FORM 20-F<R>/A</R>

US SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12 (b) OR
(g)OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THESECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OFTHE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 000-30766

NETCO ENERGY INC.(Exact name of Registrant as specified
in its charter)

Not Applicable(Translation of Registrant's Name into
English)

Alberta, Canada(Jurisdiction of incorporation or
organization)

1320 - 925 West Georgia StreetVancouver, British Columbia,
Canada V6C 1G8

(Address of principal executive offices)



Securities registered or to be registered pursuant to Section
12(b) of the Act:

NoneTitle of Class

NoneName of Each Exchange on Which Registered

Securities registered or to be registered pursuant to Section
12(g) of the Act:

Common Shares Without Par Value(Title of Class)

Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act:

NoneTitle of Class

Indicate the number of outstanding shares of each of the Issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.

There were 6,461,829 common shares, without par value, issued and outstanding
as of May 27, 2003.

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [ X ] NO [ ]

Indicate by check mark which financial statement item the Registrant has
elected to follow.

ITEM 17 [ ] ITEM 18 [X]



TABLE OF CONTENTS

Item / Page Number

PART 1

Item 1 Identity of Directors, Senior Management and Advisers /
not applicable

Item 2 Offer Statistics and Expected Timetable / not
applicable

Item 3 Key Information / page 1

Item 4 Information on Netco Energy Inc. / page 10

Item 5 Operating and Financial Review and Prospects / page
18

Item 6 Directors, Senior Management and Employees / page 21

Item 7 Major Shareholders and Related Party Transactions / page 26

Item 8 Financial Information / page 27

Item 9 The Offer and Listing / page 28

Item 10 Additional Information / page 30

Item 11 Quantitative and Qualitative Disclosures About Market Risk / page
45

Item 12 Description of Securities Other than Equity Securities / page
45

PART II

Item 13 Defaults, Dividend Arrearages and Delinquencies / not applicable

Item 14 Material Modifications to the Rights of Security Holders and Use of
Proceeds / not applicable

Item 15 Controls and Procedures / page 45

Item 16 (Reserved) (Reserved)

PART III

Item 17 Financial Statements / page 46

Item 18 Financial Statements / page 46

Item 19 Exhibits / page 59

SIGNATURES / page 61





ABBREVIATIONS

bbls - barrelsmbbls - thousand barrelsmmbbls - millions
barrelsbopd - barrels per dayboe - barrels of oil equivalentboepd -
barrels of oil equivalent per daymcf - thousand cubic feetmmcf - million
cubic feetbcf - billion cubic feetmmcf/d - million cubic feet per
daymmbtu - million British Thermal Unitsngls - natural gas
liquids



CONVERSION TABLE

|To Convert From                                     | To                                                                   | Multiply By                          
|--------------------------------------------------- | -------------------------------------------------------------------- | -------------------------------------
|McfCubic
      metresFeetMetresMilesKilometresAcres | Cubic metres ("m3")Cubic
      feetMetresFeetKilometresMilesHectares | 28.17435.4940.3053.2811.6090.6210.405

PART I

FORWARD-LOOKING STATEMENTS

This Form 20-F Annual Report contains forward-looking
statements as that term is defined in the Private Securities Litigation Reform
Act of 1995. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "may", "will", "should", "expects", "plans", "anticipates",
"believes", "estimates", "predicts", "potential" or "continue" or the negative
of these terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled "Risk Factors", that may
cause our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

As used in this prospectus, the terms "we", "us", "our", and
"Netco" mean Netco Energy Inc. and Netco's subsidiary, unless otherwise
indicated.

ITEM 1 Identity of Directors, Senior Management and
Advisers

Not applicable.

ITEM 2 Offer Statistics and Expected Timetable

Not applicable.

ITEM 3 Key Information

A. Selected Financial Data

The selected financial data presented below for the five year
period ended December 31, 2002 is derived from our consolidated financial
statements which were examined by our independent auditor. The information set
forth below should be read in conjunction with our consolidated financial
statements (including related notes thereto) and "Operating and Financial Review
and Prospects" (Item 5). The data is presented in Canadian dollars and in
accordance with Canadian generally accepted accounting principles.



Selected Financial Data

(Stated in Canadian Dollars)

Fiscal Year Ended December 31 (Audited)



|CANADIAN GAAP                                                        | 2002      | 2001      | 2000      | 1999      | 1998         
|-------------------------------------------------------------------- | --------- | --------- | --------- | --------- | -------------
|Net Sales or Operating Revenue                                       | 1,281,645 | 604,160   | 592,072   | 302,478   | 293,881      
|Direct Costs                                                         |           |           | 137,198   | 74,407    | 100,861      
|Administrative Expenses                                              | 201,245   | 266,808   | 250,267   | 196,667   | 262,932      
|Amortization and Asset Write-down                                    | 311,000   | 37,181    | 150,419   | 24,352    | 9,041,763    
|Income (Loss) From Operations                                        | 878,125   | 192,826   | 81,047    | 1,203,227 | (9,099,800)  
|Net Income (Loss) from Continuing Operations                         | 878,125   | 192,826   | 81,047    | 1,203,227 | (9,099,800)  
|Net Income (Loss) for the year                                       | 878,125   | 192,826   | 81,047    | 1,203,227 | (9,099,800)  
|Net Income (Loss) from Operations per Common Share                   | 0.14      | 0.06      | 0.03      | 0.55      | (4.52)       
|Income (Loss) from Continuing Operations per Common Share            | 0.14      | 0.06      | 0.03      | 0.55      | (4.52)       
|Total Assets                                                         | 2,873,267 | 1,737,938 | 1,009,379 | 914,082   | 851,220      
|Net Assets                                                           | 2,752,551 | 1,489,176 | 984,350   | 899,693   | (493,534)    
|Capital Stock                                                        | 9,634,484 | 9,249,234 | 8,937,234 | 8,743,984 | 8,743,984    
|Number of Common Shares(adjusted to reflect changesin
      capital) | 6,461,829 | 4,749,329 | 3,199,329 | 2,186,826 | 2,186,826    
|Diluted Net Income perCommon Share                                   | 0.13      | 0.05      | 0.02      | 0.29      | anti-dilutive
|Long-Term Debt                                                       | Nil       | Nil       | Nil       | Nil       | Nil          
|Cash Dividends per Common Share                                      | Nil       | Nil       | Nil       | Nil       | Nil          





|UNITED STATES GAAP                                                   | 2002      | 2001      | 2000      | 1999      | 1998         
|-------------------------------------------------------------------- | --------- | --------- | --------- | --------- | -------------
|Net Sales or Operating Revenue                                       | 1,281,645 | 604,160   | 592,072   | 302,478   | 293,881      
|Direct Costs                                                         | -         |           | 137,198   | 74,407    | 100,861      
|Administrative Expenses                                              | 201,245   | 266,808   | 250,667   | 196,667   | 262,932      
|Amortization and Asset Write-down                                    | 311,000   | 37,181    | 150,419   | 24,352    | 1,101,152    
|Income (Loss) From Operations                                        | 878,125   | 192,826   | 81,047    | 1,200,647 | (7,685,401)  
|Net Income (Loss) from ContinuingOperations                          | 878,125   | 192,826   | 81,047    | 1,200,647 | (7,685,401)  
|Net Income (Loss) for the year                                       | 878,125   | 192,826   | 81,047    | 1,200,647 | (7,685,401)  
|Net Income (Loss) from Operationsper Common Share                    | 0.14      | 0.06      | 0.03      | 0.55      | (3.82)       
|Income (Loss) from ContinuingOperations per Common
    Share         | 0.14      | 0.06      | 0.03      | 0.55      | (3.82)       
|Total Assets                                                         | 2,873,267 | 1,873,472 | 1,144,913 | 1,049,616 | 2,245,619    
|Net Assets                                                           | 2,752,551 | 1,624,710 | 1,119,884 | 1,035,227 | 920,865      
|Capital Stock                                                        | 9,634,484 | 9,249,234 | 8,937,234 | 8,743,384 | 8,734,984    
|Number of Common Shares(adjusted to reflect changesin
      capital) | 6,461,829 | 4,749,329 | 3,199,329 | 2,186,826 | 2,186,826    
|Diluted Net Income perCommon Share                                   | 0.13      | 0.05      | 0.02      | 0.28      | anti-dilutive
|Long-Term Debt                                                       | Nil       | Nil       | Nil       | Nil       | Nil          
|Cash Dividends per Common Share                                      | Nil       | Nil       | Nil       | Nil       | Nil          

Differences Between Generally Accepted Accounting Principles
(GAAP) in Canada and the United States

The consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles. The following
summarizes the significant adjustments or disclosures which would be required to
present these consolidated financial statements in accordance with U.S.
generally accepted accounting principles.

Earnings (Loss) Per Share

Canadian generally accepted accounting principles require that
basic earnings per share (EPS) be based solely on the common shares actually
issued and outstanding, whereas U.S. generally accepted accounting principles
require the inclusion of "common stock equivalents" in the calculation of
primary EPS when their inclusion would have dilutive effect. Our common stock
equivalents are the unexercised common share stock options and share purchase
warrants. In the current periods, inclusion of such common stock equivalents
would have an anti-dilutive effect on primary EPS and have not, therefore, been
included. Accordingly, there is no difference in the calculations of income and
loss per share presented in the periods covered by these consolidated financial
statements.

A reconciliation to United States Generally Accepted Accounting
Principles is included in Note 11 to the Audited Financial Statements.

Exchange Rate Summary

Since June 1, 1970, the government of Canada has permitted a
floating exchange rate to determine the value of the Canadian dollar as compared
to the United States dollar. On May 27, 2003, the exchange rate in effect for
Canadian dollars exchanged for United States dollars, expressed in terms of
Canadian dollars (based on the noon buying rates in New York City, for cable
transfers in Canadian dollars, as certified for customs purposes by the Federal
Reserve Bank of New York) was $1.3754. For the past five fiscal years ended
December 31 and for the period between December 31, 2002 and May 28, 2003, the
following exchange rates were in effect for Canadian dollars exchanged for
United States dollars, expressed in terms of Canadian dollars (based on the noon
buying rates in New York City, for cable transfers in Canadian dollars, as
certified for customs purposes by the Federal Reserve Bank of New York):

|Year Ended        | Average
|----------------- | -------
|December 31, 1998 | $1.484 
|December 31, 1999 | $1.486 
|December 31, 2000 | $1.4855
|December 31, 2001 | $1.5519
|December 31, 2002 | $1.58  



|Month ended       | Low / High       
|----------------- | -----------------
|December 31, 2002 | $1.5476 / $1.5776
|January 31, 2003  | $1.5184 / $1.5672
|February 28, 2003 | $1.4840 / $1.5292
|March 31, 2003    | $1.4628 / $1.4944
|April 30, 2003    | $1.4334 / $1.4740
|May 31, 2003      | $1.4197 / $1.3507

We have not issued any dividends in the past five fiscal
years.

D. Risk Factors

Much of the information included in this annual report includes
or is based upon estimates, projections or other "forward looking statements".
Such forward looking statements include any projections or estimates made by our
company and our management in connection with our business operations. While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein.

Such estimates, projections or other "forward looking
statements" involve various risks and uncertainties as outline below. We caution
the reader that important factors in some cases have affected and could
materially affect actual results in the future, and cause actual results to
differ materially from the results expressed in any such estimates, projections
or other "forward looking statements". Prospective investors should consider
carefully the risk factors set out below.

We are a company with a limited operating history which makes
it difficult to evaluate whether we will operate profitably.

We have a limited oil and gas operating history and therefore
have a limited history of earnings. We started our oil and gas operations in
August, 1997. In the past, we have incurred substantial net losses. For the year
ended December 31, 2002, we had a cumulative deficit of $6,881,933. Our ability
to generate significant revenues is uncertain. In order for us to make a profit,
our revenues will need to increase significantly.

Fluctuating World Prices

The market prices of oil and natural gas have historically
fluctuated widely and are effected by numerous global factors beyond our
control. A decline in such market prices may have an adverse effect on revenues
we receive from the sale of oil and gas. A decline in prices will also reduce
our exploration efforts and make it more difficult to raise capital.

Uncertainty of Estimates of Reserves

Under applicable regulatory requirements, we are required to
identify and disclose proved oil and gas reserves, estimated quantities of crude
oil, natural gas and natural gas liquids. This geological and engineering data
demonstrates with reasonable certainty the estimated quantities of crude oil,
natural gas and natural gas liquids which will be recoverable in future years
from known reservoirs under existing economic and operating conditions. However,
the process of estimating oil and gas reserves is complex, requiring significant
decisions and assumptions in the evaluation of available geological,
geophysical, engineering and economic data for each reservoir. As a result, such
estimates are inherently imprecise. Actual future production, oil and gas
prices, revenues, taxes, development expenditures, operating expenses and
quantities of recoverable oil and gas reserves may vary substantially from our
estimations from year to year. Any significant variance in the assumptions could
materially affect the estimated quantities and present values of reserves. For
example, a material drop in oil and gas prices, or a material increase in
applicable taxes, will require management to reassess whether known reservoirs
can continue to be reasonably judged as economically productive from one year to
the next. In addition, our reserves may be subject to downward or upward
revisions based upon production history, results of future exploration and
development, prevailing oil and gas prices and other factors, many of which are
beyond our control. Actual production, revenues, taxes, development expenditures
and operating expenses with respect to our reserves will likely vary from our
estimates, and such variances may be material.

Declining Reserves

In general, the volume of production from oil and gas
properties declines as reserves are depleted. The decline rates depend on
reservoir characteristics and vary from steep declines to the relatively slow
declines characteristic of long-lived fields in other regions. Because we do not
intend to acquire further oil and gas properties, our reserves will decline as
reserves are produced.

Environmental Risks

We are subject to laws and regulations that control the
discharge of materials into the environment, require removal and cleanup in
certain circumstances, require the proper handling and disposal of waste
materials or otherwise relate to the protection of the environment. In operating
and owning petroleum interests, we may be liable for damages and the costs of
removing hydrocarbon spills for which we are held responsible. Laws relating to
the protection of the environment have in many jurisdictions become more
stringent in recent years and may, in certain circumstances, impose strict
liability, rendering our company liable for environmental damage without regard
to actual negligence or fault. Such laws and regulations may expose us to
liability for the conduct of, or conditions caused by, others or for acts of our
company. We believe that we have complied in all material respects with
applicable environmental laws and regulations.

We have not obtained title reports and our properties may be
subject to prior unregistered agreements, native land claims or transfers which
have not been recorded or detected, resulting in a possible claim against any
future revenues generated by such properties.

We have not obtained any recent legal opinion as to title of
our assets. As a result, no assurances can be given that title defects do not
exist. If title defects do exist, it is possible that we may lose all or a
portion of our right, title, estate and interest in and to our assets.

Operating Hazards and Drilling Risks

Oil and natural gas exploration operations are subject to all
of the risks and hazards typically associated with such operations, including
fire, explosions, blowouts and oil spills, each of which could result in
substantial damage to oil and natural gas wells, producing facilities, other
property and the environment or personal injury. The nature of these risks is
such that liabilities could exceed insurance policy limits, in which event, our
company could incur significant costs that could have a materially adverse
effect upon our financial condition. Oil and natural gas production operations
are also subject to all the risks typically associated with such operations,
including premature decline of reservoirs and the invasion of water into
producing formations.

Drilling involves numerous risks, including the risk that no
commercially productive oil or gas reservoirs will be encountered. The cost of
drilling and completing wells is often unpredictable, and drilling operations
may be curtailed, delayed or cancelled as a result of a variety of factors,
including unexpected drilling conditions, pressure or irregularities in
formations, equipment failures or accidents, weather conditions and shortages or
delays in delivery of equipment.

Competition in the oil and gas industry is highly
competitive.

The oil and gas industry is highly competitive and we must
compete with many companies who have greater financial strength and technical
resources than we do.

Oil and gas operations are subject to comprehensive regulation
which may cause substantial delays or require capital outlays in excess of those
anticipated causing an adverse effect on our company.

Our oil and gas operations are subject to various Canadian
federal, provincial and local governmental regulations. Matters subject to
regulation include discharge permits for drilling operations, drilling and
abandonment bonds, reports concerning operations, the spacing of wells, and
pooling of properties and taxation. From time to time, regulatory agencies have
imposed price controls and limitations on production by restricting the rate of
flow of oil and gas wells below actual production capacity in order to conserve
supplies of oil and gas. The production, handling, storage, transportation and
disposal of oil and gas, by-products thereof, and other substances and materials
produced or used in connection with oil and gas operations are also subject to
regulation under federal, provincial and local laws and regulations relating
primarily to the protection of human health and the environment. To date,
expenditures related to complying with these laws, and for remediation of
existing environmental contamination, have not been significant in relation to
the results of operations of our company. The requirements imposed by such laws
and regulations are frequently changed and subject to interpretation, and we are
unable to predict the ultimate cost of compliance with these requirements or
their effect on our operations.

The loss of Donald Sharpe would have a materially adverse
effect on our prospects.

We consider our President and CEO, Donald Sharpe, vital to our
continued operations. The loss of the services of Mr. Sharpe, for any reason,
may have a materially adverse effect on our prospects. Furthermore, we do not
maintain "key man" life insurance on the life of Mr. Sharpe. To the extent that
the services of Mr. Sharpe become unavailable, we will be required to retain
other qualified persons; however, there can be no assurance that we will be able
to employ qualified persons upon acceptable terms.

Trading of our stock may be restricted by the SEC's "Penny
Stock" regulations which may limit a stockholder's ability to buy and sell our
stock.

The U.S. Securities and Exchange Commission has adopted
regulations which generally define "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and "accredited investors." The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of, our common stock.

