<PAGE>   1
                                                                    EXHIBIT 10.7

                         AGREEMENT OF PURCHASE AND SALE

                          (HUNTOON AREA, SASKATCHEWAN)

THIS AGREEMENT made this 12th  day of January, 2000,


BETWEEN:

         STRAIT ARROW HOLDINGS LTD. , a body corporate having an office in the
         City of Calgary, in the Province of Alberta (hereinafter called the
         "Vendor")

                                                               OF THE FIRST PART

                                     - and -

         GEOCAN ENERGY INC. a body corporate having an office in the City of
         Calgary, in the Province of Alberta (hereinafter called the
         "Purchaser")

                                                              OF THE SECOND PART

WHEREAS the Vendor has agreed to sell the Assets to the Purchaser and the
Purchaser has agreed to purchase the Assets from the Vendor on the terms and
conditions set forth herein;

NOW THEREFORE in consideration of the premises and the mutual covenants and
warranties herein contained, the Parties agree as follows:

1.       INTERPRETATION

1.1      Definitions

         In this Agreement, including the recitals and the Schedules, the
         following terms shall have the respective meanings hereby assigned to
         them:

         A.       "AGREEMENT" means this document, together with the Schedules
                  attached hereto and made a part hereof.

         B.       "ASSETS" means the Petroleum and Natural Gas Rights, the
                  Tangibles and the Miscellaneous Interests.

         C.       "CLOSING" means the exchange of Conveyance Documents at the
                  Closing Date, as more particularly described in Clause 3.3,
                  the delivery by the Purchaser to the Vendor of the Purchase
                  Price, as described in Clause 2.3, and the transfer of the
                  Assets by the Vendor to the Purchaser.



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                                      - 2 -

         D.       "CLOSING DATE" means 4:30 p.m., on January 20, 2000 or such
                  other time and date as may be agreed to by the Parties
                  pursuant to Clause 3.1 or Paragraph 8.2B(b).

         E.       "CONVEYANCE DOCUMENTS" means the documents described in
                  Paragraphs 3.3 A (a) and (b), which provide for the
                  assignment, transfer or other disposition of the Assets to the
                  Purchaser.

         F.       "EFFECTIVE DATE" means 8:00 a.m., on the first day of
                  December, 1999.

         G.       "LANDS" means the lands set forth and described in Schedule
                  "A", insofar as rights to the Petroleum Substances underlying
                  those lands are granted by the Leases.

         H.       "LEASES" means the collectively any and all leases, licences,
                  permits and other documents of title including without
                  limitation those set forth and described in Schedule "A", by
                  virtue of which the holder thereof is entitled to drill for,
                  win, take, own or remove the Petroleum Substances within, upon
                  or under the Lands or by virtue of which the holder thereof is
                  deemed to be entitled to a share of Petroleum Substances
                  removed from the Lands or any lands with which the Lands are
                  pooled or unitized and includes, if applicable, all renewals
                  and extensions of such documents and all documents issued in
                  substitution therefor.

         I.       "MISCELLANEOUS INTERESTS" means the entire interest of the
                  Vendor in and to all property, assets and rights pertaining to
                  the Petroleum and Natural Gas Rights and the Tangibles, other
                  than the Petroleum and Natural Gas Rights and the Tangibles,
                  to the extent such property, assets and rights pertain to the
                  Petroleum and Natural Gas Rights or the Tangibles, or any
                  rights relating thereto, including, without limitation of the
                  generality of the foregoing, the entire interest of the Vendor
                  in:

                  (a)      all contracts, agreements and documents, to the
                           extent that they relate directly to the Petroleum and
                           Natural Gas Rights or the Tangibles;

                  (b)      all subsisting rights to enter upon, use and occupy
                           the surface of any of the Lands, of any lands upon
                           which any Tangibles are located or of any lands to be
                           crossed in order to gain access to any of the Lands
                           or the Tangibles;

                  (c)      the well bores and casing therein for all Wells; and

                  (d)      copies of geological and engineering records, files,
                           reports and data that, in the Vendor's reasonable
                           judgement, relate directly to the Petroleum and
                           Natural Gas Rights, any well thereon or the
                           Tangibles, excluding the Vendor's tax and financial
                           records and economic evaluations.

                  Unless otherwise agreed in writing by the Parties, however,
                  the Miscellaneous Interests shall not include agreements,
                  documents or data to the extent that: (i) they



<PAGE>   3


                                      - 3 -

                  pertain to the Vendor's proprietary technology or
                  interpretations; (ii) they are owned or licensed by third
                  parties with restrictions on their deliverability or
                  disclosure by the Vendor to any assignee which is not an
                  affiliate of the Vendor.

         J.       "PARTY" means a person, partnership or corporation which is
                  bound by this Agreement.

         K.       "PERMITTED ENCUMBRANCES" means:

                  (a)      any encumbrances, overriding royalties, net profits
                           interests and other burdens identified in Schedule
                           "A";

                  (b)      the terms and conditions of the Leases, including,
                           without limitation, the requirement to pay any
                           rentals or royalties to the grantor thereof to
                           maintain the Leases in good standing;

                  (c)      the right reserved to or vested in any grantor,
                           government or other public authority by the term of
                           any Lease or by the Regulations to terminate any
                           Lease;

                  (d)      easements, rights of way, servitudes or other similar
                           rights in land, including, without in any way
                           limiting the generality of the foregoing, rights of
                           way and servitudes for highways, railways, sewers,
                           drains, gas and oil pipelines, gas and water mains,
                           electric light, power, telephone or cable television
                           conduits, poles, wires or cables;

                  (e)      regulations pertaining to taxation on Petroleum
                           Substances or the income or revenue therefrom and
                           governmental restrictions on production rates from
                           wells on the Lands or on operations being conducted
                           on the Lands or otherwise affecting the value of any
                           of the Assets;

                  (f)      the Regulations and any rights reserved to or vested
                           in any municipality or governmental, statutory or
                           public authority to control or regulate any of the
                           Assets in any manner;

                  (g)      undetermined or inchoate liens incurred or created as
                           security in favour of any person with respect to the
                           development or operation of any of the Assets, as
                           regards the Vendor's share of the costs and expenses
                           thereof;

                  (h)      the reservations, limitations, provisos and
                           conditions in any grants or transfers from the Crown
                           of any of the Lands or interests therein, and
                           statutory exceptions to title;




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                                      - 4 -

                  (i)      provisions for penalties and forfeitures under
                           agreements as a consequence of nonparticipation in
                           operations, provided that any such penalties or
                           forfeitures which apply to the Assets as a result of
                           the Vendor's failure to participate in a particular
                           operation prior to the Effective Date shall be
                           identified in Schedule "A"; and

                  (j)      liens granted in the ordinary course of business to a
                           public utility, municipality or governmental
                           authority with respect to operations pertaining to
                           any of the Assets.

         L.       "PETROLEUM AND NATURAL GAS RIGHTS" means the entire interest
                  of the Vendor in and to the Lands and, insofar as they pertain
                  to the Lands and the Leases.

         M.       "PETROLEUM SUBSTANCES" means petroleum, natural gas, sulphur
                  and every other mineral or substance, or any of them, the
                  right to explore for which, or an interest in which, is
                  granted pursuant to the Leases, insofar only as they pertain
                  to the Lands.

         N.       "PREPAID GAS OBLIGATIONS" means, with respect to production,
                  sale or related contracts pertaining to the Petroleum and
                  Natural Gas Rights, the obligations of the Vendor under "take
                  or pay" and similar provisions either to repay payments made
                  by the purchasers thereunder for Petroleum Substances not
                  taken by them or to deliver such gas or substances to such
                  purchasers without full payment therefor.

         O.       "PURCHASE PRICE" means the amount payable by the Purchaser to
                  the Vendor pursuant to Clause 2.2, as modified by the
                  reductions provided for herein.

         P.       "REGULATIONS" means all statutes, laws, rules, orders and
                  regulations in effect from time to time and made by
                  governments or governmental boards or agencies having
                  jurisdiction over the Assets.

         Q.       "SHARES" means 250,000 common shares of the Purchaser.

         R.       "TANGIBLES" means the entire interest of the Vendor, whether
                  leased or owned, in and to all tangible depreciable property,
                  real property and assets that are:

                  (a)      located in or on or in the vicinity of the Lands (or
                           lands with which the same have been pooled or
                           unitized) and used, or intended for use, in
                           connection with production, processing, gathering,
                           storage, treatment or transportation operations
                           respecting the Lands, including, without limitation,
                           the well equipment, if any, relating to the Vendor's
                           wells on the Lands; and

                  (b)      any additional items, whether located on or off the
                           Lands, that are indicated in Schedule "A" to be
                           specifically included as Tangibles.




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                                      - 5 -

         S.       "TITLE DEFECT" means a defect, deficiency or discrepancy in or
                  affecting the title of the Vendor in and to any of the Assets
                  which is sufficiently material and adverse to the enforcement
                  of title that it would not be acceptable to a knowledgeable,
                  prudent purchaser buying similar oil and gas properties,
                  acting reasonably.

         T.       "WELLS" means the entire interest of Vendor in and to all
                  wells located on the Lands or any lands pooled or unitized
                  therewith, including, without limitation, the wells listed in
                  Schedule "A".

