoco Canada will be successful  in its claim that gas  processing  fees
should be charged to the carried interest account.

         Although, according to the Operator's reports, the Kotaneelee gas field
reached pay out status on November  10,  1999,  the  Operator  has  notified the
Company  that it will not make any  payments  to the  carried  interest  owners,
including the Company,  until the issue of the amount of recoverable costs under
the carried  interest account has been resolved by the Court of Queen's Bench of
Alberta,  Canada.  The Operator  has stated that it will  deposit the  Company's
share of net production  proceeds in an interest  bearing account with an escrow
agent. A motion was filed in December 1999 by the plaintiffs in Canada to direct
all of the Defendants to make timely payments

8.       Litigation (Cont'd)

of all  current  and  future  amounts  due  from  the  Company's  share of field
revenues.  The motion was subsequently amended to include all of the Defendants.
On April 10, 2000,  the trial court  dismissed the Company's  motion pending the
Court's ultimate  determination  of the issues  surrounding the Kotaneelee field
carried-interest  account.  The  Company  has  filed a notice  of  appeal of the
dismissal with the Alberta Court of Appeal. Net production proceeds are unlikely
to be paid to the Company until final resolution by the Courts of the Kotaneelee
litigation.

         Since  March  2000,  the  Operator  of the  Kotaneelee  field  has been
reporting the amount of the Company's  share of net revenues being  deposited in
escrow.  The July 2000 report  provided  information  for production  during the
month of April 2000.  Based on the reported data, the Company believes the total
amount due the Company is  $2,702,470  of which  $896,038 has been  deposited in
escrow.

         Columbia has filed a counterclaim  against the Company seeking,  if the
Company is  successful in its claim for the  forfeiture of the field,  repayment
from the Company of all unrecovered sums Columbia has expended on the Kotaneelee
lands before the Company is entitled to its interest.

         Based upon newly  discovered  evidence,  the Company  filed a new claim
during  May 1998 that the  Defendants  failed to  develop  the field in a timely
manner.  The Company is unable to estimate the time  necessary to conclude  this
litigation.

Matters Ancillary to Kotaneelee Litigation

         In its 1989  statement  of  claim,  the  Company  sought a  declaratory
judgment regarding two issues:

         (1)      whether interest accrued on the carried interest account; and

         (2)      whether  expenditures  for  gathering  lines  and  dehydration
                  equipment are expenditures  chargeable to the carried interest
                  account or whether the Company  will be assessed a  processing
                  fee on gas throughput.

         With respect to the first issue, the Company maintains that no interest
should  accrue  on the  account  and the  Defendants  have  not  contested  this
position.  With  regard to the second  issue,  the  Company  maintains  that the
expenditures are chargeable to the carried  interest  account.  Mobil,  Esso and
Columbia  have  essentially  agreed to the  Company's  position in the  original
pleadings  to the Court  while the Amoco Dome Group  continues  to contest  this
issue.

         On January 22, 1996, the Company settled two claims outstanding against
the Company in the Court of Queen's Bench of Alberta, Canada, which related to a
suit brought against

8.       Litigation (Cont'd)

AlliedSignal Inc.  ("AlliedSignal")  in Florida which was dismissed on the basis
that  Canada was the  appropriate  forum for the  litigation.  AlliedSignal  had
sought  additional  relief against the Company in Canada to preclude other types
of suits by the  Company  and to recover the costs of the defense of the initial
action. The settlement bars AlliedSignal from making a claim against the Company
for any costs in connection with the Kotaneelee  Litigation.  The Company agreed
not to bring any action against  AlliedSignal  in connection with the Kotaneelee
gas field. Neither party made any monetary payment to the other party.

         Under  Canadian law,  certain  costs (known as "taxable  costs") of the
litigation may be assessed against the non-prevailing party. Effective September
1,  1998,  the  Alberta  Rules of Court were  amended to provide  for a material
increase  in the costs which may be awarded to the  prevailing  party in matters
before the Court.