Our directors and officers own a significant amount of stock
and, if they act as a group, will have a significant influence on all matters
requiring shareholder approval which may delay or prevent a change in
control.

As of May 31, 2003, directors and executive officers
beneficially owned approximately 14.6% of our outstanding common shares. As a
group, the directors and officers also have options and/or warrants to purchase
1,001,000 additional shares which if exercised would represent approximately
3.4% of our outstanding common shares. As a result, these shareholders, if they
act as a group, will have a significant influence on all matters requiring
shareholder approval, including the election of directors and approval of
significant corporate transactions. Such control may have the effect of delaying
or preventing a change in control.

Trading in our common shares on the TSX Venture Exchange is
limited and sporadic making it difficult for our shareholders to sell their
shares or liquidate their investments.

The trading price of our shares has been and may continue to be
subject to wide fluctuations. Trading prices of the our shares may fluctuate in
response to a number of factors, many of which are beyond our control. In
addition, the stock market in general, and the market for gas and oil
exploration companies in particular, has experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of such companies. These broad market and industry factors may
adversely affect the market price of our shares, regardless of our operating
performance.

In the past, following periods of volatility in the market
price of a company's securities, securities class-action litigation has often
been instituted. Such litigation, if instituted, could result in substantial
costs and a diversion of management's attention and resources.

Our By-laws contain provisions indemnifying our officers and
directors against all costs, charges and expenses incurred by them.

Our By-laws contain provisions limiting the liability of our
officers and directors for all acts, receipts, neglects or defaults of
themselves and all of our other officers or directors or for any other loss,
damage or expense incurred by our company which shall happen in the execution of
the duties of such officers or directors. Such limitations on liability may
reduce the likelihood of derivative litigation against our officers and
directors and may discourage or deter the our shareholders from suing our
officers and directors based upon breaches of their duties to our company,
though such an action, if successful, might otherwise benefit our company and
our shareholders.

Investors' interests in our company will be diluted and
investors may suffer dilution in their net book value per share if we issue
additional shares or raise funds through the sale of equity securities.

In the event that we are required to issue additional shares or
decide to enter into joint ventures with other parties in order to raise
financing through the sale of equity securities, investors' interests in our
company will be diluted and investors may suffer dilution in their net book
value per share depending on the price at which such securities are sold. There
are also outstanding common share purchase warrants exercisable into 2,500,000
common shares which, if exercised, would represent approximately 27% of our
issued and outstanding shares. If all of these shares are exercised and issued,
such issuance also will cause a reduction in the proportionate ownership and
voting power of all other shareholders. The dilution may result in a decline in
the market price of the our shares.

U.S. investors could suffer adverse tax consequences if we are
characterized as a passive foreign investment company

We may be treated as a passive foreign investment company, or
PFIC, for United States federal income tax purposes during the 2002 tax year or
in subsequent years. We may be deemed a PFIC because previous financings
combined with proceeds of future financings may produce, or be deemed to be held
to produce, passive income. Additionally, U.S. citizens should review the
section entitled "Taxation-U.S. Federal Income Taxation - Passive Foreign
Investment Companies" contained in this Registration Statement for a more
detailed description of the PFIC rules and how those rules may affect their
ownership of our capital shares.

If we are or become a PFIC, many of the U.S. shareholders will
be subject to the following adverse tax consequences:

- they will be taxed at the highest ordinary income tax rates
in effect during their holding period on certain distributions on our capital
shares, and gains from the sale or other disposition of our capital shares;

- they will be required to pay interest on taxes allocable to
prior periods; and

- the tax basis of our capital shares will not be increased to
fair market value at the date of their date.

We do not expect to declare or pay any dividends

We have not declared or paid any dividends on our common stock
since our inception, and we do not anticipate paying any such dividends for the
foreseeable future.

ITEM 4 Information on Netco Energy Inc.

A. History and Development of Netco Energy Inc.

Netco Energy Inc. was incorporated on May 21, 1993 as "567905
Alberta Ltd." pursuant to the Business Corporations Act (Alberta)(the
"ABCA"). We changed our name to "Hilstar Capital Corporation" on September 8,
1993. Pursuant to Articles of Amendment filed on October 5, 1995, we changed our
name to "KINeSYS Pharmaceutical Inc.", and our then issued and outstanding
common shares were consolidated on a three-for-one basis (one new common share
for every three common shares then outstanding). On August 20, 1997, we changed
our name to "Green River Petroleum Inc.", and on July 6, 1999, to "Green River
Holdings Inc.". Also on July 6, 1999, our then issued and outstanding common
shares were consolidated on a one-for-five basis (one new common share for every
five common shares then outstanding). On July 28, 2000, we changed our name to
"Netco Energy Inc.", and our then issued and outstanding common shares were
consolidated on a one-for-two basis (one new common share for every two common
shares then outstanding).

We do not have any subsidiaries. Our previous wholly-owned
subsidiary, Green River Petroleum (USA) Ltd., incorporated under the laws of the
State of Wyoming was dissolved during 2002.

Development of Our Company

Our common shares were listed and posted on the Alberta Stock
Exchange on January 4, 1994 as a junior capital pool corporation under the name
"Hilstar Capital Corporation". As a junior capital pool corporation, our
principal business was to identify and evaluate properties or businesses with a
view to acquisition or participation. The Alberta Stock Exchange was a
predecessor exchange of the Canadian Venture Exchange, which was formed by the
merger of the Alberta and Vancouver Stock Exchanges effective November 26, 1999.
The Canadian Venture Exchange is now the TSX Venture Exchange.

On August 19, 1997, acting through our subsidiary, Green River
Petroleum (USA) Inc., we entered into a Farm-In Agreement with Ultra Resources,
Inc. and Ultra Petroleum (USA) Inc. (together, "Ultra"), both wholly-owned
subsidiaries of Ultra Petroleum Corp., pursuant to which our subsidiary agreed
to pay prospect fees and drill three wells in order to earn a portion of Ultra's
interest in certain petroleum and natural gas assets located in Sublette County,
Wyoming. The Farm-In Agreement was formalized by way of an Exploration
Development Agreement among our subsidiary and Ultra. Pursuant to the Farm-In
Agreement, we agreed to drill three (3) wells and pay various costs and expenses
with respect to certain of Ultra's land holdings in Sublette County, Wyoming to
earn an interest in such leasehold. The Farm-In Agreement covered prospects in
four areas: Warbonnet (406.40 net acres), Lovatt Draw (4,847.9 net acres), Fort
Bonneville (7,239.3 net acres) and Merna (9,920 net acres). Ultra was to be the
initial operator in all four areas.

Pursuant to a letter agreement dated October 31, 1997 with
Ultra Petroleum (USA) Inc., William Charles Helton, Barbara Mary Helton and
Enterprise Exploration and Production Co., Inc., our company, acting through our
subsidiary, acquired a 17.75% working interest and a 13.274211% net revenue
interest in certain petroleum and natural gas assets covering 430.808 gross
acres in the Bon Air Field, Jefferson Davis Parish, Louisiana, USA. The
transaction closed on January 16, 1998, with an effective date of July 1, 1997.
The assets on the Louisiana property include one producing gas well, the Mildred
Landry MT#1 well.

Pursuant to a letter agreement dated April 27, 1998, acting
through our subsidiary, we acquired a non-convertible 0.5% gross overriding
royalty interest in certain petroleum and natural gas leases known as the Corona
Property, located in Sublette County, Wyoming. Our subsidiary received 0.5% of
the gross revenues from any production on the leases and is only responsible for
its 0.5% share of the costs incurred after the production reaches the sales
point.

None of the wells drilled in Wyoming pursuant to our agreements
with Ultra achieved commercial production. As a result of the drilling and
completion of operations of the three wells, we were indebted to Ultra
Resources, Inc. in the amount of US$830,942 as of April 30, 1999. As a result of
negotiations between Ultra and our company, the parties entered into an
agreement dated August 5, 1999, pursuant to which the debt owing to Ultra was
settled by payment to Ultra of US$35,000, and our relinquishment of all of the
interests that we had earned under the Farm-In Agreement, except for an interest
equal to 20% of Ultra's interest in approximately 10,000 acres in one area
called the Lovatt Draw. The interest retained by our company amounted to a 17%
working interest in certain leases in the Lovatt Draw, excluding the 40-acre
spacing unit where Ultra's Lovatt Draw well is located. As a working interest
owner in the Lovatt Draw leases, we had the right, but not the obligation, to
participate in any further exploration programs that might be proposed, as well
as the obligation to pay our proportionate share of the annual rentals of
between US$1.00 and US$2.00 per acre.

Our Business

Our principal business has been the exploration, development
and production of oil and natural gas reserves. Our main focus had been on our
assets located in the Bon Air Field, Jefferson Davis Parish, Louisiana, although
we had received some revenues from our gross overriding royalty interest in our
assets in Sublette County, Wyoming.

As noted herein, we have recently acquired interests in oil and
gas properties located in Alberta, Canada. To date we have received modest
revenues from such interests. However, there are no assurances that any revenue
stream derived from such interests will be consistent in the future. To the
extent that we receive an uncertain cash flow from our oil and gas revenues and
that these amounts are not significant, we are highly dependent on external
sources of financing to maintain a positive cash flow.

Sale of Our Assets to Patriot Petroleum
Corp. (formerly Patriot Capital Corp.)

Pursuant to a letter of intent dated May 25, 2001 from Patriot
Capital Corp. ("Patriot"), we received an offer to purchase our subsidiary's
interest in our assets located in Louisiana and Wyoming. Pursuant to the terms
of the letter of intent, and a definitive agreement dated August 7, 2001 (the
"Patriot Agreement") the consideration to be paid by Patriot for the acquisition
of our subsidiary's interest in the Louisiana and Wyoming assets was US$644,419,
payable as to US$521,419 for the assets located in Wyoming and US$123,000 for
the assets located in Louisiana.

Pursuant to the Patriot Agreement, we sold all of our interests
in oil and gas assets located in the States of Louisiana and Wyoming to Patriot,
based upon their value as at May 1, 2001, in consideration for the total
purchase price of US$644,419. The sale closed on March 1, 2002. Pursuant to the
terms of the Patriot Agreement, all income collected or accrued on the oil and
gas assets from May 1, 2001 to March 1, 2002 was credited to Patriot. As a
result of the income that accrued to Patriot, we entered into an amendment to
the Patriot Agreement such that the total purchase price payable was reduced to
US$494,734.04 to account for the accrued income.

Two of the directors of Patriot, Donald Sharpe and John Hislop,
are also members of our board of directors. As a result, both Mr. Sharpe and Mr.
Hislop abstained from voting on the resolution approving the sale of the
Louisiana and Wyoming assets to Patriot.

Our board of directors carefully analyzed the performance of
our assets located in Louisiana and Wyoming in assessing the merits of the sale
of those assets. Our board of directors was of the view that, in light of the
new business focus by virtue of the reverse take-over with Chalk discussed
earlier in this section, the sale of our Louisiana and Wyoming assets was in our
best interests.

The sale of our assets provided our shareholders with the right
to dissent from the special resolution regarding the sale of the assets pursuant
to Section 184 of the Alberta Business Corporation Act (the "ABCA"). With
respect to the special resolution, any shareholder who dissents in compliance
with Section 184 of the ABCA would be entitled, in the event that the sale of
the our assets became effective, to be paid the fair market value of the common
shares held by the dissenting shareholder determined as of the close of business
on the last business day before the special resolution is adopted. A shareholder
is not entitled to dissent with respect to the sale of our assets if such holder
votes any of the common shares beneficially held by it in favour of the special
resolution. The execution or exercise of a proxy does not constitute a written
objection for purposes of the rights to dissent under the ABCA. The ABCA
requires adherence to the procedures established therein and accordingly, each
of our shareholders who might desire to exercise rights of dissent should
carefully consider and comply with the provisions of Section 184 of the ABCA and
consult its legal advisors. We did not receive any notices of dissent from our
shareholders in regards to the sale of our Louisiana and Wyoming assets to
Patriot.

B. Business Overview

Present Operations of Our Company

Our current operations consist of holding working interests in
various oil and gas properties located in Alberta, Canada. Our working interests
range from 18.75% to 68.75% depending upon the property. Our more material
properties and interests are discussed below.

On August 2, 2001 we entered into a farm-out agreement with
Moxie Exploration Ltd. ("Moxie") pursuant to which we drilled a well in the
Jumpbush area of Alberta. We paid $376,418, or 75% of the drilling costs of the
well and earned a 37.5% interest in the well and the farm-out lands. The well
was put into production in February, 2002. The farm-out lands that are
encompassed by our agreement with Moxie are more particularly described as Twp.
20 Rge. 19 W4M: Sections 3 and 22.

Further to our initial agreement with Moxie, on September 21,
2001 we entered into a second farm-out agreement with Moxie. Under this
farm-out, we again paid for 75% of the cost to drill and complete a further well
in the Jumpbush area of Alberta to thereby earn out 37.5% interest. This well
has been drilled and cased to a depth of 757 meters and is waiting on a tie-in
to production. Our total cost was $117,371.

We subsequently entered into a further farm-out agreement with
Moxie Exploration Ltd. dated October 10, 2001. Pursuant to the terms of the
farm-in, we participated for 50% in the drilling of a well in the Eyremore area
of Alberta. The cost to us was $177,550 and we acquired a 50% interest in the
well. The well commenced production in February, 2002.

We have also entered into a farm-out arrangement with Daybreak
Energy Inc. ("Daybreak") in the Wainwright area of Alberta pursuant to an
agreement dated September 14, 2001, as amended by an agreement dated October 18,
2001. Under the terms of the farm-in, we paid $79,131 for a 50% interest in the
land and paid 100% of the cost to re-enter, drill and complete a well in order
to earn a 68.75% interest, after payout, in the prospect. Our cost to drill and
complete the well was $146,867. Donald A Sharpe, our president, is a director of
Daybreak Energy Inc.

The lands that are encompassed by our farm-out agreement with
Daybreak are more particularly described as:

Twp. 43 Rge. 5 W4M: Sections 35, 35, and 16; and

Twp. 43 Rge. 5 W4M: Sections 1, 2, 3, 10, 11 and 12

On November 22, 2001, Daybreak re-entered the well bore in the
Wainwright area at 6-2-44-5 W4 targeting the Colony formation. The well was
completed and put on production in April, 2002.

We entered into a Farm-in Agreement dated January 24, 2003 with
Warrior Energy Corporation ("Warrior"), whereby we can earn an undivided 60%
working interest in Block 1 of the farm-in lands, and an undivided 20% working
interest in Block 11 of the farm-in lands, by the drilling of a test well,
located in the Greencourt Area, Alberta.

We subsequently entered into a Participation Agreement dated
February 19, 2003 with Warrior whereby we can earn a 40% interest before pay-out
(24% after pay-out) in two wells located in the Morningside Area,
Alberta.

Revenues

For the year ended December 31, 2002 we received total revenues
of $1,281,645 from our interests in our oil and gas properties located in
Alberta, Canada.

Market Prices of Oil and Natural Gas

The market prices of oil and natural gas have historically
fluctuated widely and are affected by numerous global factors beyond our
control. A decline in such market prices may have an adverse effect on revenues
we receive from the sale of oil and gas. A decline in prices will also reduce
our exploration efforts and make it more difficult to raise capital.

Governmental Regulation/Environmental Issues

Our oil and gas operations are subject to various United States
federal, state and local governmental regulations. Matters subject to regulation
include discharge permits for drilling operations, drilling and abandonment
bonds, reports concerning operations, the spacing of wells, and pooling of
properties and taxation. From time to time, regulatory agencies have imposed
price controls and limitations on production by restricting the rate of flow of
oil and gas wells below actual production capacity in order to conserve supplies
of oil and gas. The production, handling, storage, transportation and disposal
of oil and gas, by-products thereof, and other substances and materials produced
or used in connection with oil and gas operations are also subject to regulation
under federal, state, provincial and local laws and regulations relating
primarily to the protection of human health and the environment. To date,
expenditures related to complying with these laws, and for remediation of
existing environmental contamination, have not been significant in relation to
the results of operations of our company. The requirements imposed by such laws
and regulations are frequently changed and subject to interpretation, and we are
unable to predict the ultimate cost of compliance with these requirements or
their effect on our operations.

C. Organizational Structure

As of the date of this annual report, we do not have any
subsidiaries.

D. Property, Plants and Equipment

Our executive office is located at Suite 1320 - 925 West
Georgia Street, Vancouver, British Columbia, Canada V6C 1G8. We entered into a
lease agreement with First Merit Group Ltd. to lease our office space, which is
approximately 1500 square feet in size, at a base rent of $31,200 per year.
Commencing April, 2001, our base rent increased to $38,400 per year. This space
accommodates all of our executive and administrative offices.

Our Jumpbush Area Assets

We hold a working interest of 18.75% to 37.5% in certain oil and gas assets
located in the Jumpbush areas of Alberta, Canada.

Our Wainwright Area Assets

We hold a 68.75% working interest in certain oil and gas assets located in
the Wainwright area of Alberta, Canada.

Our Eyremore Area Assets

We hold a 50% working interest in certain oil and gas assets located in the
Eyremore area of Alberta, Canada.

Our Granlea Area Assets

We hold a 27.75% working interest in certain oil and gas assets located in
the Granlea area of Alberta, Canada.

Our Majorville Area Assets

We hold a 35% working interest in certain oil and gas assets located in the
Majorville area of Alberta, Canada.

Production History and Drilling Activity

Our oil and gas assets in Alberta, Canada began production
during 2002. For the year ended December 31, 2002 gross production from our
Alberta assets was 606 mmcf of gas and 12,500 bbl of oil. Of this gross
production, our interest was 332 mmcf of gas and 4,700 bbl of oil.

We have 10 productive wells as at March 31, 2003.