1.2      Schedules

         The following Schedules are attached hereto and made part of this
         Agreement:

<TABLE>
<S>                                         <C>
         (a)      Schedule "A"      -       Land Schedule and Wells

         (b)      Schedule "B"      -       General Conveyance;

         (c)      Schedule "C"      -       Certificate to be provided
                                            pursuant to Article 10 with
                                            respect to the truth of a Party's
                                            representations and warranties.
</TABLE>

1.3      References

         The references "hereunder", "herein" and "hereof" refer to the
         provisions of this Agreement, and references to Articles, Clauses,
         Subclauses, Paragraphs or Subparagraphs herein refer to Articles,
         Clauses, Subclauses, Paragraphs or Subparagraphs of this Agreement. Any
         reference to time shall refer to Mountain Standard Time or Mountain
         Daylight Savings Time during the respective intervals in which each is
         in force.

1.4      Headings

         The headings of the Articles, Clauses, Schedules and any other
         headings, captions or indices herein are inserted for convenience of
         reference only and shall not be used in any way in construing or
         interpreting any provision hereof.

1.5      Singular/Plural

         Whenever the singular or masculine or neuter is used in this Agreement
         or in the Schedules, it shall be interpreted as meaning the plural or
         feminine or body politic or corporate, and vice versa, as the context
         requires.




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                                      - 6 -

1.6      Use Of Canadian Funds

         All references to "dollars" or "$" herein shall refer to lawful
         currency of Canada.

1.7      Derivatives

         Where a term is defined herein, a capitalized derivative of such term
         shall have a corresponding meaning unless the context otherwise
         requires.

1.8      Interpretation If Closing Does Not Occur

         In the event that Closing does not occur, each provision of this
         Agreement which presumes that the Purchaser has acquired the Assets
         hereunder shall be construed as having been contingent upon Closing
         having occurred.

1.9      Conflicts

         If there is any conflict or inconsistency between a provision of the
         body of this Agreement and that of a Schedule or a Conveyance Document,
         the provision of the body of this Agreement shall prevail. If any term
         or condition of this Agreement conflicts with a term or condition of a
         Lease or the Regulations, the term or condition of such Lease or the
         Regulations shall prevail, and this Agreement shall be deemed to be
         amended to the extent required to eliminate any such conflict.

2.       PURCHASE AND SALE

2.1      Agreement Of Purchase And Sale

         The Purchaser agrees to purchase the Assets from the Vendor and the
         Vendor agrees to sell the Assets to the Purchaser on the terms and
         conditions set forth herein.

2.2      Allocation Of Purchase Price

         The monetary consideration payable by the Purchaser to the Vendor for
         the Assets is One Hundred and Eighty Thousand ($180,000) Dollars and
         shall be allocated among the Assets as follows:



<TABLE>

<S>                                                               <C>
         (a)      To Petroleum and Natural Gas Rights             $125,999.00
         (b)      To Tangibles                                    $ 54,000.00
         (c)      To Miscellaneous Interests                      $      1.00
                                                                  -----------

                  TOTAL:                                          $180,000.00
                                                                  ===========
</TABLE>


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                                      - 7 -

         In determining the Purchase Price, the Parties have taken into account
         the Purchaser's assumption of responsibility for the future abandonment
         and reclamation costs associated with the Assets, as set forth in this
         Agreement, and the Vendor's release of responsibility therefor.

2.3      Payment Of Purchase Price

         The Purchase Price shall be paid by the Purchaser to the Vendor at
         Closing, subject to any reductions as may be made pursuant to Article 7
         and any adjustments provided for in Article 4. The Purchase Price shall
         be paid at Closing as follows:

         (a)      $80,000.00 shall be paid by certified cheque or bank draft;
                  and

         (b)      the balance by the issuance to the Vendor of the Shares at an
                  assigned value of $0.40 per share.

2.4      GST

         The Purchaser shall pay to the Vendor at Closing the seven percent (7%)
         goods and services tax applicable to that portion of the Purchase Price
         allocated to the Tangibles, in accordance with the Excise Tax Act
         (Canada), being $3,780.00. The Vendor's GST Registration Number is and
         the Purchaser's GST Registration Number is 871099040RT 0001.

3.       CLOSING

3.1      Place Of Closing

         Unless otherwise agreed in writing by the Parties, Closing shall take
         place at the offices of Howard, Mackie, the solicitors for the
         Purchaser, at 1000, 400 - 3rd Avenue, S.W., Calgary, Alberta on the
         Closing Date.

3.2      Effective Date Of Transfer

         The transfer and assignment of the Assets from the Vendor to the
         Purchaser shall be effective as of the Effective Date, provided Closing
         occurs. Possession of the Assets, however, shall not pass to the
         Purchaser until after Closing on the Closing Date, and the Vendor shall
         maintain the Assets between the Effective Date and the Closing Date
         pursuant to the provisions of Article 5.




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                                      - 8 -

3.3      Deliveries At Closing

         A.       At Closing, the Vendor shall deliver the following to the
                  Purchaser:

                  (a)      a General Conveyance, in the form attached as
                           Schedule "B", which has been executed by the Vendor;

                  (b)      all specific assignments, registrable transfers,
                           novation agreements, trust agreements and other
                           instruments required to convey the Vendor's interest
                           in the Assets to the Purchaser;

                  (c)      copies of all consents to disposition and waivers of
                           rights of first refusal obtained by the Vendor with
                           respect to the sale of the Assets to the Purchaser;

                  (d)      originals of the Vendor's records, files, reports and
                           data pertaining to the Assets, insofar as such
                           delivery is permitted and required hereunder, unless
                           and to the extent that the Purchaser agrees to allow
                           the Vendor to deliver such records, files, reports
                           and data at a later date;

                  (e)      the certificate required by Paragraph 10.2(d);

                  (f)      registrable discharges in respect of any security
                           notices or caveats registered against the Assets or
                           any part or portion thereof, and no interest letters
                           in respect of any other security interests
                           encumbering Vendor's interest in and to the Assets of
                           any part or portion thereof; and

                  (g)      such other documents as may be specifically required
                           hereunder or as may be reasonably requested by the
                           Purchaser upon reasonable notice to the Vendor.

         B.       At Closing, the Purchaser shall deliver the following to the
                  Vendor:

                  (a)      the Purchase Price and the goods and services tax in
                           accordance with Clauses 2.3 and 2.4;

                  (b)      a General Conveyance, in the form attached as
                           Schedule "B", which has been executed by the
                           Purchaser;

                  (c)      the certificate required by Paragraph 10.3(c); and

                  (d)      such other documents as may be specifically required
                           hereunder.



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                                      - 9 -

3.4      Costs Of Registration

         The Purchaser shall bear all costs incurred in registering any
         conveyances of title to the Assets to it and all costs of preparing and
         registering any further assurances required to convey the Assets to it.
         The Purchaser shall register all such conveyances promptly after
         Closing.

4.       ADJUSTMENTS

4.1      Benefits And Obligations To Be Apportioned

         A.       All benefits and obligations of any kind and nature accruing,
                  payable, paid, received or receivable with respect to the
                  Assets (including, without limitation, maintenance,
                  development, capital and operating costs, advances, payments
                  with respect to the Permitted Encumbrances, proceeds from the
                  sale of production, accounts receivable and incentives
                  accruing pursuant to the Regulations) shall be apportioned, as
                  of the Effective Date, between the Vendor and the Purchaser in
                  accordance with generally accepted accounting principles,
                  subject to the provisions of this Agreement. All costs of
                  whatever nature pertaining to work performed or goods or
                  services provided with respect to the Assets prior to the
                  Effective Date shall be borne by the Vendor, notwithstanding
                  that such costs may be payable in whole or in part after the
                  Effective Date.

         B.       Notwithstanding the provisions of Subclause 4.1A, all surface
                  lease rentals and all similar rentals and payments required to
                  preserve any of the Leases, all taxes levied under the
                  Freehold Mineral Rights Tax Act (Alberta) and all other taxes,
                  including municipal taxes, (other than income taxes) levied
                  with respect to the Assets shall be apportioned between the
                  Vendor and the Purchaser on a per diem basis as of the
                  Effective Date.

         C.       Petroleum Substances which were produced, but not sold, as of
                  the Effective Date shall be credited to the Vendor.

4.2      Adjustments To Accounts

         A.       Prior to the Closing Date, the Purchaser shall deliver to the
                  Vendor a written interim statement of all adjustments and
                  payments to be made pursuant to this Agreement and an interim
                  accounting and adjustment shall be conducted for Closing,
                  based on the Vendor's and the Purchaser's good faith estimate
                  of all adjustments to be made for the transactions herein
                  pursuant to this Article, and a final accounting and
                  adjustment shall be conducted within one hundred and eighty
                  (180) days following the Closing Date. All adjustments shall
                  be settled by payment by the Party required to make payment
                  hereunder within fifteen (15) days of being notified of the
                  determination of the amount owing.



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                                     - 10 -

         B.       During the one hundred and eighty (180) day period following
                  the Closing Date, the Purchaser may audit the books, records
                  and accounts of the Vendor respecting the Assets, for the
                  purpose of effecting adjustments pursuant to this Article.
                  Such audit shall be conducted upon reasonable notice to the
                  Vendor at the Vendor's offices during the Vendor's normal
                  business hours, and shall be conducted at the sole expense of
                  the Purchaser. Any claims of discrepancies disclosed by such
                  audit shall be made in writing to the Vendor within two (2)
                  months following the completion of such audit, and the Vendor
                  shall respond in writing to any claims of discrepancies within
                  one (1) month of the receipt of such claims. To the extent
                  that the Parties are unable to resolve any outstanding claims
                  of discrepancies disclosed by such audit within one (1) month
                  of the Vendor's response thereto, such audit exceptions shall
                  be resolved pursuant to Article 9.

