JOINT OPERATING AGREEMENT

            For Oil and Gas Permit No. 96-04, 05, 07, 08, 09, and 10
                          Prince Edward Island, Canada




This Agreement dated the 22nd day of October, 2001.

AMONG:

     Rally Energy Corp., a body corporate, having an office in the City of
     Calgary, in the Province of Alberta (hereinafter called "Rally"); and

     Osprey Energy Limited, a body corporate having an office in the City of
     Bridgewater, in the Province of Nova Scotia (hereinafter called "Osprey");
     and

     Energy Power Systems Limited, a body corporate, having an office in the
     city of Toronto, in the Province of Ontario (hereinafter called "EPS"); and

     CMB Energy Corp., a body corporate, having an office in the City of
     Bedford, in the Province of Nova Scotia (hereinafter called "CMB"); and

     Shannon International Resources Inc., a body corporate, having an office in
     the City of Calgary, in the Province of Alberta (hereinafter called
     "Shannon").

     WHEREAS the parties jointly own certain Title Documents covering the Joint
Lands as more particularly set forth in Schedule "A" attached hereto and forming
part of this Agreement; and


<PAGE>
     WHEREAS the parties desire to provide for the ownership, maintenance,
exploration, development and production of petroleum substances from the Joint
Lands in the manner hereinafter set forth.

     NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and mutual covenants herein contained, the parties covenant and agree
as follows:


1.       DEFINITIONS

In this Agreement, including the recitals and Schedules, unless otherwise
defined herein, the definitions contained in Clause 101 of the Operating
Procedure shall apply. In addition to such definitions in the Operating
Procedure, the following expressions shall have the respective meanings herein
assigned to them, namely:

     a.   "Assignment Procedure" means the 1993 form of Canadian Association of
          Petroleum Landmen Assignment Procedure, including the Notice of
          Assignment form, both of which are incorporated by reference into this
          Agreement;

     b.   "Joint Lands" means the lands set forth and described in Schedule "A",
          and includes the petroleum substances within, upon or under such lands
          insofar as the same are held pursuant to the Title Documents, or any
          lands which may from time to time remain or become subject to this
          Agreement;

     c.   "Operating Procedure" means the 1990 CAPL Operating Procedure attached
          hereto as Schedule "B", and includes the PASC Accounting Procedure
          attached hereto as Exhibit 1, as amended therein; and

     d.   "Party" means any person, firm, corporation or partnership bound by
          this Agreement,

     e.   "Title Documents" means the documents of title described as such in
          Schedule "A", insofar as they relate to the Joint Lands, or any of
          them, and any renewals, extensions, continuations or conversions
          thereof effected pursuant to the Regulations or otherwise.
<PAGE>

2.       GENERAL

     a.   The headings of the clauses in this Agreement are inserted for
          convenience of reference only and shall not affect the meaning or
          construction hereof.

     b.   Whenever the plural or masculine or neuter is used in this Agreement,
          the same shall be construed as meaning singular or feminine or body
          politic or corporate and vice versa where the context so requires.

3.       SCHEDULES

The following Schedules are attached to and incorporated into and form a part of
this Agreement:

     a.   Schedule "A" which sets forth and describes the Title Documents and
          Joint Lands;

     b.   Schedule "B" which is the Operating Procedure to which is attached the
          Accounting Procedure as Exhibit 1;


4.       ASSIGNMENT PROCEDURE

Clause 2404 of the Operating Procedure is deleted in its entirety and is
replaced by the Assignment Procedure. The Assignment Procedure shall apply with
respect to any assignment of an interest in this Agreement. Notwithstanding
Clause 2.02 of the Assignment Procedure, no provision of the Assignment
Procedure shall be construed so as to make the Assignee responsible for any
obligation or liability which had arisen or accrued prior to the Transfer Date
(as defined in the Assignment Procedure).

<PAGE>
5.       EFFECTIVE DATE

The Effective Date of this Agreement shall be October 23, 2001.

6.       OPERATING PROCEDURE

     a.   From and after the Effective Date hereof, the parties shall bear all
          costs and expenses paid or incurred under this Agreement and shall own
          the Title Documents, the Joint Lands, all wells thereon and
          information obtained therefrom, the equipment pertaining thereto and
          petroleum substances produced therefrom, and shall conduct operations
          thereon in accordance with the Operating Procedure which together with
          the body of this Agreement shall thereafter govern the relationship
          between the parties in the following respective undivided working
          interests:

              Rally                              55.0%
              Osprey                             10.0%
              EPS                                25.0%
              CMB                                 5.0%
              Shannon                             5.0 %
                                                -----
                                                100.0%

     b.   As of the Effective Date, Rally is hereby appointed Operator of the
          Joint Lands under the Operating Procedure and hereby accepts such
          appointment and agrees to act in such capacity in accordance with the
          provisions of the Operating Procedure.

