Canadian Superior Energy Inc. Announces Record Growth in Cash Flow and Net Income for the First Quarter of 2001.

Business Editors

CALGARY, Alberta--(BUSINESS WIRE)--May 31, 2001

Canadian Superior Energy Inc. ("Canadian Superior") (CDNX:SNG.) of Calgary, Alberta announced today record growth in cash flow and net income for the first three months of 2001.

The first quarter of 2001 was a very exciting and active period for Canadian Superior. The period commenced with the net asset base of the Company growing to a record level estimated at $100,500,000 (Cdn. $2.38/share on a fully diluted basis). During the first quarter, the

Company launched several exciting initiatives focused on further expanding our rapidly growing asset base while continuing to maintain a strong debt-free balance sheet.

During the period, our team of experienced professionals continued to expand and develop opportunities from our existing land base and prospect inventory as well as from an aggressive detailed examination of external opportunities that fit with our established strategic corporate objectives. During the past several months, we have established one of the top operational teams in Western Canada with a lean, motivated, focused operation that is supported by highly qualified professionals and strong financial planning expertise. We believe this has positioned us to properly identify and respond rapidly to both internally generated opportunities and to external opportunities that hold the potential for further significant growth and value generation for our shareholders.

In this regard, on March 14, 2001, Canadian Superior launched its 2001 East Coast Drilling Initiative focused on developing our world-class "Marquis Natural Gas Project" Offshore Nova Scotia. Subsequent to the end of the first quarter of 2001, Canadian Superior also launched its Merger Proposal with Canadian 88 Energy Corp. ("Canadian 88"). Full details on both of these major initiatives are available on Canadian Superior's website (www.cansup.com) and we shall discuss these initiatives further in this report. In addition to the above-mentioned initiatives, which included preparing for the drilling of our first exploration well on our world class prospects offshore Nova Scotia and focusing on Western Canadian cash flow generation and reserves and production growth, we were involved in several other exciting activities in the first quarter of 2001. These activities included:

-- Closed the remaining $4.56 Million of $17.32 Million of equity financing
arranged during the fourth quarter of 2000.

-- Submitting a bid to acquire Nova Scotia Resources Limited ("NSRL"), the
Government of Nova Scotia's resources company that owns an approximate 8.4%
interest in the giant Sable Island Offshore Project and related infrastructure.
In the final bidding round in January 2001, we were joined in our bid with a
substantial industry partner who agreed to initially completely fund the
acquisition in return for participation in the project with Canadian Superior.
The joint bid exceeded $415 Million.

Canadian Superior was positioned to acquire a 50% share in the

assets of NSRL on very favorable terms alongside our industry

partner. This arrangement was the direct result of recognition

by the industry partner of the substantial value provided by

the detailed technical research and financial planning work

done on the project by Canadian Superior's professional

technical and financial teams.

-- We carefully analyzed a number of other acquisition

opportunities that we believed were consistent with our

established strategic objectives and are actively continuing

these efforts.

-- To the extent that proper notification and information was

provided, we carefully assessed opportunities arising from our

Farmout Rights Agreement with Canadian 88 and endeavored to

proceed forward with these opportunities.

-- We proceeded with farm-in discussions with several large

industry players interested in participating with us on our

Marquis Project Offshore Nova Scotia.

-- We initiated contacts with a wide range of investment dealers

in Canada and the United States to encourage the further

development of a broad range of research coverage for Canadian

Superior. This initiative has resulted in four investment

firms actively covering the stock with Canadian Superior now

having a wide and expanding following in both the Canadian and

U.S. investment community.

Accordingly, we believe our focused efforts are paying off and we have been able to provide our shareholders with record returns over the past several months. We believe we have achieved our year 2000 goal of establishing a solid foundation for future continued growth and now our objective is to emerge as a premier, intermediate oil and gas player over the next 12 to 24 months.

Financial and Operational Highlights of First Three Months of 2001

Record Financial Results

During the first three months of 2001, revenue increased to $1,816,660, up 116% from the $841,909 reported in the same period in 2000. Income from operations was $893,651, up 168% from the $332,985 reported in the same period in 2000. Cash flow for the quarter was a record $1,088,719 representing a 127% increase over the $480,212 reported in the first quarter of 2000. Net income of $629,689 was also at a new record level increasing 79% above the $352,264 reported in the same period in 2000. Ongoing strength in commodity prices was a major contributor to these significantly improved financial figures.