         C.       Notwithstanding the preceding Subclauses of this Clause and
                  Clause 13.1, any adjustments established by an audit conducted
                  pursuant to the Regulations or the provisions of the Leases
                  with respect to the payment of royalties shall be made at the
                  time such adjustment is established, with payment being made
                  by the Party required to make payment hereunder within fifteen
                  (15) days of being notified of the determination of the amount
                  owing.

5.       MAINTENANCE OF BUSINESS

5.1      Assets To Be Maintained In Proper Manner

         The Vendor shall continue to maintain the Assets in a proper and
         prudent manner in accordance with good oil field practice and the
         Regulations until Closing. The Vendor shall maintain insurance
         respecting the Assets during the period between the Effective Date and
         the Closing Date.

5.2      Material Commitments

         A.       Until Closing, the Vendor shall not, without the prior written
                  consent of the Purchaser:

                  (a)      voluntarily assume any obligation or commitment with
                           respect to the Assets, where the Vendor's share of
                           the expenditure associated with such obligation or
                           commitment is estimated to exceed $25,000.00;

                  (b)      surrender or abandon any of the Assets;

                  (c)      amend or terminate the Leases or any agreement to
                           which the Assets are subject or enter into any new
                           agreement or commitment respecting the Assets;




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                                     - 11 -

                  (d)      propose or initiate the exercise of any right
                           (including bidding rights at Crown sales, rights
                           under area of mutual interest provisions and rights
                           of first refusal) or option relative to, or arising
                           as a result of the ownership of the Assets, or
                           propose or initiate any operations on the Lands which
                           have not been commenced or committed to by the Vendor
                           as of the earlier of the date of this Agreement or
                           the Effective Date, if such exercise or option would
                           result in either an obligation of the Purchaser
                           hereunder after the Effective Date or a material
                           adverse effect on the value of any of the Assets;

                  (e)      sell, transfer or otherwise dispose of the Assets, or
                           any of them, subject to the provisions of Clause
                           15.1; or

                  (f)      grant a security interest or any encumbrance with
                           respect to any of the Assets.

                  However, the Vendor may assume such obligations or commitments
                  and propose or initiate such operations or exercise any such
                  right or option without the prior consent of the Purchaser, if
                  the Vendor reasonably determines that such expenditures or
                  actions are necessary for the protection of life or property,
                  in which case the Vendor shall promptly notify the Purchaser
                  of such intention or actions and the Vendor's estimate of the
                  costs and expenses associated therewith.

         B.       If an operation or the exercise of any right or option
                  respecting the Assets is proposed in circumstances in which
                  such operation or the exercise of such right or option would
                  result in an obligation of the Purchaser pursuant to Subclause
                  5.2 A, the following Paragraphs shall apply to such operation
                  or the exercise of such right or option (hereinafter referred
                  to as "the Proposal"):

                  (a)      the Vendor shall promptly give notice of the Proposal
                           to the Purchaser, including with such notice the
                           particulars of such Proposal in reasonable detail;

                  (b)      the Purchaser shall, not later than twenty-four (24)
                           hours prior to the time the Vendor is required to
                           make its election with respect to the Proposal,
                           advise the Vendor, by notice, whether it wishes the
                           Vendor to exercise its rights with respect to the
                           Proposal on behalf of the Purchaser, provided that
                           failure of the Purchaser to make such election within
                           such period shall be deemed to be an election by the
                           Purchaser to participate in the Proposal;

                  (c)      the Vendor shall make the election authorized by the
                           Purchaser with respect to the Proposal within the
                           period during which the Vendor may respond to the
                           Proposal; and

                  (d)      the election by the Purchaser not to participate in
                           any Proposal required to preserve the existence of
                           any of the Assets shall not entitle the Purchaser to



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                                     - 12 -

                           any reduction of the Purchase Price in the event that
                           the Vendor's interest therein is terminated as a
                           result of such election, and such termination shall
                           not constitute a failure of the Vendor's
                           representations and warranties pertaining to such
                           Assets, notwithstanding Clause 6.3.

5.3      Maintenance Of Assets Until Novations Completed

         Following Closing and to the extent that the Purchaser must be novated
         into operating agreements or other agreements governing any of the
         Assets, the following provisions shall apply with respect to such
         Assets from the Effective Date until the novation has been effected:

         (a)      the Vendor shall not initiate any operation with respect to
                  the Assets, except upon the written instruction of the
                  Purchaser or if the Vendor reasonably determines that it is
                  required for the protection of life or property, in which case
                  the Vendor may take such actions as it reasonably determines
                  are required without the written instruction of the Purchaser
                  and shall promptly notify the Purchaser of such intention or
                  actions and the Vendor's estimate of the costs and expenses
                  associated therewith;

         (b)      the Vendor shall forthwith provide to the Purchaser all
                  authorizations for expenditure, notices, specific information
                  and other documents the Vendor receives with respect to the
                  Assets, and shall respond to such authorizations for
                  expenditure, notices, information and other documents pursuant
                  to the written instruction of the Purchaser, if received on a
                  timely basis, provided that the Vendor may (but shall not be
                  obligated to) refuse to follow instructions which it
                  reasonably believes to be unlawful, unethical or in conflict
                  with an applicable contract; and

         (c)      the Vendor shall forthwith deliver to the Purchaser all
                  revenues, proceeds and other benefits received by the Vendor
                  with respect to the Assets, less the share of the applicable
                  lessor royalties, operating costs, treating, processing and
                  transportation expenses and those other costs and expenses
                  directly associated with the Assets and the production of
                  Petroleum Substances, provided that the Vendor shall not be
                  permitted to deduct from such revenues, proceeds and other
                  benefits any other costs and expenses it incurs as a result of
                  such delivery to the Purchaser.

5.4      Vendor Deemed Agent Of Purchaser

         A.       Insofar as the Vendor maintains the Assets and takes actions
                  with respect thereto on behalf of the Purchaser pursuant to
                  this Article, the Vendor shall be deemed to have been the
                  agent of the Purchaser hereunder. The Purchaser ratifies all
                  actions taken by the Vendor or refrained to be taken by the
                  Vendor pursuant to the terms of this Article 5. in such
                  capacity during such period, with the intention that all such
                  actions shall be deemed to be those of the Purchaser. To the
                  extent that any losses, claims, damages or demands are
                  suffered or incurred by the Vendor or the Purchaser, and



<PAGE>   13


                                     - 13 -

                  which accrue to the Assets or ownership of the Assets during
                  the period of time between the Effective Date and the Closing
                  Date, are reimbursable by the insurance maintained by the
                  Vendor during such time period, Vendor shall make a claim for
                  such proceeds and the Party subject to or suffering from such
                  losses, claims, damages or demands shall be reimbursed by such
                  insurance proceeds.

         B.       Insofar as the Vendor participates in either operations or the
                  exercise of rights or options as the agent of the Purchaser
                  pursuant to this Article, the Vendor may require the Purchaser
                  to secure the costs to be incurred by the Vendor on behalf of
                  the Purchaser pursuant to such election in such manner as may
                  be reasonably appropriate in the circumstances.

         C.       The Purchaser shall indemnify the Vendor and its directors,
                  officers, servants, agents or employees against all
                  liabilities, losses, costs (including legal costs on a
                  solicitor-client basis), claims or damages which the Vendor or
                  its directors, officers, servants, agents or employees may
                  suffer or incur as a result of maintaining the Assets as the
                  agent of the Purchaser pursuant to this Article, insofar as
                  such liabilities, losses, costs, claims or damages are not a
                  direct result of the gross negligence or wilful misconduct of
                  the Vendor or its directors, officers, servants, agents or
                  employees. An action or omission of the Vendor or its
                  directors, officers, servants, agents or employees shall not
                  be regarded as gross negligence or wilful misconduct, however,
                  to the extent it was done or omitted to be done in accordance
                  with the instructions of or with the concurrence of the
                  Purchaser.

5.5      Restriction On Purchaser's Proposal Of Operations

         Prior to Closing and except to the extent provided in this Article or
         permitted under an operating agreement, unit agreement or other
         agreement to which the Purchaser is a party as of the Effective Date,
         the Purchaser shall not, without the written consent of the Vendor,
         propose to the Vendor, or request the Vendor to propose to others, the
         conduct of any operations on the Lands or the exercise of any right or
         option respecting the Assets.

