Marshall Abbot, CEO of Sabretooth's Letter

As a born and bred Albertan, I am embarrassed by the royalty review panel's recommendation to change existing agreements. I have been raised in this business and instilled in me over 25 years has been the credo that a "deal is a deal". Having spent $14 million at Alberta Crown land sales in the last two years, do I get to apply to the Crown for refunds? The economics we ran to justify our bid levels will be changed drastically. Three-quarters of our recently bought acreage is now uneconomical and will not be drilled.

Over 25 years, I have endured the NEP, $10 oil, $1 gas, 100-per-cent increases in service costs year to year and broken federal promises on the taxtation of income trusts. Our a small company is overwhelmed by challenges from mother nature, both above ground and below. Pools are smaller, costs are higher and access to capital has dried up in the past year since the income-trust ruling. Penalizing high volume gas wells removes incentive to pursue prospects of value in Alberta.

British Columbia, here we come. A record land sale in Saskatchewan earlier this month is a sign of capital redistribution that is occurrin now as company budgets are designed for 2008.

I was marketing my company in Eastern Canada and the Northeastern U.S. when the panel's report was made public. I had meetings cancelled with four well-heeled institutions in the U.S. who have been shareholders for upwards of 15 years. Capital flight occurred before my eyes and will not return anytime soon.

The panel's report was flawed and full of erroneous assumptions as pointed out by numerous institutions and even admitted to by one of the panel's members. It is quite apparent that none of the panel members has ever had to make a capital investment decision in the oil and gas business. Brandishing PhD's of panel members as any kind of justification for a flawed analysis is insulting. I do not know of many PhD's who have been successful in the business that is the main economic engine of the province. (Jim Buckee of Talisman is an exception, and his view of the report is well known.) They are fine teachers and should stick to what they are good at and what they are trained for.

I have operated in foreign jurisdictions (Indonesia, Trinidad and Australia) during my career. Fiscal regime contracts in these jurisdictions are treated as unbreakable. During an intense round of negotiations with the Indonesian National Oil Company (Pertamina) in 1997 it was emphasized to me that once a contract is signed, the rules will not change. They pointed out our ill-conceived national energy program as an example of how flawed our contracts were. I defended Alberta's regime at the time because it was competitive, incentive-based and stimulated entrepreneurship. Sadly, that will no longer be the case and, unfortunately, they were right.

Hopefully, in two years Albertans will understand why we have returned to deficit budgets, why home values have dropped materially, why bankrupted junior oil and gas companies are dominating the headlines, why land sale revenues are a fraction of what they were, why service company unemployment is at an all time high, why charitable groups are drastically underfunded. Hopefully, in two years, the panel members will have the fortitude to finally admit that perhaps they were off the mark and in over their head, as it were.

Marshall Abbott, CEO, Sabretooth Energy Ltd