         The trial has been lengthy,  complicated  and costly to all parties and
the Company believes that the prevailing party or parties in the litigation will
argue for a substantial  assessment of costs against the non-prevailing party or
parties.  The Court has very broad  discretion  as to whether to award costs and
disbursements  and  as  to  the  calculation  of  any  amounts  to  be  awarded.
Accordingly,  the Company is unable to determine  whether,  in the event that it
does not prevail on its claims in the litigation, costs will be assessed against
it or in what amounts.  However, since the costs incurred by the Defendants have
been  substantial,  and since the Court has broad  discretion in the awarding of
costs, an award to the Defendants  potentially  could be material.  A cost award
against the Company  could be of sufficient  magnitude to  necessitate a sale of
Company assets or a debt or equity financing to fund such an award. There are no
assurances that any such sale or financing would be consummated.

         There is no assurance whatsoever that the Company will be successful on
the merits of its claims, which have been vigorously defended by the Defendants.
There is also no  assurance  that the Company  will be awarded any  damages,  or
that,  if damages are  awarded,  the Court will apply the measure of damages the
Company claims should be applied.

9.       Related party transactions

         In 1991,  the Company  granted  interests  to certain of its  officers,
employees,  directors, counsel and consultants amounting to an aggregate of 7.8%
of any and all benefits to the Company  after  expenses  from the  litigation in
Canada  relating to the  Kotaneelee  gas field.  The Company has reserved a 2.2%
interest in such net  benefits  for  possible  future  grants to persons who may
include officers and directors of the Company.

         Mr. Heath, a director of the Company,  has royalty interests in certain
of the Company's oil and gas properties,  (present and past) which were received
directly  or  indirectly  through  the  Company.  The  Company  and  third-party
operators and/or owners of properties made payments  pursuant to these royalties
for the benefit of Mr. Heath totaling U.S. $15,435,  $8,324 and $11,158 in 1999,
1998 and 1997,  respectively.  During the six month  period ended June 30, 2000,
Mr. Heath was paid $8,435.

10.      Other financial information

                                                                   June 30,                  December 31,
Accrued liabilities
                                                                     2000               1999              1998
                                                                     ----               ----              ----
Accrued accounting and legal expenses                            $ 142,535          $ 18,256          $ 69,890
Accrued royalties                                                        -                 -           141,575
Other                                                               38,065                 -            83,026
                                                                 ---------          --------          --------
                                                                 $ 180,600          $ 18,256          $294,491
                                                                 =========          ========          ========
Six months ended
                                               June 30,                          Year ended December 31,
                                        ----------------------            -------------------------------------
                                         2000             1999            1999             1998            1997
                                        ------          -------         --------         --------        --------
Royalty payments (1)                    $1,877          $12,992         $ 71,838         $146,161        $366,661
                                        ======          =======         ========         ========        ========

Interest payments (2)                     $212               $53         $ 2,600         $ 1,625          $ 1,775
                                        ======          ========        ========         =======          =======

Large corporation tax payments          $5,772           $9,336         $ 15,108         $ 22,837        $ 27,388
                                        ======           ======         ========         ========        ========
--------------------
(1)      Oil and gas sales are reported net of royalties paid.
(2)      Bank line of credit charges.
11.      Leases

         At June 30, 2000,  the future  minimum  rental  payments and  estimated
operating costs  applicable to the Company's  noncancelable  five year operating
(office) lease which was effective June 1, 2000 are as follows:
                                Fiscal Year                               Amount
                                -----------                               ------
                                    2000                                 $23,061
                                    2001                                  39,534
                                    2002                                  40,943
                                    2003                                  41,949
                                    2004                                  41,949
                                    2005                                  17,478
                                                                          ------
                                   Total                                $204,914
                                                                        ========
CANADA SOUTHERN PETROLEUM LTD.
                         (Expressed in Canadian dollars)
                                December 31, 1999
                        SUPPLEMENTARY INFORMATION ON OIL
                               AND GAS ACTIVITIES
                                   (unaudited)

         The following information includes estimates which are subject to rapid
and unanticipated change. Therefore,  these estimates may not accurately reflect
future net income to the Company.

         All amounts below except for costs, acreage,  wells drilled and present
activities  relate  to  Canada.  Oil and gas  reserve  data and the  information
relating to cash flows were  provided by Paddock  Lindstrom &  Associates  Ltd.,
independent consultants.