6.       REPRESENTATIONS AND WARRANTIES OF PARTIES

6.1      Vendor's Representations And Warranties

         The Vendor represents and warrants to the Purchaser that:

         (a)      Standing: The Vendor is a corporation, duly organized, valid
                  and subsisting and incorporated under the laws of the Province
                  of Alberta, and is authorized to carry on business in the
                  jurisdiction where the Lands are located;




<PAGE>   14


                                     - 14 -

         (b)      Requisite Authority: The Vendor has the requisite capacity,
                  power and authority to execute this Agreement and the
                  Conveyance Documents and to perform the obligations to which
                  it thereby becomes subject;

         (c)      No Conflict: The execution and delivery of this Agreement and
                  the completion of the sale of the Assets in accordance with
                  the terms of this Agreement are not and will not be in
                  violation or breach of, or be in conflict with:

                  (i)      any term or provision of the charter, by-laws or
                           other governing documents of the Vendor;

                  (ii)     any agreement, instrument, permit or authority to
                           which the Vendor is a party or by which the Vendor is
                           bound; or

                  (iii)    the Regulations or any judicial order, award,
                           judgement or decree applicable to the Vendor or the
                           Assets;

         (d)      Execution And Enforceability: The Vendor has taken all actions
                  necessary to authorize the execution and delivery of this
                  Agreement, and, as of the Closing Date, the Vendor shall have
                  taken all actions necessary to authorize and complete the sale
                  of the Assets in accordance with the provisions of this
                  Agreement. This Agreement has been validly executed and
                  delivered by the Vendor, and this Agreement and all other
                  documents executed and delivered on behalf of the Vendor
                  hereunder shall constitute valid and binding obligations of
                  the Vendor enforceable in accordance with their respective
                  terms and conditions;

         (e)      Residency For Tax Purposes: The Vendor is not a non-resident
                  of Canada within the meaning of the Income Tax Act (Canada);

         (f)      No Finders' Fees: The Purchaser shall not have any
                  responsibility for any obligation or liability, contingent or
                  otherwise, for brokers' or finders' fees, if any, incurred by
                  the Vendor with respect to the transactions herein;

         (g)      Lawsuits And Claims: To the best of the information, knowledge
                  and belief of the Vendor, there are no unsatisfied judgments,
                  claims, proceedings, actions, governmental investigations or
                  lawsuits in existence, contemplated or threatened against or
                  with respect to the Assets or the interest of the Vendor
                  therein, and there exists no particular circumstance which the
                  Vendor reasonably believes will give rise to such a claim,
                  proceeding, action, governmental investigation or lawsuit;

         (h)      Compliance With Leases And Agreements: To the best of the
                  information, knowledge and belief of the Vendor, no act or
                  omission has occurred whereby the Vendor is, or would be, in
                  default under the terms of the Regulations, any Lease or



<PAGE>   15


                                     - 15 -

                  any agreement pertaining to the Assets, where such a default
                  would impact materially and adversely upon the Assets, or any
                  of them;

         (i)      No Default Notices: Except as has been specifically identified
                  in Schedule "A", the Vendor has not received any notice of
                  default under the Leases or any notice alleging its default
                  under any agreement pertaining to any of the Assets, which
                  default has not been rectified as of the date of this
                  Agreement;

         (j)      Payment Of Royalties And Taxes: To the best of the
                  information, knowledge and belief of the Vendor, all royalties
                  and all ad valorem, property, production, severance and
                  similar taxes and assessments based on, or measured by, the
                  Vendor's ownership of the Assets, the production of Petroleum
                  Substances from the Lands or the receipt of proceeds therefrom
                  that are payable by the Vendor and which accrued prior to the
                  Effective Date have been properly and fully paid and
                  discharged in the manner and at the time prescribed by the
                  Leases and the Regulations;

         (k)      Encumbrances: The Vendor does not warrant its title to the
                  Assets, but does warrant that the interest of the Vendor in
                  the Assets is free and clear of any and all liens, mortgages,
                  pledges, claims, options, encumbrances, overriding royalties,
                  net profits interests or other burdens created by, through or
                  under the Vendor other than the Permitted Encumbrances and for
                  those for which discharges or releases are to be provided at
                  Closing;

         (l)      No Reduction: The interests of the Vendor in the Assets are
                  not subject to reduction by payout of a well or otherwise, or
                  subject to modification in size or nature by virtue of any
                  right or interest granted by, through or under the Vendor
                  except for the Permitted Encumbrances and any such rights and
                  interests identified in Schedule "A";

         (m)      Sale Agreements: Except as identified in Schedule "A", the
                  Petroleum and Natural Gas Rights are not subject to any
                  Prepaid Gas Obligations, any gas balancing agreements or any
                  agreements for the sale of Petroleum Substances which are not
                  terminable on thirty (30) days' notice (without an early
                  termination penalty or other cost);

         (n)      Environmental Matters: The Vendor is not aware of and has not
                  received:

                  (i)      any orders or directives under the Regulations which
                           relate to environmental matters and which require any
                           work, repairs, construction or capital expenditures
                           with respect to the Assets, where such orders or
                           directives have not been complied with in all
                           material respects; or

                  (ii)     any demand or notice issued under the Regulations
                           with respect to the breach of any environmental,
                           health or safety law applicable to the Assets,
                           including, without limitation, any Regulations
                           respecting the use, storage, treatment,


<PAGE>   16


                                     - 16 -

                           transportation or disposition of environmental
                           contaminants, which demand or notice remains
                           outstanding on the Closing Date;

                  except as have been specifically disclosed by the Vendor, by
                  notice to the Purchaser prior to the Vendor's submission of
                  this Agreement to the Purchaser for the Purchaser's execution;

         (o)      Condition Of Wells: To the best of the information, knowledge
                  and belief of the Vendor, each well located on the Lands,
                  whether producing, shut-in, injection, disposal or otherwise,
                  has been drilled and, if completed, completed and operated in
                  accordance with good oil and gas field practices and the
                  material requirements of the Regulations;

         (p)      Abandonment Of Wells: To the best of the information,
                  knowledge and belief of the Vendor, each well located on the
                  Lands which has been abandoned has been plugged and abandoned,
                  and the wellsite therefor properly restored, in accordance
                  with good oil and gas field practices and the material
                  requirements of the Regulations;

         (q)      Condition Of Tangibles: To the best of the information,
                  knowledge and belief of the Vendor, the Tangibles have been
                  constructed, installed, maintained and operated in accordance
                  with generally accepted engineering practices, good oil and
                  gas field practices and the material requirements of the
                  Regulations;

         (r)      Authorized Expenditures: To the best of the knowledge,
                  information and belief of the Vendor, there are no outstanding
                  authorizations for expenditure or outstanding financial
                  commitments respecting the Assets, pursuant to which
                  expenditures are or may be required by the Purchaser as a
                  result of the acquisition of the Assets or in respect of which
                  any amount is outstanding, other than as specifically
                  disclosed in Part IV of Schedule "A" or as may be authorized
                  on behalf of the Purchaser hereunder;

         (s)      Regulatory Production Penalties And Allowables: Except as
                  specifically identified in Schedule "A", to the best of the
                  information, knowledge and belief of the Vendor:

                  (i)      each Well located on the Lands which has been drilled
                           for the purpose of producing Petroleum Substances
                           therefrom has been drilled at a location for which an
                           off target production penalty is not applicable under
                           the Regulations; and

                  (ii)     none of the Wells located on the Lands have been
                           produced in excess of applicable production
                           allowables imposed by the Regulations and there is no
                           pending change in such production allowable, other
                           than as may generally be applicable pursuant to a
                           change in the Regulations; and



<PAGE>   17


                                     - 17 -


         (t)      No Removal of Tangibles: No tangible depreciable property and
                  assets which are used, were used or are intended to be used in
                  producing, processing, gathering, treating, measuring, making
                  marketable or injecting the Petroleum Substances or any of
                  them or in connection with water injection or removal
                  operations that pertain to the Petroleum and Natural Gas
                  Rights, has been removed from its location since December 1,
                  1999, nor has Vendor alienated or encumbered any such tangible
                  depreciable property and assets since such date.

6.2      Purchaser's Representations And Warranties

         The Purchaser represents and warrants to the Vendor that:

         (a)      Standing: The Purchaser is a corporation, duly organized,
                  valid and subsisting under the laws of its jurisdiction of
                  incorporation, and duly registered and authorized to carry on
                  business in the jurisdiction in which the Lands are located;

         (b)      Requisite Authority: The Purchaser has the requisite capacity,
                  power and authority to execute this Agreement and the
                  Conveyance Documents and to perform the obligations to which
                  it thereby becomes subject;

         (c)      No Conflict: The execution and delivery of this Agreement and
                  the completion of the purchase of the Assets in accordance
                  with the terms of this Agreement are not and will not be in
                  violation or breach of, or be in conflict with:

                  (i)      any term or provision of the charter, by-laws or
                           other governing documents of the Purchaser; or

                  (ii)     the Regulations or any judicial order, award,
                           judgement or decree applicable to the Purchaser;

         (d)      Execution And Enforceability: The Purchaser has taken all
                  actions necessary to authorize the execution and delivery of
                  this Agreement and, as of the Closing Date, the Purchaser
                  shall have taken all actions necessary to authorize and
                  complete the purchase of the Assets in accordance with the
                  provisions of this Agreement. This Agreement has been validly
                  executed and delivered by the Purchaser, and this Agreement
                  and all other documents executed and delivered on behalf of
                  the Purchaser hereunder shall constitute valid and binding
                  obligations of the Purchaser enforceable in accordance with
                  their respective terms and conditions;

         (e)      Residency For Tax Purposes: The Purchaser is not a
                  non-resident of Canada within the meaning of the Income Tax
                  Act (Canada);



<PAGE>   18


                                     - 18 -

         (f)      No Sales Commission: The Purchaser has not incurred any
                  obligation or liability, contingent or otherwise, for brokers'
                  or finders' fees with respect to the transactions herein for
                  which the Vendor shall have any responsibility; and

         (g)      Shares: Upon Closing, the Shares will have been validly issued
                  as fully paid and non- assessable shares in the capital of the
                  Purchaser.