As at the date of this Annual Report, the following 18 wells
have been drilled on the properties located in Alberta, Canada in which we hold
an interest:



|Property    | Well             | Well Type   | Status                           | Working Interest
|----------- | ---------------- | ----------- | -------------------------------- | ----------------
|Jumpbush    | 16-3-20-19W4     | Natural Gas | Shut In                          | 37.50%          
|Jumpbush    | 10-21-20-19W4    | Natural Gas | Producing                        | 37.50%          
|Jumpbush    | 10-22-20-19W4    | Natural Gas | Producing                        | 37.50%          
|Jumpbush    | 6-16-20-19W4     | Natural Gas | Producing                        | 37.50%          
|Jumpbush    | 10-24-20-19W4    | Natural Gas | Producing                        | 37.50%          
|Jumpbush    | 5-17-20-19W4     | Natural Gas | Producing                        | 18.75%          
|Jumpbush    | 1-1-20-19W4      | Oil         | Producing                        | 35.00%          
|Eyremore    | 102/16-8-19-18W4 | Natural Gas | Producing                        | 50.00%          
|Jumpbush    | 6-29-20-19W4     | Natural Gas | Suspended, waiting on pipeline   | 37.50%          
|Jumpbush    | 8-28-20-19W4     | Natural Gas | Shut In                          | 37.50%          
|Jumpbush    | 12-29-19-20W4M   | Natural Gas | Suspended, waiting on pipeline   | 37.50%          
|Majorville  | 15-25-19-20W4    | Natural Gas | Suspended, waiting on completion | 35.00%          
|Jumpbush    | 11-36-19-20W4M   | Natural Gas | Producing                        | 35.00%          
|Granlea     | 6-23             | Natural Gas | Suspended, waiting on completion | 27.75%          
|Granlea     | 16-14            | Natural Gas | Suspended, waiting on completion | 27.75%          
|Greencourt  | 4-20             | Natural Gas | Suspended, waiting on completion | 60.00%          
|Morningside | 8-13-42-1W5M     | Natural Gas | Producing                        | 24.00%          
|Morningside | 14-12-42-1W5M    | Natural Gas | Producing                        | 24.00%          
|Wainwright  | 6-2-44-5W4M      | Natural Gas | Producing                        | 68.75%          
|Jumpbush    | 8-29-38-7W4      | Natural Gas | Suspended, waiting on pipeline   | 50.00%          



Geology and Reserve Summaries

McDaniel & Associates Consultants Ltd. ("McDaniel")
independent geological and petroleum engineering consultants of Calgary,
Alberta, have prepared a report utilizing escalated cost and price assumptions
dated January 1, 2003, evaluating as at January 1, 2003 the crude oil and
natural gas reserves attributable to the Assets (the "McDaniel Report"). All of
the reserves identified in the McDaniel Report are located in Alberta, Canada.
The McDaniel Report is summarized in the table below.

Total Reserves and Present Worth Values Escalating Prices as
of January 1, 2003Proved and Probable Reserves - Unrisked

Total of All Areas

|                                 | Company Share ofRemaining Reserves(mbbl, mmcf,
      mlt) | Company Share of Present Worth ValuesBefore Income Tax
      (4)(5)(6)(M$)
|-------------------------------- | --------------------------------------------------------- | --------------------------------------------------------------------------
|                                
|                                 | Gross (1)                                                 | Net (2)                                                                   
|                                
|Proved Producing Reserves        |                                                           |                                                                           
|                                 | Natural Gas                                               | 1,111.9                                                                   
|                                 | Royalty Tax Credit                                        |                                                                           
|                                
|                                 | Total                                                     |                                                                           
|                                 |                                                           |                                                                           
|Proved Non-Producing Reserves    |                                                           |                                                                           
|                                 | Crude Oil                                                 | 5.8                                                                       
|                                 | Natural Gas                                               | 132.2                                                                     
|                                
|                                 | Total                                                     |                                                                           
|                                 |                                                           |                                                                           
|Total Proved Reserves            |                                                           |                                                                           
|                                 | Crude Oil                                                 | 5.8                                                                       
|                                 | Natural Gas                                               | 1,244.2                                                                   
|                                 | Royalty Tax Credit                                        |                                                                           
|                                
|                                 | Total                                                     |                                                                           
|                                 |                                                           |                                                                           
|Total Probable Reserves          |                                                           |                                                                           
|                                 | Crude Oil                                                 | 5.8                                                                       
|                                 | Natural Gas                                               | 640.6                                                                     
|                                 | Royalty Tax Credit                                        |                                                                           
|                                
|                                 | Total                                                     |                                                                           
|                                 |                                                           |                                                                           
|Total Proved & Probable Reserves |                                                           |                                                                           
|                                 | Crude Oil                                                 | 11.6                                                                      
|                                 | Natural Gas                                               | 1,884.8                                                                   
|                                 | Royalty Tax Credit                                        |                                                                           
|                                
|                                 | Total                                                     |                                                                           
|                                 |                                                           |                                                                           
|BOE Reserves & PWV/BOE (3)       |                                                           |                                                                           
|                                 | Proved Producing                                          | 185.3                                                                     
|                                 | Proved Non-Producing                                      | 27.8                                                                      
|                                 | Total Proved                                              | 213.1                                                                     
|                                 | Total Probable                                            | 112.5                                                                     
|                                 | Total Proved & Probable                                   | 325.7                                                                     

(1)

(2)

(3)

(4)

(5)

(6)

The values may not necessarily be fair market value of the
reserves.

The McDaniel Report contains an evaluation prior to provision
for income taxes, interest, <R></R> and site restoration costs and
general and administrative costs, after deduction of royalties and estimated
future capital. It should not be assumed that the discounted net present value
estimated by McDaniel represents the fair market value of the reserves. Where
the present value is based on escalating or constant price and cost assumptions,
there is no assurance that such price and cost assumptions will be attained and
variances could be material. Other assumptions and qualifications relating to
costs, prices for future production and other matters are summarized in the
notes following the tables.

We are subject to laws and regulations that control the
discharge of materials into the environment, require removal and cleanup in
certain circumstances, require the proper handling and disposal of waste
materials or otherwise relate to the protection of the environment. In operating
and owning petroleum interests, we may be liable for damages and the costs of
removing hydrocarbon spills for which we are held responsible. Laws relating to
the protection of the environment have in many jurisdictions become more
stringent in recent years and may, in certain circumstances, impose strict
liability, rendering our company liable for environmental damage without regard
to actual negligence or fault. Such laws and regulations may expose us to
liability for the conduct of, or conditions caused by, others or for acts of our
company. We believe that we have complied in all material respects with
applicable environmental laws and regulations.

ITEM 5 Operating and Financial Review and Prospects

The information in this section is presented in accordance with
Canadian generally accepted accounting principles, and has not been reconciled
to United States generally accepted accounting principles. The following
discussion of our financial condition and results of operations for the fiscal
years ended December 31, 2002, 2001 and 2000 should be read in conjunction with
our consolidated financial statements and related notes included therein
included in this annual report in accordance with Item 8 - "Financial
Information".

A. Operating Results

Revenues

For the year ended December 31, 2002 we received revenues
totalling $1,281,645 from our interest in our Alberta assets before deduction of
royalties. For the year ended December 31, 2001 we received revenues of
$604,160. The increase in revenues is due to the production from our oil and gas
assets located in Alberta, Canada which went into production during 2002. For
the year ended December 31, 1001 we did not receive any revenues from our
Canadian oil and gas assets. We recognize our revenues by accruing them in the
month earned.

Expenses

During the year ended December 31, 2000, general and
administrative expenses were $250,267. This reflects lower office overhead but
also an increase in professional fees related to our regulatory filings. For the
year ended December 31, 2001, general and administrative expenses increased
marginally to $266,808. For the year ended December 31, 2002, general and
administrative expenses decreased marginally to $201,245 due to the sale of our
US assets.

In 2000, we paid $93,742 in royalties and $43,455 in operating
expenses. In 2001, we paid $98,812 in royalties and $52,028 in operating
expenses. In 2002 we paid $208,154 in royalties and $162,732 in operating
expenses. The increase in royalties and operating expenses from the 2001 to the
2002 fiscal year was as a result of the increased number of producing wells in
Alberta, Canada.

Other Income

Over the year ended December 31, 2000, we had interest income
of $13,996 and a foreign exchange gain of $13,223. For the year ended December
31, 2001 we had interest income of $20,939 and a foreign exchange gain of
$18,556. Over the year ended December 31, 2002 we had interest income of $7,699
and a foreign exchange gain of $28,833.

Pursuant to the Patriot Agreement, we sold all of our interests
in oil and gas assets located in the States of Louisiana and Wyoming to Patriot,
based upon their value as at May 1, 2001, in consideration for the total
purchase price of US$644,419. The sale closed on March 1, 2002. Pursuant to the
terms of the Patriot Agreement, all income collected or accrued on the oil and
gas assets from May 1, 2001 to March 1, 2002 was credited to Patriot. Given the
income that accrued to Patriot, we entered into an amendment to the Patriot
Agreement such that the total purchase price payable was reduced to
$US494,734.04 to account for the accrued income.

Income Taxes

We have a net capital loss for Canadian tax purposes of
$979,000, which is available to carry forward indefinitely to apply against any
future taxable capital gains as calculated under the Canadian income tax act. We
also have non-capital losses of $2,059,822 to offset future taxable income as
calculated under the Canadian income tax act.

Net Income or Loss

Our net income for the year ended December 31, 2002 was
$878,125, or $0.14 per share, compared to the year ended December 31, 2001 when
the net income was $192,826 or $0.06 per share. The increase was primarily due
to the sale of our Wyoming and Louisianna assets and the increases in production
from our Alberta assets. For the year ended December 31, 2002 the net income
from our Alberta assets was $411,510, as compared to a net loss of $255,939 from
our Alberta assets for the year ended December 31, 2001.

We do not believe that inflation will affect our operations at
this stage of our development.

B. Liquidity and Capital Resources

On January 18, 2002 we issued 1,000,000 units (the "Units") at
a price of $0.20 per unit, with each Unit consisting of one common share and one
non-transferable share purchase warrant, entitling the holder to purchase one
additional common share for a period of two (2) years from the issuance of the
Units at a price of $0.23 per share pursuant to a private placement of an
aggregate of 2,500,000 Units (the "Private Placement") for aggregate proceeds of
$500,000. The first closing of the Private Placement closed on November 15, 2001
with the issuance of 1,500,000 Units and the remaining 1,000,000 Units were
issued to Cubix Investments Ltd. ("Cubix") on January 18, 2002 following the
receipt of shareholder approval at a special meeting held on January 7, 2002. As
the issuance of the 1,000,000 Units to Cubix would, if fully converted,
potentially result in our "change of control" pursuant to the Policies of the
TSX Venture Exchange, under the Policies of the TSX Venture Exchange the
issuance of the Units to Cubix required shareholder approval.

On January 9, 2002 we issued 712,500 common shares pursuant to
the exercise of 712,500 share purchase warrants at $0.25 per common share, for
proceeds of $185,250.

Subsequent to the year ended December 31, 2002 we arranged an
operating credit line with the National Bank of Canada consisting of an $850,000
revolving operating demand loan, and a $250,000 non-revolving acquisition and
development demand loan. These loans are secured by an Acknowledgement of Debt
Revolving Demand Credit Agreement, a General Assignment of Book Debts, a
Negative Pledge, and a Floating Charge Demand Debenture from us to National Bank
in the principal amount of $5,000,000 securing all of our present and
after-acquired real and personal property.

Also subsequent to the year ended December 31, 2002, we
completed a non-brokered private placement consisting of 100 convertible
debentures valued at $10,000 per debenture for net proceeds of $1,000,000. Each
debenture carries interest at the rate of 15% per annum, payable quarterly, in
arrears and has a term of three years, expiring on March 28, 2006, as may be
extended upon mutual agreement between us and the placees. All or any portion of
the outstanding principal sum and accrued interest of each debenture is
convertible at the option of the placees into units in the capital of our
company at a price of $0.30 per unit if converted during the first two years of
the debenture or at a price of $0.33 per unit if converted during the third year
of the debenture.

Each unit consists of one common share and one non-transferable
share purchase warrant. Each warrant entitles the placees to purchase one
additional common share at a price of:

i) $0.30 per warrant share if the debenture is converted after
the date of issuance of the debenture and on or before one year following the
date of issuance of the debenture;

ii) $0.40 per warrant share if the debenture is converted after
the first anniversary of the issuance of the debenture and on or before two
years following the date of issuance of the debenture; and

iii) $0.50 per warrant share if the debenture is converted
after the second anniversary of the issuance of the debenture and on or before
the due date of the debenture.

Related parties to our company subscribed for a total of 69.88
debentures of the total offering of 100 debentures. Proceeds from this private
placement will be used to further our exploration and drilling program in
Alberta.

We do not plan any further land acquisitions or exploratory
programs at this time. Our commitments for capital expenditures are limited to
our participation in the Canadian properties in which we have an interest or a
right to acquire an interest, and for our office rent. We have sufficient cash
from our operations and financing activities to be able to pay for these
commitments.

U.S. GAAP

The results of operations discussed above are based on our
audited financial statements prepared in accordance with Canadian generally
accepted accounting principles. Differences between Canadian generally accepted
accounting principles and principles generally accepted in the United States are
listed and quantified in Note 11 to our consolidated financial statements
included elsewhere in this document. Significant differences between Canadian
GAAP and US GAAP include:

- the requirement under US GAAP to record compensation expense
when shares or share options are issued or granted to officers at prices below
market value at the time of issuance or grant, whereas under Canadian GAAP,
compensation expense is generally not recorded under these circumstances;

- the requirement under Canadian GAAP requires that basic
earnings per share ("EPS") be based solely on the common shares actually issued
and outstanding, whereas U.S. GAAP requires the inclusion of "common stock
equivalents" in the calculation of primary EPS when their inclusion would have
dilutive effect. Our common stock equivalents are the unexercised common share
stock options and share purchase warrants;

As at December 31, 2002 there were no material differences
between the loss per share under Canadian generally accepted accounting
principles and under United States generally accepted accounting principles. The
reasons for the losses are as discussed above under "Results from
Operations".

C. Research and Development, patents, licenses etc.

We do not currently, and did not previously, have research and
development policies in place. Over the past three fiscal years, we have not
expended any material amounts on research or development of our oil and gas
properties.

D. Trend Information

We are not aware of any other trends, demands uncertainties,
commitments or events which are reasonably likely to have a material effect upon
our net sales or revenues, income from continuing operations, profitability,
liquidity or capital resources, or that would cause reported financial
information not necessarily to be indicative of future operating results or
financial condition.

ITEM 6 Directors, Senior Management and Employees

A. Directors and Senior Management

The following table sets forth the names, business experience
and function/areas of expertise of each of our directors and officers:

|NameOffice HeldAge                                                                                                                | Area of Experience and Functions in Netco Energy
      Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Donald A. SharpePresident, Chief ExecutiveOfficer, Chief
      Executive Officer, Secretary, Treasurer and Director
      Age: 45 | Director since August 15, 1997; President, CEO, CFO, Secretary and
      Treasurer since June 29, 1999
      As President and CEO, Mr. Sharpe is responsible for the day to day
      operations of our company. As CFO and Treasurer, Mr. Sharpe is primarily
      responsible for the internal accounting and record keeping, general
      administration and SEC reporting. As Secretary, Mr. Sharpe is responsible
      for keeping all records, making all necessary filings, general
      administration and internal accounting for our company, and as a director,
      he is responsible for the management and supervision of the affairs and
      business of our company.
|John R. HislopDirector
      Age: 50                                                                                              | Director since June 29, 1999.
      As a director, Mr. Hislop is responsible for the management and
      supervision of the affairs and business of our company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Hans Christopher Schultze Director
      Age: 39                                                                                  | Director since March 14, 2003.
      As a director, Mr. Schultze is responsible for the management and
      supervision of the affairs and business of our
  company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

Donald A. Sharpe, President, CEO, CFO, Secretary, Treasurer and
Director

Mr. Sharpe devotes approximately fifty percent (50%) of his
working time to the affairs of our company. Mr. Sharpe also serves or has served
as: (a) Director and President of Gemini Energy Corp, an oil and gas exploration
company listed on the TSX Venture Exchange since October 20, 2000; (b) director
of Heartland Oil and Gas Corp., a public resource company since September 2002;
(c) director of Watch Resources Ltd., a public resource company since April
2002; (d) director, President and Chief Executive Officer of Capital Charter
Corp. from November 1998 to March 2000; (e) director of Result Energy Inc.
(formerly Daybreak Resources Corp.), a public resource company, from May 2000 to
present; (f) director, President and Chief Executive Officer of Empress Capital
Corp., a public resource company, from April 1999 to May 2000; (g) director and
President of JABA Inc., a public resource company, from April 1995 to November
1997; (h) President and Chief Executive Officer of Nation Energy, Inc., a public
resource company, from June 1999 to present; (i) director, President and Chief
Executive Officer of Patriot Petroleum Corp., a public resource company listed
on the TSX Venture Exchange, from June 1999 to present; (j) director of UKT
Recycling Technologies Inc., a public resource company, from November 1994 to
January 1999, Chairman from January 1996 to January 1999, and Chief Executive
Officer from January 1996 to January 1998; (k) director of Velvet Exploration
Inc., a public resource company, from November 1996 to November 1998; and (l)
professional geo-physicist with 20 years of experience in the oil and gas
industry, and in the management of public companies.