Estimated net quantities of proved oil and gas reserves:

                                                                                                  Oil             Gas
                                                                                               (bbls)           (bcf)
                                                                                               ------           -----
Proved reserves:
December 31, 1996                                                                             425,800          29.031
  Revisions of previous estimates                                                             179,333         (3.802)
  Production*                                                                                (71,333)          (.838)
                                                                                             --------          ------
December 31, 1997                                                                             533,800          24.391
  Sale of properties                                                                        (350,800)         (2.632)
  Revisions of previous estimates                                                            (73,419)         (2.088)
  Production*                                                                                (73,381)         (1.263)
                                                                                             --------         -------
December 31, 1998                                                                              36,200          18.408
  Revisions of previous estimates                                                               5,050           6.786
  Production*                                                                                (11,650)         (1.710)
                                                                                             --------         -------
December 31,1999                                                                               29,600          23.484
                                                                                               ======          ======

Proved developed reserves:
December 31, 1996                                                                             358,400          28.265
                                                                                              =======          ======
December 31, 1997                                                                             508,200          24.391
                                                                                              =======          ======
December 31, 1998                                                                              36,200          18.408
                                                                                               ======          ======
December 31, 1999                                                                              29,600          23.484
                                                                                               ======          ======

-----------------
*     Production  data  includes  oil and gas  sales and the  proceeds  from the
      carried interest properties.
Results of oil and gas operations:

                                                                      1999                  1998                 1997
                                                                                      (Restated)           (Restated)
Income:
Oil and gas sales                                               $189,461            $1,603,155           $1,644,222
  Proceeds from carried interests                                  587,073               206,503              475,697
  Gain on sale of assets                                                 -             1,378,180                    -
                                                                  --------             ---------            ---------
                                                                   776,534             3,187,838            2,119,919
                                                                  --------             ---------            ---------
Costs and expenses:
  Production costs                                                 147,332               975,899              799,372
  Depletion depreciation, and amortization                         707,200               869,600              623,600
  Provision for future site restoration costs                          600                29,500               21,500
  Abandonments and write downs                                           -               684,635                    -
  Income tax expense (recovery)                                   (35,243)               281,687              302,870
                                                                  --------             ---------            ---------
                                                                   819,889             2,841,321            1,747,342
                                                                   -------             ---------            ---------
Net income (loss) from operations                               $ (43,355)              $346,517             $372,577
                                                                ==========              ========             ========
Capitalized costs of oil and gas activities:

                                                                      1999                  1998                 1997
                                                                  --------              --------            ---------
Acquisition costs                                                 $241,000              $ 11,000            $ 399,000
Exploration                                                        514,000               174,000              546,000
Development                                                        145,000             1,758,000            2,313,000
Standardized  measure of discounted future net cash flows relating to proved oil
and gas  reserve  quantities  during  the  following  period  (in  thousands  of
dollars):

                                                                      1999                  1998                 1997
Future cash inflows                                                $70,491               $28,052              $46,435
Future development and production costs                            (24,364)              (14,030)             (22,517)
                                                                   --------              --------             --------
                                                                    46,127                14,022               23,918
Future income tax expense*                                          (6,331)                    -               (1,573)
                                                                    -------              --------              -------
Future net cash flows                                               39,796                14,022               22,345
10% annual discount                                                 (8,758)               (4,781)              (7,836)
                                                                    -------              --------              -------
Standardized measure of discounted
  future net cash flows                                            $31,038                $9,241              $14,509
                                                                   =======                ======              ========
------
* Reflects tax benefit for the years 1999,  1998 and 1997, from carry forward of
exploration,  development and lease  acquisition  costs,  undepreciated  capital
costs and book earned depletion of $18,940,000, $16,381,000 and $18,065,000.