6.3      Survival Of Representations And Warranties

         Each Party acknowledges that the other may rely on the representations
         and warranties made by such Party pursuant to Clause 6.1 or 6.2, as the
         case may be. Subject to Paragraph 5.2B(d), the representations and
         warranties in Clauses 6.1 and 6.2 shall be true on the Effective Date
         and on the Closing Date, and such representations and warranties shall
         continue in full force and effect and shall survive the Closing Date
         for a period of one (1) year, for the benefit of the Party for which
         such representations and warranties were made. In the absence of fraud,
         however, no claim or action shall be commenced with respect to a breach
         of any such representation or warranty, unless, within such period,
         written notice specifying such breach in reasonable detail has been
         provided to the Party which made such representation or warranty.

6.4      No Merger

         The representations and warranties in Clauses 6.1 and 6.2 shall be
         deemed to apply to all assignments, conveyances, transfers and other
         documents conveying any of the Assets from the Vendor to the Purchaser.
         There shall not be any merger of any of such representations or
         warranties in such assignments, conveyances, transfers or other
         documents, notwithstanding any rule of law, equity or statute to the
         contrary, and all such rules are hereby waived.

6.5      No Additional Representations Or Warranties By Vendor

         The Vendor makes no representations or warranties to the Purchaser in
         addition to those expressly enumerated in Clause 6.1. Except and to the
         extent provided in Clause 6.1, the Vendor does not warrant title to the
         Assets or make representations or warranties with respect to: (i) the
         quantity, quality or recoverability of Petroleum Substances respecting
         the Lands; (ii) any estimates of the value of the Assets or the
         revenues applicable to future production from the Lands; (iii) any
         engineering, geological or other interpretations or economic
         evaluations respecting the Assets; (iv) the rates of production of
         Petroleum Substances from the Lands; (v) the quality, condition or
         serviceability of the Assets; or (vi) the suitability of their use for
         any purpose. Without restricting the generality of the foregoing, but
         subject always to Clause 6.3, the Purchaser acknowledges that it has
         made its own independent investigation, analysis, evaluation and
         inspection of the Vendor's interests in the Assets and the state and
         condition thereof and that it has relied solely on such investigation,

<PAGE>   19


                                     - 19 -

         analysis, evaluation and inspection as to its assessment of the
         condition, quantum and value of the Assets.

7.       THIRD PARTY RIGHTS AND CONSENTS

7.1      Preferential Right Of Purchase

         A.       If any of the Assets are subject to a preferential right of
                  purchase or similar restriction, or if the disposition herein
                  requires the consent of any third party, the Vendor shall
                  promptly serve all notices, in a form that is acceptable to
                  Purchaser, as are required under such preferential purchase or
                  consent provision. Unless otherwise agreed by the Purchaser,
                  each such notice shall include a request for a waiver of any
                  preferential or similar right to purchase any of the Assets
                  and for the granting of any consent that may be required.

         B.       The Purchaser shall provide to the Vendor the value placed by
                  the Purchaser, for the purposes of this purchase, on any of
                  the Assets with respect to which the Vendor is required to
                  give notice pursuant to this Clause.

         C.       If the holder of any preferential right to purchase any of the
                  Assets exercises such right, or a third party required to give
                  a necessary consent refuses to give such consent, such right
                  or refusal or consent, as the case may be, shall be considered
                  a Title Defect for the purposes of Subclause 8.2B.

8.       PURCHASER'S REVIEW

8.1      Vendor To Provide Access

         The Vendor shall:

         (a)      provide the Purchaser and its nominees reasonable access to
                  the Vendor's records, files and documents directly relating to
                  the Assets, for the purpose of the Purchaser's review of the
                  Assets and the Vendor's title thereto, including, without
                  limitation, the Leases and applicable operating agreements,
                  unit agreements, overriding royalty agreements and production
                  sale contracts; and

         (b)      provide the Purchaser and its nominees with a reasonable
                  opportunity to inspect the Assets at the Purchaser's sole
                  cost, risk and expense, insofar as the Vendor can reasonably
                  provide such access to the Assets.




<PAGE>   20


                                     - 20 -

8.2      Title Defects

         A.       The Purchaser shall conduct its review of the Vendor's title
                  to the Assets with reasonable diligence. Not later than three
                  (3) days prior to the Closing Date, the Purchaser shall give
                  the Vendor written notice of the Title Defects which the
                  Purchaser does not waive. Such notice shall include a
                  description of each Title Defect and the interests affected
                  thereby, the Purchaser's requirements for the rectification
                  thereof, the value allocated by Purchaser acting reasonably to
                  each affected interest and the amount, in Purchaser's opinion,
                  acting reasonably, by which the value of each affected
                  interest has been reduced by the defect or omission. The
                  Vendor shall thereupon diligently make reasonable efforts to
                  cure such Title Defects not later than one (1) day prior to
                  the Closing Date. Failure to include a defect or omission in a
                  written notice shall be deemed to be a waiver of such defect
                  or omission for the purposes of this Article 8.

         B.       Insofar as the Title Defects described in the Purchaser's
                  notice have not been cured to the Purchaser's reasonable
                  satisfaction, but subject to clause 10.4 with respect to prior
                  third party rights and required consents, the Purchaser may
                  elect at or before the Closing Date by written notice to the
                  Vendor, to do one of the following:

                  (a)      delay the Closing Date to such later date as is
                           agreed between the Parties, so as to provide the
                           Vendor with additional time to cure the remaining
                           Title Defects;

                  (b)      waive such uncured Title Defects and proceed with
                           Closing; or

                  (c)      where the cumulative amount by which the value of the
                           affected interests has been reduced is, in
                           Purchaser's opinion acting reasonably, 5% or more of
                           the Purchase Price, in addition to the elections set
                           out in Subclause 8.2 B(a) and (b), Vendor or
                           Purchaser may terminate this Agreement upon written
                           notice to the other, and the Parties shall have no
                           further obligation to each other hereunder, except
                           for obligations arising pursuant to Article 11.

                  However, failure of the Purchaser to make an election at or
                  before the Closing Date pursuant to Subclause 8.2B shall be
                  deemed to be an election by the Purchaser pursuant to
                  Paragraph (b) of this Subclause.




<PAGE>   21


                                     - 21 -

9.       ARBITRATION

[THIS ARTICLE HAS BEEN INTENTIONALLY DELETED]

10.      CONDITIONS TO CLOSING

10.1     Required Consents

         It is a condition precedent to Closing that any and all approvals
         required under the Regulations and any and all consents of third
         parties required to permit the transactions to be completed shall have
         been obtained or that such approval or consent requirement shall have
         been waived or otherwise lapsed. Each of the Parties shall use all
         reasonable efforts to obtain any such consents. Notwithstanding the
         foregoing, the Parties acknowledge that the consent of buyers under
         production sale agreements may not be obtainable until after Closing
         and that the acquisition of such consents shall not be a condition
         precedent to Closing.

10.2     Conditions For Benefit Of Purchaser

         The obligation of the Purchaser to complete the purchase hereunder is
         subject to the following conditions precedent:

         (a)      No Substantial Damage: The Purchaser shall have been
                  satisfied, acting reasonably that no damage (including
                  environmental damage) to or alteration of any of the Assets
                  shall have occurred between the Effective Date and the Closing
                  Date which, in the Purchaser's reasonable opinion, would
                  materially and adversely affect the value of the Assets;

         (b)      Availability Of Documents: The Vendor shall have provided the
                  nominees of the Purchaser with reasonable access to the
                  Vendor's records and documents pertaining to the Assets
                  pursuant to Article 8., in order to confirm the Vendor's title
                  to the Assets;

         (c)      Material Compliance By Vendor: The Vendor shall have performed
                  or complied in all material respects with each of the terms,
                  covenants and conditions of this Agreement to be performed or
                  complied with by the Vendor at or prior to the Closing Date;

         (d)      Certificate That Representations Are Correct: Each of the
                  covenants, representations and warranties contained in Clause
                  6.1 was, as of the Effective Date, and is, as of the Closing
                  Date, true and correct in all material respects, except for
                  those changes thereto which necessarily arise as a consequence
                  of the operation of the provisions of this Agreement, as
                  specifically provided herein and a certificate of a senior
                  officer of the Vendor, in the form of Schedule "C" dated as of
                  the Closing Date to that effect shall be delivered at Closing;


<PAGE>   22


                                     - 22 -

         (e)      Delivery Of Conveyance Documents: The Vendor shall have
                  delivered to the Purchaser one copy of the General Conveyance
                  described in Paragraph 3.3A(a) executed by the Vendor and
                  those other documents and materials described in Paragraphs
                  3.3 A which are to be provided to the Purchaser at Closing;

         (f)      Title: The Purchaser shall be satisfied on the Closing Date
                  that the Vendor holds the interests in the Assets as described
                  in Schedule "A"; and

         (g)      Regulatory Approval: The Purchaser has obtained all regulatory
                  approvals required in connection with the issuance of the
                  Shares.

10.3     Conditions For Benefit Of Vendor

         The obligation of the Vendor to complete the sale hereunder is subject
         to the following conditions precedent:

         (a)      Material Compliance By Purchaser: The Purchaser shall have
                  performed or complied in all material respects with each of
                  the terms, covenants and conditions of this Agreement to be
                  performed or complied with by the Purchaser at or prior to the
                  Closing Date;

         (b)      Payment Of Purchase Price: The Purchaser shall have tendered
                  to the Vendor the Purchase Price and the applicable goods and
                  services tax in the manner provided for in Clauses 2.3 and
                  2.4, subject to any adjustments provided for in Article 4. and
                  any alteration expressly provided for herein;

         (c)      Certificate That Representations Are Correct: Each of the
                  covenants, representations and warranties contained in Clause
                  6.2 was, as of the Effective Date, and is, as of the Closing
                  Date, true and correct in all material respects; and a
                  certificate of a senior officer of the Purchaser, in the form
                  of Schedule "C" dated as of the Closing Date to that effect
                  shall be delivered at Closing; and

         (d)      Delivery Of Documents: The Purchaser shall have executed and
                  delivered to the Vendor one copy of the General Conveyance
                  described in Paragraph 3.3B(b) and those other documents which
                  are to be provided by the Purchaser pursuant to Paragraph 3.3
                  B at Closing.

