FORM 20-F



US SECURITIES AND EXCHANGE COMMISSION
Washington, 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 THE
SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended December 31, 2003



OR



[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE 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)



1100  609 West Hastings Street
Vancouver, British Columbia, Canada  V6B 4W4

(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)





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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 14,212,586 common shares, without par value, issued and outstanding as of June 21, 2004.



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]









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TABLE OF CONTENTS

PART 1

Item 1 Identity of Directors, Senior Management and Advisers

Item 2 Offer Statistics and Expected Timetable

Item 3 Key Information

Item 4 Information on Netco Energy Inc.

Item 5 Operating and Financial Review and Prospects

Item 6 Directors, Senior Management and Employees

Item 7 Major Shareholders and Related Party Transactions

Item 8 Financial Information

Item 9 The Offer and Listing

Item 10 Additional Information

Item 11 Quantitative and Qualitative Disclosures About Market Risk

Item 12 Description of Securities Other than Equity Securities

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

Item 16 (Reserved)

Item 16A Audit Committee Financial Expert

Item 16B Code of Ethics

Item 16C Principal Accountant Fees and Services

PART III

Item 17 Financial Statements

Item 18 Financial Statements

Item 19 Exhibits

SIGNATURES







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ABBREVIATIONS



bbls - barrels
mbbls - thousand barrels
mmbbls - millions barrels
bopd - barrels per day
boe - barrels of oil equivalent
boepd - barrels of oil equivalent per day
mcf - thousand cubic feet
mmcf - million cubic feet
bcf - billion cubic feet
mmcf/d - million cubic feet per day
mmbtu - million British Thermal Units
ngls - natural gas liquids



CONVERSION TABLE

|To Convert From                                     | To                                                                   | Multiply By                                
|--------------------------------------------------- | -------------------------------------------------------------------- | -------------------------------------------
|Mcf
Cubic metres
Feet
Metres
Miles
Kilometres
Acres | Cubic metres ("m3")
Cubic feet
Metres
Feet
Kilometres
Miles
Hectares | 28.174
35.494
0.305
3.281
1.609
0.621
0.405





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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, 2003 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.





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Selected Financial Data

(Stated in Canadian Dollars)



Fiscal Year Ended December 31 (Audited)



|CANADIAN GAAP                                                    | 2003       | 2002      | 2001      | 2000      | 1999     
|---------------------------------------------------------------- | ---------- | --------- | --------- | --------- | ---------
|Net Sales or Operating Revenue                                   | 3,409,365  | 1,281,645 | 604,160   | 592,072   | 302,478  
|Direct Costs                                                     |            |           |           | 137,198   | 74,407   
|Administrative Expenses                                          | 368,388    | 201,245   | 266,808   | 250,267   | 196,667  
|Amortization and Asset Write-down                                | 1,526,893  | 311,000   | 37,181    | 150,419   | 24,352   
|Income (Loss) From Operations                                    | 174,296    | 878,125   | 192,826   | 81,047    | 1,203,227
|Net Income (Loss) from Continuing
Operations                     | 174,296    | 878,125   | 192,826   | 81,047    | 1,203,227
|Net Income (Loss) for the year                                   | 174,296    | 878,125   | 192,826   | 81,047    | 1,203,227
|Net Income (Loss) from Operations
per Common Share               | 0.03       | 0.14      | 0.06      | 0.03      | 0.55     
|Income (Loss) from Continuing
Operations per Common Share        | 0.03       | 0.14      | 0.06      | 0.03      | 0.55     
|Total Assets                                                     | 4,526,921  | 2,873,267 | 1,737,938 | 1,009,379 | 914,082  
|Net Assets                                                       | 3,320,497  | 2,752,551 | 1,489,176 | 984,350   | 899,693  
|Capital Stock                                                    | 10,024,234 | 9,634,484 | 9,249,234 | 8,937,234 | 8,743,984
|Number of Common Shares
(adjusted to reflect changes
in capital) | 8,149,329  | 6,461,829 | 4,749,329 | 3,199,329 | 2,186,826
|Diluted Net Income per
Common Share                              | 0.02       | 0.13      | 0.05      | 0.02      | 0.29     
|Long-Term Debt                                                   | Nil        | Nil       | Nil       | Nil       | Nil      
|Cash Dividends per Common Share                                  | Nil        | Nil       | Nil       | Nil       | Nil      



|UNITED STATES GAAP                                               | 2003       | 2002      | 2001      | 2000      | 1999     
|---------------------------------------------------------------- | ---------- | --------- | --------- | --------- | ---------
|Net Sales or Operating Revenue                                   | 3,409,365  | 1,281,645 | 604,160   | 592,072   | 302,478  
|Direct Costs                                                     | -          | -         |           | 137,198   | 74,407   
|Administrative Expenses                                          | 368,388    | 201,245   | 266,808   | 250,667   | 196,667  
|Amortization and Asset Write-down                                | 1,526,893  | 311,000   | 37,181    | 150,419   | 24,352   
|Income (Loss) From Operations                                    | 174,296    | 878,125   | 192,826   | 81,047    | 1,200,647
|Net Income (Loss) from Continuing
Operations                     | 174,296    | 878,125   | 192,826   | 81,047    | 1,200,647
|Net Income (Loss) for the year                                   | 174,296    | 878,125   | 192,826   | 81,047    | 1,200,647
|Net Income (Loss) from Operations
per Common Share               | 0.02       | 0.14      | 0.06      | 0.03      | 0.55     
|Income (Loss) from Continuing
Operations per Common Share        | 0.02       | 0.14      | 0.06      | 0.03      | 0.55     
|Total Assets                                                     | 4,526,921  | 2,873,267 | 1,873,472 | 1,144,913 | 1,049,616
|Net Assets                                                       | 3,320,497  | 2,752,551 | 1,624,710 | 1,119,884 | 1,035,227
|Capital Stock                                                    | 10,024,234 | 9,634,484 | 9,249,234 | 8,937,234 | 8,743,384
|Number of Common Shares
(adjusted to reflect changes
in capital) | 8,149,329  | 6,461,829 | 4,749,329 | 3,199,329 | 2,186,826
|Diluted Net Income per
Common Share                              | 0.02       | 0.13      | 0.05      | 0.02      | 0.28     
|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 June 30, 2004, 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 $1.3407.  For the past five fiscal years ended December 31 and for the period between December 31, 2003 and May 31, 2004, 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, 1999 | $1.493 
|December 31, 2000 | $1.4855
|December 31, 2001 | $1.5489
|December 31, 2002 | $1.5642
|December 31, 2003 | $1.4008



|Month ended       | Low / High       
|----------------- | -----------------
|December 31, 2003 | $1.3405 / $1.2923
|January 31, 2004  | $1.3340 / $1.2690
|February 29, 2004 | $1.3442 / $1.3108
|March 31, 2004    | $1.3480 / $1.3097
|April 30, 2004    | $1.3711 / $1.3095
|May 31, 2004      | $1.3970 / $1.3580

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, 2003, we had a cumulative deficit of $6,707,637.  Our ability to generate significant revenues is uncertain.  In order for us to make a profit, our revenues will need to increase significantly.

The potential profitability of oil and gas ventures depends upon factors beyond the control of our company

The potential profitability of oil and gas properties is dependent upon many factors beyond our control.  For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments.  Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project.  These changes and events may materially affect our financial performance.

Adverse weather conditions can also hinder drilling operations.  A productive well may become uneconomic in the event water or other deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well.  In addition, production from any well may be unmarketable if it is impregnated with water or other deleterious substances.  The marketability of oil and gas which may be acquired or discovered will be affected by numerous factors beyond our control.  These factors include the proximity and capacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. The extent of these factors cannot be accurately predicted but the combination of these factors may result in our company not receiving an adequate return on invested 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.

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.

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.

Exploratory drilling involves many risks and we may become liable for pollution or other liabilities which may have an adverse effect on our financial position.

Drilling operations generally involve a high degree of risk.  Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labour, and other risks are involved. We may become subject to liability for pollution or hazards against which it cannot adequately insure or which it may elect not to insure.  Incurring any such liability may have a material adverse effect on our financial position and operations.

Competition in the oil and gas industry is highly competitive and there is no assurance that we will be successful in acquiring desirable oil and gas leases.

The oil and gas industry is intensely competitive. We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial and operational resources and staffs.  Accordingly, there is a high degree of competition for desirable oil and gas leases, suitable properties for drilling operations and necessary drilling equipment, as well as for access to funds.  There can be no assurance that the necessary funds can be raised or that any projected work will be completed.

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.

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 minor amount of stock and, if they act as a group, will not have a significant influence on all matters requiring shareholder approval which may delay or prevent a change in control.

As of June 30, 2004, directors and executive officers beneficially owned approximately 0.73% of our outstanding common shares.  As a group, the directors and officers also have options and/or warrants to purchase 343,524 additional shares which if exercised would represent approximately 2.36% of our outstanding common shares.  As a result, these shareholders, if they act as a group, will not have a significant influence on all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions.

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 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 1,865,689 common shares which, if exercised, would represent approximately 11.61% 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 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 2003 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.

At that time, two of the directors of Patriot, Donald Sharpe and John Hislop, were 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 at the time, was also  a director of Daybreak Energy Inc.

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.

On November 26, 2002, we entered into a Farm-out Agreement with Zorin Exploration whereby we can earn a 27.75% working interest in two wells in the Granlea area of Alberta and the Farm-out lands by paying 55.5% of the costs to drill and complete the wells.

On January 15, 2003, we entered into a Participation Agreement with Moxie Exploration Ltd. whereby we can earn a 35% working interest in three test wells in the West Jumpbush area of Alberta and the farm-out lands by paying 70% of the costs to drill and complete the three wells.

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.

On April 21, 2003, we entered into a Farm-in Agreement with Warrior whereby we have the option to pay 20% of the costs to drill, test, cap, complete or abandon one well in the Carrot Creek area of Alberta in order to earn a 12% working interest in the well and Farm-in lands.

On May 1, 2003, we entered into a Participation Agreement with Makah Energy Corporation whereby we can participate in an undivided 50% interest in joint oil and gas exploration and development activities within an area of mutual interest in the Provost area of Alberta.

On June 2, 2003 we entered into a Farm-out and Participation Agreement with Mustang Resource Inc., whereby we can earn a 30% working interest in a well and farm-out lands in the Sylvan Lake area of Alberta by paying 60% of the costs to drill to casing point or abandon the well.

On December 12, 2003 the Farm-in Agreement dated January 24, 2003 with Warrior was amended whereby we agreed to waive the requirement to complete and test the well to earn a 60% interest in the well and one section in favour of us earning a 50% earned working interest in the test well, one section and a 20% working interest in an adjoining section comprising the farm-in lands located in Greencourt, Alberta.