         Current  prices  used in the above  estimates  were based upon  selling
prices at the  wellhead at December of each year.  The actual  price  ($2.83) of
Kotaneelee gas at December 31, 1999, was used in these estimates.  Current costs
were based upon estimates made by consulting engineers at the end of each year.
Changes in the standardized  measure during the following  periods (in thousands
of dollars):

                                                                    Year ended December 31,
                                                        -----------------------------------------------------
                                                           1999                   1998                  1997
Changes due to:                                         --------------        ------------            -------
Sale of properties                                        $     -               $(4,374)              $     -
Prices and production costs                                17,776                  (402)                 (579)
Future development costs                                     (116)               (1,204)               (2,350)
Sales net of production costs                                (619)                 (906)               (1,562)
Development costs incurred
  during the year                                             145                 1,758                 2,313
Net change due to extensions,
  discoveries and improved recovery                             -                     -                 1,692
Revisions of quantity estimates                             7,256                  (872)               (3,642)
Accretion of discount                                         924                 1,045                 1,723
Net change in income taxes                                 (3,569)                 (313)                  939
                                                           -------              --------              --------
Net change                                                $21,797               $(5,268)              $(1,466)
                                                          ========              ========              ========
--------------------------------------------------------------------------------
You should rely only on the  information  contained or incorporated by reference
in this  prospectus.  We have not  authorized  anyone  (including  any broker or
salesman) to provide you with different or inconsistent  information.  If anyone
provides you with different or inconsistent information,  you should not rely on
it. This  document may be used only where it is legal to sell these  securities.
You should assume that the information  contained in this prospectus is accurate
only as of _______, 2000. You should not assume that this prospectus is accurate
as of any other date.
--------------------------------------------------------------------------------

                         Canada Southern Petroleum Ltd.

                               __________ LIMITED
                                  VOTING SHARES

                              ___________ RIGHTS TO
                                PURCHASE LIMITED
                                  VOTING SHARES

                                                          ------------------
                                                             PROSPECTUS
                                                          ------------------

                                                            __________, 2000
II-5
                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

         The following  table sets forth our estimates of the expenses  incurred
in connection with the sale of common stock being registered,  all of which will
be paid by us.

SEC registration fee                                                  $[______]
Stock exchange listing fees                                           $[______]
Printing expenses                                                     $[______]
Transfer agent's and registrar's fees                                 $[______]
Legal fees and expenses                                               $[______]
Accounting fees and expenses                                          $[______]
Blue sky qualification fees and expenses                              $[______]
Miscellaneous fees and expenses                                       $[______]

                                                TOTAL:

Item 14. Indemnification of Directors and Officers.

          Paragraph  177 of the  Company's  Articles  of  Association  (By-Laws)
provides as follows:

         177. (a) Each of the  Directors  and officers for the time being of the
         Company and his heirs, executors and administrators,  in the absence of
         any dishonesty on his part,  shall be indemnified and secured  harmless
         by the Company from and against all claims,  actions,  costs,  charges,
         losses,  damages and  expenses  incurred or  sustained by reason of any
         action or thing done, concurred in or omitted in or about the execution
         of his duty or supposed duty as a result of the breach of his fiduciary
         duty.

         (b) No  Director  or officer  for the time being of the Company and his
         heirs,  executors and administrators,  in the absence of any dishonesty
         on his part,  shall be liable  for:  the acts,  receipts,  neglects  or
         defaults of any other person;  or for joining in any receipt or act for
         conformity; or for any loss, damage or expense happening to the Company
         through  the  insufficiency  or  deficiency  of title  to any  property
         acquired by, for or on behalf of the Company;  or for the insufficiency
         or  deficiency  of any  security  in or upon  which  any  moneys of the
         Company  are  invested;  or for any loss or  damages  arising  from the
         bankruptcy,  insolvency  or  tortious  act of any person  with whom any
         moneys,  securities  or other  property  of the  Company  are lodged or
         deposited;  or for any other loss, damage or misfortune  whatever which
         may arise out of the  execution  of his duty or  supposed  duty or as a
         result of the breach of his fiduciary duty or in relation thereto.

         (c) The Company shall indemnify a director or officer of the Company, a
         former director or officer of the Company or a person who acts or acted
         at the Company's  request as a director or officer of a body  corporate
         of which the Company is or was a shareholder or creditor, and his heirs
         and legal  representatives,  against  all  claims,  costs,  charges and
         expenses,  including  an amount  paid to settle an action or  satisfy a
         judgment, penalty or fine, reasonably incurred by him in respect of any
         civil,  criminal or administrative  action or proceeding to which he is
         made a party by reason of being or having been a director or officer of
         such corporation or body corporate if:

                  (1)   He acted honestly and in good faith with a view to the
                        best interests of the Company; or

                  (2)   In the case of a criminal  or  administrative  action or
                        proceeding  that is enforced by a monetary  penalty,  he
                        had  reasonable  grounds for believing  that his conduct
                        was lawful; or

                  (3)   He was substantially successful on the merits in this
                        defense of the action or proceeding.