<PAGE>
7.       WARRANTY OF TITLE
         No party warrants title to its working interest in the Title Documents
         or the Joint Lands. Each party covenants that it has complied with the
         terms of the Title Documents to the extent necessary to keep them in
         full force and effect and has good right, full power and authority to
         enter into this Agreement and represents that it has not, as of the
         Effective Date, received any notice of default in respect thereof. No
         party warrants any better title than it now holds by virtue of the
         Title Documents.

8.       ENCUMBRANCES
         If the interest of a party in the Joint Lands is now or hereafter
         becomes encumbered by any royalty, excess royalty, overriding royalty,
         production payment, carried interest or other charge of a similar
         nature (herein called "encumbrances"), other than the royalties payable
         under the Title Documents to the grantors thereof or as otherwise
         identified herein, such encumbrances shall be charged to and paid
         entirely by the party whose interest is or becomes encumbered. Such
         party shall ensure that any such encumbrances shall either be
         terminated upon that party ceasing to have an interest in the Joint
         Lands so encumbered or shall be assumed by the transferee to which such
         party transfers its interest, PROVIDED HOWEVER, that in no event shall
         a party hereto acquiring an interest in the Joint Lands by virtue of
         the operation of any provision of the body of this Agreement or of the
         Operating Procedure (except for Clause 2401 B of the Operating
         Procedure, where applicable), ever be required to assume any part of
         such encumbrances, and the party which has so encumbered its interest
         shall at all times indemnify and hold the other parties harmless.

9.       FURTHER ASSURANCES
         Each of the parties shall from time to time do such further acts and
         execute and deliver all such further deeds and documents as shall be
         reasonable required in order to fully perform and carry out the terms
         of this Agreement.
<PAGE>
10.      MISCELLANEOUS

     a.   If any term or condition of this Agreement conflicts with a term or
          condition in the Title Documents then such term or condition in the
          Title Documents shall prevail and this Agreement shall be deemed to be
          amended to the extent necessary to give effect to such term or
          condition in the Title Documents concerned, and those Joint Lands
          thereby covered. If any term or condition of this Agreement conflicts
          with a term or condition of a parcel(s), then such term or condition
          in the parcel(s) shall prevail and this Agreement shall be deemed to
          be modified accordingly.

     b.   Wherever any term or condition, express or implied, of any such
          Schedule, including the Operating Procedure, conflicts with or is at
          variance with any term or condition of this Agreement, such term or
          condition of this Agreement shall prevail.

     c.   This Agreement and the relationship between the parties shall be
          construed and determined according to the laws of the Province of
          Alberta. The paties agree to submit to the jurisdiction of the courts
          of the Province of Alberta.

     d.   The terms of this Agreement express and constitute the entire
          agreement between the parties and no implied covenant or liability of
          any kind on the part of the parties is created or shall arise by
          reason of these presents or anything contained in this Agreement.

     e.   This Agreement replaces and supersedes all prior agreements,
          documents, writings and verbal understandings between the parties
          relating to the Joint Lands and the Title Documents.

     f.   Subject to the terms herein, this Agreement shall be binding upon and
          enure to the benefit of the parties and their respective successors
          and permitted assigns.

     g.   This Agreement may be executed in counterpart and all of the executed
          counterparts, when taken together, shall constitute one Agreement.

<PAGE>
         IN WITNESS whereof the parties have executed this Agreement as of the
date first written above.


Rally Energy Corp.                         Osprey Energy Limited
Per: Original "Signed"                     Per: Original "Signed"
     -----------------                          ------------------

Per: Original "Signed"                     Per: Original "Signed"
    ------------------                         ------------------


CMB Energy Corp.                           Shannon International Resources Inc.

Per: Original "Signed"                     Per: Original "Signed"
    ------------------                         ------------------

Per: Original "Signed"                     Per: Original "Signed"
    ------------------                         ------------------


Energy Power Systems Limited

Per: Original "Signed"
    ------------------

Per: Original "Signed"
    ------------------


<PAGE>



                                  Schedule "A"

Attached to and forming part of a Joint Operating Agreement dated the 23rd day
of October, 2001 between Rally Energy Corp., Ltd., Osprey Energy Limited, Energy
Power Systems Limited, CMB Energy Corp., and Shannon International Resources
Inc.
--------------------------------------------------------------------------------

TITLE DOCUMENTS:
Prince Edward Island Crown Oil and Gas Permit No. 96-04, 05, 07, 08, 08, 09, 10.