On January 5, 2004 we entered into a Farm-out Agreement with Chirripo Resources Inc. (Chirripo), whereby Chirripo at its cost can earn an undivided 100% of our 50% working interest in the Greencourt test well and section by completing the test well and if successful bringing the test well on production. We will retain a 5% gross override on any production from the test well and upon payout of Chirripos completion and tie-in costs will convert our 5% gross override interest into a 20% working interest

Revenues

For the year ended December 31, 2003 we received total revenues of $3,409,365 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 1100 - 609 West Hastings Street, Vancouver, British Columbia, Canada  V6B 4W4.  Management, administration, information services, accounting, rent, utilities and compliance services are provided by a private management company.  The services are provided on a month to month basis and there is no formal written agreement.

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.





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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.

Our Carrot Creek Area Assets

We hold a 12% working interest in certain oil and gas assets located in the Carrot Creek area of Alberta, Canada.

Our Provost Area Assets

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

Our Sylvan Lake Area Assets

We hold a 30% working interest in certain oil and gas assets located in the Sylvan Lake 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, 2003 our gross production from our Alberta assets was 508 mmcf of gas and approximately 1,800 bbl of oil.

We have 12 productive wells as at March 31, 2004.

As at the date of this Annual Report, the following 22 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 | Producing                        | 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                        | 35.625%         
|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      | 6-23-08-10W4M    | Natural Gas | Dry Hole                         | 27.75%          
|Granlea      | 16-14-08-10W4M   | Natural Gas | Dry Hole                         | 27.75%          
|Greencourt   | 4-20-60-9W5M     | Natural Gas | Suspended, waiting on facilities | 0%              
|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%          
|Provost      | 8-29-38-7W4      | Natural Gas | Producing                        | 50.00%          
|Carrot Creek | 8-27-53-12W5M    | Natural Gas | Dry Hole                         | 12.00%          
|Sylvan Lake  | 7-2-38-4W5       | Natural Gas | Suspended, waiting on tie-in     | 30.00%          

Geology and Reserve Summaries

AJM Petroleum Consultants (AJM) independent geological and petroleum engineering consultants of Calgary, Alberta, have prepared a report utilizing escalated cost and price assumptions dated December 31, 2003, evaluating as at December 31, 2003 the crude oil and natural gas reserves attributable to the Assets (the AJM Report).  All of the reserves identified in the AJM Report are located in Alberta, Canada.  The AJM Report is summarized in the table below.





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Total Reserves and Present Worth Values 
Escalating Prices as of December 31, 2003
Proved and Probable Reserves - Unrisked

Total of All Areas

|RESERVES                                
|----------------------------------------
|                                        
|                                        
|                                        
|RESERVE                                 
|CLASSIFICATION                          
|                                        
|Proved                                  
|                                        
|                                        
|                                        
|                                        
|Total Proved                            
|                                        
|                                        
|                                        
|Total Proved + Probable                 
|                                        
|                                        
|NET PRESENT VALUES OF FUTURE NET REVENUE
|                                        
|                                        
|                                        
|RESERVE                                 
|CLASSIFICATION                          
|                                        
|Proved                                  
|                                        
|                                        
|                                        
|                                        
|Total Proved                            
|                                        
|                                        
|                                        
|Total Proved + Probable                 



(1)Before royalty deductions.

(2)After royalty deductions.

(3)No allowance was made for the degree of risk associated with any of the reserve categories.

(4)Includes allowance for Alberta Royalty Tax Credit.

(5)Costs associated with extraction of natural gas products have in most cases been deducted from the natural gas revenues.

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

The AJM Report contains an evaluation prior to provision for income taxes, interest, 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 AJM 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, 2003, 2002 and 2001 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, 2003 we received revenues totalling $3,409,365 from our interest in our Alberta assets before deduction of royalties.  For the year ended December 31, 2002 we received revenues of $1,281,645.  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.

Expenses

During the year ended December 31, 2003, general and administrative expenses were $368,388 compared to $201,245 during the year ended December 31, 2002.  The increase was primarily due to the increase in interest expense as a result of a completed convertible debenture and a revolving line of credit.

During the year ended December 31, 2003, we paid $862,286 in royalties and $480,405 in operating expenses compared to $208,154 paid in royalties and $162,732 in operating expenses during the year ended December 31, 2003.  The increase in royalties and operating expenses from the 2002 to the 2003 fiscal year was as a result of the increased number of producing wells in Alberta, Canada.

Other Income

Over the year ended December 31, 2003, we had interest income of $5,003 and a foreign exchange loss of $368 compared to interest income of $7,699 and a foreign exchange gain of $28,833 for the year ended December 31, 2002.

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 US$494,734.04 to account for the accrued income.

Income Taxes

We have a net capital loss for Canadian tax purposes of $4,460,000, 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 $340,000 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, 2003 was $174,296, or $0.03 per share, compared to the year ended December 31, 2002 when the net income was $878,125 or $0.14 per share.  The decrease was primarily due to the sale of our Wyoming and Louisiana assets and the increases in production from our Alberta assets.  For the year ended December 31, 2003 the net income from our Alberta assets was $174,296 as compared to a net income of $411,510 from our Alberta assets for the year ended December 31, 2002.

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

B.          Liquidity and Capital Resources

In February 2003, 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.  National Bank of Canada periodically reviews the operating credit line and effective March 2004 our credit line consists of a $750,000 revolving operating demand loan, and a $300,000 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.

In April 2003, 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.

During the first quarter of 2004 all of the 15% convertible debentures relating to the private placement that closed April 2003 were converted.

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.

Subsequent to year-end, we arranged a non-brokered private placement with certain investors of 15% Convertible Debentures for aggregate gross proceeds of up to $1,000,000; and 2,000,000 flow through units at a price of $0.44 per flow-through unit, for additional gross proceeds of $880,000.

The debentures shall have a term of three (3) years and carry interest at 15% per annum, payable quarterly, in arrears.  All or any portion of the outstanding principal sum and accrued interest of each debenture is convertible into units in the capital stock of our company at a price of $0.55 if converted during the first two years of the debenture, or at a price of $0.61 if converted during the third year of the debenture.  We will grant the debentureholders a floating charge general security subordinated to existing security agreements in regards to collateral.

Each debenture unit consists of one common share in the capital stock of our company and one non-transferable share purchase warrant.  Each debenture warrant entitles the holder to purchase on additional common share at a price of $0.55 per debenture warrant.  The debenture warrant shall expire on the earlier of: (a) the due date of the Debenture or (b) two years from the issuance of the warrant upon conversion of the debenture.

Each flow-through unit consists of one common share in the capital stock of our company and one non-transferable share purchase warrant.  Each flow-through warrant entitles the holder to purchase on additional common flow-through share at a price of $0.55 per flow-through warrant.  The flow-through warrants shall expire five years from the issuance of the flow-through unit.

We will use the proceeds of the financing to fund our oil and gas exploration programs in Alberta and for general working capital.

As of June 30, 2004 we have not closed this private placement. 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.

E.          Off-balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

F.          Contractual Obligations

We do not have any contractual obligations.

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:

|Name
Office Held
Age                                                               | Area of Experience and Functions in Netco Energy Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Chris Schultze
President, Chief Executive
Officer, Secretary and Director
Age:  40 | Director since March 15, 2003; President and Secretary since October 22, 2003 and CEO since May 11, 2004
As President and CEO, Mr. Schultze is responsible for the day to day operations of our company.  As Secretary, Mr. Schultze 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.
|Michael Schoen
Director
Age:  50                                                   | Director since October 22, 2003.
As a director, Mr. Schoen is responsible for the management and supervision of the affairs and business of our company.                                                                                                                                                                                                                                                                                                                                      
|Daniel Weisbeck
Chief Financial Officer
Age: 63                                    | CFO since May 11, 2004
As the CFO, Mr Weisbeck is primarily responsible for internal accounting and record keeping, general administration and SEC reporting.                                                                                                                                                                                                                                                                                                                                 
|David Finn 
Director
Age:  57                                                      | Director since June 17, 2004.
As a director, Mr. Finn is responsible for the management and supervision of the affairs and business of our company.                                                                                                                                                                                                                                                                                                                                           

Chris Schultze, President, CEO, Secretary and Director

Mr. Schultze devotes approximately fifty percent (50%) 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 public resource company listed on the TSX Venture Exchange since February 2000; and CEO of FM Resources Corp. since May 2004; (b) President, CEO and Director of Gemini Energy Corp., a public resource company listed on the Toronto Stock Exchange since October 2003, Secretary of Gemini Energy Corp. from September 1998 to October 2003 and Vice-President of Exploration of Gemini Energy Corp. from May 1997 to June 2001; (c) Director of Patriot Petroleum Corp. a public resource company listed on the TSX Venture Exchange since October 2003, secretary of Patriot Petroleum Corp. from June 1999 to October 2003 and (d) geologist with Cominco Ltd. from May 1988 to May 1997.

Michael Schoen, Director

Mr. Schoen devotes approximately five percent (5%) of his working time to the affairs of our company.  Mr. Schoen has also served or serves as: (a) Director of Gemini Energy Corp., a public resource company listed on the Toronto Stock Exchange since April 2002; (b) Director of Ultra Holdings Inc., a investment holding company listed on the TSX Venture Exchange from July 1999 to October 2001; (c) Director of Q Investments Ltd. (formerly Cubix Investments Ltd.), a public investments holding company listed on the TSX Venture Exchange from November 1996 to January 2001; (d) Director of Ultra Petroleum Corp., public resource company listed on the Toronto Stock Exchange from August 1999 to December 1999. (e) Lecture at the University of British Columbia since October 1992.

Daniel Weisbeck, CFO

Mr. Weisbeck devotes approximately five percent (5%) of his working time to the affairs of our Company.  Mr. Weisbeck also served or serves as: (a) CFO of Gemini Energy Corp., a public resource company listed on the Toronto Stock Exchange since May 2002 and as Secretary of Gemini Energy Corp. since October 2003; (b) CFO of FM Resources Corp., a public resource company listed on the TSX Venture Exchange since May 2004.

David Finn, Director

Mr. Finn devotes approximately five percent (5%) of his working time to the affairs of our company.  Mr. Finn has also served or served as: (a) Director of Penteco Resources Limited, a public resources company listed on the TSX Venture Exchange since September 2003 and (b) Director of ADDA Resources Ltd., a public resource company listed on the Vancouver Stock Exchange (now called the TSX Venture Exchange) from March 1998 to April 2000.

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 officers were not paid and did not earn compensation from our company for performing his duties during the three fiscal year ended December 31, 2003:



|SUMMARY COMPENSATION TABLE                                                 
|---------------------------------------------------------------------------
|Name and
Principal
Position                                                
|Salary                                                                     
|Securities
Under
Options/
SARs
Granted                                     
|Donald A. Sharpe
President, CEO, CFO, Secretary, Treasurer and Director (2)
|Chris Schultze
President, CEO, Secretary and Director (3)                  
|Daniel Weisbeck
CFO (4)                                                    



(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" for a discussion of terms.

(2)          Mr. Sharpe  resigned on October 21, 2003.

(3)          Mr. Schultze was appointed President on October 22, 2003 and CEO on May 11, 2004.

(3)          Mr. Weisbeck was appointed CFO on May 11, 2004.