John R. Hislop, Director

Mr. Hislop devotes approximately five percent (5%) of his
working time to the affairs of our company. Since 1990, Mr. Hislop has worked as
an independent financial consultant. He also serves or has served as: (a)
Director of Gemini Energy Corp, an oil and gas exploration company listed on the
TSX Venture Exchange from March 3, 1995 to June 27, 2002 and President from
March 13, 1997 to January 28, 1998; (b) director of Ariel Resources Ltd., a
public resource company, from December 1991 to March 2000, and Chief Financial
Officer from December 1994 to December 1997; (c) director of Cubix Investments
Ltd., a public resource and investment company, from February 1994 to present,
and President from February 1994 to February 2001; director, (d) President, CEO
and CFO of Exxel Energy Corp., a public company, since October 2001; (e)
director of Kinysis Pharmaceutical Inc., a public resource company, from July -
October 1997, and President, Secretary, Chief Financial Officer and Chief
Executive Officer from July - August 1997; (f) director and President of Warrior
Energy N.V., a public resource company, from October 1997 to present; (g)
director and Secretary of Nation Energy, Inc., a public resource company, from
June 1999 to present; (h) director of Patriot Petroleum Corp., from April 1999
to present; (i) director of Spectrum Resources Ltd., a public resource company,
from September 1996 to November 1997; (j) director of Ultra Petroleum Corp., a
public oil & gas company, from March 1993 to January 18, 2001, President
from March of 1993 to May of 1996, and Chief Financial Officer from May of 1996
to September of 1998; (k) President and director of Ultra Holdings Inc., a
public resource company, from July 1999 to October 2001; and (l) director of
Zconnexx Corporation from November 1998 to May 2000.

Hans Christopher Schultze, Director

Mr. Schultze devotes approximately five percent (5%) of his
working time to the affairs of our company. Mr. Schultze has also served or
serves as: (a) President and Director of FM Resources Corp., a resource company
listed on the TSX Venture Exchange since February 2000; (b) Secretary of Gemini
Energy Corp. since October 1998 and Vice President of Exploration of Gemini
Energy Corp. since May 1997; (c) secretary of Patriot Petroleum Corp. since June
1999 and (d) geologist with Cominco Ltd. from May 1988 to May 1997.

There are no family relationships between any of our officers
and/or directors.

B. Compensation

Other than as set forth in the table below, our executive
officer was not paid and did not earn compensation from our company for
performing his duties during the three fiscal year ended December 31, 2002:

|SUMMARY COMPENSATION TABLE                                                  
|----------------------------------------------------------------------------
|Name andPrincipalPosition                                                   
|Salary                                                                      
|SecuritiesUnderOptions/SARsGranted                                          
|Donald A. SharpePresident, CEO, CFO, Secretary, Treasurer and
      Director

(1) Pursuant to a Management Consulting Agreement dated June 1,
1999, we pay $5,000 per month in management fees to D. Sharpe Management Inc., a
private company controlled by Donald A. Sharpe. A similar agreement was in place
for 1998. See "Major Shareholders and Related Party Transactions"

(2) These options were granted pursuant to our Incentive Stock
Option Plan. 200,000 stock options were granted on November 22, 1999 at an
exercise price is $0.11 expiring on November 22, 2004. 175,000 stock options
were granted on December 7, 1999 at an exercise price of $0.13 expiring on
December 7, 2004. As a result of the consolidation of our capital effective July
8, 2000, each outstanding option was subsequently consolidated on a two-for-one
basis with a corresponding increase in the exercise price by a factor of two, so
that as at the date of this annual report, Mr. Sharpe holds 100,000 stock
options exercisable at a price of $0.22 per share, expiring on November 22,
2004, and 87,500 stock options exercisable at a price of $0.26 per share,
expiring on December 7,. 2004.

No cash compensation was paid to any of our directors for their
services as directors during the fiscal year ended December 31, 2002. We have no
standard arrangement pursuant to which our directors are compensated for their
services in their capacity as directors except for the granting from time to
time of incentive stock options.

As of the date of this annual report, we have no compensatory
plan or arrangement with respect to any officer that results or will result in
the payment of compensation in any form from the resignation, retirement or any
other termination of employment of such officer's employment with our company,
from a change in control of our company or a change in such officer's
responsibilities following a change in control.

C. Board Practices

The directors are re-elected and the officers are re-appointed
at the annual general meeting of shareholders. The last annual meeting was held
on June 27, 2002, and each of our current directors and officers will continue
to hold his respective office until his successor is elected or appointed,
unless his office is earlier vacated under any of the relevant provisions of our
Articles or of the ABCA.

There are no service contracts between our company and any of
our officers, directors or employees providing for benefits upon termination of
employment.

The members of our company's audit committee include Donald
Sharpe and John Hislop. The audit committee reviews and approves the scope of
the audit procedures employed by our independent auditors, reviews the results
of the auditor's examination, the scope of audits, the auditor's opinion on the
adequacy of internal controls and quality of financial reporting and our
accounting and reporting principles, policies and practices, as well as our
accounting, financial and operating controls. The audit committee also reports
to the board of directors with respect to such matters and recommends the
selection of independent auditors. Before financial statements that are to be
submitted to the shareholders at an annual general meeting are considered by the
board of directors, such financial statements are submitted to the audit
committee for review with the independent auditors, following which the report
of the audit committee on the financial statements is submitted to the board of
directors.

We do not currently have a remuneration or compensation
committee.

D. Employees

As of December 31, 2002, we did not have any employees, and as
of May 31, 2003, we did not have any employees. Our operations are managed by
our sole officer, Donald A. Sharpe.

E. Share Ownership

There were 6,461,829 common shares issued and outstanding as of
May 27, 2003. Of the shares issued and outstanding and the stock options
granted, our directors and officers owned the following common shares as of May
31, 2003:

|NameOffice Held                                                              | Number of Common SharesBeneficially Owned as of May
      31, 2002 | Percentage(1)
|---------------------------------------------------------------------------- | ------------------------------------------------------------------ | -------------
|Donald A. SharpePresident, CEO, CFO, Secretary,
      Treasurer and Director | 633,500(2)                                                         | 9.3%         
|John R. HislopDirector                                                       | 592,583(3)                                                         | 8.7%         
|Hans Christopher SchultzeDirector                                            | 20,000(4)                                                          | *%           

* Less than 1%

(1) Based on 6,461,829 common shares issued and outstanding as
at May 31, 2003, and the number of shares issuable upon the exercise of issued
and outstanding stock options which are exercisable within 60 days of May 31,
2003.

(2) Includes 100,000 stock options granted on November 22, 1999
at an exercise price of $0.22, expiring on November 22, 2004, and 87,500 stock
options granted on December 7, 1999, at an exercise price of $0.26, expiring on
December 7, 2004. In addition, Mr. Sharpe holds 350,000 share purchase warrants
entitling him to acquire up to an additional 350,000 common shares at a price of
$0.23 per share up to November 15, 2003. In addition, Mr. Sharpe also holds
11.63 convertible debentures entitling him to acquire up to an additional
387,667 common shares and 387,667 share purchase warrants at a price of $0.30
per share if converted at any time until March 28, 2005 or at $0.33 per share if
converted at any time from March 29, 2005 to March 28, 2006.

(3) Includes 93,500 stock options granted on November 22, 1999
at an exercise price of $0.22, expiring on November 22, 2004. In addition, Mr.
Hislop holds 350,000 share purchase warrants entitling him to acquire up to an
additional 350,000 common shares at a price of $0.23 per share up to November
15, 2003. In addition, Mr. Hislop also holds 43.25 convertible debentures
entitling him to acquire up to an additional 1,441,667 common shares and
1,441,667 share purchase warrants at a price of $0.30 per share if converted at
any time until March 28, 2005 or at $0.33 per share if converted at any time
from March 29, 2005 to March 28, 2006.

(4) Includes 20,000 stock options granted on February 20, 2003
at an exercise price of $0.27, expiring on February 20, 2008. In addition, Mr.
Schultze also holds 3 convertible debentures entitling him to acquire up to an
additional 100,000 common shares and 100,000 share purchase warrants at a price
of $0.30 per share if converted at any time until March 28, 2005 or at $0.33 per
share if converted at any time from March 29, 2005 to March 28, 2006.

The voting rights attached to the common shares owned by our
officers and directors do not differ from those voting rights attached to shares
owned by people who are not officers or directors of our company.

There were no long-term incentive awards made to our executive
officers during the fiscal year ended December 31, 2002. There are no pension
plan benefits in place for our executive officers.

Our Incentive Stock Option Plan, as amended by the 2002 Stock
Option Plan, effective as of June 27, 2002, provides for the granting of an
aggregate of 1,292,365 stock options to officers, directors, employees,
consultants and other key personnel of our company. We intend to utilize the
stock options available under our 2002 Stock Option Plan to encourage the
interest of those persons to whom stock options are granted in the growth and
development of our company by providing them with an opportunity to acquire an
increased proprietary interest in our company.

Subsequent to our fiscal year ended December 31, 2002 we
granted a total of 30,000 stock options to one of our directors and to one of
our consultants. The stock options are exercisable at a price of $0.27 per share
until February 20, 2008.

ITEM 7 Major Shareholders and Related Party Transactions

A. Major Shareholders

There were 6,461,829 of our common shares issued and
outstanding as of May 27, 2003. The following table sets forth, as of May 27,
2003, persons known to us to be the beneficial owner of more than five (5%) of
our common shares:

|Name of Shareholder       | No. of CommonShares Owned | Percentage of OutstandingCommon
  Shares
|------------------------- | ------------------------- | ----------------------------------------
|Cubix Investments Ltd.(1) | 1,000,000                 | 15.48%                                  
|Donald Sharpe             | 446,000(1)                | 6.9%                                    
|John Hislop(2)            | 499,083(3)                | 7.38%                                   



(1)

(2)

(3)

The voting rights of our major shareholders do not differ from
the voting rights of holders of our shares who are not major shareholders.

As of May 27, 2003, the registrar and transfer agent for our
company reported that there were 6,461,829 common shares issued and outstanding.
Of those common shares issued and outstanding, 5,963,985 common shares were
registered to Canadian residents (13 shareholders), 464,844 common shares were
registered to residents of the United States (31 shareholders) and 33,000 common
shares were registered to residents of other foreign countries (1
shareholder).

To the best of our knowledge, our company is not directly or
indirectly owned or controlled by another corporation, by any foreign government
or by any other natural or legal person.

There are no arrangements known to us, the operation of which
may at a subsequent date result in a change in the control of our company,
except that Cubix has the right to acquire a further 1,000,000 of our common
shares upon the exercise of share purchase warrant which, if exercised, would
result in Cubix holding 26.8% of our issued and outstanding common
shares.

B. Related Party Transactions

Pursuant to the terms of a Management Consulting Agreement with
D. Sharpe Management Inc., dated June 1, 1999, we pay D. Sharpe Management
Inc. the sum of $60,000 per year in consulting fees. Our CEO, CFO and President,
Donald A. Sharpe, is the sole director, officer and shareholder of D. Sharpe
Management Inc. Under the agreement, we pay D. Sharpe Management Inc. a monthly
management fee of $5,000 and will reimburse expenses to a maximum of $600 per
month. Unless notice is given by either party, the agreement is automatically
renewed for a further one month term. There are no provisions in the agreement
that allow for additional compensation in the event of our change of control or
the termination of the agreement with D. Sharpe Management Inc.

Two members of our board of directors, Donald Sharpe (who is
also our President, CEO, CFO, Secretary, and Treasurer) and John Hislop, are
also directors of Patriot Petroleum Corp. We entered into the Patriot Agreement,
pursuant to which Patriot purchased our subsidiary's interest in our assets
located in Louisiana and Wyoming. Pursuant to the terms of the Patriot
Agreement, the consideration to be paid by Patriot for the interest in our
assets in Louisiana and Wyoming is US$644,419, payable as US$521,419 for the
assets located in Wyoming and US$123,000 for the assets located in Louisiana.
The sale closed on March 1, 2002. Pursuant to the terms of the Patriot
Agreement, all income collected or accrued on the oil and gas assets from May 1,
2001 to March 1, 2002 was credited to Patriot. Given the income that accrued to
Patriot, we entered into an amendment to the Patriot Agreement such that the
total purchase price payable was reduced to $US494,734.04 to account for the
accrued income. Both Mr. Sharpe and Mr. Hislop abstained from voting on any
resolution approving the sale of the assets located in Louisiana and Wyoming to
Patriot.

None of the following persons was indebted to Netco or to our
subsidiary at any time during the last three fiscal years:

1. any of our directors or officers; and

2. any associate of any such director or
officer.

ITEM 8 Financial Information

Our financial statements are stated in Canadian dollars and are
prepared in accordance with Canadian Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are
expressed in Canadian dollars.

All Audited Statements are in Canadian dollars.

Financial Statements Filed as Part of the Annual Report:

Financial Statements of Netco Energy Inc. for the Years Ended
December 31, 2002, 2001, and 2000 (audited), reported on by Lancaster &
David, Chartered Accountants:

Auditor's Report dated April 25, 2003, as to disclosure changes
for generally accepted accounting principles in the United States

Consolidated Balance Sheets as at December 31, 2002 and
2001

Consolidated Statements of Income and Deficit for the years
ended December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000

Notes to Financial Statements

Legal Proceedings

There are no pending legal proceedings to which Netco or our
subsidiary is a party or of which any of our property is the subject. There are
no legal proceedings to which any of the directors, officers or affiliates or
any associate of any such directors, officers or affiliates of either our
company or our subsidiary is a party or has a material interest adverse to
us.

Dividend Distributions

Holders of our common shares are entitled to receive such
dividends as may be declared from time to time by our board of directors, in the
board's discretion, out of funds legally available for that purpose. We intend
to retain future earnings, if any, for use in the operation and expansion of our
business and does not intend to pay any cash dividends in the foreseeable
future.

B. Significant Changes

None.

ITEM 9 The Offer and Listing

Price History

Full Financial Years

The annual high and low market prices for the five most recent
full financial years (January 1, 1998 through December 31, 2002) on the TSX
Venture Exchange (formerly the Canadian Venture Exchange) were as follows:



|Year/Period Ended | High  | Low   
|----------------- | ----- | ------
|December 31, 1998 | $1.55 | $0.045
|December 31, 1999 | $0.28 | $0.02 
|December 31, 2000 | $0.90 | $0.19 
|December 31, 2001 | $0.75 | $0.23 
|December 31, 2002 | $0.52 | $0.24 

Full Financial Quarters (two most recent financial
years)

The high and low market prices for each full financial quarter
for the two most recent full fiscal years, and for subsequent financial
quarters, on the TSX Venture Exchange were as follows:

|Quarter Ended      | High          | Low          
|------------------ | ------------- | -------------
|December 31, 2002  | $0.30         | $0.24        
|September 30, 2002 | $0.39         | $0.24        
|June 30, 2001      | $0.52         | $0.33        
|March 31, 2001     | $0.43         | $0.25        
|December 31, 2001  | $0.50         | $0.23        
|September 30, 2001 | $0.61         | $0.25        
|June 30, 2001(1)   | not available | not available
|March 31, 2001(1)  | $0.75         | $0.45        

(1) There is no data available with respect to our common shares
between February 28, 2001 and July 11, 2001, due to the halt in trading as a
result of our proposed acquisition of Chalk.com Network (Holding)
Corporation.



Most Recent 6 Months

The high and low market prices for each of the most recent six
months (December 1, 2001 through May 31, 2002) on the TSX Venture Exchange were
as follows:

|Month Ended       | High  | Low   
|----------------- | ----- | ------
|December 31, 2002 | $0.30 | $0.24 
|January 31, 2003  | $0.28 | $0.25 
|February 28, 2003 | $0.35 | $0.25 
|March 31, 2003    | $0.32 | $0.27 
|April 30, 2003    | $0.40 | $0.28 
|May 31, 2003      | $0.33 | $0.305

C. Markets

Our common shares trade on the TSX Venture Exchange. Our symbol
is "NEI" and our CUSIP number is 64108H-10-9.

ITEM 10 Additional Information

B. Memorandum and Articles of Association

Our Articles provide as follows:

(a) A director who is, in any way, directly or indirectly
interested in a proposed contract or transaction with our company shall disclose
the nature and extent of his interest at a meeting of the directors in
accordance with the provisions of the ABCA, and the contract shall be submitted
to our board of directors or our shareholders for approval. A director shall not
vote in respect of any contract or transaction with our company in which he is
interested, and if he shall do so, his vote shall not be counted but he may be
counted in the quorum present at the meeting at which such vote is taken.

(b) Subject to the provisions of any ordinary resolution, the
remuneration of the directors may from time to time be determined by the
directors themselves.

(c) The directors may, at their discretion and subject to any
restrictions in our Articles or in the ABCA, authorize us to borrow any sum of
money and may raise or secure the repayment of such sum of money in such manner
and upon such terms and conditions as the directors of our company think
fit.

(d) There are no provisions with respect to the retirement of a
director or the non-retirement of a director under an age requirement.

(e) A director is not required to hold a share in the capital
of our company as qualification for his office.

With respect to the above noted matters, there are generally no
significant differences between Canadian and U.S. law.

Rights, Preference and Restrictions

Common Shares

All of the authorized common shares of our company, once
issued, rank equally as to dividends, voting powers, and participation in
assets. Holders of common shares are entitled to one vote for each common share
held of record on all matters to be acted upon by the shareholders. Holders of
common shares are entitled to receive such dividends as may be declared from
time to time by the board of directors, in its discretion, out of funds legally
available therefore. Our Articles do not provide for cumulative voting.

Upon liquidation, dissolution or winding up of our company,
holders of common shares are entitled to receive pro rata our assets, if any,
remaining after payments of all debts and liabilities. No common shares have
been issued subject to call or assessment. There are no pre-emptive or
conversion rights and no provisions for redemption or purchase for cancellation,
surrender, or sinking or purchase funds. There are no restrictions on the
repurchase or redemption of common shares by our company while there is any
arrearage in the payment of dividends or sinking fund instalments.