10.4     Waiver Of Conditions

         The conditions in Clauses 10.2 and 10.3 are for the sole benefit of the
         Purchaser and the Vendor respectively. The Party for the benefit of
         which such conditions have been included may waive any of them, in
         whole or in part, by written notice to the other Party, without
         prejudice to any of the rights of the Party waiving such condition,
         including, without limitation, reliance on or enforcement of the
         representations, warranties or covenants which


<PAGE>   23


                                     - 23 -

         are preserved and pertain to conditions similar to the condition so
         waived. However, the Purchaser may not waive the existence and
         operation of any preferential right of a third party to purchase any of
         the Assets or, without the concurrence of the Vendor, any required
         consent of a third party to the Vendor's disposition of any of the
         Assets.

10.5     Failure To Satisfy Conditions

         In the event any of the conditions in Clauses 10.2 or 10.3 has not been
         satisfied at or before the Closing Date (or, in respect of the
         condition in Subclause 10.2(a), by no later than ten (10) days prior to
         the Closing Date) and such condition has not been waived by the Party
         for the benefit of which such condition has been included, such Party
         may terminate this Agreement by written notice to the other Party.
         However, a Party may not terminate this Agreement in such manner after
         Closing, and its remedies thereafter, if any, with respect to the
         failure to satisfy such condition shall be limited to damages.

10.6     Parties To Exercise Diligence With Respect To Conditions

         Each Party shall proceed diligently, honestly and in good faith and use
         all reasonable efforts with respect to all matters within its control
         to satisfy the conditions referred to in Clauses 10.1, 10.2 and 10.3.

11.      CONFIDENTIALITY

11.1     Purchaser's Obligation To Maintain Information Confidential

         Information respecting the Assets shall be retained in confidence and
         used only for the purposes of this acquisition and shall not be
         disclosed, used, dealt with or exploited by Purchaser for any other
         purpose, provided that upon Closing, the Purchaser's rights to use or
         disclose such information shall be subject only to any operating, unit
         or other agreements that may apply thereto. Any additional information
         obtained as a result of such access which does not relate to the Assets
         shall continue to be treated as confidential and shall not be
         disclosed, used, dealt with or exploited by the Purchaser without the
         prior written consent of the Vendor. However, the restrictions on
         disclosure and use of information in this Agreement shall not apply to
         information to the extent it:

         (a)      is or becomes publicly available through no act or omission of
                  the Purchaser or its consultants or advisors;

         (b)      is subsequently obtained lawfully from a third party, which,
                  after reasonable inquiry, the Purchaser does not know to be
                  bound to the Vendor to restrict the use or disclosure of such
                  information; or

         (c)      is already in the Purchaser's possession at the time of
                  disclosure, without restriction on disclosure.


<PAGE>   24


                                     - 24 -

         However, specific items of information shall not be considered to be in
         the public domain merely because more general information respecting
         the Assets is in the public domain.

11.2     Consultants And Advisors Bound

         If the Purchaser employs consultants, advisors or agents to assist in
         its review of the Assets pursuant to Article 8, the Purchaser shall be
         responsible to the Vendor for ensuring that such consultants, advisors
         and agents comply with the restrictions on the use and disclosure of
         information set forth in Clause 11.1.

12.      DEFAULT

12.1     Remedies Of Injured Party

         If a Party (hereinafter referred to as "the Defaulting Party") fails to
         comply with any of the terms and conditions of this Agreement such that
         Closing does not occur, the other Party (hereinafter referred to as
         "the Injured Party") may, by notice to the Defaulting Party, elect to:

         (a)      treat this Agreement as terminated by reason of the
                  non-fulfilment of the Defaulting Party's obligations and, if
                  the Injured Party so decides, pursue a claim for damages
                  which, in the event that the Injured Party is the Vendor,
                  shall be limited to the Deposit; or

         (b)      continue to treat the Agreement as binding and enforceable,
                  pending resolution of the default by agreement of the Parties
                  or by a court of competent jurisdiction.

         However, the Injured Party shall be deemed to be treating the Agreement
         as binding and enforceable, unless and until it specifically elects in
         writing to pursue the alternative in Paragraph (a) of this Clause.

12.2     Interest Accrues On Amounts Owing

         Any amount owing to a Party by the other Party pursuant to any
         provision of this Agreement after Closing and remaining unpaid shall
         bear compound interest, as computed monthly, from the day such amount
         was due to be paid until the day such amount was paid, at the rate of
         one (1%) percent per annum above the rate designated as the prime rate
         for Canadian dollar commercial loans by the main branch in Calgary of
         the Alberta Treasury Branches, regardless of whether such Party has
         given the other Party prior notice of the accrual of interest
         hereunder.




<PAGE>   25


                                     - 25 -

13.      LIABILITY AND INDEMNIFICATION

13.1     Responsibility Of Vendor

         Subject to Clause 13.4 and provided that Closing has occurred, the
         Vendor shall:

         (a)      be liable to the Purchaser for all losses, costs, damages and
                  expenses whatsoever which the Purchaser may suffer, sustain,
                  pay or incur; and

         (b)      indemnify and save the Purchaser and its directors, officers,
                  servants, agents and employees harmless from and against all
                  claims, liabilities, actions, proceedings, demands, losses,
                  costs, damages and expenses whatsoever which may be brought
                  against or suffered by the Purchaser, its directors, officers,
                  servants, agents or employees or which they may sustain, pay
                  or incur;

         as a direct result of any matter or thing arising out of, resulting
         from, attributable to or connected with the Assets and occurring or
         accruing prior to the Effective Date, except any losses, costs,
         damages, expenses, claims, liabilities, actions, proceedings and
         demands to the extent that the same either are reimbursable by
         insurance maintained by the Purchaser or are caused by the gross
         negligence or wilful misconduct of the Purchaser, its directors,
         officers, servants, agents, employees or assigns. The indemnity granted
         by the Vendor herein, however, is not a title warranty and does not
         provide either an extension of any representation or warranty contained
         in Clause 6.1 or an additional remedy with respect to the Vendor's
         breach of such a representation or warranty. Notwithstanding any
         provision herein, the liability of the Vendor and the indemnity hereby
         granted by the Vendor to the Purchaser shall only apply with respect to
         claims made within one (1) year following the Closing Date.

13.2     Responsibility Of Purchaser

         Provided that Closing has occurred, the Purchaser shall:

         (a)      be liable to the Vendor for all losses, costs, damages and
                  expenses whatsoever which the Vendor may suffer, sustain, pay
                  or incur; and

         (b)      indemnify and save the Vendor and its directors, officers,
                  servants, agents and employees harmless from and against all
                  claims, liabilities, actions, proceedings, demands, losses,
                  costs, damages and expenses whatsoever which may be brought
                  against or suffered by the Vendor, its directors, officers,
                  servants, agents or employees or which they may sustain, pay
                  or incur;

         as a direct result of any matter or thing arising out of, resulting
         from, attributable to or connected with the Assets and occurring or
         accruing subsequent to the Effective Date, except any losses, costs,
         damages, expense, claims, liabilities, actions, proceedings and demands
         to the extent that the same either are reimbursed (or reimbursable) by
         insurance maintained by the Vendor or are caused by the gross
         negligence or wilful misconduct of

<PAGE>   26


                                     - 26 -

         the Vendor, its directors, officers, servants, agents, employees or
         assigns. The responsibility prescribed by this Clause, however, does
         not provide either an extension of any representation or warranty
         contained in Clause 6.2 or an additional remedy for the Purchaser's
         breach of such a representation or warranty.

13.3     Assets Acquired On "As Is" Basis

         Notwithstanding the foregoing provisions of this Article, the Purchaser
         acknowledges that it is acquiring the Assets on an "as is" basis, as of
         the Effective Date. The Purchaser acknowledges that it is familiar with
         the condition of the Assets, including the past and present use of the
         Lands and the Tangibles, that the Vendor has provided the Purchaser
         with a reasonable opportunity to inspect the Assets at the sole cost,
         risk and expense of the Purchaser (insofar as the Vendor could
         reasonably provide such access) and that the Purchaser is not relying
         upon any representation or warranty of the Vendor as to the condition,
         environmental or otherwise, of the Assets, except as is specifically
         made pursuant to Clause 6.1. Provided that Closing has occurred, the
         Purchaser further agrees that, as of the Effective Date, it shall:

         (a)      be solely liable and responsible for any and all losses,
                  costs, damages and expenses which the Vendor may suffer,
                  sustain, pay or incur; and

         (b)      indemnify and save the Vendor and its directors, officers,
                  servants, agents and employees harmless from any and all
                  claims, liabilities, actions, proceedings, demands, losses,
                  costs, damages and expenses whatsoever which may be brought
                  against or suffered by the Vendor, its directors, officers,
                  servants, agents or employees or which they may sustain, pay
                  or incur;

         as a direct result of any matter or thing arising out of, resulting
         from, attributable to or connected with acts or omissions pertaining to
         environmental damage or contamination or other environmental problems
         pertaining to the Assets, however or by whomever the same occurred,
         whether such claims, demands, losses, costs, risks or expenses arose
         prior or subsequent to the Effective Date including any matters
         relating to:

         (a)      surface, underground, air, groundwater or surface
                  contamination,

         (b)      the abandonment or plugging of any Wells,

         (c)      the restoration or reclamation of any part of the Assets,

         (d)      the breach of applicable government rules and regulations, as
                  the same relate to the environment, in effect at any time, or

         (e)      the removal of or failure to remove any foundations, structure
                  or equipment from the Lands

         Once Closing has occurred, the Purchaser shall be solely responsible
         for all of the foregoing environmental liabilities respecting the
         Lands, the abandonment of all wells on the Lands and

<PAGE>   27


                                     - 27 -

         the reclamation of the Lands as between the Vendor and the Purchaser,
         and hereby releases the Vendor from any claims the Purchaser may have
         against the Vendor with respect to all such liabilities and
         responsibilities, except for any claims which the Purchaser may have
         for fraud or the breach of a representation or warranty made by the
         Vendor pursuant to Clause 6.1.