No cash compensation was paid to any of our directors for their services as directors during the fiscal year ended December 31, 2003.  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 17, 2004, 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 Alberta Business Corporations Act.

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 Chris Schultze, Michael Schoen and David Finn.  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, 2003, we did not have any employees, and as of June 30, 2004, we did not have any employees.  Our operations are managed by Chris Schultze.

E.          Share Ownership

There were 14,212,586 common shares issued and outstanding as of June 21, 2004.  Of the shares issued and outstanding and the stock options granted, our directors and officers owned the following common shares as of June 21, 2004:



|Name
Office Held                                      | Number of Common Shares
Beneficially Owned as of June 21, 2004 | Percentage (1)
|----------------------------------------------------- | -------------------------------------------------------------- | --------------
|Chris Schultze
President, CEO, Secretary and Director | 156,857(2)                                                     | 1.10%         
|Michael Schoen
Director                               | 16,666 (3)                                                     | *%            
|Daniel Weisbeck
CFO                                   | Nil (4)                                                        | *%            
|David Finn
Director                                   | Nil (5)                                                        | *%            

*             Less than 1%

(1)          Based on 14,212,586 common shares issued and outstanding as at June 21, 2004, and the number of shares issuable upon the exercise of issued and outstanding stock options which are exercisable within 60 days of June 21, 2004.

(2)          Includes 20,000 stock options granted on February 20, 2003 at an exercise price of $0.27, expiring on February 20, 2008 and 33,333 of the 100,000 stock options granted on January 26, 2004 at an exercise price of $0.53, expiring on January 26, 2009.  Mr. Schultze also holds 103,524 share purchase warrants at an exercise price of $0.30, expiring on March 29, 2006.

(3)          Includes 16,666 of 50,000 stock options granted on January 26, 2004 at an exercise price of $0.53, expiring on January 26, 2009.

(4)         Mr. Weisbeck holds 20,000 stock options granted on June 17, 2004 at an exercise price of $0.52, expiring on June 17, 2009.

(5)          Mr. Finn holds 50,000 stock options granted on June 17, 2004 at an exercise price of $0.52, expiring on June 17, 2009.

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, 2003.  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, 2003 we granted a total of 150,000 stock options to Chris Schultze and Michael Schoen.  The stock options are exercisable at a price of $0.53 per share until January 26, 2009.

Also subsequent to our fiscal year ended December 31, 2003, we granted a total of 70,000 stock options to David Finn and Daniel Weisbeck.  The stock options are exercisable at a price of $0.52 per share until June 17, 2009.



ITEM 7 Major Shareholders and Related Party Transactions

A.          Major Shareholders

There were 14,212,586 of our common shares issued and outstanding as of June 21, 2004. The following table sets forth, as of June 21, 2004, persons known to us to be the beneficial owner of more than five (5%) of our common shares:



|Name of Shareholder | No. of Common
Shares Owned | Percentage of 
Outstanding
Common Shares
|------------------- | -------------------------- | ----------------------------------------
|John R. Hislop(1)   | 1,529,600                  | 10.83%                                  



(1)In addition, Mr. Hislop holds 1,486,100 warrants at a price of $0.30 expiring on March 29,2006.

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 June 21, 2004, the registrar and transfer agent for our company reported that there were 14,212,586 common shares issued and outstanding.  Of those common shares issued and outstanding, 13,746,242 common shares were registered to Canadian residents (13 shareholders), 466,344 common shares were registered to residents of the United States (30 shareholders) and no common shares were registered to residents of other foreign countries.

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.

B.          Related Party Transactions

Pursuant to the terms of a Management Consulting Agreement with D. Sharpe Management Inc., dated June 1, 1999, we paid D. Sharpe Management Inc. the sum of $60,000 per year in consulting fees.  Donald A. Sharpe, is the sole director, officer and shareholder of D. Sharpe Management Inc.  Under the agreement, we paid D. Sharpe Management Inc. a monthly management fee of $5,000 and reimbursed expenses to a maximum of $600 per month.  This agreement was terminated with the resignation of Mr. Sharpe on October 21, 2003.

On April 22,2003, we closed a non-brokered private placement for aggregate proceeds of $1,000,000 and issued a total of 100 15% convertible debentures at a price of $10,000 per convertible debenture.  John Hislop, a director of our company at the time, purchased 43.25 convertible debentures, Chris Schultze, the President, CEO, Secretary and director of our company purchased 3 convertible debentures and Donald Sharpe, a former director of our company, purchased 11.63 convertible debentures.  During the first quarter of 2004, all of the 15% convertible debentures relating to the completed private placement announced April 22 were converted.

None of the following persons was indebted to Netco 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, 2003, 2002, and 2001 (audited), reported on by Ellis Foster, Chartered Accountants:

Auditor's Report dated April 29, 2004, as to disclosure changes for generally accepted accounting principles in the United States

Consolidated Balance Sheets as at December 31, 2003 and 2002

Consolidated Statements of Income and Deficit for the years ended December 31, 2003, 2002 and 2001

Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001

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, 1999 through December 31, 2003) on the TSX Venture Exchange (formerly the Canadian Venture Exchange) were as follows:



|Year/Period Ended | High  | Low  
|----------------- | ----- | -----
|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 | $0.25
|December 31, 2003 | $0.55 | $0.25

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, 2003  | $0.55 | $0.34 
|September 30, 2003 | $0.48 | $0.265
|June 30, 2003      | $0.40 | $0.28 
|March 31, 2003     | $0.28 | $0.25 
|December 31, 2002  | $0.30 | $0.25 
|September 30, 2002 | $0.39 | $0.26 
|June 30, 2002      | $0.52 | $0.35 
|March 31, 2002     | $0.40 | $0.28 



Most Recent 6 Months

The high and low market prices for each of the most recent six months (December 1, 2003 through May 31, 2004) on the TSX Venture Exchange were as follows:



|Month Ended       | High  | Low   
|----------------- | ----- | ------
|December 31, 2003 | $0.55 | $0.375
|January 31, 2004  | $0.61 | $0.45 
|February 29, 2004 | $0.71 | $0.55 
|March 31, 2004    | $0.63 | $0.55 
|April 30, 2004    | $0.75 | $0.54 
|May 31, 2004      | $0.63 | $0.51 

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 Alberta Business Corporations Act, 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 Alberta Business Corporations Act, 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 Alberta Business Corporations Act.  The Alberta Business Corporations Actrequires 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 Alberta Business Corporations Act).

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 must be held once every financial year, within 15 months of the previous annual general meeting.  Under the Alberta Business Corporations Act, we must give our shareholders written notice of an annual general meeting not less than 21 days and not more than 50 days before the annual general meeting is to be held.  The Alberta Business Corporations Actalso requires that we publish, notice of the record date with respect to the annual general meeting 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 annual general meeting.

Our directors may, whenever they think fit, convene an extraordinary general meeting.  An extraordinary general meeting 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 extraordinary general meeting.  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 annual general meeting or an extraordinary general meeting 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 annual general meeting must be held and the percentage of shareholders required to call an annual general meeting or extraordinary general meeting, there are generally no material differences between Canadian and United States law respecting annual general meetings and extraordinary general meetings.

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 Alberta Business Corporations Act 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 Alberta Business Corporations Act 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 Alberta Business Corporations Act.

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.  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.  This agreement was terminated with the resignation of Mr. Sharpe on October 21, 2003.

On August 2, 2001 we entered into a farm-out agreement with Moxie Exploration Ltd. 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 Exploration, on September 21, 2001 we entered into a second farm-out agreement with Moxie Exploration.  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 15, 2003, we entered into a Participation Agreement with Moxie Exploration Ltd. whereby we can earn a 35% working interest in three test wells in the West Jumpbush area of Alberta and the farm-out lands by paying 70% of the costs to drill and complete the three wells.

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 as at the end of the period covered by this report.  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

ITEM 16A         Audit Committee Financial Expert

Our Board of Directors has determined that it does not have a member of its audit committee that qualifies as an "audit committee financial expert" as defined in Item 401(e) of Regulation S-B, and is "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.

We believe that the members of our Board of Directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting.  In addition, we believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated revenues to date.

ITEM 16B         Code of Ethics

Code of Ethics

Effective June 30, 2004, our company's board of directors adopted a Code of Business Conduct and Ethics that applies to, among other persons, our company's president (being our principal executive officer) and our company's secretary, and the companys chief financial officer (being our principal financial and accounting officer and controller), as well as persons performing similar functions.  As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:

(1) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

(2) full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;

(3) compliance with applicable governmental laws, rules and regulations;

(4) the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and

(5) accountability for adherence to the Code of Business Conduct and Ethics.

Our Code of Business Conduct and Ethics requires, among other things, that all of our company's personnel shall be accorded full access to our president and secretary and chief financial officer with respect to any matter which may arise relating to the Code of Business Conduct and Ethics.  Further, all of our company's personnel are to be accorded full access to our company's board of directors if any such matter involves an alleged breach of the Code of Business Conduct and Ethics by our president or secretary or chief financial officer.

In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal , provincial and state securities laws. Any employee who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to his or her immediate supervisor or to our company's president or secretary.  If the incident involves an alleged breach of the Code of Business Conduct and Ethics by the president or secretary or financial officer, the incident must be reported to any member of our board of directors.  Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter.  It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our company's Code of Business Conduct and Ethics by another.

Our Code of Business Conduct and Ethics is filed herewith with the Securities and Exchange Commission as Exhibit 11.1 to this annual report.  We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request.  Requests can be sent to:  Netco Energy Inc., Suite 1100-609 West Hastings Street, Vancouver, British Columbia, Canada, V6B 4W4.

ITEM 16C         Principal Accountant Fees and Services

Audit Fees

Our board of directors appointed Ellis Foster as independent auditors to audit our financial statements for the fiscal year ended December 31, 2003.  The aggregate fees billed by Ellis Foster for professional services rendered for the audit of our annual financial statements included in this Annual Report for the fiscal year ended December 31, 2003 were $11,900.

The aggregate fees billed by Lancaster & David (our former auditors) for professional services rendered for the audit of our annual financial statements for the fiscal year ended December 31, 2002 were $6,500.

Audit Related Fees

For the fiscal year ended December 31, 2003, the aggregate fees billed for assurance and related services by Ellis Foster relating to our quarterly financial statements which are not reported under the caption "Audit Fees" above, were $NIL.

For the fiscal year ended December 31, 2002, the aggregate fees billed for assurance and related services by Lancaster & David (our former auditors) relating to our quarterly financial statements which are not reported under the caption "Audit Fees" above, were $11,000.

Tax Fees

For the fiscal year ended December 31, 2003, the aggregate fees billed for tax compliance, tax advice and tax planning by Ellis Foster were $1,100

For the fiscal year ended December 31, 2002, the aggregate fees billed for tax compliance, tax advice and tax planning by Lancaster & David (our former auditors)were $6,000.

All Other Fees

For the fiscal year ended December 31, 2003, the aggregate fees billed by Ellis Foster for other non-audit professional services, other than those services listed above, totalled $NIL.

