Petro-Canada Acquires Veba Assets

Petro-Canada announced that it has agreed to acquire the international oil and gas operations of Veba Oil & Gas Gmbh from Veba and BP p.l.c. for a price of Cdn $3.2 billion in cash. Veba's production and exploration interests are concentrated in three regions: the North Sea, North Africa, and Northern Latin America. Veba produces about 175,000 barrels of oil equivalent per day and has proven oil and gas reserves of almost 600 million barrels of oil equivalent. This acquisition marks a major expansion, making Petro-Canada a significant international player and the largest integrated oil and gas company in Canada.

``We seized a rare opportunity to acquire a business of superb quality,'' said Petro-Canada President and Chief Executive Officer Ron Brenneman. ``For some time now, we have been evaluating international prospects to complement and build on our strong position in every major oil and gas play in Canada. The challenge has been to find sizeable assets that are geographically concentrated, that fit well with Petro-Canada's strengths and expertise, and that have both current production and strong growth potential. This deal is an excellent fit for us - it positions Petro-Canada in some of the world's most prolific and high-potential petroleum basins, its size is significant but manageable, and it adds significant value for shareholders.'' Veba's North Sea assets include interests in the Guillemot and Scott fields in the U.K. and in the Hanze field in the Netherlands, production in Norway, and exploration interests in Denmark and the Faroes. In North Africa, Veba has significant production with considerable development potential in Libya, as well as strong current production from Syria and a small position in Egypt. In Latin America, Veba has an interest in the Cerro Negro integrated heavy oil development in Venezuela, as well as an interest in an offshore natural gas development in Trinidad.

``This is a highly strategic acquisition for Petro-Canada, as the Veba assets and organization build on our existing capabilities,'' Mr. Brenneman said. ``Veba's respected management team and long history in these areas of operations add an attractive breadth of international experience. Our knowledge of the Canadian offshore will serve us well in the North Sea; our existing North Africa operations will nicely complement Veba's Libyan assets; and our integrated oil sands expertise is a good fit in Venezuela. We will continue to invest in Veba's high quality growth opportunities, and we are looking forward to welcoming Veba's 300 employees to our organization.''

The acquisition of Veba will be accretive to Petro-Canada's earnings and cash flow. Petro-Canada's already strong growth profile will be considerably enhanced. The acquisition immediately increases Petro-Canada's production and total proved reserves by over 70 per cent, and over the next five years, Petro-Canada's production is expected to more than double from the 2001 level. The return on investment is consistent with corporate objectives and the impact on return on capital employed is neutral. The combined strong cash flow can be used to continue to fund Canadian and international growth opportunities and to pay down debt incurred in this transaction. The transaction makes use of Petro-Canada's strong balance sheet, yet key debt ratios remain manageable and consistent with industry peer levels.

Mr. Brenneman highlighted the importance of this acquisition to Petro-Canada. ``The addition of this international strategy as a fifth core business, building on our core North American natural gas, East Coast offshore oil, Alberta oil sands, and refining and marketing businesses, positions us well for solid growth into the future. We are proud to be Canada's oil and gas company, and we believe we have considerably expanded and strengthened the company through this acquisition.'' The purchase price of Cdn $3.2 billion is subject to closing adjustments and transaction costs. The assets will be acquired in an all-cash transaction, facilitated by committed credit facilities which Royal Bank of Canada and Deutsche Bank AG, Canada Branch have agreed to underwrite. It is expected that the deal will close in stages over a period running from May through September 2002. Harrison Lovegrove & Co. acted as the primary advisor to Petro-Canada in this transaction. Other advisors were Gaffney Cline & Associates Ltd., Merrill Lynch Canada Inc. and RBC Capital Markets. Conclusion of the transaction is subject to a number of considerations, including host government approvals and rights of first refusal affecting assets in Norway, Egypt and Venezuela. Petro-Canada's corporate head office will remain in Calgary, while its international operations will be managed by a wholly owned subsidiary. The subsidiary's headquarters will continue to be in Essen, while its operations Center for Excellence will be maintained in London.