During the first quarter of 2001, commodity prices remained strong. The average price achieved for natural gas production was $8.92/mcf and the average price achieved for oil and liquids was approximately $48.70/bbl.

Operating costs and depletion and depreciation costs for the first three months of 2001 decreased due to lower production levels and reserves allocations at Waterton. As our Western Canadian exploration and development programs progress during 2001, the Waterton property will become even less significant as a contributor to Canadian Superior's performance. Production additions from our new lower operating cost properties should enable us to maintain an attractive operating cost profile throughout this year. General and administrative costs increased substantially compared to the prior year period as a direct result of Canadian Superior's successful efforts focused on hiring a full complement of highly qualified operating staff.

Capital expenditures in the first quarter amounted to $3,985,940, a significant increase over the $169,037 expended in the same period in 2000. The majority of this expenditure occurred in March and has resulted in several new discoveries and significant incremental oil and gas production and capability not yet reflected in our operating results. Currently, sales production ranges from 4.3 to 5.4 mmcf/d and 45 bbls/d of oil, up significantly from the first quarter of 2000, in spite of the poor operating performance on the Company's non-operated Waterton property (10% Canadian Superior). The current gas production variance is due to new facilities testing, which is expected to be completed by the end of June. We are currently on track with our Western Canadian exploration and development program and intend to expend approximately $20.0 Million on Western Canadian activities in 2001, which is anticipated to result in further significant increases in our Western Canadian production and reserve base.

Operational Highlights

Western Canadian Operations

Bison Lake, Alberta

During the first quarter of 2001, Canadian Superior initiated a very successful shallow gas project at Bison Lake (operated, 100% W.I.) in North Central Alberta, which consisted of construction of road access, successful recompletion of three shallow Cretaceous Bluesky/Gething gas wells and the drilling and completion of two successful exploration gas wells. Two of the recompleted wells and one of the exploration wells were put on production at restricted rates in the second quarter. Current production is approximately 1.3 mmcf/d. With the pending modification of an existing compressor, deliverability from these wells is estimated at 2.5 mmcf/d. The remaining recompleted well and the remaining exploration well have an aggregate deliverability capability estimated at 2.5 mmcf/d. Plans are proceeding for construction of a 7 kilometre, 3-inch pipeline commencing early in the third quarter of this year to tie-in this additional production.

Giroux Lake, Alberta

At Giroux Lake (non-operated, 25% W.I.) in North Central Alberta, Canadian Superior is involved in a significant oil discovery. The well was production tested at the end of the first quarter and is currently producing approximately 200 bbls/d (50 bbls/d net to Canadian Superior). Several follow-up locations to this discovery are planned on this non-operated property with the first well expected to be drilled in the near future.

Waterton, Alberta

During the first quarter, production from Waterton declined to 17.5 mmcf/d (1.75 mmcf/d net to Canadian Superior). The performance of this property (non-operated, 10% W.I.) during the past year and throughout the first quarter has been extremely disappointing. Very little operator activity occurred on this property during the first quarter or, for that matter, during the last year. A minor workover was completed on one well and a new well was drilled to which Canadian Superior has asserted participation rights. This well, known as the Castle River well, was drilled to evaluate both the Mississippian and Devonian formations. The Waterton property is performing at substantially below its true potential. In Canadian Superior's opinion, this is due to the poor operating practice of the operator of the property. We expect the true value of this property to be recognized shortly and long overdue exploitation programs to be commenced by a new operator.

Other Alberta Properties

At Josephine (operated, 60% W.I.), Canadian Superior successfully acquired lands and new acreage in the first quarter for $230,000 at the Alberta Government Land Sale and we are currently conducting recompletion activities on one well. If recompletion activities are successful, additional drilling will be conducted and a 2.2 kilometre tie-in to existing pipelines will be completed. At Twinning (operated, 100% W.I., subject to a 1/3 post completion reversion to Canadian 88), Canadian Superior has exercised its right of first refusal under its Farmout Rights Agreement with Canadian 88 and will earn two sections per well drilled. One successful gas well has been drilled and is currently waiting completion and testing. At least one additional well will be spudded in the third quarter. At Okotoks (operated, 100% W.I.), Canadian Superior also exercised a right of first refusal under the Farmout Rights Agreement. One shallow gas well was drilled during the first quarter. Testing is currently in progress and pipeline options are being reviewed. One additional well is planned for the third quarter. On the Stanmore property (non-operated, 33.33% WI), one well was successfully recompleted during the first quarter to improve deliverability and is currently producing at 320 mmcf/d. At Garrington (non-operated, 18.75% W.I.), one Mississippian gas well was recompleted and is currently producing at 150 mcf/d.