For the fiscal year ended December 31, 2002, the aggregate fees billed by Lancaster & David for other non-audit professional services, other than those services listed above, totalled $1,000.

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before Ellis Foster is engaged by us or our subsidiaries to render any auditing or permitted non-audit related service, the engagement be:

- approved by our audit committee; or

- entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.

The audit committee pre-approves all services provided by our independent auditors.  The pre-approval process has just been implemented in response to the new rules.  Therefore, the audit committee does not have records of what percentage of the above fees were pre-approved.  However, all of the above services and fees were reviewed and approved by the audit committee either before or after the respective services were rendered.

The audit committee has considered the nature and amount of the fees billed by Ellis Foster, and believes that the provision of the services for activities unrelated to the audit is compatible with maintaining Ellis Fosters independence.

ITEM 16D.        Exemption from the Listing Standards for Audit Committees

Not Applicable.

ITEM 16E         Purchases of Equity Securities the Company and Affiliated Purchasers

Not Applicable.





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#





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, 2003, 2002, and 2001 (audited), reported on by Ellis Foster, Chartered Accountants:

Auditor's Report dated April 29, 2004 as to disclosure changes for generally accepted accounting principles in the United States

Consolidated Balance Sheets as at December 31, 2003 and 2002

Consolidated Statements of Income and Deficit for the years ended December 31, 2003, 2002 and 2001

Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001

Notes to Financial Statements







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#







NETCO ENERGY INC.



Consolidated Financial
  Statements

December 31, 2003, 2002
  and 2001





Index

Independent Auditors Reports

Consolidated Balance
  Sheets

Consolidated Statements
  of Income and Retained Earnings

Consolidated Statements
  of Cash Flows

Notes to Consolidated
  Financial Statements







---

ELLIS
    FOSTER

CHARTERED
    ACCOUNTANTS



1650 West 1st Avenue

Vancouver,
  BC  Canada   V6J 1G1

Telephone:  (604)
  734-1112  Facsimile: (604) 714-5916

Website:  www.ellisfoster.com









INDEPENDENT AUDITORS REPORT



To the Shareholders
    of



NETCO ENERGY INC.





We
  have audited the consolidated balance sheet of Netco Energy Inc. (the
  Company) as at December 31, 2003 and the consolidated statements of income
  and retained earnings and cash flows for the year 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 audit.  The consolidated financial statements as at December 31,
  2002 and for the years ended December 31, 2002 and 2001 were audited by other
  auditors who expressed an opinion without reservation on those financial statements
  in their report dated April 25, 2003.

We
  conducted our audit in accordance with generally accepted auditing standards
  in Canada and the standards of the Public Company Accounting Oversight Board
  (United States).  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.  We believe that our audit provides a reasonable basis for
  our opinion.

In
  our opinion, these consolidated financial statements present fairly, in all
  material respects, the financial position of the company as at December 31,
  2003 and the results of its operations and its cash flows for the year then
  ended in accordance with Canadian generally accepted accounting principles.

Differences
  between Canadian and United States generally accepted accounting principles
  for the year ended December 31, 2003 are summarized in note 12.



Vancouver,
  Canada                                                                               Ellis
  Foster

April
  29, 2004                                                                                  Chartered
  Accountants







EFA
            partnership of incorporated professionals

An
        independently owned and operated member of Moore Stephens North America
        Inc., a member of Moore Stephens International Limited

-
        members in principal cities throughout the world







---

|NETCO
              ENERGY INC.                                                         |                                |   |                                |   |            
|--------------------------------------------------------------------------------------- | ------------------------------ | - | ------------------------------ | - | -----------
|                                                                                        |                                |   |                                |   |            
|Consolidated Balance
            Sheets                                                 |                                |   |                                |   |            
|December 31, 2003
            and 2002                                                  |                                |   |                                |   |            
|(In Canadian Dollars)                                                                   |                                |   |                                |   |            
|                                                                                        |                                |   | 2003                           |   | 2002       
|                                                                                        |                                |   |                                |   |            
|ASSETS                                                                                  |                                |   |                                |   |            
|                                                                                        |                                |   |                                |   |            
|Current                                                                                 |                                |   |                                |   |            
|Cash and
            cash equivalents                                                   |                                | $ | 23,194                         | $ | 122,335    
|Accounts
            receivable                                                         |                                |   | 538,010                        |   | 420,981    
|Prepaid
            expenses                                                            |                                |   | 191,525                        |   | 200,105    
|                                                                                        |                                |   |                                |   |            
|                                                                                        |                                |   | 752,729                        |   | 743,421    
|                                                                                        |                                |   |                                |   |            
|Equipment(note
            4)                                                           |                                |   | -                              |   | 2,553      
|                                                                                        |                                |   |                                |   |            
|Petroleum and natural
              gas interests (note 5)                              |                                |   | 3,774,192                      |   | 2,127,292  
|                                                                                        |                                |   |                                |   |            
|                                                                                        |                                | $ | 4,526,921                      | $ | 2,873,266  
|                                                                                        |                                |   |                                |   |            
|LIABILITIES                                                                             |                                |   |                                |   |            
|                                                                                        |                                |   |                                |   |            
|Current                                                                                 |                                |   |                                |   |            
|Accounts
            payable and accrued liabilities                                    |                                | $ | 206,424                        | $ | 120,715    
|                                                                                        |                                |   |                                |   |            
|Convertible debentures (note
            6)                                             |                                |   | 1,000,000                      |   | -          
|                                                                                        |                                |   |                                |   |            
|                                                                                        |                                |   | 1,206,424                      |   | 120,715    
|                                                                                        |                                |   |                                |   |            
|SHAREHOLDERS' EQUITY                                                                    |                                |   |                                |   |            
|                                                                                        |                                |   |                                |   |            
|Share capital (note
            7)                                                      |                                |   | 10,024,234                     |   | 9,634,484  
|                                                                                        |                                |   |                                |   |            
|Contributed surplus                                                                     |                                |   | 3,900                          |   | -          
|                                                                                        |                                |   |                                |   |            
|Deficit                                                                                 |                                |   | (6,707,637)                    |   | (6,881,933)
|                                                                                        |                                |   |                                |   |            
|                                                                                        |                                |   | 3,320,497                      |   | 2,752,551  
|                                                                                        |                                |   |                                |   |            
|                                                                                        |                                | $ | 4,526,921                      | $ | 2,873,266  
|                                                                                        |                                |   |                                |   |            
|                                                                                        |                                |   |                                |   |            
|The
            accompanying notes form an integral part of these financial statements. |                                |   |                                |   |            
|                                                                                        |                                |   |                                |   |            
|                                                                                        |                                |   |                                |   |            
|Approved by the
              Directors:                                                | Michael
                Schoen |   | Chris
                Schultze |   |            
|                                                                                        | Michael
            Schoen     |   | Chris
            Schultze     |   |            







---

|NETCO
              ENERGY INC.                                                         |   |             |   |             |   |            
|--------------------------------------------------------------------------------------- | - | ----------- | - | ----------- | - | -----------
|                                                                                        |   |             |   |             |   |            
|Consolidated Statements
            of Income and Retained Earnings                     |   |             |   |             |   |            
|Years Ended December
            31, 2003, 2002, and 2001                               |   |             |   |             |   |            
|(In Canadian Dollars)                                                                   |   |             |   |             |   |            
|                                                                                        |   | 2003        |   | 2002        |   | 2001       
|                                                                                        |   |             |   |             |   |            
|Revenue                                                                                 |   |             |   |             |   |            
|Petroleum
            and natural gas interests                                         | $ | 3,409,365   | $ | 1,281,645   | $ | 604,160    
|                                                                                        |   |             |   |             |   |            
|Royalties                                                                               |   | 862,286     |   | 208,154     |   | (94,812)   
|                                                                                        |   |             |   |             |   |            
|                                                                                        |   | 2,547,079   |   | 1,073,491   |   | 509,348    
|                                                                                        |   |             |   |             |   |            
|Direct operating
              expenses                                                 |   | 2,007,298   |   | 473,732     |   | 89,209     
|                                                                                        |   |             |   |             |   |            
|Operating income                                                                        |   | 539,781     |   | 599,759     |   | 420,139    
|                                                                                        |   |             |   |             |   |            
|General and administrative
              expenses                                       |   | 368,388     |   | 201,245     |   | 266,808    
|                                                                                        |   |             |   |             |   |            
|Income before other
              items                                                 |   | 171,393     |   | 398,514     |   | 153,331    
|                                                                                        |   |             |   |             |   |            
|Other items                                                                             |   |             |   |             |   |            
|Foreign
            exchange gain (loss)                                                |   | (368)       |   | 28,833      |   | 18,556     
|Gain from
            disposition of petroleum and                                      |   |             |   |             |   |            
|natural
            gas interests (note 5(b))                                           |   | -           |   | 443,079     |   | -          
|Interest
            income                                                             |   | 5,003       |   | 7,699       |   | 20,939     
|Writedown
            of equipment                                                      |   | (1,732)     |   | -           |   | -          
|                                                                                        |   |             |   |             |   |            
|Net income for
              the year                                                   |   | 174,296     |   | 878,125     |   | 192,826    
|                                                                                        |   |             |   |             |   |            
|Deficit, beginning
            of year                                                  |   | (6,881,933) |   | (7,760,058) |   | (7,952,884)
|                                                                                        |   |             |   |             |   |            
|Deficit,end
            of year                                                         | $ | (6,707,637) | $ | (6,881,933) |   | (7,760,058)
|                                                                                        |   |             |   |             |   |            
|Earnings per share                                                                      |   |             |   |             |   |            
|- basic                                                                                 | $ | 0.03        | $ | 0.14        | $ | 0.06       
|- diluted                                                                               | $ | 0.02        | $ | 0.13        | $ | 0.05       
|                                                                                        |   |             |   |             |   |            
|Weighted average
              number of                                                |   |             |   |             |   |            
|common
              shares outstanding:                                                |   |             |   |             |   |            
|- basic                                                                                 |   | 6,717,206   |   | 6,462,000   |   | 3,466,000  
|- diluted                                                                               |   | 7,472,068   |   | 6,805,000   |   | 4,211,000  
|                                                                                        |   |             |   |             |   |            
|                                                                                        |   |             |   |             |   |            
|The
            accompanying notes form an integral part of these financial statements. |   |             |   |             |   |            
|                                                                                        |   |             |   |             |   |            