         (d) The foregoing  provisions of this article shall be in amplification
         of and in addition to and not by way of limitation  of or  substitution
         for any rights, immunities or protection conferred upon any director or
         officer by any statute, law, matter or thing whatsoever.

         The Company has entered  into  expense  agreements  with its  executive
officers and each of its directors.  These  agreements  provide that the Company
shall advance such persons the costs,  including reasonable  attorneys' fees, of
defending any litigation  brought against them by reason of such person being or
having been a director or executive officer of the Company.  The agreements also
obligate the directors and executive  officer to repay any such amounts advanced
should a final decision by a court having  jurisdiction in the matter  determine
that the  director  or  executive  officer in  question  is not  entitled  to be
indemnified.

         In 1987,  we  purchased  U.S.  $150,000  of  directors'  and  officers'
liability  insurance coverage from an unaffiliated  Bermuda company at a cost of
U.S.  $150,000 plus an annual U.S.  $7,500  service fee during the period of the
policy.  We are credited with  investment  income from the policy premium during
the term of the policy and all or a portion of such  premium will be refunded at
the end of the policy  term to the extent  that no claims are made.  We had been
unable to obtain any other  liability  coverage for the Company's  directors and
officers.

         In recent years, we have been able to purchase directors' and officers'
insurance coverage.  The current amount of D&O coverage is Can. $15 million
(including the above policy) at an annual cost of Can. $122,000.

Item 15. Recent Sales of Unregistered Securities

                  None.

Item 16. Exhibits and Financial Statement Schedules.

         (a)      Exhibits

      Exhibit No.                           Exhibit
      -----------                           -------
          3.1       Memorandum of  Association  as amended on June 30, 1982, May
                    14,  1985 and April 7, 1988  filed as Exhibit 4B to Form S-8
                    as filed on November 25, 1998 is incorporated by reference.

          3.2       By-laws, as amended, filed as Exhibit 4C to Form S-8 as
                    filed on November 25, 1998 are

           5        Form of Opinion of Counsel - Patterson Palmer Hunt Murphy
                    (filed herewith).

          10.1      Agreement dated May 28, 1959 between the Company et al. and
                    Home Oil Company Limited et

          10.2      Copies of Supplementary Documents to May 28, 1959 Agreement
                    (see Exhibit 10.1 above),

          10.3      Copy of Modification to Agreement dated May 28, 1959
                    (see Exhibit 10.1 above), made as of

          10.4      Copy of Agreement dated April 1, 1966 among the Company et
                    al. and Dome Petroleum Limited

          10.5      Copy of Letter Agreement dated February 1, 1977 between the
                    Company and Columbia Gas

          10.6      Copy of Agreement dated January 28, 1972 between the Company
                    and Panarctic Oils Ltd. for

          10.7      Stock Option Plan adopted December 9, 1992 filed as Exhibit
                    10(c) to Annual Report on Form

          10.8      Stock Option Plan effective July 1, 1998 filed as Exhibit A
                    to Schedule 14A Information

          23.1      Consent of Ernst & Young LLP (filed herewith).

          23.2      Consent of Patterson Palmer Hunt Murphy (filed herewith).

          23.3      Consent of Murtha Cullina LLP (filed herewith).

          23.4      Consent of Blake, Cassels & Graydon LLP (filed herewith).

          23.5      Consent of Paddock Lindstrom & Associates, Ltd.
                    (filed herewith).

           24       Powers of Attorney of Ben A. Anderson, M. Anthony Ashton,
                    Timothy L. Largay, Arthur B.

           27       Financial Data Schedule.

          99.1      Form of rights certificate/subscription card (filed
                    herewith).

          99.2      Instructions for Purchasing Stock (filed herewith).

          99.3      Offering cover letter to stockholders  (filed herewith).

Item 17. Undertakings

         The undersigned registrant hereby undertakes:

         (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

         (i)  To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

         (ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration  statement (or the most recent post-effective
amendment  thereof)  which,  individually  or  in  the  aggregate,  represent  a
fundamental change in the information set forth in the registration statement;

         (iii) To include any material  information  with respect to the plan of
distribution  not  previously  disclosed  in the  registration  statement or any
material change to such information in the registration statement;

         Provided,  however,  that paragraphs (1)(i) and (1)(ii) do not apply if
the  registration  statement  is on Form S-3 or Form  S-8,  and the  information
required to be included in a  post-effective  amendment by those  paragraphs  is
contained in periodic reports filed by either registrant  pursuant to section 13
or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.

         (2) That,  for the  purpose  of  determining  any  liability  under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such  securities at that time shall be deemed to be the initial bona
fide offering thereof.

         (3) To remove from registration by means of a post-effective  amendment
any of the securities being registered which remain unsold at the termination of
the offering.

         (4) To file a post-effective amendment to the registration statement to
include any financial  statements required by Rule 3-19 of Regulation S-X at the
start of any delayed offering or throughout a continuous offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors,  officers and controlling  persons of
the  registrants  pursuant  to  the  foregoing  provisions,  or  otherwise,  the
registrants have been advised that in the opinion of the Securities and Exchange
Commission  such  indemnification  is against  public policy as expressed in the
Securities Act and is, therefore,  unenforceable.  In the event that a claim for
indemnification  against  such  liabilities  (other  than  the  payment  by  the
registrants of expenses  incurred or paid by a director,  officer or controlling
person of the  registrants  in the  successful  defense of any  action,  suit or
proceeding)  is  asserted by such  director,  officer or  controlling  person in
connection with the securities being registered, the registrants will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit  to a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification  is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
SIGNATURES

         Pursuant  to the  requirements  of the  Securities  Act  of  1933,  the
registrant has duly caused this amendment to this  registration  statement to be
signed on its behalf by the  undersigned,  thereunto duly authorized in the city
of Calgary, Alberta, Canada, on the 22nd day of September, 2000.

                         CANADA SOUTHERN PETROLEUM LTD.
                                  (Registrant)

                             By: /s/ Ben A. Anderson
                                     Ben A. Anderson, President

         Pursuant  to the  requirements  of the  Securities  Act of  1933,  this
amendment to this registration  statement has been signed below by the following
persons in the capacities and o the date indicated.

               Signature                              Title                              Date
               ---------                              -----                              ----

Principal executive officer:
/s/Ben A. Anderson                                   President                    September 22, 2000
------------------
Ben A. Anderson

Principal financial officer:

/s/David Blain                            Secretary/Treasurer and Chief           September 22, 2000
--------------                                  Financial Officer
David Blain

A majority of the Board of
Directors:

/s/ James R. Joyce                                                                September 22, 2000
------------------
James R. Joyce
Attorney-in-Fact for:

Ben A. Anderson                                      Director

M. Anthony Ashton                                    Director

Benjamin W. Heath                                    Director

Timothy L. Largay                                    Director

Arthur B. O'Donnell                                  Director
Pursuant  to the  requirements  of the  Securities  Act  of  1933,  the
undersigned has signed this registration statement on September 22, 2000.

                               /s/James R. Joyce
                                  James R. Joyce
                            Authorized Representative
                               in the United States
INDEX OF EXHIBITS

              Item Number                       Description

                   5           Form of Opinion of Counsel - Patterson Palmer
                               Hunt Murphy

                 23.1          Consent of Ernst & Young LLP

                 23.2          Consent of Patterson Palmer Hunt Murphy

                 23.3          Consent of Murtha Cullina LLP

                 23.4          Consent of Blake, Cassels & Graydon LLP

                 23.5          Consent of Paddock Lindstrom & Associates, Ltd.

                  24           Powers of Attorney of Ben A. Anderson,
                               M. Anthony Ashton, Benjamin W. Heath,

                  27           Financial Data Schedule

                 99.1          Form of rights certificate/subscription card

                 99.2          Instructions for Purchasing Stock

                 99.3          Offering cover letter to stockholders