Saskatchewan Properties

During the first quarter, activities were directed at successful shallow gas production at Bronson Lake, Makwa, Frenchman Butte and Whalen. To date in the second quarter, we have completed a gathering system and constructed facilities for four wells currently producing at 2.4 mmcf/d, we have recompleted three wells, and we are adding facilities to expand deliverability by 1.0 mcf/d. Additional development locations are being pursued. At Brightsand, plans are proceeding for the drilling of a heavy oil well during the second quarter.

Umbach, British Columbia

During the first quarter, we commissioned a complete reserves report on this play in North East British Columbia. Potential for development of approximately 10.5 bcf of gross reserves has been identified in this exciting new area. The recompletion of one shut-in gas well owned by the Company is scheduled for June and the construction of a one-half mile pipeline could result in potential for 3.0 to 4.5 mmcf/d of gross gas deliverability. This property is operated by Canadian Superior (62.5% W.I.).

Canadian Superior's 2001 East Coast Drilling Initiative

Alongside our successful activities in Western Canada during the first quarter of 2001, we announced our plans to proceed with drilling, planned for September of this year, on our "Marquis Prospect" Offshore Nova Scotia on what is arguably one of the most exciting prospects in the Atlantic. The Company's new holdings are located approximately 20 kilometres (12.5 miles) northwest of Sable Island and are directly on trend and analogous to the recent Panuke Abenaki Reef Natural Gas Discovery, approximately 25 kilometres (15.6 miles) to the southwest where several new wells have been recently tested with productive capacity each in excess of 50 mmcf/d. This new discovery is expected to produce up to 400 mmcf/d when it is brought on line through a new pipeline recently announced by PanCanadian. Canadian Superior's properties are in shallow water depths (50 to 100 metres) in close proximity to newly constructed pipeline infrastructure connecting 500 mmcf/d of Sable Island natural gas to vibrant New England natural gas markets.

Canadian Superior has emerged as a significant player in the evolving world-class Scotian Shelf Offshore Nova Scotia natural gas play. This basin represents one of the greatest opportunities in North America for oil and gas exploration and development. The world-class nature of this basin and its reserves has recently been recognized by Goldman Sachs Global Equity Research, Cambridge Energy Research Associates, Ziff Energy Group and several others.

Canadian Superior has assembled one of the largest seismic databases Offshore Nova Scotia and, to date, we have identified two large drillable structures on our 100% holdings Offshore Nova Scotia.

We are continuing to acquire and interpret seismic data over this shelf. To date, we have acquired and interpreted in excess of 60,000 kilometres of modern high quality data. This work has allowed us to identify a second major structure on our "Marquis Holdings" that is separate from the Abenaki reef structure already identified on our property. On May 15, 2001, Geophysical Services Inc. commenced the acquisition of 1,100 kilometres of high-resolution seismic coverage over Canadian Superior's Offshore Nova Scotia Marquis Prospects at a cost of approximately $3.75 Million to finalize the drill site locations on two world-class prospects proposed for drilling on Canadian Superior's "Marquis Blocks" on the Scotian Shelf Offshore Nova Scotia. Subject to receipt of necessary regulatory approvals, our plan is to commence drilling of our first exploration well on this exciting prospect in the fall of this year.

We believe that the Scotian Shelf represents one of the greatest opportunities in North America for oil and gas exploration and development. We intend to continue to actively examine and pursue all opportunities that are available to us to expand our presence in this area offshore Nova Scotia.

Canadian Superior's Canadian 88 Merger Proposal

On April 26, 2001, Canadian Superior announced an unconditional offer to all shareholders of Canadian 88 to combine the two companies. Under the terms of the offer, which is subject to regulatory approval, each common share of Canadian 88 will be exchangeable into 2.75 shares of Canadian Superior. Canadian 88 has an excellent asset base, which is being under managed. We strongly believe that Canadian Superior can realize substantially better value and performance for all shareholders. The new merged company will be a focused gas-oriented company operating in two of North America's premier natural gas producing basins, the Alberta Foothills of Western Canada and the Nova Scotia Offshore area of Atlantic Canada.

Under the proposed Plan of Arrangement, a new board of directors will be installed to oversee the new company. It is proposed that the independent directors include Gerald J. Maier, former Chairman and CEO of TransCanada Pipelines, and Dale G. Blue, recent Past Chairman, President and CEO of Chase Manhattan Bank of Canada.