---

|NETCO
              ENERGY INC.                                                         |   |             |   |           |   |            
|--------------------------------------------------------------------------------------- | - | ----------- | - | --------- | - | -----------
|                                                                                        |   |             |   |           |   |            
|Consolidated
            Statements of Cash Flows                                       |   |             |   |           |   |            
|Years
            Ended December 31, 2003, 2002 and 2001                                |   |             |   |           |   |            
|(In
              Canadian Dollars)                                                     |   |             |   |           |   |            
|                                                                                        |   | 2003        |   | 2002      |   | 2001       
|                                                                                        |   |             |   |           |   |            
|Cash
              flows from (used in) operating activities                            |   |             |   |           |   |            
|Net
            income for the year                                                     | $ | 174,296     | $ | 878,125   | $ | 192,826    
|Adjustment
            for items not involving cash:                                    |   |             |   |           |   |            
|Depletion
            and amortization                                                  |   | 1,526,893   |   | 311,000   |   | 37,181     
|Foreign
            exchange (gain) loss                                                |   | -           |   | (28,833)  |   | (18,556)   
|Gain
            from disposition of petroleum and                                      |   |             |   |           |   |            
|natural
            gas interests                                                       |   | -           |   | (443,079) |   | -          
|Stock-based
            compensation                                                    |   | 3,900       |   | -         |   | -          
|Writedown
            of equipment                                                      |   | 1,732       |   | -         |   | -          
|                                                                                        |   |             |   |           |   |            
|                                                                                        |   | 1,706,821   |   | 717,213   |   | 211,451    
|Changes
            in non-cash working capital:                                        |   |             |   |           |   |            
|Decrease
            (increase) in accounts receivable                                  |   | (117,029)   |   | (366,574) |   | 123,721    
|Decrease
            (increase) in prepaid expenses                                     |   |             |   |           |   |            
|and
            deposits                                                                |   | 8,580       |   | (195,917) |   | 5,392      
|Increase
            in accounts payable                                                |   |             |   |           |   |            
|and
            accrued liabilities                                                     |   | 85,709      |   | 82,203    |   | 3,689      
|                                                                                        |   |             |   |           |   |            
|                                                                                        |   | 1,684,081   |   | 236,925   |   | 344,253    
|                                                                                        |   |             |   |           |   |            
|Cash
              flows used in investing activities                                   |   |             |   |           |   |            
|Increase
            (decrease) in deposit received                                     |   | -           |   | (25,000)  |   | 25,000     
|Acquisition
            of petroleum and natural gas interests                          |   | (3,172,972) |   | (552,452) |   | (1,089,005)
|                                                                                        |   |             |   |           |   |            
|                                                                                        |   | (3,172,972) |   | (577,452) |   | (1,064,005)
|                                                                                        |   |             |   |           |   |            
|Cash
              flows from (used in) financing activities                            |   |             |   |           |   |            
|Decrease
            (increase) in share subscriptions                                  |   |             |   |           |   |            
|received
            in advance                                                         |   | -           |   | (185,250) |   | 185,250    
|Issuance
            of common shares                                                   |   | 389,750     |   | 385,250   |   | 312,000    
|Issuance
            of convertible debenture                                           |   | 1,000,000   |   | -         |   | -          
|                                                                                        |   |             |   |           |   |            
|                                                                                        |   | 1,389,750   |   | 200,000   |   | 497,250    
|                                                                                        |   |             |   |           |   |            
|Decrease
              in cash and cash equivalents                                     |   | (99,141)    |   | (140,527) |   | (222,502)  
|                                                                                        |   |             |   |           |   |            
|Cash
              and cash equivalents, beginning of year                              |   | 122,335     |   | 262,862   |   | 485,364    
|                                                                                        |   |             |   |           |   |            
|Cash
              and cash equivalents, end of year                                    | $ | 23,194      | $ | 122,335   | $ | 262,862    
|                                                                                        |   |             |   |           |   |            
|                                                                                        |   |             |   |           |   |            
|The
            accompanying notes form an integral part of these financial statements. |   |             |   |           |   |            
|                                                                                        |   |             |   |           |   |            







---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







1.         Continued
        Operations

The
      Company was incorporated under the laws of the Province of Alberta on May
      21, 1993 under the name of Green River Holdings Inc.  On July 28,
      2000, the Company changed its name to Netco Energy Inc.  The Companys
      principal business activity is the exploration, development and production
      of petroleum and natural gas reserves located in Canada.

2.         Change
        in Accounting Policy

Effective
      January 1, 2003, the Company adopted, prospectively, the Canadian Institute
      of Chartered Accountants Handbook, Section 3870, Stock-based compensation
      and other stock-based payments. Under the new recommendation, the Company
      adopted the fair value for all direct awards of stocks and applies the
      fair value method. The fair value of stock options is determined by the Black-Scholes
      Option Pricing Model with assumptions for risk-free interest rates,
      dividend yields, volatility factors of the expected market price of the
      Companys common shares, and the expected life of the options. The
      fair value of direct awards of stocks is determined by the quoted market
      price of the Companys stock.

The
      adoption of the new accounting policy has no cumulative effect on the prior
      years financial statements.

3.         Significant
        Accounting Policies

The
      consolidated financial statements of the Company have been prepared in
      accordance with Canadian generally accepted accounting principles within
      reasonable limits of materiality and within the framework of the significant
      accounting policies summarized below:

(a)        Basis
      of Consolidation

The
      consolidated financial statements of the Company include its wholly-owned
      subsidiary, Green River Petroleum USA Inc., incorporated in the State of
      Wyoming.  The subsidiary was inactive throughout the year and all
      inter-company transactions and balances have been eliminated on consolidation.





---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







3.           Significant
        Accounting Policies (continued)

(b)        Use
      of Estimates

The
      preparation of financial statements in conformity with Canadian generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amount of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amount of revenues and expenses during the
      period.  Actual results may differ from those estimates.

(c)        Income
      Taxes

The
      Company has adopted the provision of CICA Handbook Section 3465, Income
      Taxes.  Under this standard, current income taxes are recognized for
      the estimated income taxes payable for the current period.

Future
      taxes are recognized for the tax consequences of temporary differences by
      applying enacted or substantively enacted statutory tax rates applicable
      to future years to differences between the financial statement carrying
      amounts and the tax basis of existing assets and liabilities.  The
      effect on deferred taxes for a change in tax rates is recognized in income
      in the period that includes the date of enactment or substantive enactment.  In
      addition, Section 3465 requires the recognition of future tax benefits
      to the extent that realization of such benefits is more likely than not.

(d)        Equipment

Equipment
      is recorded at cost.  The Company provides for amortization at the
      following annual rate:

Office
      equipment                        20%
      declining balance





---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







3.           Significant
        Accounting Policies (continued)

(e)        Petroleum
      and Natural Gas Interests

The
      Company follows the full cost method of accounting for petroleum and natural
      gas interests whereby all costs of exploration for and development of,
      petroleum and natural gas reserves are capitalized.  These costs include
      lease acquisition costs, geological and geophysical expenses, drilling
      costs of successful as well as unsuccessful wells and overhead charges
      related directly to the exploration.  The carrying value of petroleum
      and natural gas interests are not intended to report replacement or current
      market values.

Depletion
      of exploration and development costs is provided using the unit of production
      method based on estimated proven petroleum and natural gas reserves.

If
      the interests are sold or abandoned, the proceeds will be applied against
      capitalized costs unless such sale significantly impacts the rate of depletion.

Costs
      associated with unproven reserves are reviewed by management to determine
      whether or not they have become impaired.  If impairment occurs, the
      carrying value of the related interest will be reduced to reflect the estimated
      net realizable value.  The estimate will be based on the then current
      conditions and it is possible that changes could occur which would adversely
      affect managements estimates resulting in further write downs of
      the carrying value of the interest.

(f)         Cash
      Equivalents

Cash
      equivalents usually consist of highly liquid investments, which are readily
      convertible into cash with maturities of three months or less when purchased.  The
      Company has no cash equivalents as at December 31, 2003 and 2002.

(g)        Earnings
      Per Share

Basic
      earnings per share is computed using the weighted average number of common
      shares outstanding during the year.  Diluted earnings per share amounts
      are calculated giving effect to the potential dilution that would occur
      if securities or other contracts to issue common shares were exercised
      or converted to common shares using the treasury stock method.  The
      treasury stock method assumes that proceeds received from the exercise
      of stock options and warrants are used to repurchase common shares at the
      prevailing market rate.





---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







3.           Significant
        Accounting Policies (continued)

(h)        Property
      Option Agreements

From
      time to time, the Company may acquire or dispose of an interest pursuant
      to the terms of an option agreement.  Due to the fact that options
      are exercisable entirely at the discretion of the optionee, the amounts
      payable or receivable are not recorded.  Option payments are recorded
      as property costs or recoveries when the payments are made or received.

(i)         Long-lived
      Assets Impairment

Long-lived
      assets of the Company are reviewed when changes in circumstances suggest
      their carrying value has become impaired.  Management considers assets
      to be impaired if the carrying value exceeds the future projected cash
      flows from related operations (undiscounted and without interest charges).  If
      impairment is deemed to exist, the assets will be written down to their
      fair value.

(j)         Foreign
      Currency Translations

Assets
      and liabilities denominated in foreign currencies are translated into Canadian
      dollars at exchange rates in effect at the balance sheet date for monetary
      items and at exchange rates prevailing at the transaction dates for non-monetary
      items.  Revenues and expenses are translated at the average exchange
      rates prevailing during the year except for amorization, which is translated
      at historical exchange rates.  Gain and losses on translations are
      included as income for the year.

4.         Equipment

|                 | 2003             | 2002                          
|---------------- | ---------------- | ------------------------------
|                 | Cost             | Accumulated
      Amortization
|                 |                  |                               
|Office equipment | $              - | $                -            









---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







5.         Petroleum
        and Natural Gas Interests

As
      at December 31, 2003, the Companys petroleum and natural gas interests
      include the following acquisition costs and accumulated depletion:

|                                                 | Cost        | Accumulated
            Depletion | Total
      2003 | Total
      2002       
|------------------------------------------------ | ----------- | --------------------------------- | ---------------- | -----------------------
|Petroleum and Natural
            Gas Interests: |             |                                   |                  |                        
|Canadian Properties                              | $ 5,606,483 | $
            1,832,291           | $ 3,774,192      | $
            2,127,292



(a)        Canadian
      Properties

(i)          On
        January 29, 2003, the Company entered into a Farmout agreement with Warrior
        Energy Inc. (Warrior) in which the Company  has the
        option to pay 100% of the costs to drill, test, cap, complete or abandon
        one well in the Greencourt area of Alberta in order to earn a 60% working
        interest in the well and one Section and a 20% working interest in an
        adjoining Section comprising the Farmin lands.

On
      December 12, 2003, the Farmout agreement was amended wherein the Company
      and Warrior agreed to waive the requirement to complete and test the well
      to earn a 60% interest in the well and one Section in favour of the Company
      earning a 50% earned working interest in the test well, one Section and
      a 20% working interest in an adjoining Section comprising the Farmin lands.

On
      February 19, 2003 the Company entered into a Participation agreement with
      Warrior in which the Company has the option to pay 40% of the recompletion
      costs in two wells in the Morningside area of Alberta, to earn a 40% BPO
      and 12% APO working interest in the wells and Participation lands.

On
      April 21, 2003, the Company entered into a Farmin agreement dated April
      21, 2003 with Warrior in which the Company has the option to pay 20% of
      the costs to drill, test, cap, complete or abandon one well in the Niton
      area of Alberta in order to earn a 12% working interest in the well and
      Farmin lands.