With respect to the rights, preferences and restrictions
attaching to our common shares, there are generally no significant differences
between Canadian and United States law as the board of directors, or the
applicable corporate statute, will determine the rights, preferences and
restrictions attaching to each class of a company's shares.

Changes to Our Common Shares

Provisions as to the modification, amendment or variation of
the rights attaching to our common shares are contained in the ABCA. The ABCA
requires approval by a special resolution (ie. approved by at least two-thirds
of the votes cast at a meeting of our shareholders or consented to in writing by
each of the shareholders entitled to vote) of our company's shareholders in
order to effect any of the following changes:

(a) create new classes of shares;

(b) change the designation of all or any of its shares, and
add, change or remove any rights, privileges, restrictions and conditions,
including rights to accrued dividends, in respect of all or any of its shares,
whether issued or unissued;

(c) change the shares of any class or series, whether issued or
unissued, into a different number of shares of the same class or series or into
the same of a different number of shares of other classes or series;

(d) divide a class of shares, whether issued or unissued, into
series, and fix the number of shares in each series and the rights, privileges,
restrictions and conditions of that series;

(e) cancel a class or series of shares where there are no
issued or outstanding shares of that class or series;

(f) authorize the directors to divide any class of unissued
shares into series and fix the number of shares in each series and the rights,
privileges, restrictions and conditions of that series;

(g) authorize the directors to change the rights, privileges,
restrictions and conditions attached to unissued shares or any series; and

(h) revoke, diminish or enlarge any authority conferred under
clauses [(h) and (i)] (of the ABCA).

Generally, there are no significant differences between
Canadian and United States law with respect to changing the rights of
shareholders as most state corporation statutes require shareholder approval
(usually a majority) for any such changes that affect the rights of
shareholders.

Annual General Meetings and Extraordinary General
Meetings

Annual General Meetings (an "AGM") must be held once every
financial year, within 15 months of the previous AGM. Under the ABCA, we must
give our shareholders written notice of an AGM not less than 21 days and not
more than 50 days before the AGM is to be held. The ABCA also requires that we
publish, notice of the record date with respect to the AGM in a newspaper
published or distributed in the place where our registered office is located,
and in each place in Canada that we have a transfer agent, not less than 7 days
before the record date, which may be not less than 21 days and not more than 50
days prior to the AGM.

Our directors may, whenever they think fit, convene an
Extraordinary General Meeting (an "EGM"). An EGM may also be requisitioned by
one or more shareholders of our company so long as such shareholders own not
less than 5% of the issued and outstanding shares at the date such shareholders
requisition an EGM. Within 21 days of receiving such requisition, our directors
must call a meeting, failing which any shareholder who signed the requisition
may call the meeting.

All shareholders entitled to attend and vote at an AGM or an
EGM will be admitted to the meeting.

Most state corporation statutes require a public company to
hold an annual meeting for the election of directors and for the consideration
of other appropriate matters. The state statutes also include general provisions
relating to shareholder votings and meetings. Apart from the timing of when an
AGM must be held and the percentage of shareholders required to call a AGM or
EGM, there are generally no material differences between Canadian and United
States law respecting AGMs and EGMs.

Rights to Own Securities

There are no limitations on the rights of non-resident or
foreign shareholders to hold or exercise voting rights.

Except as provided in the Investment Canada Act, there are no
limitations under the applicable laws of Canada or by our charter or other
constituent documents of our company on the right of foreigners to hold or vote
common shares or other securities of our company.

The Investment Canada Act will prohibit implementation, or if
necessary, require divestiture of an investment deemed "reviewable" under the
Investment Canada Act by an investor that is not a "Canadian" as defined in the
Investment Canada Act (a "non-Canadian"), unless after review the Minister
responsible for the Investment Canada Act ("the Minister") is satisfied that the
"reviewable" investment is likely to be of net benefit to Canada. An investment
in our common shares by a non-Canadian would be reviewable under the Investment
Canada Act if it was an investment to acquire control of our company and the
value of our assets was $5 million or more. A non-Canadian would be deemed to
acquire control of our company for the purposes of the Investment Canada Act if
the non-Canadian acquired a majority of our outstanding common shares (or less
than a majority but controlled our company in fact through the ownership of
one-third or more of our outstanding common shares ) unless it could be
established that, on the acquisition, our company was not controlled in fact by
the acquirer through the ownership of such common shares. Certain transactions
in relation to our common shares would be exempt from review under the
Investment Canada Act, including, among others, the following:

1. acquisition of common shares by a person in the ordinary
course of that person's business as a trader or dealer in securities;

2. acquisition of control of our company in connection with the
realization of security granted for a loan or other financial assistance and not
for any purpose related to the provisions of the Investment Canada Act; and

3. acquisition of control of our company by reason of an
amalgamation, merger, consolidation or corporate reorganization following which
the ultimate direct or indirect control of our company, through the ownership of
voting interests, remains unchanged.

The Investment Canada Act was amended with the World Trade
Organization Agreement to provide for special review thresholds for "WTO
Investors" of countries belonging to the World Trade Organization, among others,
nationals and permanent residents (including "WTO Investor controlled entities"
as defined in the Investment Canada Act). Under the Investment Canada Act, as
amended, an investment in our common shares by WTO Investors would be reviewable
only if it was an investment to acquire control of our company and the value of
our assets was equal to or greater than a specified amount (the "Review
Threshold"), which is published by the Minister after its determination for any
particular year. The Review Threshold is currently $209 million for the year
2001.

Change in Control

There are no provisions in our Articles or By-laws that would
have the effect of delaying, deferring or preventing a change in control of our
company, and that would operate only with respect to a merger, acquisition or
corporate restructuring involving our company.

The ABCA does not contain any provisions that would have the
effect of delaying, deferring or preventing a change of control of our company.
Generally, there are no significant differences between Canadian and United
States law in this regard, as many state corporation statutes also do not
contain such provisions and only empower a company's board of directors to adopt
such provisions.

Ownership Threshold

There are no provisions in our Articles or Bylaws or in the
ABCA governing the threshold above which shareholder ownership must be
disclosed. The Securities Act (Alberta) requires that we disclose, in our
annual general meeting proxy statement, holders who beneficially own more than
10% of our issued and outstanding shares. Most state corporation statutes do not
contain provisions governing the threshold above which shareholder ownership
must be disclosed. United States federal securities laws require a company to
disclose, in its Annual Report on Form 20-F, holders who own more than 5% of a
company's issued and outstanding shares.

Changes in the Capital of our Company

There are no conditions imposed by our Articles which are more
stringent than those required by the ABCA.

C. Material Contracts

Pursuant to the terms of a Management Consulting Agreement with
D. Sharpe Management Inc., dated June 1, 1999, we pay D. Sharpe Management
Inc. the sum of $60,000 per year in consulting fees. Our CEO, CFO and President,
Donald A. Sharpe, is the sole director, officer and shareholder of D. Sharpe
Management Inc. Under the agreement, we pay Mr. Sharpe a monthly management fee
of $5,000 and will reimburse expenses to a maximum of $600 per month. Unless
notice is given by either party, the agreement is automatically renewed for a
further one month term. There are no provisions in the agreement that allow for
additional compensation in the event of a change of control of Netco or the
resignation, retirement or termination of Mr. Sharpe's employment.

On March 27, 2000, we entered into an Amending Agreement with
First Merit Group Ltd. and Armada Ventures Inc., which amended the Office Space
and Support Services Agreement dated October 1, 1999. Pursuant to the Office
Space and Support Services Agreement, we agreed to pay a base rent of $31,200
per year to First Merit Group Ltd., in exchange for the use of certain office
space and equipment, and for certain office services. The Amending Agreement
extended the Office Space and Support Services Agreement through February 28,
2001. On February 1, 2001, we entered into a further Amending Agreement,
extending the Office Space and Support Services Agreement.

On August 2, 2001 we entered into a farm-out agreement with
Moxie Exploration Ltd. ("Moxie") pursuant to which we drilled a well in the
Jumpbush area of Alberta. We were to pay 75% of the drilling costs of the well
to earn a 37.5% interest in the well and the farm-out lands.

Further to our initial agreement with Moxie, on September 21,
2001 we entered into a second farm-out agreement with Moxie. Under this
farm-out, we again paid for 75% of the cost to drill and complete a further well
in the Jumpbush area of Alberta to thereby earn out 37.5% interest.

We subsequently entered into a further farm-out agreement with
Moxie Exploration Ltd. dated October 10, 2001. Pursuant to the terms of the
farm-in, we participated for 50% in the drilling of a well in the Eyremore area
of Alberta.

We have also entered into a farm-out arrangement with Result
Energy Inc. (formerly Daybreak Energy Inc.) in the Wainwright area of Alberta
pursuant to an agreement dated September 14, 2001, as amended by an agreement
dated October 18, 2001. Under the terms of the farm-in, we paid $79,131 for a
50% interest in the land and paid 100% of the cost to re-enter, drill and
complete a well in order to earn a 68.75% interest, after payout, in the
prospect.

On January 24, 2003 we entered into a farm-in agreement with
Warrior Energy Corporation. Under this farm-in agreement we can earn an
undivided 60% working interest in Block 1 of the farm-in lands, and an undivided
20% working interest in Block 11 of the farm-in lands, by the drilling of a test
well, located in the Greencourt Area, Alberta.

On February 19, 2003 we entered into a participation agreement
with Warrior Energy Corporation to earn a 40% interest before pay-out (24% after
pay-out) in two wells located in the Morningside Area, Alberta.

D. Exchange Controls

There are no government laws, decrees or regulations in Canada
which restrict the export or import of capital or which affect the remittance of
dividends, interest or other payments to non-resident holders of our common
shares. Any remittances of dividends to United States residents and to other
non-residents are, however, subject to withholding tax. See "Taxation"
below.

E. Taxation

Canadian Federal Income Taxation

We consider that the following summary fairly describes the
principal Canadian federal income tax consequences applicable to a holder of our
common shares who at all material times deals at arm's length with our company,
who holds all common shares as capital property, who is resident in the United
States, who is not a resident of Canada and who does not use or hold, and is not
deemed to use or hold, his common shares of our company in connection with
carrying on a business in Canada (a "non-resident holder"). It is assumed that
the common shares will at all material times be listed on a stock exchange that
is prescribed for purposes of the Income Tax Act(Canada) (the
"ITA") and regulations thereunder. Investors should be aware that the Canadian
federal income tax consequences applicable to holders of our common shares will
change if, for any reason, we cease to be listed on a prescribed stock exchange.
Accordingly, holders and prospective holders of our common shares should consult
with their own tax advisors with respect to the income tax consequences of them
purchasing, owing and disposing of our common shares should we cease to be
listed on a prescribed stock exchange.

This summary is based upon the current provisions of the ITA,
the regulations thereunder, the Canada-United States Tax Convention as amended
by the Protocols thereto (the "Treaty") as at the date of the registration
statement and the currently publicly announced administrative and assessing
policies of the Canada Customs and Revenue Agency (the "CCRA"). This summary
does not take into account Canadian provincial income tax consequences. This
description is not exhaustive of all possible Canadian federal income tax
consequences and does not take into account or anticipate any changes in law,
whether by legislative, governmental or judicial action. This summary does,
however, take into account all specific proposals to amend the ITA and
regulations thereunder, publicly announced by the Government of Canada to the
date hereof.



This summary does not address potential tax effects relevant to
our company or those tax considerations that depend upon circumstances specific
to each investor. Accordingly, holders and prospective holders of our common
shares should consult with their own tax advisors with respect to the income tax
consequences to them of purchasing, owning and disposing of common shares in our
company.

Dividends

The ITA provides that dividends and other distributions deemed
to be dividends paid or deemed to be paid by a Canadian resident corporation
(such as our company) to a non-resident of Canada shall be subject to a
non-resident withholding tax equal to 25% of the gross amount of the dividend of
deemed dividend. Provisions in the ITA relating to dividend and deemed dividend
payments to and gains realized by non-residents of Canada, who are residents of
the United States, are subject to the Treaty. The Treaty may reduce the
withholding tax rate on dividends as discussed below.

Article X of the Treaty as amended by the US-Canada Protocol
ratified on November 9, 1995 provides a 5% withholding tax on gross dividends or
deemed dividends paid to a United States corporation which beneficially owns at
least 10% of the voting stock of the company paying the dividend. In cases where
dividends or deemed dividends are paid to a United States resident (other than a
corporation) or a United States corporation which beneficially owns less than
10% of the voting stock of a company, a withholding tax of 15% is imposed on the
gross amount of the dividend or deemed dividend paid. We would be required to
withhold any such tax from the dividend and remit the tax directly to CCRA for
the account of the investor.

The reduction in withholding tax from 25%, pursuant to the
Treaty, will not be available:

(a) if the shares in respect of which the dividends are paid
formed part of the business property or were otherwise effectively connected
with a permanent establishment or fixed base that the holder has or had in
Canada within the 12 months preceding the disposition, or

(b) the holder is a U.S. LLC which is not subject to tax in the
U.S.

The Treaty generally exempts from Canadian income tax dividends
paid to a religious, scientific, literary, educational or charitable
organization or to an organization exclusively administering a pension,
retirement or employee benefit fund or plan, if the organization is resident in
the U.S. and is exempt from income tax under the laws of the U.S.

Capital Gains

A non-resident holder is not subject to tax under the ITA in
respect of a capital gain realized upon the disposition of one of our shares
unless the share represents "taxable Canadian property" to the holder thereof.
Our common shares will be considered taxable Canadian property to a non-resident
holder only if-.

(a) the non-resident holder;

(b) persons with whom the non-resident holder did not deal at
arm's length- or

(c) the non-resident holder and persons with whom he did not
deal at arm's length,

owned not less than 25% of the issued shares of any class or
series of our company at any time during the five year period preceding the
disposition. In the case of a non-resident holder to whom shares of our company
represent taxable Canadian property and who is resident in the United States, no
Canadian taxes will generally be payable on a capital gain realized on such
shares by reason of the Treaty unless:

(a) the value of such shares is derived principally from real
property (including resource property) situated in Canada,

(b) the holder was resident in Canada for 120 months during any
period of 20 consecutive years preceding, and at any time during the 10 years
immediately preceding, the disposition and the shares were owned by him when he
ceased to be a resident of Canada,

(c) they formed part of the business property or were otherwise
effectively connected with a permanent establishment or fixed base that the
holder has or bad in Canada within the 12 months preceding the disposition,
or

(d) the holder is a U.S. LLC which is not subject to tax in the
U.S.

If subject to Canadian tax on such a disposition, the
taxpayer's capital gain (or capital loss) from a disposition is the amount by
which the taxpayer's proceeds of disposition exceed (or are exceeded by) the
aggregate of the taxpayer's adjusted cost base of the shares and reasonable
expenses of disposition. For Canadian income tax purposes, the "taxable capital
gain" is equal to one-half of the capital gain.

United States Federal Income Taxation

The following is a discussion of the material United States
Federal income tax consequences, under current law, applicable to a U.S. Holder
(as defined below) of our common shares who holds such shares as capital assets.
This discussion does not address all potentially relevant Federal income tax
matters and it does not address consequences peculiar to persons subject to
special provisions of Federal income tax law, such as those described below as
excluded from the definition of a U.S. Holder. In addition, this discussion does
not cover any state, local, or foreign tax consequences. (See "Canadian Federal
Income Tax Consequences" above.)

The following discussion is based on the Internal Revenue Code
of 1986, as amended (the "Code"), Treasury Regulations, published Internal
Revenue Service ("IRS") rulings, published administrative positions of the IRS
and court decisions that are currently applicable, any or all of which could be
materially and adversely changed, possibly on a retroactive basis, at any time.
In addition, this discussion does not consider the potential effects, both
adverse and beneficial, of any recently proposed legislation which, if enacted,
could be applied, possibly on a retroactive basis, at any time.

The discussion below does not address potential tax effects
relevant to our company or those tax considerations that depend upon
circumstances specific to each investor. In addition, this discussion does not
address the tax consequences that may be relevant to particular investors
subject to special treatment under certain U.S. Federal income tax laws, such
as, dealers in securities, tax-exempt entities, banks, insurance companies and
non-U.S. Holders. Purchasers of the common stock should therefore satisfy
themselves as to the overall tax consequences of their ownership of the common
stock, including the State, local and foreign tax consequences thereof (which
are not reviewed herein), and should consult their own tax advisors with respect
to their particular circumstances.

U.S. Holders

As used herein, a "U.S. Holder" includes a beneficial holder of
common shares of our company who is a citizen or resident of the United States,
a corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof, any trust if a US court
is able to exercise primary supervision over the administration of the trust and
one or more US persons have the authority to control all substantial decisions
of the trust, any entity created or organized in the United States which is
taxable as a corporation for U.S. tax purposes and any other person or entity
whose ownership of common shares of our company is effectively connected with
the conduct of a trade or business in the United States. A U.S. Holder does not
include persons subject to special provisions of Federal income tax law, such as
tax-exempt organizations, qualified retirement plans, financial institutions,
insurance companies, real estate investment trusts, regulated investment
companies, broker-dealers, non-resident alien individuals or foreign
corporations whose ownership of our common shares is not effectively connected
with the conduct of a trade or business in the United States and shareholders
who acquired their shares through the exercise of employee stock options or
otherwise as compensation.

Dividend Distribution on Shares of our Company

U.S. Holders receiving dividend distributions (including
constructive dividends) with respect to the common shares of our company are
required to include in gross income for United States Federal income tax
purposes the gross amount of such distributions to the extent that we have
current or accumulated earnings and profits, without reduction for any Canadian
income tax withheld from such distributions. Such Canadian tax withheld may be
deducted or may be credited against actual tax payable, subject to certain
limitations and other complex rules, against the U.S. Holder's United States
Federal taxable income. See "Foreign Tax Credit" below. To the extent that
distributions exceed our current or accumulated earnings and profits, they will
be treated first as a return of capital to the extent of the shareholder's basis
in the common shares of our company and thereafter as gain from the sale or
exchange of the common shares of our company. Preferential tax rates for net
long term capital gains may be applicable to a U.S. Holder which is an
individual, estate or trust.