The current Board of Directors of Canadian 88 is controlled by Duke Energy Corp. ("Duke") (NYSE: DUK) and it is proposed that they be replaced by a new experienced Board of Directors to provide strong independent shareholder and strong institutional shareholder representation, which will allow the Company to move forward with a new focused strategic direction.

Duke acquired approximately 19.3% of Canadian 88 in early 2000 and appointed new senior management to run the Company. Under this management, over the past year, Canadian 88 has experienced severe average daily production decline (down 21%), a dramatic increase in operating costs (up 22% on a unit of production basis), record high proven finding and development costs of $19.55 on a 10-to-1 basis, unprecedented low morale and high staff attrition, a large decline in Western Canadian landholdings (down 22%) as a result of an ill conceived asset sales process and an unproductive farmout and land sale process. The Company has failed to manage its reserve base properly and furthermore, the Company has failed to even replace proven produced reserves in spite of $64 Million of capital spending during 2000. In addition, the Company has failed dismally in the key area of investor and shareholder communications or lack thereof. Prior to Duke appointed management, Canadian 88's senior management showed consistent annual growth since inception of the Company.

This situation is in stark contrast to Canadian Superior's impressive operational and financial results. Canadian Superior is confident that this unfortunate situation at Canadian 88 will be corrected immediately should the Canadian Superior proposal proceed forward. Canadian Superior's proposal is accretive to Canadian Superior shareholders on a cash flow basis and at the same time, it is a value-added transaction, which will provide Canadian 88 with immediate growth and badly needed broad-based leadership and direction and the ability to participate in immediate upside in the merged Company alongside Canadian Superior shareholders. Canadian 88's Duke appointed management has tried to deflect the merits of Canadian Superior's premium offer citing the issue of current litigation (commenced in mid-March of 2001) between the Companies as having a bearing on the Canadian 88 failed corporate auction process, which has been ongoing since October of 2000. Canadian Superior is of the opinion that Canadian 88's process has failed as a result of a broad-based asset sale process implemented by the Company, which has resulted in the Company failing to properly attract corporate buyers.

Canadian Superior believes that it has suffered damages and that it has bona-fide claims against Canadian 88. Moreover, Canadian Superior has a fiduciary responsibility to its shareholders to pursue these claims. The main areas of dispute between Canadian 88 and Canadian Superior revolve around the Waterton and Blackstone areas where, in Canadian Superior's opinion, at Waterton, Canadian 88 has for several months improperly withheld information jointly owned by Canadian 88 and Canadian Superior, and where at Blackstone, Canadian 88 has failed, in Canadian Superior's opinion, to properly honor its commitments to Canadian Superior including the Farmout Rights Agreement between the parties. Accordingly, Canadian Superior is seeking damages and other remedies related to these claims. Canadian 88's senior management conveniently neglects to volunteer or point out in the case of Waterton that the permanent right to co-owned data is entirely different than being offered access to data or information in a contrived time constrained data room subject to unilaterally imposed conditions, nor do they wish to acknowledge in any way that it was Canadian Superior that facilitated the Blackstone Farmout to Canadian 88 that has, in Canadian Superior's opinion, been subsequently improperly farmed-out by Canadian 88 to the detriment of Canadian Superior shareholders.

Notwithstanding this, Canadian Superior's recent proposal to the Board of Canadian 88 and Duke Energy provides for all litigation between the Companies to be dropped in return for the Board of Directors of Canadian 88 and Duke Energy supporting Canadian Superior's merger proposal in the absence of cash offers on the Company and a standard industry break fee. Accordingly, the ball is clearly in Canadian 88's court to advance alternative proposals to Canadian Superior's premium offer.

Despite our differences of opinion, after giving effect to the merger, the new company will have a strong balance sheet to allow it to proceed forward with the development of world-class Nova Scotia Offshore Prospects and an attractive inventory of prospects in Western Canada. Canadian Superior's initiative will provide strong leadership and direction for the combined companies with significant synergy and upside for shareholders of both Canadian Superior and Canadian 88. The merged company will have approximately 2,350,000 gross acres (1,350,000 net) acres of attractive acreage in Western Canada and Offshore Nova Scotia and own the following principal assets:

Western Canadian Assets

-- High working interest producing properties containing

significant proved reserves with expected average daily sales

estimated to be in excess of 85 MMCFE/D, after giving effect

to the sale of certain Canadian 88 properties, with

significant annualized cash flow.