Cumulative
      costs to date are $933,602.





---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







5.           Petroleum
        and Natural Gas Interests (continued)

(ii)         On
        May 1, 2003, the Company entered into a Participation Agreement with
        Makah Energy Corporation (Makah) in which the Company can
        participate in an undivided 50% interest in joint oil and gas exploration
        and development activities within an Area of Mutual interest in the Provost
        area of Alberta.

Cumulative
      costs to date are $207,260.

(iii)        On
        November 26, 2002, the Company entered into a Farmout and Participation
        Agreement with Mustang Resources Inc. (Mustang) in which
        the Company has the option to pay 60% of the costs to drill to casing
        point or abandon one well in the Sylvan Lake area of Alberta in order
        to earn a 30% working interest in the well and Farmout lands.

Cumulative
      costs to date are $767,443.

(iv)        On
        November 26, 2002, the Company entered into a Farmout Agreement with
        Zorin Exploration. (Zorin) in which the Company has the option
        to pay 55.5% of the costs to drill and complete two wells in the Granlea
        area of Alberta for the right to earn a 27.75% working interest in the
        wells and Farmout lands.

Cumulative
      costs to date are $159,055.

(v)         On
        October 18, 2001, the Company amended a Farmout Agreement, originally
        entered into on September 14, 2001 with Result Energy Inc. (Result)
        in which the Company agreed to 100% of the cost to re-enter a test well.

Cumulative
      costs to date are $680,971.

(vi)        On
        August 2, 2001 and on September 21, 2001, the Company entered into Farmout
        Agreements Moxie Exploration Ltd. (Moxie) in which the Company
        has the option to pay 75% of the cost to drill and complete four wells
        in the Jumpbush area of Alberta, to earn a 37.5% working interest.

On
      October 10, 2001, the Company entered into a Participation Agreement with
      Moxie in which the Company has the option to participate in an undivided
      50% interest in a test well in the Eyremore area of Alberta.

On
      January 15, 2003, the Company entered into a Participation Agreement with
      Moxie in which the Company has the option to pay 70% of the cost to drill
      and complete three test wells in the West Jumpbush area of Alberta, to
      earn a 35% working interest in the wells and Farmout lands.

Cumulative
      costs to date are $2,858,152.

5.           Petroleum
        and Natural Gas Interests (continued)

(b)        US
      Properties

The
      Company entered into a formal agreement dated August 7, 2001 with Patriot
      Petroleum Corp. (Patriot) to dispose of all of its US 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.

Ownership
      in petroleum and natural gas interests involve certain inherent risks due
      to the difficulties in determining the validity of certain interests as
      well as the potential for problems arising from the frequently ambiguous
      conveyancing history characteristic of many petroleum and natural gas interests.  The
      Company has investigated the ownership of its interests and, to the best
      of its knowledge, they are in good standing.

6.         Convertible
        Debentures

|                                                                                                                                     | 2003       | 2002        
|------------------------------------------------------------------------------------------------------------------------------------ | ---------- | ------------
|                                                                                                                                     |            |             
|Convertible
            debentures payable, bearing interest at the rate of 15% per annum,
            payable quarterly, in arrears | $1,000,000 | $          -
|                                                                                                                                     |            |             



(a)        On
      April 22, 2003, the Company completed a non-brokered private placement
      with certain investors by issuing 100 convertible debentures at $10,000
      per issued debenture, bearing interest at the rate of 15% per annum for
      gross proceeds of $1,000,000.





---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







6.           Convertible
        Debentures(continued)

(b)        The
      debentures shall have a term of three years and any portion of the outstanding
      principal sum and accrued interest of each debenture is convertible into
      units in the capital of the Company at a price of $0.30 if converted during
      the first two years of the debenture or at a price of $0.33 if converted
      during the third year of the debenture.

Each
      unit consists of one common share in the capital of the Company and one
      non-transferable share purchase warrant.  Each warrant entitles the
      holder to purchase one additional common share at a price of $0.30 per
      share if the debenture is converted after the date of issuance and on or
      before one year following the date of issuance of the debenture; $0.40
      per share if the debenture is converted after the first anniversary of
      the issuance and on or before two years following the date of issuance;
      and $0.50 per share if the debenture is converted after the second anniversary
      of the issuance and on or before the due date of the debenture (note 11(a)).

(c)        As
      at December 31, 2003, the present value of the convertible debenture was
      $1,014,617 after applying a discount rate of 15% and accruing interest
      at 15%.  The Company has adopted the residual approach and has reported
      100% of the debenture as a liability.







---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







7.         Share
        Capital

(a)        Authorized:        Unlimited
      number of common shares without par value

Unlimited
      number of preferred shares without par value.

(b)        Issued:

|                                                    | Number
            of Shares | Amount      
|--------------------------------------------------- | ---------------------------- | ------------
|                                                    |                              |             
|Common shares:                                      |                              |             
|Balance
            at December 31, 2001            | 4,749,329                    | $  9,249,234
|Shares
            issued during the year for cash: |                              |             
|-
            by exercise of warrants               | 712,500                      | 185,250     
|-
            by private placement                  | 1,000,000                    | 200,000     
|                                                    |                              |             
|Balance
            at December 31, 2002            | 6,461,829                    | 9,634,484   
|Shares
            issued during the year for cash: |                              |             
|-
            by private placement                  | -                            | -           
|-
            by exercise of stock options          | 187,500                      | 44,750      
|-
            by exercise of warrants               | 1,500,000                    | 345,000     
|Balance
            at December 31, 2003            | 8,149,329                    | $10,024,234 



(c)        Warrants

As
      at December 31, 2003 the Company has outstanding share purchase warrants
      entitling the holders to acquire additional common shares, as follows:

|Number
            of Shares | Exercise
            Price | Expiry                      
|---------------------------- | -------------------------- | ----------------------------
|                             |                            |                             
|1,000,000                    | $0.23                      | January
            18, 2004
|                             |                            |                             









---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







7.           Share
        Capital   (continued)

(d)        Stock
      Options

As
      at December 31, 2003, the Company has outstanding directors and employees incentive
      stock options enabling the holders to acquire additional common shares
      as follows:

|Number
            of Shares | Exercise
            Price | Expiry
            Date      
|---------------------------- | -------------------------- | -----------------------------
|93,500                       | $0.22                      | June
            30, 2005    
|30,000                       | $0.27                      | February
            20, 2008
|                             |                            |                              
|                             |                            |                              



During
      the year, the Company granted 30,000 stock options to employees and directors
      with an exercise price of $0.27 per share.  For the year ended December
      31, 2003, the Company recorded stock-based compensation expense totalling
      $3,900.

A
      summary of the stock option activity for the current year is as follows:

|                                         | Number    | Weighted
            Average Exercise
      Price
|---------------------------------------- | --------- | -------------------------------------------------
|                                         |           |                                                  
|Balance
            at December 31, 2001 | 331,000   | $    0.25                                        
|Granted                                  | -         | -                                                
|Exercised                                | -         | -                                                
|Forfeited
            / Cancelled        | -         | -                                                
|                                         |           |                                                  
|Balance
            at December 31, 2002 | 331,000   | 0.25                                             
|Granted                                  | 30,000    | 0.27                                             
|Exercised                                | (187,500) | 0.24                                             
|Forfeited
            / Cancelled        | (50,000)  | 0.33                                             
|                                         |           |                                                  
|Balance
            at December 31, 2003 | 123,500   | $   0.23                                         



The
      weighted average fair value of stock options granted during the year ended
      December 31, 2003 was $0.27 per share (2002  nil; 2001 - $0.33) based
      on the Black-Scholes model.  Assumptions used were as follows:  risk-free
      interest rate of 4.5%, dividend yield 0%; volatility of 109% and expected
      lives of approximately five years.





---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







7.           Share
        Capital (continued)

(d)         Stock
      Options (continued)

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.  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.

|Range
            of
      Exercise
      Prices | Number
      Outstanding | Number
      Exercisable | Average
      Remaining
      Contractual
      Life (year) | Weighted
      Average
      Exercise
      Price
            on
      Outstanding
      Options | Weighted
      Average
      Exercise
      Price
            on
      Exercisable
      Option
|------------------------------------------------ | ------------------------ | ------------------------ | ----------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | -----------------------------------------------------------------------------------------------
|                                                 |                          |                          |                                                             |                                                                                                  |                                                                                                
|$0.22
            - $0.27                        | 123,500                  | 123,500                  | 2.65                                                        | $0.23                                                                                            | $0.23                                                                                          
|                                                 |                          |                          |                                                             |                                                                                                  |                                                                                                

8.         Financial
        Instruments

Fair
      value estimates of financial instruments are made at a specific point in
      time, based on relevant information about financial markets and specific
      financial instruments.  As these estimates are subjective in nature,
      involving uncertainties and matters of significant judgement, they cannot
      be determined with precision.  Changes in assumptions can significantly
      affect estimated fair values.

The
      carrying value of cash and cash equivalents and accounts payable and accrued
      liabilities approximate their fair value because of the short-term nature
      of those instruments.





---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)









9.         Related
        Party Transactions

The
      aggregate amount of expenditures made to parties not at arms length
      to the Company include:

|                                                                 | 2003                 | 2002                 | 2001                
|---------------------------------------------------------------- | -------------------- | -------------------- | --------------------
|                                                                 |                      |                      |                     
|Management fees paid
            to a former director            | $
            50,000 | $
            60,000 | $
            60,000
|                                                                 |                      |                      |                     
|Administrative and
            consulting fees paid to directors | $
            29,000 | $           -        | $           -       
|                                                                 |                      |                      |                     



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 5.

Management
      is of the opinion that the terms and conditions entered into are consistent
      with standard business practice.





---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)









10.         Income
        Taxes

The
      components of the Companys future tax assets and liabilities are
      as follows:

|                                                                                        | 2003               | 2002              
|--------------------------------------------------------------------------------------- | ------------------ | ------------------
|                                                                                        |                    |                   
|Future tax assets
            (liabilities):                                            |                    |                   
|Non-capital
            loss carryforwards                                              | $                - | $        2,000    
|Timing
            difference re: petroleum and natural
      gas
            interests | 340,000            | -                 
|                                                                                        |                    |                   
|Total future tax assets                                                                 | 340,000            | 2,000             
|                                                                                        |                    |                   
|Valuation allowance                                                                     | (340,000)          | (2,000)           
|                                                                                        |                    |                   
|Net future tax assets                                                                   | $                - | $                -



In
      assessing the reliability 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.

The
      Companys unused Canadian exploration and development expenses, totalling
      approximately $4,460,000, are available to reduce Canadian taxable income
      earned in future years.  These unused expenses can be carried forward
      indefinitely.