13.5     No Merger Of Legal Responsibilities

         The liabilities and indemnities created in this Article shall be deemed
         to apply to, and shall not merge in, all assignments, transfers,
         conveyances, novations, trust agreements and other documents conveying
         any of the Assets from the Vendor to the Purchaser, notwithstanding the
         terms of such assignments, transfers, conveyances, novations and other
         documents, the Regulations or any rule of law or equity to the
         contrary, and all such rules are hereby waived.

13.6     Substitution And Subrogation

         Insofar as is possible, each Party shall have full rights of
         substitution and subrogation in and to all covenants, representations
         and warranties by others previously given or made in respect of the
         Assets or any of them.

13.7     Responsibility Extends To Legal Costs

         Notwithstanding any provision to the contrary contained in this
         Article, references to costs in the liability and indemnification
         obligations prescribed by Clauses 13.1, 13.2 and 13.3 shall be deemed
         to include reasonable legal costs on a solicitor-client basis.

14.      WAIVER

14.1     Waiver Must Be In Writing

         No waiver by any Party of any breach (whether actual or anticipated) of
         any of the terms, conditions, representations or warranties contained
         herein shall take effect or be binding upon that Party unless the
         waiver is expressed in writing under the authority of that Party. Any
         waiver so given shall extend only to the particular breach so waived
         and shall not limit or affect any rights with respect to any other or
         future breach.

15.      ASSIGNMENT

15.1     Assignments Before Closing

         Prior to Closing, neither Party may assign its interest in or under
         this Agreement or to the Assets without the prior written consent of
         the other Party, except as may be required by the Vendor to comply with
         its obligations respecting any preferential rights, as provided in
         Article 7.


<PAGE>   28


                                     - 28 -

15.2     Assignments By Purchaser After Closing

         No assignment, transfer or other disposition of this Agreement or all
         or any portion of the Assets by the Purchaser after Closing shall
         relieve the Purchaser from its obligations to the Vendor herein. The
         Vendor shall have the option to claim payment or performance of such
         obligations from the Purchaser or the assignee or transferee, and to
         bring proceedings in the event of default against either or all of
         them, provided that nothing herein shall entitle the Vendor to receive
         duplicate payment or performance of the same obligation.

16.      NOTICE

16.1     Service Of Notice

         Notwithstanding anything to the contrary contained herein, all notices
         required or permitted hereunder shall be in writing. Any notice to be
         given hereunder shall be deemed to be served properly if served in any
         of the following modes:

         (a)      personally, by delivering the notice to the Party on which it
                  is to be served at that Party's address for service.
                  Personally served notices shall be deemed to be received by
                  the addressee when actually delivered as aforesaid, provided
                  that such delivery shall be during normal business hours on
                  any day other than a Saturday, Sunday or statutory holiday in
                  Alberta. If a notice is not delivered on such a day or is
                  delivered after the addressee's normal business hours, such
                  notice shall be deemed to have been received by such Party at
                  the commencement of the addressee's first business day next
                  following the time of the delivery;

         (b)      by telecopier or telex (or by any other like method by which a
                  written message may be sent) directed to the Party on which it
                  is to be served at that Party's address for service. A notice
                  so served shall be deemed to be received by the addressee when
                  actually received by it, if received within normal business
                  hours on any day other than a Saturday, Sunday or statutory
                  holiday in Alberta or at the commencement of the next ensuing
                  business day following transmission if such notice is not
                  received during such normal business hours; or

         (c)      by mailing it first class (air mail if to or from a location
                  outside of Canada) registered post, postage prepaid, directed
                  to the Party on which it is to be served at that Party's
                  address for service. Notices so served shall be deemed to be
                  received by the addressee at noon, local time, on the earlier
                  of the actual date of receipt or the fourth (4th) day
                  (excluding Saturdays, Sundays and statutory holidays in
                  Alberta) following the mailing thereof. However, if postal
                  service is (or is reasonably anticipated to be) interrupted or
                  operating with unusual delay, notice shall not be served by
                  such means during such interruption or period of delay.


<PAGE>   29


                                     - 29 -

16.2     Addresses For Notices

         The address for service of notices hereunder of each of the Parties
         shall be as follows:

                  VENDOR:                     STRAIT ARROW HOLDINGS LTD.
                                              19 Woodside Road
                                              Airdrie, Alberta

                                              Telephone:  (403) 948-2969

                  PURCHASER:                  GEOCAN ENERGY INC.
                                              Suite 800, 717 7th Avenue S.W.
                                              Calgary, Alberta  T2P 0Z3

                                              ATTENTION: President
                                              Telephone : (403) 261-3835
                                              FAX : (403) 261-3834

16.3     Right To Change Address

         A Party may change its address for service by notice to the other
         Party, and such changed address for service thereafter shall be
         effective for all purposes of this Agreement.

17.      PUBLIC ANNOUNCEMENTS

17.1     Approval Required for Press Releases

         A.       The Parties shall cooperate with each other in relaying to
                  third parties information concerning this Agreement and shall
                  receive written approval from the other Party of all press
                  releases and other releases of information prior to
                  publication which approval may not be unreasonably withheld.
                  However, nothing in this Clause shall prevent a Party from
                  furnishing any information to any governmental agency or
                  regulatory authority or to the public, insofar only as is
                  required by the Regulations or securities laws applicable to
                  such Party, provided that a Party which proposes to make such
                  a public disclosure shall, to the extent reasonably possible,
                  provide the other Party with a draft of such statement a
                  sufficient time prior to its release to enable such other
                  Party to review such draft and advise that Party of any
                  comments it may have with respect thereto.

         B.       Notwithstanding Subclause 17.1A, the Vendor shall be permitted
                  to disclose information pertaining to this Agreement and the
                  identity of the Purchaser, to the extent required to enable
                  the Vendor to fulfil its obligations pertaining to
                  preferential rights of purchase and other third party rights,
                  in accordance with Article 7.


<PAGE>   30


                                     - 30 -

17.2     Signs And Notification To Governmental Agencies

         Following Closing, the Vendor may remove any signs which indicate the
         Vendor's ownership or operation of the Assets. If the Purchaser will be
         the operator of the Assets, it shall be the responsibility of the
         Purchaser to erect or install any signs required by governmental
         agencies which pertain to the Assets. In addition, the Purchaser shall
         be responsible for advising governmental agencies, contractors,
         suppliers and other affected third parties of the Purchaser's interest
         in the Assets, subject to Article 7 and Clause 10.1.

18.      MISCELLANEOUS PROVISIONS

18.1     Further Assurances

         At the Closing Date and thereafter as may be necessary, the Parties
         shall execute, acknowledge and deliver such instruments and take such
         other actions as may be reasonably necessary to fulfil their respective
         obligations under this Agreement. The Vendor shall cooperate with the
         Purchaser as reasonably required to secure execution by third parties
         of the documents referred to in Paragraphs 3.3A (b) and (c).

18.2     Governing Law

         This Agreement shall be subject to and be interpreted, construed and
         enforced in accordance with the laws in effect in the Province of
         Alberta. Each Party accepts the jurisdiction of the courts of the
         Province of Alberta and all courts of appeal therefrom.

18.3     Time

         Time shall be of the essence in this Agreement

18.4     No Amendment Except In Writing

         Subject to Clause 16.3, this Agreement may be amended only by written
         instrument executed by the Vendor and the Purchaser.

18.5     Consequences Of Termination

         If this Agreement is terminated in accordance with its terms prior to
         Closing, then except for the provisions of Articles 11 and 12 and the
         covenants, warranties, representations or other obligations breached
         prior to the time at which such termination occurs, the Parties shall
         be released from all of their obligations under this Agreement. If this
         Agreement is so terminated, the Purchaser shall promptly return to the
         Vendor all materials delivered to the Purchaser by the Vendor
         hereunder, together with all copies of them that may have been made by
         or for the Purchaser.


<PAGE>   31


                                     - 31 -

18.6     Supersedes Earlier Agreements

         This Agreement supersedes all other agreements between the Parties with
         respect to the Assets and expresses the entire agreement of the Parties
         with respect to the transactions contained herein.

18.7     Enurement

         Subject to the provisions of Article 15, this Agreement shall be
         binding upon and enure to the benefit of the Parties and their
         respective successors and permitted assigns.

IN WITNESS WHEREOF the Parties have duly executed this Agreement.