-- A large inventory of high-impact exploration plays covering

approximately 750,000 gross (500,000 net) undeveloped acres

covered by extensive D-2 and 3D seismic data.

-- An attractive inventory of approximately 200 defined

exploitation and development drilling locations with

significant undeveloped reserve potential.

-- Significant midstream assets with an estimated replacement

cost of over $100 Million and third-party processing income.

-- Tax pools of over $200 Million (net of certain properties

sales).

Nova Scotia Offshore

-- Six exploration licenses totaling approximately 1.6 million

gross acres (850,000 net acres) where Canadian Superior has

identified several world-class high impact exploration plays.

-- On four exploration licenses, several deep water Turbidite

Sand fan deposits have been identified; the first of which

will be drilled on a 50/50 basis with Kerr McGee Corp.

starting in 2002.

-- On the other two exploration licenses, which are 100% owned by

Canadian Superior, Canadian Superior is currently proceeding

ahead with drilling planned for September of this year on its

"Marquis Prospect" Offshore Nova Scotia on what is arguably

one of the most exciting prospects in the Atlantic.

-- The offshore plays are supported by Canadian Superior's

extensive seismic database, which is one of the largest and

most modern data sets in the Atlantic.

Summary and Initiatives

The new company's business plan will focus on the Nova Scotia Offshore areas and cash flow generation in Western Canada and:

-- Canadian Superior providing strong leadership and direction

for the combined companies.

-- Facilitating the sale of certain Canadian 88 and Canadian

Superior assets to provide for a strong balance sheet.

-- Replacing the production and reserves to be sold with a

strategic acquisition and/or the development of several

existing projects including development drilling in the

Alberta Foothills "Blackstone" area.

-- Fully developing the 100% owned large Olds/Crossfield

properties and newly expanded 100% owned Olds gas plant now

owned by Canadian 88, and consider midstream opportunities.

-- Accelerating the rate of development of proved and probable

non-producing properties.

-- Rapidly proceeding ahead with the world-class exploration

portfolio in the Nova Scotia Offshore area to provide maximum

shareholder value.

-- Completing Canadian Superior's seismic operations currently

underway over shallow water prospects now owned by Canadian

Superior in the Nova Scotia Offshore shelf area in order to

facilitate initial drilling of at least one of Canadian

Superior's world-class prospects by September of 2001. Utilize

Canadian Superior's extensive East Coast seismic database to

expedite drilling on the massive multiple target deep water

Turbidite Sand plays identified by Canadian Superior for

future drilling and for drilling during 2002 in partnership

with the Kerr McGee Corp. These world-class prospects will

provide several years of focused opportunities for

shareholders over the years to come.

Accordingly, the Canadian Superior proposal offers both Canadian 88 and Canadian Superior shareholders tremendous upside going forward with an exciting new Company led by a skilled, motivated team and an experienced independent Board of Directors. Canadian Superior has the vision and motivated personnel required to provide strong leadership and direction for the combined company to realize significant synergies and upside for shareholders of both Canadian Superior and Canadian 88. Canadian 88 has called a special meeting of its shareholders for July 12, 2001 to address Canadian Superior's unconditional offer, and we look forward to the favorable conclusion of this transaction.

Outlook for Canadian Superior

Canadian Superior is focused on delivering solid sustainable growth for shareholders based on careful technical and financial planning. We have a motivated, talented and expanding team of professionals who are equipped to properly identify and manage opportunities that match our strategic objectives. We have a strong balance sheet and we intend to use it to aggressively pursue both internally generated opportunities and opportunities that are under managed or under exploited. We intend to continue to aggressively pursue these opportunities for the benefit of our shareholders and we wish to thank you for your continued support.

Respectfully submitted on behalf of management, staff and the Board of Directors.

Canadian Superior is a Calgary based oil and gas exploration and production company. The shares of Canadian Superior trade on the Canadian Venture Exchange (CDNX) under the stock symbol (SNG).

Forward-Looking Information - This release contains statements that constitute forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and Section 21 of the Securities Exchange Act of 1934 and are subject to the safe harbor provisions of those sections and the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties including those described in our filings with Canadian and U.S. securities commissions, and that the actual results or developments may differ materially from those in the forward-looking statements as a result of various factors. We have based these forward-looking statements on information currently available and disclaim any intention or obligation to update or revise any forward-looking statements.

The information contained herein has neither been approved nor disapproved by the Canadian Venture Exchange.