JOINT LANDS:

O&G Permit No.:   Grid Areas:
96-04             46 degrees 30 minutes N. Lat.   63 degrees 45 minutes W. Long.
     S. Half      46 degrees 40 minutes N. Lat.   63 degrees 45 minutes W. Long.
     Acreage:     116,279
96-05             46 degrees 20 minutes N. Lat.   63 degrees 15 minutes W. Long.
     Acreage:     58,139  (South half and NE Quad.)
96-07             46 degrees 20 minutes N. Lat    63 degrees 30 minutes W. Long
     NE Quad      46 degrees 20 minutes N. Lat    63 degrees 45 minutes W. Long
     Acreage:     96,898

96-08             46 degrees 20 minutes N. Lat    63 degrees 00 minutes W. Long
     S. Half      46 degrees 30 minutes N. Lat    63 degrees 00 minutes W. Long
     Acreage:     116,279

96-09             46 degrees 20 minutes N. Lat    62 degrees 45 minutes W. Long
                  46 degrees 30 minutes N. Lat    62 degrees 45 minutes W. Long
     Acreage:     116, 279

96-10             46 degrees 10 minutes N. Lat    63 degrees 00 minutes W. Long
                  (NE Quad.)
     Acreage:     21,983


For all permits, all PNG rights, surface to basement.
REGISTERED INTEREST OWNERS as of August 27, 2001:

Prince Edward Gas Company Inc.              10%

CMP Energy Corporation                      25%

Energy Power Systems                        25%

Osprey Energy Limited                       10%

Rally Energy Corporation                    30%

ENCUMBRANCES: Crown Royalty

<PAGE>


                                  Schedule "B"

  Attached to a Joint Operating Agreement dated the 23rd day of October, 2001,
 among Rally Energy Corp., Osprey Energy Limited, Energy Power Systems Limited,
           CMB Energy Corp. and Shannon International Resources Inc.
   --------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                 1990 CAPL OPERATING AGREEMENT

<S>                                                    <C>
I.   Insurance (Clause 311)                             Alternate  A
     ---------                                                    ----
II.  Marketing Fee (Clause 604) *                       Alternate  A
     -------------                                                 -
III. Casing Point Election (Clause 903)                 Alternate  A
     ---------------------                                        ----
IV.  Penalty for Independent Operations (Clause 1007)   Development wells       300 %
     ----------------------------------                                    ----------
                                                        Exploratory wells          500 %
                                                                              ----------
V.   Title Preserving well (Clause 1010)                 365  days
     ---------------------                              -----
VI.  Disposition of Interests (Clause 2401)             Alternate  A
     ------------------------                                     ----
VII. Recognition Upon Assignment (Clause 2404)          Alternate  Delete;  superceded by the 1993 CAPL Assignment Procedure
     ---------------------------                                   ----------------------------------------------------------

</TABLE>


                         1996 PASC ACCOUNTING PROCEDURE

I.   Operating Advance (Clause 105) Proportionate share of  10 %
     -----------------                                     -----
II.  Approvals (Clause 110)           2   or more parties totaling  75 %
     ---------                      -----                          -----
III  Expenditure Limits  (Clause 112)    (a) $100,000    (c)  $25,000
     ------------------                      ---------        -------
IV.  Employee Benefits  (Clause 202(b)                             25 %
     -----------------                                           ------
V.   Housing (Clause 213(b))  Shall be chargeable
     -------                  ------
V.   Warehouse Handling (Clause 2l6)   5 %
     ------------------                --
VI   Allocation Options  (Clause 221)  Delete
     ------------------

VI.  Overhead Rates (Clause 302)
     --------------
         (a)  For each Exploration Project:
                  (1)   5 % of first   $ 50,000.00
                      ----              ------------
                  (2)   3 % of next    $ 150,000.00
                      ----              ------------
                  (3)   1 % of cost over $ 200,000
                      ----               ---------
         (b)  For each Drilling Well:
                  (1)   3  % of first   $ 50,000.00
                      -----              -------------
                  (2)   2  % of next  $  150,000.00
                      -----            ---------------
                  (3)   1  % of cost over $ 200,000
                      -----               ---------
         (c)  For each Initial Construction:
                  (1)   5  % of first   $ 50,000.00
                      -----              -------------
                  (2)   3  % of next  $  150,000.00
                      -----            ---------------
                  (3)   1  % of cost over $ 200,000
         -----        -----
         (d)  For each Construction Project:
                   Flat  N/A
                         ----
                   OR
                  (1) 5 % of first   $ 50,000.00
                      --             --------------
                  (2) 3 % of next  $ 150,000.00
                      --             ----------
                  (3) 1  % of cost over $ 200,000
                      --                ---------
          (e)   For Operation and Maintenance:
                  (1) 10 % of the cost;  and
                      -----
                  (2) $ 250.00  per month for producing well per month; or
                      ---------
                  (3)   ---     flat rate per month for producing, injection
                      --------- and water source operations

     The rates in Subclauses (e)(2) and (e)(3) will /will not X be adjusted as
of the first day of July each year.


VII. Dispositions (Clause 406)
     ------------
         $25,000.00  for requiring approval.
          ----------

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