In general, dividends paid on our common shares will not be
eligible for the dividends received deduction provided to corporations receiving
dividends from certain United States corporations.

Foreign Tax Credit

A U.S. Holder who pays (or who has had withheld from
distributions) Canadian income tax with respect to the ownership of our common
shares may be entitled, at the election of the U.S. Holder, to either a
deduction or a tax credit for such foreign tax paid or withheld. This election
is made on a year-by-year basis and generally applies to all foreign income
taxes paid by (or withheld from) the U.S. Holder during that year. There are
significant and complex limitations which apply to the credit, among which is
the general limitation that the credit cannot exceed the proportionate share of
the U.S. Holder's United States income tax liability that the U.S. Holder's
foreign source income bears to his or its world-wide taxable income. In
determining the application of this limitation, the various items of income and
deduction must be classified into foreign and domestic sources. Complex rules
govern income such as "passive income", "high withholding tax interest",
"financial services income", "shipping income" and certain other classifications
of income. A U.S. Holder who is treated as a domestic U.S. corporation owning
10% or more of our voting stock is also entitled to a deemed paid foreign tax
credit in certain circumstances for the underlying foreign tax of our company
related to dividends received or Subpart F income received from us. (See the
discussion below of Controlled Foreign Corporations). The availability of the
foreign tax credit and the application of the limitations on the foreign tax
credit are fact specific and holders and prospective holders of our common
shares should consult their own tax advisors regarding their individual
circumstances.

Disposition of Common Shares

If a "U.S. Holder" is holding shares as a capital asset, a gain
or loss realized on a sale of our common shares will generally be a capital gain
or loss, and will be long-term if the shareholder has a holding period of more
than one year. However, gains realized upon sale of our common shares may, under
certain circumstances, be treated as ordinary income, if we were determined to
be a "collapsible corporation" within the meaning of Code Section 341 based on
the facts in existence on the date of the sale (See below for definition of
"collapsible corporation"). The amount of gain or loss recognized by a selling
U.S. Holder will be measured by the difference between (i) the amount realized
on the sale and (ii) his tax basis in our common shares. Capital losses are
deductible only to the extent of capital gains. However, in the case of
taxpayers other than corporations (U.S.)$3,000 ($1,500 for married individuals
filing separately) of capital losses are deductible against ordinary income
annually. In the case of individuals and other non-corporate taxpayers, capital
losses that are not currently deductible may be carried forward to other years.
In the case of corporations, capital losses that are not currently deductible
are carried back to each of the three years preceding the loss year and forward
to each of the five years succeeding the loss year.

A "collapsible corporation" is a corporation that is formed or
availed principally to manufacture, construct, produce, or purchase prescribed
types or property that the corporation holds for less than three years and that
generally would produce ordinary income on its disposition, with a view to the
stockholders selling or exchanging their stock and thus realizing gain before
the corporation realizes two thirds of the taxable income to be derived from
prescribed property. Prescribed property includes: stock in trade and inventory;
property held primarily for sale to customers in the ordinary course of
business; unrealized receivables or fees, consisting of rights to payment for
noncapital assets delivered or to be delivered, or services rendered or to be
rendered to the extent not previously included in income, but excluding
receivables from selling property that is not prescribed; and property gain on
the sale of which is subject to the capital gain/ordinary loss rule. Generally,
a shareholder who owns directly or indirectly 5 percent or less of the
outstanding stock of the corporation may treat gain on the sale of his shares as
capital gain.

Other Considerations for U.S. Holders

In the following circumstances, the above sections of this
discussion may not describe the United States Federal income tax consequences
resulting from the holding and disposition of common shares of the Registrant.
Our management is of the opinion that there is little, if not, any likelihood
that we will be deemed a "Foreign Personal Holding Company", a "Foreign
Investment Company" or a "Controlled Foreign Corporation" (each as defined
below) under current and anticipated conditions.

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total
combined voting power or the total value of our outstanding shares is owned,
actually or constructively, by five or fewer individuals who are citizens or
residents of the United States and 60% or more of our gross income for such year
was derived from certain passive sources (e.g., from dividends received from its
subsidiaries), we would be treated as a "foreign personal holding company." In
that event, U.S. Holders that hold common shares in our capital would be
required to include in income for such year their allocable portion of our
passive income which would have been treated as a dividend had that passive
income actually been distributed.

Foreign Investment Company

If 50% or more of the combined voting power or total value of
our outstanding shares are held, actually or constructively, by citizens or
residents of the United States, United States domestic partnerships or
corporations, or estates or trusts other than foreign estates or trusts (as
defined by the Code Section 7701(a)(31)), and we are found to be engaged
primarily in the business of investing, reinvesting, or trading in securities,
commodities, or any interest therein, it is possible that we might be treated as
a "foreign investment company" as defined in Section 1246 of the Code, causing
all or part of any gain realized by a U.S. Holder selling or exchanging our
common shares to be treated as ordinary income rather than capital
gains.

Passive Foreign Investment Company

A U.S. Holder who holds stock in a foreign corporation during
any year in which such corporation qualifies as a passive foreign investment
company ("PFIC") is subject to U.S. federal income taxation of that foreign
corporation under one of two alternative tax methods at the election of each
such U.S. Holder.

Section 1297 of the Code defines a PFIC as a corporation that
is not formed in the United States and, for any taxable year, either (i) 75% or
more of its gross income is "passive income," which includes interest, dividends
and certain rents and royalties or (ii) the average percentage, by value (or, if
the company is a controlled foreign corporation or makes an election, adjusted
tax basis), of its assets that produce or are held for the production of
"passive income" is 50% or more. For taxable years of U.S. persons beginning
after December 31, 1997, and for tax years of foreign corporations ending with
or within such tax years, the Taxpayer Relief Act of 1997 provides that publicly
traded corporations must apply this test on a fair market value basis only. The
Registrant believes that it is a PFIC.

As a PFIC, each U.S. Holder must determine under which of the
alternative tax methods it wishes to be taxed. Under one method, a U.S. Holder
who elects in a timely manner to treat the Registrant as a Qualified Electing
Fund ("QEF"), as defined in the Code, (an "Electing U.S. Holder") will be
subject, under Section 1293 of the Code, to current federal income tax for any
taxable year in which we qualify as a PFIC on his pro-rata share of our (i) "net
capital gain" (the excess of net long-term capital gain over net short-term
capital loss), which will be taxed as long-term capital gain to the Electing
U.S. Holder and (ii) "ordinary earnings" (the excess of earnings and profits
over net capital gain), which will be taxed as ordinary income to the Electing
U.S. Holder, in each case, for the U.S. Holder's taxable year in which (or with
which) our taxable year ends, regardless of whether such amounts are actually
distributed. Such an election, once made shall apply to all subsequent years
unless revoked with the consent of the IRS.

A QEF election also allows the Electing U.S. Holder to (i)
generally treat any gain realized on the disposition of his common shares (or
deemed to be realized on the pledge of his common shares) as capital gain; (ii)
treat his share of our net capital gain, if any, as long-term capital gain
instead of ordinary income, and (iii) either avoid interest charges resulting
from PFIC status altogether (see discussion of interest charge below), or make
an annual election, subject to certain limitations, to defer payment of current
taxes on his share of our annual realized net capital gain and ordinary earnings
subject, however, to an interest charge. If the Electing U.S. Holder is an
individual, such an interest charge would be not deductible.

The procedure a U.S. Holder must comply with in making an
timely QEF election will depend on whether the year of the election is the first
year in the U.S. Holder's holding period in which we are a PFIC. If the U.S.
Holder makes a QEF election in such first year, (sometimes referred to as a
"Pedigreed QEF Election"), then the U.S. Holder may make the QEF election by
simply filing the appropriate documents at the time the U.S. Holder files its
tax return for such first year. If, however, we qualified as a PFIC in a prior
year, then the U.S. Holder may make an "Unpedigreed QEF Election" by recognizing
as an "excess distribution" (i) under the rules of Section 1291 (discussed
below), any gain that he would otherwise recognize if the U.S. Holder sold his
stock on the qualification date (Deemed Sale Election) or (ii) if we are a
controlled foreign corporation ("CFC"), the Holder's pro rata share of the
corporation's earnings and profits (Deemed Dividend Election) (But see
"Elimination of Overlap Between Subpart F Rules and PFIC Provisions"). The
effect of either the deemed sale election or the deemed dividend election is to
pay all prior deferred tax, to pay interest on the tax deferral and to be
treated thereafter as a Pedigreed QEF as discussed in the prior paragraph. With
respect to a situation in which a Pedigreed QEF election is made, if we no
longer qualify as a PFIC in a subsequent year, normal Code rules and not the
PFIC rules will apply.

If a U.S. Holder has not made a QEF Election at any time (a
"Non-electing U.S. Holder"), then special taxation rules under Section 1291 of
the Code will apply to (i) gains realized on the disposition (or deemed to be
realized by reason of a pledge) of his common shares and (ii) certain "excess
distributions", as specially defined, by our company. An "excess distribution"
is any current-year distribution in respect of PFIC stock that represents a
rateable portion of the total distributions in respect of the stock during the
year that exceed 125 percent of the average amount of distributions in respect
of the stock during the three preceding years.

A Non-electing U.S. Holder generally would be required to
pro-rate all gains realized on the disposition of his common shares and all
excess distributions over the entire holding period for the common shares. All
gains or excess distributions allocated to prior years of the U.S. Holder (other
than years prior to our first taxable year during such U.S. Holder's holding
period and beginning after January, 1987 for which it was a PFIC) would be taxed
at the highest tax rate for each such prior year applicable to ordinary income.
The Non-electing U.S. Holder also would be liable for interest on the deferred
tax liability for each such prior year calculated as if such liability had been
due with respect to each such prior year. A Non-electing U.S. Holder that is an
individual is not allowed a deduction for interest on the deferred tax
liability. The portions of gains and distributions that are not characterized as
"excess distributions" are subject to tax in the current year under the normal
tax rules of the Internal Revenue Code.

If we are a PFIC for any taxable year during which a
Non-electing U.S. Holder holds common shares, then we will continue to be
treated as a PFIC with respect to such common Shares, even if it is no longer by
definition a PFIC. A Non-electing U.S. Holder may terminate this deemed PFIC
status by electing to recognize gain (which will be taxed under the rules
discussed above for Non-Electing U.S. Holders) as if such common shares had been
sold on the last day of the last taxable year for which it was a PFIC.

Under Section 1291(f) of the Code, the Department of the
Treasury has issued proposed regulations that would treat as taxable certain
transfers of PFIC stock by Non-electing U.S. Holders that are generally not
otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations,
and transfers at death. If a U.S. Holder makes a QEF Election that is not a
Pedigreed Election (i.e., it is made after the first year during which we are a
PFIC and the U.S. Holder holds our shares) (a "Unpedigreed Election"), the QEF
rules apply prospectively but do not apply to years prior to the year in which
the QEF first becomes effective. U.S. Holders should consult their tax advisors
regarding the specific consequences of making a Non-Pedigreed QEF Election.

Certain special, generally adverse, rules will apply with
respect to the common shares while we are a PFIC whether or not it is treated as
a QEF. For example under Section 1297(b)(6) of the Code (as in effect prior to
the Taxpayer Relief Act of 1997), a U.S. Holder who uses PFIC stock as security
for a loan (including a margin loan) will, except as may be provided in
regulations, be treated as having made a taxable disposition of such stock.

The foregoing discussion is based on currently effective
provisions of the Code, existing and proposed regulations thereunder, and
current administrative rulings and court decisions, all of which are subject to
change. Any such change could affect the validity of this discussion. In
addition, the implementation of certain aspects of the PFIC rules requires the
issuance of regulations which in many instances have not been promulgated and
which may have retroactive effect. There can be no assurance that any of these
proposals will be enacted or promulgated, and if so, the form they will take or
the effect that they may have on this discussion. Accordingly, and due to the
complexity of the PFIC rules, U.S. Holders of the Registrant are strongly urged
to consult their own tax advisors concerning the impact of these rules on their
investment in our company. For a discussion of the impact of the Taxpayer Relief
Act of 1997 on a U.S. Holder of a PFIC, see "Mark-to-Market Election For PFIC
Stock Under the Taxpayer Relief Act of 1997" and "Elimination of Overlap Between
Subpart F Rules and PFIC Provisions" below.

Mark-to-Market Election for PFIC Stock Under the Taxpayer
Relief Act of 1997

The Taxpayer Relief Act of 1997 provides that a U.S. Holder of
a PFIC may make a mark-to-market election with respect to the stock of the PFIC
if such stock is marketable as defined below. This provision is designed to
provide a current inclusion provision for persons that are Non-Electing Holders.
Under the election, any excess of the fair market value of the PFIC stock at the
close of the tax year over the Holder's adjusted basis in the stock is included
in the Holder's income. The Holder may deduct any excess of the adjusted basis
of the PFIC stock over its fair market value at the close of the tax year.
However, deductions are limited to the net mark-to-market gains on the stock
that the Holder included in income in prior tax years, or so called "unreversed
inclusions." For purposes of the election, PFIC stock is marketable if it is
regularly traded on (1) a national securities exchange that is registered with
the SEC, (2) the national market system established under Section II A of the
Securities Exchange Act of 1934, or (3) an exchange or market that the IRS
determines has rules sufficient to ensure that the market price represents
legitimate and sound fair market value.

A Holder's adjusted basis of PFIC stock is increased by the
income recognized under the mark-to-market election and decreased by the
deductions allowed under the election. If a U.S. Holder owns PFIC stock
indirectly through a foreign entity, the basis adjustments apply to the basis of
the PFIC stock in the hands of the foreign entity for the purpose of applying
the PFIC rules to the tax treatment of the U.S. owner. Similar basis adjustments
are made to the basis of the property through which the U.S. persons hold the
PFIC stock.

Income recognized under the mark-to-market election and gain on
the sale of PFIC stock with respect to which an election is made is treated as
ordinary income. Deductions allowed under the election and loss on the sale of
PFIC with respect to which an election is made, to the extent that the amount of
loss does not exceed the net mark-to-market gains previously included, are
treated as ordinary losses. The U.S. or foreign source of any income or losses
is determined as if the amount were a gain or loss from the sale of stock in the
PFIC.

If PFIC stock is owned by a CFC (discussed below), the CFC is
treated as a U.S. person that may make the mark-to-market election. Amounts
includible in the CFC's income under the election are treated as foreign
personal holding company income, and deductions are allocable to foreign
personal holding company income.

The above provisions apply to tax years of U.S. persons
beginning after December 31, 1997, and to tax years of foreign corporations
ending with or within such tax years of U.S. persons.

The rules of Code Section 1291 applicable to nonqualified funds
as discussed above generally do not apply to a U.S. Holder for tax years for
which a mark-to-market election is in effect. If Code Section 1291 is applied
and a mark-to-market election was in effect for any prior tax year, the U.S.
Holder's holding period for the PFIC stock is treated as beginning immediately
after the last tax year of the election. However, if a taxpayer makes a
mark-to-market election for PFIC stock that is a nonqualified fund after the
beginning of a taxpayer's holding period for such stock, a co-ordination rule
applies to ensure that the taxpayer does not avoid the interest charge with
respect to amounts attributable to periods before the election.

Controlled Foreign Corporation Status

If more than 50% of the voting power of all classes of stock or
the total value of the stock of our company is owned, directly or indirectly, by
U.S. Holders, each of whom own after applying rules of attribution 10% or more
of the total combined voting power of all classes of stock of our company, we
would be treated as a "controlled foreign corporation" or "CFC" under Subpart F
of the Code. This classification would bring into effect many complex results
including the required inclusion by such 10% U.S. Holders in income of their pro
rata shares of "Subpart F income" (as defined by the Code) of our company and
our earnings invested in "U.S. property" (as defined by Section 956 of the
Code). In addition, under Section 1248 of the Code if we are considered a CFC at
any time during the five year period ending with the sale or exchange of its
stock, gain from the sale or exchange of common shares of our company by such a
10% U.S. Holder of our common stock at any time during the five year period
ending with the sale or exchange is treated as ordinary dividend income to the
extent of our earnings and profits attributable to the stock sold or exchanged.
Because of the complexity of Subpart F, and because we may never be a CFC, a
more detailed review of these rules is beyond of the scope of this
discussion.

Elimination of Overlap Between Subpart F Rules and PFIC
Provisions

Under the Taxpayer Relief Act of 1997, a PFIC that is also a
CFC will not be treated as a PFIC with respect to certain 10% U.S. Holders. For
the exception to apply, (i) the corporation must be a CFC within the meaning of
section 957(a) of the Code and (ii) the U.S. Holder must be subject to the
current inclusion rules of Subpart F with respect to such corporation (i.e., the
U.S. Holder is a "United States Shareholder," see "Controlled Foreign
Corporation," above). The exception only applies to that portion of a U.S.
Holder's holding period beginning after December 31, 1997. For that portion of a
United States Holder before January 1, 1998, the ordinary PFIC and QEF rules
continue to apply.

As a result of this new provision, if we were ever to become a
CFC, U.S. Holders who are currently taxed on their pro rata shares of Subpart F
income of a PFIC which is also a CFC will not be subject to the PFIC provisions
with respect to the same stock if they have previously made a Pedigreed QEF
Election. The PFIC provisions will however continue to apply to U.S Holders for
any periods in which Subpart F does not apply (for example he is no longer a 10%
Holder or we are no longer a CFC) and to U.S. Holders that did not make a
Pedigreed QEF Election unless the U.S. Holder elects to recognize gain on the
PFIC shares held in our company as if those shares had been sold.