A
      reconciliation of the statutory tax rate to the average effective rate
      for the Company is as follows:

|                                         | 2003 | 2002 | 2001
|---------------------------------------- | ---- | ---- | ----
|                                         | %    | %    | %   
|                                         |      |      |     
|Statutory income tax
            rate    | 40   | 40   | 40  
|Resource deductions
            utilized | (40) | (40) | (40)
|Average
            effective tax rate   | -    | -    | -   
|                                         |      |      |     









---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







11.         Subsequent
        Events

(a)        The
      convertible debenture holders exercised their options to convert the principal
      and accrued interest resulting in the issuance of 3,414,473 common shares
      and 3,414,473 share purchase warrants.  Each warrant entitles the
      holder to purchase a further common share at a price of $0.30 per share
      on or before March 16, 2006 (note 6).

(b)        A
      company under common control has acquired, through the exercise of share
      purchase warrants, ownership of one million common shares of the Company.  The
      warrants were exercised at a price of $0.23 per share for total proceeds
      of $230,000 [note 7(c)].

12.         Differences
        Between Canadian and United States Generally Accepted Accounting Principles
        (Canadian GAAP and U.S. GAAP)

These
      consolidated financial statements and the selected financial data have
      been prepared under Canadian Generally Accepted Accounting Principles (Canadian
      GAAP).

For
      each year of presentation, the modifications necessary in order for these
      consolidated financial statements to conform to U.S. GAAP have been suitably
      provided as follows:

(a)        Reconciliation
      of Consolidated Balance Sheet Items:

Reconciliation
      of Deficit Under U.S. GAAP

|                                                      | 2003               | 2002              
|----------------------------------------------------- | ------------------ | ------------------
|                                                      |                    |                   
|Deficit, end of year,
            Canadian GAAP       | $      (6,707,637) | $      (6,881,933)
|Beneficial conversion
            expense [note 12(h) | (341,447)          | -                 
|                                                      |                    |                   
|Deficit, end of year,
            U.S. GAAP           | $      (7,049,084) | $      (6,881,933)









---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







12.         Differences
        Between Canadian And United States Generally Accepted Accounting Principles
        (Canadian GAAP and U.S. GAAP)(continued)

(b)        Reconciliation
      of Consolidated Income Items:

Reconciliation
      of Net Loss Under U.S. GAAP

|                                                         | 2003            | 2002           | 2001            
|-------------------------------------------------------- | --------------- | -------------- | ----------------
|                                                         |                 |                |                 
|Net
            income for the year per Canadian GAAP    | $       174,296 | $      878,125 | $        192,826
|Beneficial conversion
            expense                | (341,447)       | -              | -               
|                                                         |                 |                |                 
|Net
            income (loss) for the year per U.S. GAAP | $               | $              | $               



(c)        Income
      (Loss) Per Share U.S. GAAP

|                                      | 2003               | 2002              | 2001               
|------------------------------------- | ------------------ | ----------------- | -------------------
|                                      |                    |                   |                    
|Earnings
            (loss) per share |                    |                   |                    
|-
            basic                   | $           (0.03) | $            0.14 | $              0.06
|-
            diluted                 | (0.03)             | 0.13              | 0.05               
|                                      |                    |                   |                    















---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)







12.         Differences
        Between Canadian And United States Generally Accepted Accounting Principles
        (Canadian GAAP and U.S. GAAP)(continued)

(d)        Supplemental
      Financial Information  Comprehensive Income

Statement
      of Financial Accounting Standards No. 130 requires the reporting of comprehensive
      income in addition to net earnings.  Comprehensive income includes
      net income plus other comprehensive income; specifically, all changes in
      equity of a company during a period arising from non-owner sources.

Under
      U.S. GAAP, a statement of changes in shareholders equity and comprehensive
      income in the following format would form a part of the annual financial
      statement:

Consolidated
      Statement of Changes in Shareholders Equity



|                                                 | Share
            Capital | Additional                        | Compre-
      hensive | Retained                 | Accumulated
      Other
      Compre-
      hensive
      Income
      (Loss) | Total
      Share-
      holders
      Equity
|------------------------------------------------ | ------------------------- | --------------------------------- | --------------------- | ------------------------ | ----------------------------------------------------------------------------- | ----------------------------------------------
|Number
            of Shares                     | Amount                    | Paid
            In
      Capital | Income
      (Loss)   | Earnings
      (Deficit) |                                                                               |                                               
|                                                 |                           |                                   |                       |                          |                                                                               |                                               
|Balance
            forward,   December 31, 2000 | 3,199,329                 | $8,937,234                        | $            -        |                          | $(7,952,884)                                                                  | $            -                                
|                                                 |                           |                                   |                       |                          |                                                                               |                                               
|Issuance
            of shares   (see Note 7)    | 1,550,000                 | 312,000                           | -                     |                          | -                                                                             | -                                             
|Components
            of comprehensive income:  |                           |                                   |                       |                          |                                                                               |                                               
|-
            net income (loss)                  | -                         | -                                 | -                     | $   174,,270             | 174,270                                                                       | -                                             
|-
            foreign currency gain              | -                         | -                                 | -                     | 18,556                   | -                                                                             | 18,556                                        
|                                                 |                           |                                   |                       |                          |                                                                               |                                               
|                                                 |                           |                                   |                       | $   192,,826             |                                                                               |                                               
|                                                 |                           |                                   |                       |                          |                                                                               |                                               
|Balance,
            December 31, 2001           | 4,749,329                 | $
            9,249,234           | $             -       |                          | $(
            7,778,614)                                                     | $
            18,556                          





12.         Differences
        Between Canadian And United States Generally Accepted Accounting Principles
        (Canadian GAAP and U.S. GAAP)(continued)

(d)         Supplemental
      Financial Information  Comprehensive Income (continued)

Consolidated
      Statement of Changes in Shareholders Equity (continued)



|                                                | Share
            Capital | Additional                        | Compre-
      hensive | Retained                 | Accumulated
      Other
      Compre-
      hensive
      Income
      (Loss) | Total
      Share-
      holders
      Equity
|----------------------------------------------- | ------------------------- | --------------------------------- | --------------------- | ------------------------ | ----------------------------------------------------------------------------- | ----------------------------------------------
|Number
            of Shares                    | Amount                    | Paid
            In
      Capital | Income
      (Loss)   | Earnings
      (Deficit) |                                                                               |                                               
|                                                |                           |                                   |                       |                          |                                                                               |                                               
|Balance
            forward, December 31, 2001  | 4,749,329                 | $9,249,234                        | $               -     |                          | $(7,778,614)                                                                  | $18,556                                       
|                                                |                           |                                   |                       |                          |                                                                               |                                               
|Issuance
            of shares (see Note 7)     | 1,712,500                 | 385,250                           | -                     |                          | -                                                                             | -                                             
|Components
            of Comprehensive income: |                           |                                   |                       |                          |                                                                               |                                               
|- net
            income (loss)                 | -                         | -                                 | -                     | $  849,792               | 849,792                                                                       | -                                             
|-
            foreign currency gain (loss)      | -                         | -                                 | -                     | 28,333                   | -                                                                             | 28,333                                        
|                                                |                           |                                   |                       |                          |                                                                               |                                               
|                                                |                           |                                   |                       | $  878,125               |                                                                               |                                               
|                                                |                           |                                   |                       |                          |                                                                               |                                               
|Balance,
            December 31, 2002          | 6,461,829                 | 9,634,484                         | -                     |                          | (6,928,822)                                                                   | 46,889                                        
|                                                |                           |                                   |                       |                          |                                                                               |                                               
|Issuance
            of shares (see Note 7)     | 1,687,500                 | 389,750                           | -                     | -                        | -                                                                             | -                                             
|Stock
            based compensation            | -                         | -                                 | 3,900                 | -                        | -                                                                             | -                                             
|Components
            of comprehensive income: |                           |                                   |                       |                          |                                                                               |                                               
|- net
            income (loss)                 | -                         | -                                 | -                     | $  174,664               | 174,664                                                                       | -                                             
|-
            foreign currency gain (loss)      | -                         | -                                 | -                     | (368)                    | -                                                                             | (368)                                         
|                                                |                           |                                   |                       |                          |                                                                               |                                               
|                                                |                           |                                   |                       | $         174,296        |                                                                               |                                               
|                                                |                           |                                   |                       |                          |                                                                               |                                               
|Balance,
            December 31, 2003          | 8,149,329                 | $10,024,234                       | $3,900                |                          | $(6,754,158)                                                                  | $46,521                                       
|                                                |                           |                                   |                       |                          |                                                                               |                                               





---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)









12.         Differences
        Between Canadian and United States Generally Accepted Accounting Principles
        (Canadian GAAP and U.S. GAAP)(continued)

(e)        Recent
      account pronouncements

In
      April 2003, FASB issued SFAS No. 149, "Amendment of Statement 133
      on Derivative Instruments and Hedging Activities". This Statement
      amends and clarifies financial accounting and reporting for derivative
      instruments, including certain derivative instruments embedded in other
      contracts (collectively referred to as derivatives) and for hedging activities
      under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
      Activities". This Statement is effective for contracts entered into
      or modified after June 30, 2003. We do not expect the implementation of
      SFAS No. 149 to have a material impact on these consolidated financial
      statements.

In
      May 2003, FASB issued SFAS No. 150, "Accounting for Certain Financial
      Instruments with Characteristics of Both Liabilities and Equity".
      This Statement establishes standards for how an issuer classifies and measures
      certain financial instruments with characteristics of both liabilities
      and equity. It requires that an issuer classify a financial instrument
      that is within its scope as a liability (or an asset in some circumstances).
      This Statement is effective for financial instruments entered into or modified
      after May 30, 2003, and otherwise is effective at the beginning of the
      first interim period beginning after June 15, 2003. We do not expect the
      implementation of SFAS No. 150 to have a material impact on these consolidated
      financial statements.

In
      December 2003, FASB issued SFAS 132(R), a revision to SFAS No. 132, Employers Disclosure
      About Pensions and Other Postretirement Benefits.  SFAS No. 132(R)
      requires additional disclosures about the assets, obligations, cash flow
      and net periodic benefit cost of defined benefit pension plans and other
      defined benefit postretirement plans.  SFAS No. 132(R) is effective
      for financial statements with fiscal years ending after December 15, 2003,
      with the exception of disclosure requirements related to foreign plans
      and estimated future benefit payments which are effective for fiscal years
      ending after June 15, 2004.  The adoption of SFAS No. 132(R) did not
      impact these consolidated financial position or results of operations.