STRAIT ARROW HOLDINGS LTD.                   GEOCAN ENERGY INC.


Per:                                         Per:
     ----------------------------------          -------------------------------


Per:                                         Per:
     ----------------------------------          -------------------------------



<PAGE>   32




                           THIS IS SCHEDULE "A" TO AN AGREEMENT OF
                           PURCHASE AND SALE DATED JANUARY 12, 2000
                           BETWEEN STRAIT ARROW HOLDINGS LTD., AS
                           VENDOR, AND GEOCAN ENERGY INC., AS
                           PURCHASER

                                  LAND SCHEDULE

<TABLE>
<CAPTION>

                                                                  WORKING
                                                                 INTEREST/
                                                                  ROYALTY
          LANDS:                  P & NG RIGHTS:                 INTEREST:                ENCUMBRANCES:             HECTARES:
          ------                  --------------                 ---------                -------------             ---------
<S>                         <C>                               <C>                     <C>                           <C>

007-08W2M;  N1/2            Freehold P & NG Lease dated       24.75% W.I. for         12.5% LOR plus S/S GOR              128
Sec 7                       Sept 17, 1968 (50% in all P&NG    NW 7                    of 1/150 (2.5%-7.5%) on
                            for NW) (50% in NE7)              12.375% W.I. for NE     50% production from NW7
                                                                                      payable to Canadian
                                                                                      Occidental Ltd.



007-08W2M;    NW            Freehold P & NG Lease dated             24.75% W.I.       12.5% LOR to Crown on                64
Sec 7                       March 1, 1972, Crown acquired                             50% production plus S/S
                            (50% undivided interest to 2770                           GOR of 1/150 (5-15%)
                            ft. below mean sea level)                                 payable to Talisman Energy
                                                                                      based on 50% production

007-08W2M;    NW            Freehold P & NG Lease dated             24.75% W.I.       12.5% LOR plus S/S GOR               64
Sec 7                       March 1, 1972 (50% undivided                              of 1/150 (5-15%) payable to
                            interest below 2770 ft. below                             Talisman Energy based on
                            mean sea level)                                           50% production

007-08W2M;    NW            P&NG to Base Souris Valley              24.75% W.I.                 Crown SS                   64
Sec 18                      Beds Crown Lease No. PN
                            22,784 (Frobisher-Alida)

007-08W2M;    NW            12.5% GOR 1/150 (5-15%)                 24.75% GOR                                             64
Sec 18

007-08W2M; LSD 4            P&NG to Base Souris Valley              24.75% W.I.                 Crown SS
Sec 18                      Beds Crown Lease No. PN
                                         12,439

007-08W2M; LSD's            12.5% GOR 1/150 (5-15%)                 24.75% GOR                                             64
4 & 6 SW Sec 18

007-08W2M; LSD's            P&NG to Base Souris Valley              24.75% W.I.                 Crown SS
3, 5 & 6 Sec 18             Beds Crown Lease No. PN
                                         12,439

007-09W2M; LSD 10           All P & NG Crown Lease No. PN           24.75% W.I.       Crown SS plus S/S GOR of             64
Sec 12                                    9018                                        1/150 (5-15%) on 50%
                                                                                      production payable to
                                                                                      Franco Nevada

007-09W2M; LSD 10           Non-convertible 5% GOR                    24.75%                                               64
Sec 12

007-09W2M; LSD 9            All P & NG Crown Lease No. PN           24.75 W.I.        Crown SS plus S/S GOR of             64
15 & 16 Sec 12                            9018                                        1/150 (5-15%) on 50%
                                                                                      production payable to
                                                                                      Franco Nevada

007-09W2M; LSD's            All P & NG Crown Lease No. PN           24.75% W.I.       Crown SS                             64
3 & 4, Sec 12                            12,533

007-09W2M; SE Sec           Freehold P & NG Lease dated             24.75% W.I.       12.5% LOR                            64
13                          Jan 12, 1963
</TABLE>





<PAGE>   33


                                      - 2 -

<TABLE>
<CAPTION>

WELLS:                                                                       WORKING INTEREST (%)
-----
<S>                                                                          <C>
155725 et al Huntoon 41/13-7-007-087W2/0                                             24.75
Tappit Huntoon 01/04-18-007-08W2/0                                                   24.75
155725 et al Huntoon 01/05-18-007-08W2/0                                             24.75
Tappit Huntoon 2HZ 4D9-13-4B6-1891/06-18-007-08W2/0                                  24.75
155725 et al Huntoon 31/09-12-007-09W2/0                                             24.75
Tappit Huntoon 01/10-12-007-09W2/0                                                   24.75
Hamoll Ensign Teck Benson 01/11-12-007-09/02                                         24.75
155725 et al Huntoon 11/01-13-007-09W2/0                                             24.75
155725 et al Huntoon 01/03-12-007-09W2/0                                             24.75

FACILITIES:

11-12-007-09W2M battery and water injection facility                                 24.75
</TABLE>






<PAGE>   34


                                      - 1 -

                  THIS IS SCHEDULE "B" TO AN AGREEMENT OF PURCHASE AND SALE
                  DATED JANUARY 12, 2000 BETWEEN STRAIT ARROW HOLDINGS
                  LTD., AS VENDOR, AND GEOCAN ENERGY INC., AS PURCHASER

                               GENERAL CONVEYANCE

This Conveyance made this ____________ day of ______________________ , 19____.


BETWEEN:

         STRAIT ARROW HOLDINGS LTD., a body corporate, having an office in the
         City of Calgary, in the Province of Alberta (hereinafter called the
         "Vendor")

                                     - and -

         GEOCAN ENERGY INC., a body corporate, having an office in the City of
         Calgary, in the Province of Alberta (hereinafter called the
         "Purchaser")


         WHEREAS the Vendor has agreed to sell and convey the Vendor's entire
right, title, estate and interest in the Assets to the Purchaser and the
Purchaser has agreed to purchase and accept all of the Vendor's right, title,
estate and interest in and to the Assets;

         THE PARTIES AGREE AS FOLLOWS:

1.       Definitions

         In this Conveyance, including the recitals, "Agreement" means the
         Agreement of Purchase and Sale dated the 12th day of January, 2000
         between the Vendor and the Purchaser. In addition, the definitions
         provided for in the Agreement are adopted in this Conveyance.

2.       Conveyance

         The Vendor, for the consideration provided for in the Agreement, the
         receipt and sufficiency of which is acknowledged by the Vendor, sells,
         assigns, transfers and conveys the Vendor's entire right, title, estate
         and interest in the Assets to the Purchaser, and the Purchaser
         purchases and accepts such interests from the Vendor, TO HAVE AND TO
         HOLD the same absolutely, subject to the terms of the Agreement, the
         Permitted Encumbrances and compliance with the terms of the Leases.

3.       Effective Time

         This Conveyance is effective as of the Effective Date.

4.       Subordinate Document




<PAGE>   35


                                      - 2 -

         This Conveyance is executed and delivered by the Parties pursuant to
         the Agreement for the purposes of the provisions of the Agreement, and
         the terms hereof shall be read in conjunction with the terms of the
         Agreement. The Agreement shall prevail if there is a conflict between
         the provisions of the Agreement and this Conveyance.

5.       Enurement

         This Conveyance enures to the benefit of and is binding upon the
         Parties and their respective successors and permitted assigns.

6.       Further Assurances

         Each Party shall, after the date of this Conveyance, at the request of
         the other Party and without further consideration, do all further acts
         and execute and deliver all further documents which are reasonably
         required to perform and carry out the terms of this Conveyance.

IN WITNESS WHEREOF the Parties have duly executed this Conveyance.


STRAIT ARROW HOLDINGS LTD.                   GEOCAN ENERGY INC.


Per:                                         Per:
     ----------------------------------          -------------------------------


Per:                                         Per:
     ----------------------------------          -------------------------------



<PAGE>   36

                  THIS IS SCHEDULE "C" TO AN AGREEMENT OF PURCHASE AND SALE
                  DATED JANUARY 12, 2000 BETWEEN STRAIT ARROW HOLDINGS
                  LTD., AS VENDOR, AND GEOCAN ENERGY INC., AS PURCHASER


                  (VENDOR'S/PURCHASER'S) OFFICER'S CERTIFICATE

(REPRESENTATIONS ARE TRUE)

RE: Article 6 of the Agreement of Purchase and Sale ("Agreement") dated January
12, 2000 between STRAIT ARROW HOLDINGS LTD. , as Vendor, and GEOCAN ENERGY INC.,
as Purchaser.

         Unless otherwise stated, the definitions provided for in the Agreement
are adopted in this Certificate.

         I, (name), (position) of (name of party) ("the Vendor" or "the
Purchaser") hereby certify that as of the date of this Certificate:

         1. Each of the covenants, representations and warranties of the
(Vendor/Purchaser) contained in Article 6 of the Agreement was true and correct
in all material respects as of the Effective Date and is true and correct in all
material respects as of the Closing Date.

         2. This Certificate is made for and on behalf of the (Vendor/Purchaser)
and is binding upon it, and I am not incurring and will not incur any personal
liability whatsoever with respect to it.

         3. This Certificate is made with full knowledge that the
(Vendor/Purchaser) is relying on the same for the Closing of the transactions
contemplated by the Agreement.


IN WITNESS WHEREOF I have executed this Certificate effective the day of
January, 2000.





                                                 -------------------------------
                                                 (NAME OF VENDOR/PURCHASER)