ALL PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON
SHARES OF OUR COMPANY.

H. Documents on Display

The documents concerning our company may be viewed at the
offices of our corporate solicitor, Clark, Wilson, Suite 800 - 885 West Georgia
Street, Vancouver, British Columbia V6C 3H1, during normal business
hours.

I. Subsidiary Information

As at the date of this annual report, we do not have any
wholly-owned subsidiaries. Our previously wholly-owned subsidiary, Green River
Petroleum (USA) Inc., a company incorporated on October 13, 1997, under the laws
of the State of Wyoming, was dissolved by the State of Wyoming.

ITEM 11 Quantitative and Qualitative Disclosures About Market
Risk

Not applicable.

ITEM 12 Description of Securities Other Than Equity
Securities

Not applicable.

PART II

ITEM 13 Defaults, Dividend Arrearages and Delinquencies

Not applicable.

ITEM 14 Material Modifications to the Rights of Security
Holders and Use of Proceeds

Not applicable.

ITEM 15 Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, within the
90 days prior to the filing date of this report, we have carried out an
evaluation of the effectiveness of the design and operation of our company's
disclosure controls and procedures. This evaluation was carried out under the
supervision and with the participation of our company's management, including
our company's president and chief executive officer. Based upon that evaluation,
our company's president and chief executive officer concluded that our company's
disclosure controls and procedures are effective. There have been no significant
changes in our company's internal controls or in other factors, which could
significantly affect internal controls subsequent to the date we carried out our
evaluation.

Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to be disclosed
in our company's reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our company's reports filed
under the Exchange Act is accumulated and communicated to management, including
our company's president and chief executive officer as appropriate, to allow
timely decisions regarding required disclosure.

ITEM 16 Reserved

PART III

ITEM 17 Financial Statements

Refer to Item 18 - Financial Statements

ITEM 18 Financial Statements

Financial Statements Filed as Part of the Annual Report:

Financial Statements of Netco Energy Inc. for the Years Ended
December 31, 2002, 2001, and 2000 (audited), reported on by Lancaster &
David, Chartered Accountants:

Auditor's Report dated April 25, 2003 as to disclosure changes
for generally accepted accounting principles in the United States

Consolidated Balance Sheets as at December 31, 2002 and
2001

Consolidated Statements of Income and Deficit for the years
ended December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000

Notes to Financial Statements







NETCO ENERGY INC.

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002





AUDITORS' REPORT

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF INCOME AND DEFICIT

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|LANCASTER & DAVID     | Incorporated Partners                     
|--------------------- | ------------------------------------------
|CHARTERED ACCOUNTANTS | David E. Lancaster, CAMichael J. David, CA







|AUDITORS' REPORT
|----------------



To the Shareholders of Netco Energy Inc.

We have audited the consolidated balance sheets of Netco Energy
Inc. as at December 31, 2002 and 2001 and the consolidated statements of loss
and deficit and cash flows for each of the three years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the Company as at
December 31, 2002 and 2001 and the results of its operations and its cash flows
for each of the three years then ended in accordance with Canadian generally
accepted accounting principles.







"Lancaster & David"CHARTERED ACCOUNTANTS

Vancouver, BCApril 25, 2003





|New Westminster Office- Suite 404, 960 Quayside
      Drive, New Westminster, BC, Canada, V3M 6G2 Facsimile:
      604.524.9837Vancouver Office - Suite 3240, 666 Burrard Street,
      Vancouver, BC, Canada, V6C 2X8 Facsimile:604.602.0867
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Telephone:604.717.5526                                                                                                                                                                                                                       





NETCO ENERGY INC.CONSOLIDATED BALANCE SHEETSAS AT
DECEMBER 31(Prepared in Canadian dollars)

|                                                           
|-----------------------------------------------------------
|                                                           
|                                                           
|                                                           
|                                                           
|ASSETS                                                     
|                                                           
|CURRENT                                                    
|Cash and short-term investments                            
|Accrued revenues                                           
|Prepaids and other                                         
|                                                           
|                                                           
|                                                           
|PROPERTY AND EQUIPMENT(Note 4)                             
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|LIABILITIES                                                
|CURRENT                                                    
|Accounts payable and accrued liabilities                   
|Deposit (Note 4)                                           
|                                                           
|                                                           
|                                                           
|LIABILITY TO ISSUE SHARES                                  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|SHAREHOLDERS' EQUITY                                       
|                                                           
|SHARE CAPITAL (Note 5)                                     
|Issued at December 31, 2002 - 6,461,829 common
      shares
|(December 31, 2001 - 4,749,329 common
      shares)        
|DEFICIT                                                    
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           







|"Donald A. Sharpe"         |  | "Hans Christopher Schultze"           
|-------------------------- |  | --------------------------------------
|Donald A. Sharpe -Director |  | Hans Christopher Schultze -
  Director

The accompanying notes are an integral part of these
consolidated financial statements.





NETCO ENERGY INC.CONSOLIDATED STATEMENTS OF INCOME AND
DEFICITFOR THE YEARS ENDED DECEMBER 31(Prepared in Canadian
dollars)

|                                    |  | 2002          | 2001          | 2000         
|----------------------------------- |  | ------------- | ------------- | -------------
|                                   
|                                   
|                                    |  |               |               |              
|                                    |  |               |               |              
|REVENUE                             |  |               |               |              
|Petroleum and natural gas           |  | $ 1,281,645   | $ 604,160     | $ 592,072    
|Royalties                           |  | (208,154)     | (94,812)      | (93,742)     
|                                   
|                                    |  |               |               |              
|                                    |  | 1,073,491     | 509,348       | 498,330      
|Gain from oil and gas properties    |  | 443,079       | -             | -            
|Foreign exchange gain               |  | 28,833        | 18,556        | 13,223       
|Interest and other income           |  | 7,699         | 20,939        | 13,996       
|                                   
|                                    |  |               |               |              
|                                    |  | 1,553,102     | 548,843       | 525,549      
|                                   
|                                    |  |               |               |              
|                                    |  |               |               |              
|EXPENSES                            |  |               |               |              
|Depletion and depreciation          |  | 311,000       | 37,181        | 150,419      
|General and administration          |  | 201,245       | 266,808       | 250,267      
|Operating                           |  | 162,732       | 52,028        | 43,456       
|                                   
|                                    |  |               |               |              
|                                    |  | 674,977       | 356,017       | 444,142      
|                                   
|                                    |  |               |               |              
|NET INCOME FOR THE YEAR             |  | 878,125       | 192,826       | 81,407       
|                                    |  |               |               |              
|DEFICIT, beginning of year          |  | (7,760,058)   | (7,952,884)   | (8,034,291)  
|                                   
|                                    |  |               |               |              
|DEFICIT, end of year                |  | $ (6,881,933) | $ (7,760,058) | $ (7,952,884)
|                                   
|                                    |  |               |               |              
|                                    |  |               |               |              
|                                    |  |               |               |              
|                                    |  |               |               |              
|                                    |  |               |               |              
|EARNINGS PER SHARE(Note 2)          |  |               |               |              
|Basic                               |  | $ 0.14        | $ 0.06        | $ 0.03       
|Diluted                             |  | $ 0.13        | $ 0.05        | $ 0.02       
|                                    |  |               |               |              
|Weighted average shares outstanding |  |               |               |              
|Basic                               |  | 6,462,000     | 3,466,000     | 2,741,000    
|Diluted                             |  | 6,805,000     | 4,211,000     | 4,047,000    
|                                    |  |               |               |              



The accompanying notes are an integral part of these
consolidated financial statements.



NETCO ENERGY INC.CONSOLIDATED STATEMENTS OF CASH
FLOWSFOR THE YEARS ENDED DECEMBER 31(Prepared in Canadian
dollars)

|                                                            |  | 2002      | 2001        | 2000     
|----------------------------------------------------------- |  | --------- | ----------- | ---------
|                                                           
|                                                           
|                                                            |  |           |             |          
|                                                            |  |           |             |          
|CASH FLOWS PROVIDED BY (USED FOR):                          |  |           |             |          
|                                                            |  |           |             |          
|OPERATING ACTIVITIES                                        |  |           |             |          
|Net income for the year                                     |  | $ 878,125 | $ 192,826   | $ 81,407 
|Adjust for non-cash items:                                  |  |           |             |          
|Depletion and depreciation                                  |  | 311,000   | 37,181      | 150,419  
|Gain from oil and gas properties                            |  | (443,079) | -           | -        
|Foreign exchange gain                                       |  | (28,833)  | (18,556)    | (13,223) 
|                                                           
|                                                            |  |           |             |          
|                                                            |  | 717,213   | 211,451     | 218,603  
|                                                           
|                                                            |  |           |             |          
|Net change in non-cash working capital
    items:           |  |           |             |          
|Prepaids and other                                          |  | (195,917) | 5,392       | 55,865   
|Accrued oil and gas revenues                                |  | (366,574) | 123,721     | (177,744)
|Accounts payable and accrued liabilities                    |  | 82,203    | 3,689       | 22,973   
|                                                           
|                                                            |  |           |             |          
|                                                            |  | (480,288) | 132,802     | (98,906) 
|                                                           
|                                                            |  |           |             |          
|                                                            |  | 236,925   | 344,253     | 119,697  
|                                                           
|                                                            |  |           |             |          
|FINANCING ACTIVITIES                                        |  |           |             |          
|Liability to issue shares                                   |  | (185,250) | 185,250     | -        
|Proceeds from issuance of share capital                     |  | 385,250   | 312,000     | 3,250    
|                                                           
|                                                            |  |           |             |          
|                                                            |  | 200,000   | 497,250     | 3,250    
|                                                           
|                                                            |  |           |             |          
|INVESTING ACTIVITIES                                        |  |           |             |          
|Deposit received (Note 4)                                   |  | (25,000)  | 25,000      | -        
|Additions to property and equipment, net of
      disposals |  | (552,453) | (1,089,005) | 77,874   
|                                                           
|                                                            |  |           |             |          
|                                                            |  | (577,453) | (1,064,005) | 77,874   
|                                                           
|                                                            |  |           |             |          
|(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS            |  | (140,527) | (222,502)   | 200,821  
|                                                            |  |           |             |          
|CASH AND CASH EQUIVALENTS, beginning of year                |  | 262,862   | 485,364     | 284,543  
|                                                           
|                                                            |  |           |             |          
|CASH AND CASH EQUIVALENTS, end of year                      |  | $ 122,335 | $ 262,862   | $485,364 
|                                                           
|                                                            |  |           |             |          
|                                                            |  |           |             |          
|                                                            |  |           |             |          
|SUPPLEMENTARY CASH FLOW INFORMATION(Note
      3)           |  |           |             |          



The accompanying notes are an integral part of these
consolidated financial statements.

NETCO ENERGY INC.NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTSDECEMBER 31, 2002

|NOTE 1 - NATURE OF OPERATIONS
|-----------------------------
|                             

The Company's principal business activity is the exploration,
development and production of oil and natural gas reserves located in Canada.
During the prior fiscal year, the Company entered into an agreement to sell all
of its US oil and natural gas interests.

|NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|---------------------------------------------------
|                                                   

These consolidated financial statements are expressed in
Canadian dollars except where noted and have been prepared in accordance with
accounting principles generally accepted in Canada, which differ from those in
the United States as explained in Note 11. All share and per share information
have been retroactively restated to reflect the share consolidation (1:5) on
July 6, 1999 and the share consolidation (1:2) on October 2, 2000.

Principles of consolidation

These financial statements have been prepared on a consolidated
basis and include the accounts of the Company and its wholly owned subsidiary,
Green River Petroleum (USA) Inc. All significant intercompany balances and
transactions have been eliminated.

Property and equipment

The Company follows the full cost method of accounting for oil
and gas properties. Under this method, all costs associated with the acquisition
of, exploration for and the development of petroleum and natural gas reserves
are capitalized, recognizing one cost centre per country. All of the Company's
oil and gas interests are held in two cost centres: Canada and the United
States. Such costs include land acquisition costs, geological and geophysical
expenses, costs of drilling both productive and non-productive wells, and
related overhead charges. Such costs do not necessarily reflect present values.
Proceeds from the sale of oil and gas properties reduce capitalized costs, with
no gain or loss recognized, unless such a sale would significantly alter the
rate of depletion.

Costs directly associated with the acquiring and evaluating of
unproved properties are initially excluded from the costs subject to depletion.
These unevaluated properties are assessed periodically to ascertain whether
impairment has occurred. When proven reserves are assigned or the property is
considered to be impaired, the cost of the property or the amount of the
impairment is added to the costs subject to depletion.

The costs related to a cost centre from which there is
production is depleted on the unit of production method based on estimated
proven reserves as determined by independent reservoir engineers. For purposes
of the calculation, oil and natural gas reserves are converted into a common
unit of measure on the basis of ten thousand cubic feet of gas to one barrel of
oil.

In applying the full cost method, the Company calculates a
ceiling test which restricts the capitalized costs less accumulated depletion
from exceeding an amount equal to the estimated undiscounted value of future net
revenues from proven oil and gas reserves, based on period end prices. If the
net carrying cost of the oil and gas properties exceeds the ultimate recoverable
amount, the excess amount is charged against operations as additional
depletion.

Substantially all oil and gas activities are conducted jointly
with others and accordingly the accounts reflect only the Company's
proportionate interest in such activities.

Depreciation of office equipment is provided using the
declining balance basis at the rate of 20% and 30% per annum.

Earnings per share

The earnings per share figures are calculated using the
weighted monthly average number of shares outstanding during the respective
years, after giving retroactive effect to the share consolidation (1:5) on July
6, 1999 and the share consolidation (1:2) on October 2, 2000. The calculation of
fully diluted earnings per share figures considered the potential exercise of
outstanding share purchase options and warrants or other contingent issuances
(i.e. Special Warrant financing) to the extent each option, warrant or
contingent issuance was dilutive.

Cash and cash equivalents

The Company considers all highly liquid instruments with a
maturity of three months or less at the time of issuance to be cash equivalents.
As at December 31, 2002 and 2001, the Company had no cash equivalents.



NETCO ENERGY INC.NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTSDECEMBER 31, 2002

|NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (Continued)
|---------------------------------------------------------------------

Foreign currency translation

The consolidated financial statements are presented in Canadian
dollars. The Company and its subsidiary are considered to be integrated
operations and the accounts are translated using the temporal method. Under this
method, foreign denominated monetary assets and liabilities are translated to
their Canadian dollar equivalents using foreign exchange rates that prevailed at
the balance sheet date. Non-monetary items are translated at historical exchange
rates, except for items carried at their market value, which are translated at
the rate of exchange in effect at the balance sheet date. Revenue and expense
items are translated at average rates of exchange during the year, except for
depletion and depreciation, which are translated at the same rates of exchange
as the related assets. Exchange gains or losses arising on foreign currency
translation are included in the determination of operating results for the
year.

Estimates, Assumptions and Measurement Uncertainty

The preparation of financial statements in conformity with
Canadian generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates. The amounts
recorded for depletion, depreciation and amortization of petroleum and natural
gas properties and equipment and the provision for future site restoration and
abandonment costs are based on estimates. The ceiling test is based on estimates
of proved reserves, production rates, oil and gas prices, future costs and other
relevant assumptions. By their nature, these estimates are subject to
measurement uncertainty and the effect on the financial statements of changes in
such estimates in future periods could be significant.

Financial instruments

The fair values of cash and cash equivalents, accrued revenues,
prepaids and other, and accounts payable and accrued liabilities were estimated
to approximate their carrying values due to the immediate or short term maturity
of these financial instruments. The Company operates in Canada and the United
States, giving rise to significant exposure to market risks from changes in
interest rates and foreign exchange rates. The financial risk is the risk to the
Company's earnings that arises from fluctuations in foreign exchange rates and
the degree of volatility of these rates. The Company does not use derivative
instruments to reduce its exposure to foreign currency risk. Management does not
believe the Company is exposed to significant credit or interest rate
risks.

Stock-based compensation plans

The Company has an incentive stock-based compensation plan,
which is described in Note 6. Effective January 1, 2002 the Company adopted the
new recommendations of the Canadian Institute of Chartered Accountants with
respect to stock-based compensation and other stock-based payments. The new
recommendations require that stock-based payments to non-employees be accounted
for using a fair value based method of accounting. The recommendations
encourage, but do not require, the use of a fair valued based method to account
for stock-based compensation to employees. The Company has elected to continue
recording stock-based compensation to employees using an intrinsic value based
method and will disclose pro forma information on the fair value of options
issued during the period in the notes to the financial statements. As no stock
options or stock-based payments were made to employees during the year ended
December 31, 2002, no pro forma information is provided in these financial
statements. The adoption of this new accounting policy has no cumulative effect
on the prior period's financial statements.

|NOTE 3 - SUPPLEMENTARY CASH FLOW INFORMATION
|--------------------------------------------
|                                            
|                                            
|                                            
|                                            
|CASH AND CASH EQUIVALENTS CONSISTS OF:      
|Cash                                        
|Short-term investments                      
|                                            
|                                            
|                                            
|                                            
|                                            
|Interest paid                               
|Income Taxes paid                           







NETCO ENERGY INC.NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTSDECEMBER 31, 2002

|NOTE 4 - PROPERTY AND EQUIPMENT
|-------------------------------
|                               
|Cost                           
|                               
|                               
|                               
|Oil and gas properties         
|Office equipment               
|                               
|                               
|                               
|                               

|Oil and gas properties allocated by cost centre: |  |  |             |            
|------------------------------------------------ |  |  | ----------- | -----------
|                                                 |  |  |             |            
|United States                                    |  |  |             |            
|Sublette County, Wyoming                         |  |  | $ -         | $ 14,894   
|Jefferson Davis Parish, Louisiana                |  |  | -           | 284,911    
|                                                
|                                                 |  |  |             |            
|                                                 |  |  | -           | 299,805    
|                                                
|Canada                                           |  |  |             |            
|Alberta                                          |  |  | 2,127,293   | 1,113,028  
|                                                
|                                                 |  |  |             |            
|                                                 |  |  | $ 2,127,293 | $ 1,412,833
|                                                

At December 31, 2002 the amount of costs that were related to
undeveloped land excluded from the depletion base amounted to $624,721 (2001 -
$1,127,922).