---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)









12.         Differences
        Between Canadian and United States Generally Accepted Accounting Principles
        (Canadian GAAP and U.S. GAAP) (continued)

(e)         Recent
      account pronouncements (continued)

In
      a December 11, 2003 speech at the American Institute of Certified Public
      Accountants, the Securities and Exchange Commission (SEC) expressed
      the opinion that rate-lock commitments represent written put options, and
      therefore should be valued as a liability.  The SEC expressed that
      they expect registrants to disclose the effect on the financial statement
      of recognizing the rate-lock commitments as written put options, for quarters
      commencing after March 15, 2004.  Additionally, the SEC recently issued
      Staff Accounting Bulletin No. 105 (SAB No. 105) which clarifies
      the SECs position that the inclusion of cash flows from servicing
      or ancillary income in the determination of the fair value of interest
      rate lock commitments is not appropriate  The adoption of SAB No.
      105 will not have an impact on the Companys consolidated financial
      statements

(f)         Petroleum
      and Natural Gas Interest

Under
      Canadian GAAP, reclamation costs, are not included in the costs subject
      to amortization.  Also, future net revenues are not discounted for
      the purpose of calculating any required ceiling test write-down.  However,
      they are reduced for estimated future general and administrative expenses
      and interest.  Ceiling test write-downs are included as additional
      depletion in the year of recognition.  Under U.S. GAAP, estimated
      dismantlement and abandonment costs, net of estimated salvage values are
      to be included in costs subject to amortization.  Management has determined
      that dismantlement costs are not material and therefore do not effect U.S.
      GAAP amortization.  The Company is required to discount future net
      revenues at 10% for purposes of calculating any required ceiling test write-down.  Had
      there been a need for a Ceiling test write-down it would have been separately
      disclosed from depletion.  The Companys last ceiling test was
      effective December 31, 2003.  It is managements opinion that
      the carrying value of the petroleum and natural gas interests would not
      be materially different had these financial statements been reported in
      accordance with U.S. GAAP.

None
      of the capitalized costs relate to unproven properties.





---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)









12.         Differences
        Between Canadian and United States Generally Accepted Accounting Principles
        (Canadian GAAP and U.S. GAAP) (continued)

(g)        Stock
      Options

The
      Company has granted stock options to certain directors and employees.  These
      options are granted for services provided to the Company.  For U.S.
      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 2002 and 2001 would have been
      as follows:

|                                                      | 2002             | 2001           
|----------------------------------------------------- | ---------------- | ---------------
|                                                      |                  |                
|Net income (loss)
            for the year:           |                  |                
|As
            reported, under Canadian and U.S. GAAP | $    878,125     | $   192,826    
|Pro
            forma                                 | 878,125          | 184,876        
|                                                      |                  |                
|Basic earnings (loss)
            per share           |                  |                
|As
            reported, under Canadian and U.S. GAAP | $           0.14 | $          0.16
|Pro
            forma                                 | 0.14             | 0.05           
|                                                      |                  |                
|Diluted earnings (loss)
            per share         |                  |                
|As
            reported, under Canadian and U.S. GAAP | $           0.13 | $          0.05
|Pro
            forma                                 | 0.13             | 0.04           
|                                                      |                  |                



For
      the year 2003, there were no reportable differences between the reported
      amounts and the pro-forma fair value method.





---

NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)









12.         Differences
        Between Canadian and United States Generally Accepted Accounting Principles
        (Canadian GAAP and U.S. GAAP) (continued)

(g)         Stock
      Options (continued)

In
      March 2000 the Financial Accounting Standards Board issued Interpretation
      #44, Accounting For Certain Transactions Involving Stock Compensation among
      other issues, this interpretation clarifies:

(i)          The
        definition of employee for purposes of applying opinion 25.

(ii)         The
        criteria for determining whether a plan qualifies as a non-compensatory
        plan.

(iii)        The
        accounting consequence of various modifications of the terms of a previously
        fixed stock option or award, and

(iv)        The
        accounting for an exchange of stock compensation awards in a business
        combination.

In
      relation to (iii) the interpretation states, if the exercise price
      of a fixed stock option award is reduced, the award shall be accounted
      for as a variable from the date of the modification to the date the award
      is exercised, is forfeited, or expires unexercised, the exercise price
      of an option award has been reduced if the fair value of the consideration
      required to be remitted pursuant to the awards original terms.

(h)        Beneficial
      Conversion Expense

Under
      U.S. GAAP a beneficial conversion expense in respect of the convertible
      debenture in the amount of $0.10 per share would have been included in
      the operating activities in the 2003 year (note 6).

(i)        Foreign
      Exchange Adjustment

Under
      U.S. GAAP, foreign exchange gains and (losses) would be excluded from the
      operating activities in the Statement of Cash Flows and would be shown
      separately as effect of exchange rate changes on monetary items:
      (2003 - $(368); 2002  $28,333; 2001 - $18,556).





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NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)









12.         Differences
        Between Canadian and United States Generally Accepted Accounting Principles
        (Canadian GAAP and U.S. GAAP)(continued)

(j)        Statement
      of Cash Flow

Supplemental
      Disclosure of Cash Flow Information

|Cash
            paid during the year for: | 2003               | 2002              | 2001         
|------------------------------------------ | ------------------ | ----------------- | -------------
|Interest                                   | $    125,049       | $               - | $           -
|Income
            taxes                   | $                - | $               - | $           -



(k)        Significant
      Accounting Policies

Under
      U.S. GAAP the Companys accounting policy with respect to advertising
      and promotion expenses would be disclosed as follows:

The
      Company expenses advertising and promotion costs as incurred.

(l)        Additional
      Disclosure Required by U.S. GAAP

(i)          Concentrations
        of Credit Risk

At
      December 31, 2003, 2002 and 2001, the Company had approximately $nil, $nil
      and $173,812, respectively, in cash balances at financial institutions
      which were in excess of the insured limits.

(ii)         Operations
        in a Foreign Country

The
      Company is subject to numerous factors relating to conducting business
      in a foreign country (including, without limitation, economic, political
      and currency risk), any of which could have a significant impact on the
      Companys operation.

The
      Companys U.S. subsidiary, Green River Petroleum USA Inc. is subject
      to U.S. corporation tax on profits.

(iii)        Beneficial
        Conversion

Subsequent
      to December 31, 2003, a number of warrant holders exercised their warrants
      at a price of $0.23 per share.  As a result, a beneficial conversion
      expense of $360,000 will be recorded in fiscal 2004 (Note 11(b).)





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NETCO
        ENERGY INC.



Notes
      to Consolidated Financial Statements

December
      31, 2003, 2002, and 2001

(In
        Canadian Dollars)









12.         Differences
        Between Canadian and United States Generally Accepted Accounting Principles
        (Canadian GAAP and U.S. GAAP)(continued)

(l)          Additional
      Disclosure Required by U.S. GAAP

(iv)        Effective
        January 1, 2003, U.S. GAAP requires the Companys adoption of SFAS
        No. 143, which recognizes that the fair value of a liability for an asset
        retirement obligation be recognized in the period in which it occurred
        if a reasonable estimate of fair value can be made.  The associate
        asset retirement costs are capitalized as part of the carrying amount
        of the long-lived asset.  Canadian GAAP was aligned with U.S. GAAP
        effective January 1, 2004.  The Company does not have material future
        site restoration and abandonment obligations.



(m)        Additional
      Disclosure Required by SEC

The
      SEC requires that related party transactions be disclosed as a separate
      line in the financial statements.  Under this requirement, the following
      related party transactions would have been shown separately as related
      party balances in the financial statements:

(i)          Administrative
        and Consulting fees of $29,000 (2002 - $nil; 2001 - $nil) were paid to
        a director.

(ii)         Management
        fees of $50,000 (2002 - $60,000; 2001 - $60,000) were paid to a former
        director.

(iii)        Gain
        from disposition of petroleum and natural gas interest of $nil (2002
        - $443,079; 2001 - $nil) (note 5(ii)).





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





AUDITORS REPORT





To the Shareholders of Netco Energy Inc.



We have audited the consolidated balance sheet of Netco Energy Inc. as at December 31, 2002 and the consolidated statements of income and deficit and cash flows for the years ended December 31, 2002 and 2001.  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 generally accepted auditing standards in Canada and the standards of the Public Company Accounting Oversight Board (United States).  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. We believe that our audit provides a reasonable basis for our opinion.



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 the results of its operations and its cash flows for the years ended December 31, 2002 and 2001 in accordance with Canadian generally accepted accounting principles.





/s/  Lancaster & David

CHARTERED ACCOUNTANTS



Vancouver, BC

April 25, 2003







Vancouver Office - Suite 510, 701 West Georgia Street, PO Box 10133, Vancouver, BC, Canada, V7Y 1C6   Facsimile: 604.602.0867

New Westminster Office Suite 404, 960 Quayside Drive, New Westminster, BC, Canada, V3M 6G2 Facsimile: 604. 524.9837

Telephone: 604.717.5526               Email:  admin@lancasteranddavid.ca





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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) with 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, dated September 14, 2001 with Daybreak Energy Inc. (incorporated by reference from our Form 20-F Annual Report, filed on June 28, 2002)

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

4.4         Letter Agreement, dated August 2, 2001 with Moxie Exploration Ltd.  (incorporated by reference from our Form 20-F Annual Report, filed on June 28, 2002)



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

4.6         Letter Agreement, dated October 10, 2001 with Moxie Exploration Ltd. (incorporated by reference from our Form 20-F Annual Report, filed on June 28, 2002)

4.7         Area of Mutual Interest Agreement, dated October 9, 2001 with Moxie Exploration Ltd. (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 (incorporated by reference from our Form 20-F Annual Report, filed on July 2, 2003)

4.9         Form of Convertible Debenture (incorporated by reference from our Form 20-F Annual Report, filed on July 2, 2003)

4.10**   Letter
Agreement, dated January 15, 2003 with Moxie Exploration Ltd.

(5)         Subsidiaries

None

(11)       Code of Ethics

11.1**   Code of Ethics

(12)       302 Certification

12.1**   Section 302 Certification under Sarbanes-Oxley Act of 2002 for Chris Schultze

12.2**   Section 302 Certification under Sarbanes-Oxley Act of 2002 for Dan Weisbeck

(13)       906 Certification

13.1**   Section 906 Certification under Sarbanes-Oxley Act of 2002

** Filed herewith.





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#





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: July 15, 2004

Netco Energy Inc.

Per:       
Chris Schultze, President
(Principal Executive Officer)







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#





CERTIFICATIONS

I, Chris Schultze, 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:   July 15, 2004

Signature:   /s/ Chris Schultze
Title:                  President
(Principal Executive Officer)





CERTIFICATIONS

I, Daniel Weisbeck, 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:   July 15, 2004

Signature:   /s/ Daniel Weisbeck
Title:                     CFO
(Principal Financial Officer)





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EXHIBIT 32.1



CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



The undersigned, Chris Schultze, President and Chief Executive Officer, and Dan Weisbeck, Chief Financial Officer, of Netco Energy Inc., each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:



(1)          the Annual Report on Form 20-F of Netco Energy Inc. for the year ended December 31, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)          the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Netco Energy Inc.



|Dated: July 15, 2004 |  |                                      
|-------------------- |  | -------------------------------------
|                     |  |                                      
|                     |  |                                      
|                     |  | /s/ Chris Schultze                   
|                     |  | Chris Schultze                       
|                     |  | President and Chief Executive Officer
|                     |  | Netco Energy Inc.                    
|                     |  |                                      
|                     |  |                                      
|                     |  | /s/ Dan Weibeck                      
|                     |  | Dan Weibeck                          
|                     |  | Chief Financial Officer              
|                     |  | Netco Energy Inc.                    





A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Netco Energy Inc. and will be retained by Netco Energy Inc. and furnished to the Securities and Exchange Commission or its staff upon request.