The Company entered into a formal agreement dated August 7,
2001 with Patriot Petroleum Corp. ("Patriot") to sell all its interests in the
oil and gas properties located in Louisiana and Wyoming. Patriot, a public
company with common directors and officers, is listed on the Canadian Venture
Exchange ("CDNX") and was classified as a Capital Pool Company as defined by the
policies of the CDNX. The sale price was US$644,419, subject to adjustment for
revenues received by the Company from May 1, 2001 until closing of the
transaction in March 2003. The Company received a non-refundable deposit of
$25,000. This agreement was subject to certain conditions precedent including
receipt of regulatory and non-interested director and shareholder
approvals.

|NOTE 5 - SHARE CAPITAL
|----------------------
|                      

Authorized:

Unlimited number of preferred shares without par
value

Issued:

|                               | Common Shares | Value      
|------------------------------ | ------------- | -----------
|                              
|                              
|                               |               |            
|Balance at December 31, 2000   | 3,199,329     | $ 8,937,234
|                              
|                               |               |            
|Issued during the year:        |               |            
|- by exercise of stock options | 25,000        | 5,500      
|- by exercise of warrants      | 25,000        | 6,500      
|- by Private Placement         | 1,500,000     | 300,000    
|                              
|                               |               |            
|                               | 1,550,000     | 312,000    
|                              
|                               |               |            
|Balance at December 31, 2001   | 4,749,329     | 9,249,234  
|Issued during the year:        |               |            
|- by exercise of warrants      | 712,500       | 185,250    
|- by Private Placement         | 1,000,000     | 200,000    
|                              
|                               |               |            
|                               | 1,712,500     | 385,250    
|                              
|                               |               |            
|Balance at December 31, 2002   | 6,461,829     | $ 9,634,484
|                              







NETCO ENERGY INC.NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTSDECEMBER 31, 2002

|NOTE 5 - SHARE CAPITAL(continued)
|---------------------------------
|                                 

Share purchase warrants are outstanding to purchase 2,500,000
common shares exercisable at a price of $0.23 per common share on or before
November 15, 2003.

The Company completed a non-brokered private placement
consisting of 1,000,000 units at a price of $0.20 per unit for total proceeds of
$200,000, to a public company listed on the TSX Venture Exchange. A director of
the Company is a director and shareholder of the public company. Each unit
consisted of one common share and one non-transferable share purchase warrant
entitling the holder to acquire one additional common share at a price of $0.23
per share exercisable over a two year period.

During the prior year, the Company completed a non-brokered
private placement consisting of 1,500,000 flow through units at a price of $0.20
per unit for total proceeds of $300,000. Each unit consisted of one common share
and one non-transferable share purchase warrant entitling the holder to acquire
an additional common share exercisable at a price of $0.23 per share on or
before November 23, 2003. Proceeds of the private placement were used for the
Company's exploration drilling program in Alberta.

|NOTE 6 - STOCK OPTION PLAN
|--------------------------
|                          

The Company's Board of Directors approved the adoption of a
stock incentive plan (the "2002 Stock Option Plan") dated June 27, 2002 in
accordance with the policies of the TSX Venture Exchange. The Board of Directors
is authorized to grant options to directors, officers, consultants or employees
to acquire up to a maximum of 1,292,365 common shares. The exercise price of
options granted under the 2002 Stock Option Plan shall be as determined by the
Board of Directors when such options are granted, subject to any limitations
imposed by any relevant stock exchange or regulatory authority. The maximum
number of options that may be granted to any one person must not exceed 5% of
the common shares outstanding at the time of the grant. Any options granted
under the 2002 Stock Option Plan shall vest in the Optionee as follows: 33.33%
six months from date of grant, 33.33% twelve months from date of grant, and the
remaining 33.33% eighteen months from the date of grant.

A summary of the changes in the Company's common share purchase
options is presented below:

|                           | December 31, 2002 |                                    | December 31, 2001
|-------------------------- | ----------------- | ---------------------------------- | -----------------
|                          
|                           | Number            | Weighted Average
    ExercisePrice |                  
|                          
|                          
|                           |                   |                                    |                  
|Balance, beginning of year | 331,000           | $ 0.25                             |                  
|Granted                    | -                 | -                                  |                  
|Exercised                  | -                 | -                                  |                  
|Forfeited / Cancelled      | -                 | -                                  |                  
|                          
|                           |                   |                                    |                  
|Balance, end of year       | 331,000           | $ 0.25                             |                  
|                          



|               | Outstanding      |                                                            | Exercisable                       
|-------------- | ---------------- | ---------------------------------------------------------- | ----------------------------------
|Exercise Price | Number of shares | Weighted Average RemainingContractual
      Life(in years) | WeightedAverage Exercise
    Price
|              
|              
|               |                  |                                                            |                                   
|$0.22          | 193,500          | 1.89                                                       | 4.60                              
|$0.26          | 87,500           | 1.93                                                       | 2.60                              
|$0.33          | 50,000           | 2.65                                                       | 3.75                              
|              
|               |                  |                                                            |                                   
|               | 331,000          |                                                            | $0.25                             
|              





NETCO ENERGY INC.NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTSDECEMBER 31, 2002

|NOTE 7 - RELATED PARTY TRANSACTIONS
|-----------------------------------
|                                   

During the year, the Company incurred $60,000 (2001 - $60,000)
in management fees to a director.

The Company entered into a purchase agreement with Patriot
Petroleum Corp. ("Patriot") to sell the Company's interest in its oil and gas
properties located in Wyoming and Louisiana. Patriot has directors and officers
in common with the Company. Refer to Note 4.



|NOTE 8 - INCOME TAXES
|---------------------
|                     

The Company has non-capital losses for Canadian income tax
purposes of approximately $1,169,000 (2001 - $865,000), which may by used to
reduce future taxable income in Canada, expiring between 2002 and 2008. The
Company has a net capital loss of $979,000 (2001 - $979,000), which can be
carried forward to set against future taxable capital gains. The Company has
unclaimed exploration and development expenditures of approximately $2,059,822
(2001 - $815,000) which can be deducted for income tax purposes in Canada in
future years at the Company's discretion.

In assessing the realizability of future tax assets, management
considers whether it is more likely than not that some portion or all of the
future tax assets will not be realized. The ultimate realization of future tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of future tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. The
amount of the future tax asset considered realizable could change materially in
the near term based on future taxable income during the carry forward period. A
valuation allowance has been provided against all net future tax assets, as
realization of such net assets is uncertain.

|NOTE 9 - SEGMENTED INFORMATION
|------------------------------
|                              

The Company is primarily engaged in oil and gas exploration in
Canada and the United States. Segmented operations and identifiable assets are
as follows:



|                              |  |  |  | 2002        | 2001       
|----------------------------- |  |  |  | ----------- | -----------
|                             
|                             
|                              |  |  |  |             |            
|Income (Loss) from Operations |  |  |  |             |            
|Canada                        |  |  |  | $ 411,510   | $ (255,939)
|United States                 |  |  |  | 466,615     | 448,764    
|                             
|                              |  |  |  |             |            
|                              |  |  |  | $ 878,125   | $ 192,826  
|                             
|                              |  |  |  |             |            
|                              |  |  |  | 2002        | 2001       
|                             
|                             
|                              |  |  |  |             |            
|Identifiable Assets           |  |  |  |             |            
|Canada                        |  |  |  | $ 2,809,646 | $ 1,354,677
|United States                 |  |  |  | 63,621      | 383,261    
|                             
|                              |  |  |  |             |            
|                              |  |  |  | $ 2,873,267 | $ 1,737,938
|                             
|                              |  |  |  |             |            









NETCO ENERGY INC.NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTSDECEMBER 31, 2002

|NOTE 10 - SUBSEQUENT EVENTS
|---------------------------
|                           

a) The Company completed a non-brokered private placement
consisting of 100 Convertible Debentures (the "Debentures") valued at $10,000
per debenture to net the Company proceeds of $1,000,000. Each Debenture carries
interest at the rate of 15% per annum, payable quarterly, in arrears and has a
term of three years, expiring on March 28, 2006, as may be extended upon mutual
agreement of the Company and the placees. All or any portion of the outstanding
principal sum and accrued interest of each Debenture is convertible at the
option of the placees into units in the capital of the Company at a price of
$0.30 per unit if converted during the first two years of the Debenture or at a
price of $0.33 per unit if converted during the third year of the Debenture.

Each unit will consist of one common share and one
non-transferable share purchase warrant. Each warrant entitles the placees to
purchase one additional common share at a price of:

(i) $0.30 per warrant share if the debenture is converted after
the date of issuance of the Debenture and on or before one year following the
date of issuance of the Debenture;

(ii) $0.40 per warrant share if the debenture is converted
after the first anniversary of the issuance of the Debenture and on or before
two years following the date of issuance of the Debenture; and

(iii) $0.50 per warrant share if the debenture is converted
after the second anniversary of the issuance of the Debenture and on or before
the due date of the Debenture.

Any shares issued are subject to a four-month hold period
expiring July 28, 2003. The warrants will expire on the earlier of the due date
of the Debenture or two years from the issuance of the warrant upon conversion
of the Debenture. Related parties subscribed for 69.88 Debentures of the total
offering of 100 debentures. Proceeds are to be used to further the Company's
exploration drilling program in Alberta.

b) Stock options were granted pursuant to the Company's 2002
Stock Option Plan to a director and an employee to purchase up to 30,000 common
shares at a price of $0.27 per share expiring February 20, 2008, subject to
regulatory approval.

Subsequent to December 31, 2002, stock options to acquire
50,000 common shares at a price of $0.33 per share were cancelled.

(c) The Company has obtained credit facilities with the
National Bank of Canada consisting of an $850,000 revolving operating demand
loan, and a $250,000 non-revolving acquisition and development demand loan.
These loans are secured by an Acknowledgement of Debt Revolving Demand Credit
Agreement, a General Assignment of Book Debts, a Negative Pledge, and a Floating
Charge Demand Debenture from the Company to the Bank in the principal amount of
$5,000,000 securing all of the Company's present and after-acquired real and
personal property.

(d) The Company entered into a Farm in Agreement dated January
24, 2003 with Warrior Energy Corporation ("Warrior"), the Company can earn an
undivided 60% working interest in Block 1 of the Farm in Lands, and an undivided
20% working interest in Block 11 of the Farm in Lands, by the drilling of a Test
Well, located in the Greencourt Area, Alberta. The Company entered into a
Participation Agreement dated February 19, 2003 with Warrior to earn a 40%
interest before Pay-out (24% after pay-out) in two wells located in the
Morningside Area, Alberta.

(e) The Company received loan proceeds of $348,750, in
consideration for the issuance of promissory notes ("Notes"), dated March 14,
2003. A director of the Company advanced $200,000. The Notes bear interest at
15% per annum, payable quarterly in arrears. These Notes were repaid in full on
April 15, 2003 together with accrued interest of $4,729.







NETCO ENERGY INC.NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTSDECEMBER 31, 2002

|NOTE 11 - RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY
      ACCEPTED ACCOUNTING PRINCIPALS ("Canadian GAAP" and "US
      GAAP")
|-------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                           

The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in Canada ("Canadian
GAAP"), which differ in certain respects from those principles and practices
that the Company would have followed had its consolidated financial statements
been prepared in accordance with generally accepted accounting principles in the
United States ("US GAAP"). Comprehensive earnings are the same as net earnings
under US GAAP for all periods presented. The following summarizes the
significant differences between Canadian GAAP and US GAAP:

a) Stock based compensation: As described in Note 6, the
Company has granted stock options to certain directors and employees. These
options are granted for services provided to the Company. For US GAAP purposes,
Statement of Financial Accounting Standards No. 123 ("FAS 123") requires that an
enterprise recognize, or at its option, disclose the impact of the fair value of
stock options and other forms of stock-based compensation in the determination
of income. The Company has elected under FAS 123 to continue to measure
compensation cost on the intrinsic value basis set out in APB Opinion No. 25. As
stock options are granted at exercise prices based on the market price of the
Company's shares at the date of grant, no compensation cost is recognized.
However, under SFAS 123, the impact on net income and income per share of the
fair value must be measured and disclosed on a fair value based method on a pro
forma basis.

The fair value of the employee's purchase rights, pursuant to
stock options, under SFAS 123, was estimated using the Black-Scholes model with
the following assumptions: risk free interest rate was 5%, expected volatility
of 70% to 80%, an expected option life of two years to five years and no
expected dividends.

If compensation expense had been determined pursuant to SFAS
123, the Company's net loss and net loss per share for fiscal 2000, 1999 and
1998 would have been as follows:



|                                        | Period ended December 31
|--------------------------------------- | ------------------------
|                                       
|                                        | 2002                    
|                                       
|                                       
|                                        |                         
|Net income (loss) for the year          |                         
|As reported, under Canadian and US GAAP | $ 878,125               
|Pro forma                               | $ 878,125               
|                                        |                         
|Basic earnings (loss) per share         |                         
|As reported, under Canadian and US GAAP | $ 0.14                  
|Pro forma                               | $ 0.14                  
|                                        |                         
|Diluted earnings (loss) per share       |                         
|As reported, under Canadian and US GAAP | $ 0.13                  
|Pro forma                               | $ 0.13                  
|                                        |                         
|                                        |                         



b) Oil and gas properties: Under



ITEM 19 Exhibits

Exhibits Required by Form 20-F

Exhibit Number / Description

(1) Articles of Incorporation and By-laws:

1.1 Articles of Incorporation, effective May 21, 1993
(incorporated by reference from our Form 20-F Registration Statement, effective
February 26, 2001)

1.2 By-Laws, effective May 21, 1993 (incorporated by reference
from our Form 20-F Registration Statement, effective February 26, 2001)

1.3 Articles of Amendment, dated July 6, 1999 (incorporated by
reference from our Form 20-F Registration Statement, effective February 26,
2001)

1.4 Articles of Amendment, dated October 1995 (incorporated by
reference from our Form 20-F Registration Statement, effective February 26,
2001)

1.5 Certificate of Change of Name, dated July 20, 1999 (British
Columbia) (incorporated by reference from our Form 20-F Registration Statement,
effective February 26, 2001)

1.6 Certificate of Amendment (Articles), dated July 6,
1999(incorporated by reference from our Form 20-F Registration Statement,
effective February 26, 2001)

1.7 Certificate of Amendment (Articles), dated July 28, 2000
(incorporated by reference from our Form 20-F Registration Statement, effective
February 26, 2001)

(2) Instruments Defining Rights of Holders of Equity Securities
Being Registered

2.1 See Exhibits 1.1 and 1.2 above

(4) Material Contracts

4.1 Amendment Agreement (Office Space and Support Services
Agreement) between Netco Energy Inc., First Merit Group Ltd. and Armada Ventures
Inc., dated February 1, 2001 (incorporated by reference from our Form 20-F
Annual Report, filed on June 29, 2001)

4.2 Letter Agreement between Netco Energy Inc. and Daybreak
Energy Inc., dated September 14, 2001 (incorporated by reference from our Form
20-F Annual Report, filed on June 28, 2002)

4.3 Amended Letter Agreement between Netco Energy Inc. and
Daybreak Energy Inc, dated October 18, 2001 (incorporated by reference from our
Form 20-F Annual Report, filed on June 28, 2002)

4.4 Letter Agreement between Netco Energy Inc. and Moxie
Exploration Ltd., dated August 2, 2001

4.5 Letter Agreement between Netco Energy Inc. and Moxie
Exploration Ltd., dated September 21, 2001 (incorporated by reference from our
Form 20-F Annual Report, filed on June 28, 2002)

4.6 Letter Agreement between Netco Energy Inc. and Moxie
Exploration Ltd., dated October 10, 2001

4.7 Area of Mutual Interest Agreement between Netco Energy Inc.
and Moxie Exploration Ltd., dated October 9, 2001 (incorporated by reference
from our Form 20-F Annual Report, filed on June 28, 2002)

4.8 Floating Charge Demand Debenture, dated January 31, 2003,
with National Bank of Canada**

4.9 Form of Convertible Debenture**

(8) Subsidiaries

None

(10) Other

10.1 Section 906 Certification under Sarbanes-Oxley Act of 2002
of Donald Sharpe, dated June 30, 2003**



** Filed herewith.



SIGNATURE

Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant certifies that it meets all of the
requirements for filing on Form 20-F and has duly caused this Annual Report to
be signed on its behalf by the undersigned, hereunto duly authorized.

Dated: <R>July 11</R>, 2003



Netco Energy Inc.



Per: /s/ Donald A. SharpeDonald A. Sharpe, President(Principal
Executive, Financial and Accounting Officer)





CERTIFICATIONS

I, Donald A. Sharpe, certify that:

1. I have reviewed this annual report on Form 20-F of Netco
Energy Inc.;

2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to date a material fact
necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual
report;

4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a day within 90 days prior to the filing date of
the report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons performing
the equivalent functions):

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls and procedures for financial reporting; and

6. The registrant's other certifying officers and I have
indicated in this annual report whether there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: <R>July 11</R>, 2003

Signature:   /s/ Donald A. SharpeTitle:
    President(Principal Executive Officer, Financial and
Accounting Officer)