Canada Southern Posts Third Quarter Profit CALGARY, Alberta, Nov. 14 /PRNewswire-FirstCall/ -- Canada Southern Petroleum Ltd. (Nasdaq: CSPLF; Toronto/Boston/Pacific: CSW) today reported a net profit of $14.9 million ($1.03 per share, basic and diluted) on revenues of $26.1 million for the three months ended September 30, as compared to last year's third quarter profit of $508,000 ($0.04 per share) on revenues of $2.2 million. For the nine month period ended September 30, the Company announced a net profit of $17.7 million ($1.23 per share, basic and diluted) on revenues of $34.3 million as compared to last year's profit of $1.5 million ($0.10 per share) on revenues of $7.1 million. A Company spokesman said this quarter's results were favorably impacted by recognition of the $25.5 million settlement ($23.7 million after assumption of abandonment liabilities and certain other settlement-related costs) of the litigation with respect to the Company's major asset at Kotaneelee in the Yukon Territories. Operations Update With settlement of the Kotaneelee litigation now complete, the Company's focus has shifted toward building reserves and production. In late October, Canada Southern commenced its 3 well drilling program in the 40 Mile Coulee area of southern Alberta. All 3 of these 100% interest, shallow natural gas wells encountered hydrocarbon-bearing zones and were cased for production. These exploratory wells successfully tested an in-house concept and currently await completion and stimulation. Canada Southern may drill up to 20 additional wells in the area. Regarding Kotaneelee, as previously disclosed, the Company is evaluating the existing developed reserves at Kotaneelee and further development opportunities on the lease, with the assistance of independent reserve engineers Gilbert Laustsen Jung Associates Ltd. Canada Southern is also considering initiation of other field activities prior to year end in northeast British Columbia. The Company has budgeted capital expenditures of approximately $4.0 million in the fourth quarter of 2003, for seismic, drilling, workovers and equipment, and other activities on lands outside of Kotaneelee. Litigation Contingent Interests In 1991 and 1997 the Company granted contingent interests in certain net recoveries from the Kotaneelee litigation. After the settlement, the Company's Board of Directors established an independent committee comprised of Myron Kanik, Richard McGinity and Michael Stewart, who consulted with independent outside counsel with regard to what amounts, if any, were payable pursuant to the contingent interests. In early October 2003, counsel to the independent committee advised each of the contingent interest grantees that the committee had concluded, based on advice of counsel, that there is no entitlement arising under such interests. Mr. Arthur B. O'Donnell (a director of Canada Southern Petroleum Ltd. since 1997), a beneficial holder of a 0.333% contingent interest (derived from G&O'D Inc.), Mr. James R. Joyce, a beneficial holder of a 0.333% contingent interest (derived from G&O'D Inc.), and Murtha Cullina LLP (Mr. Timothy L. Largay, a partner of the firm, has been a director of Canada Southern Petroleum Ltd. since 1997), a grantee of a 1.00% contingent interest, have each notified counsel to the committee that he is in agreement with the committee's conclusion. Prior to the conclusion of the independent committee that the contingent interest grantees have no entitlement arising under such interests, the Company had received communications from counsel representing the 2.0% contingent interest granted to C. Dean Reasoner asserting entitlements arising under such grants. The following grantees, each of whom were litigation counsel to the Company, have advised the Company that they disagree with the committee's conclusion: Robert J. Angerer, Sr., Esq. 2.00% V. A. MacDonald, Esq. 0.75% Peter McMahon, Esq. 1.00% These grantees have notified the Company that their position is that the contingent interests apply to the withheld processing fees, production revenues from the field, and other alleged recoveries which could total more than $200,000,000. The Company does not accept their position. Grantees of contingent interests totaling 1.13% have not yet communicated their positions to the Company. The Company has recently been advised that certain contingent interest grantees have retained legal counsel to advise them on and pursue the matter with the Company. While the Company, consistent with its legal counsel's recommendation, remains of the view that the Company's position is sound, the Company cannot predict with certainty the outcome of this dispute. The Company's quarterly report on Form 10-Q has been filed with the Securities and Exchange Commission (SEC) and System for Electronic Document Analysis and Retrieval (SEDAR). A link to the Company's SEC and SEDAR filings can be found on the Company website address of "http://www.cansopet.com/". Any statements in this release that are not historical in nature are intended to be, and are hereby identified as, "forward-looking statements" for purposes of the "Safe Harbor Statement" under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. Among these risks and uncertainties are uncertainties as to pricing and production levels from the properties in which the Company has interests, the extent of the recoverable reserves at those properties, and the outcome of disputes with respect to contingent interests granted in 1991 and 1997. The Company undertakes no obligation to update or revise forward looking statements, whether as a result of new information, future events, or otherwise. Comparative, unaudited results for the three and nine month periods ended September 30, 2003 and 2002, are shown in the following condensed income statement, statement of cash flows, and supplementary information on oil and gas producing activities. All figures are expressed in Canadian dollars. CANADA SOUTHERN PETROLEUM LTD. CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (Expressed in Canadian dollars) (unaudited) Three months ended Nine months ended September 30, September 30, 2003 2002 2003 2002 Revenues: Proceeds from carried interests $1,442,593 $1,741,624 $7,420,792 $5,663,239 Natural gas sales 689,642 290,606 2,474,564 1,031,146 Oil and liquid sales 66,101 39,398 229,615 131,933 Interest and other income 165,182 134,627 486,409 294,121 Total revenues 2,363,5187 2,206,255 10,611,380 7,120,439 Costs and expenses: General and administrative 688,166 353,900 1,646,031 1,159,310 Legal 350,960 107,512 576,111 724,936 Lease operating costs 197,694 309,311 877,299 614,913 Depletion, depreciation and amortization 413,517 596,000 1,413,043 1,826,000 Future site restoration costs 53,000 74,000 148,000 232,000 Foreign exchange loss (gain) (14,648) (140,259) 422,166 (21,071) Total costs and expenses 1,688,689 1,300,464 5,082,650 4,536,088 674,829 905,791 5,528,730 2,584,351 Settlement of litigation 23,727,078 - 23,727,078 - Income before income taxes 24,401,907 905,791 29,255,808 2,584,351 Income taxes (9,544,000) (397,875)(11,533,000) (1,120,349) Net Income 14,857,907 507,916 17,722,808 1,464,002 Deficit - beginning of period (13,222,256) (17,487,666)(16,087,157) (18,443,752) Retained Earnings (deficit) - end of period $1,635,651 $(16,979,750) $1,635,651 $(16,979,750) Net income per share: Basic $1.03 $.04 $1.23 $.10 Diluted $1.03 $.04 $1.23 $.10 Average number of shares outstanding: Basic 14,417,770 14,417,770 14,417,770 4,417,770 Diluted 14,431,766 14,417,770 14,423,368 14,417,770 CANADA SOUTHERN PETROLEUM LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in Canadian dollars) (unaudited) Three months ended Nine months ended September 30, September 30, 2003 2002 2003 2002 Cash flows from operating activities: Net income $14,857,907 $507,916 $17,722,808 $1,464,002 Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depletion depreciation, and amortization 413,517 596,000 1,413,043 1,826,000 Future income tax expense (876,000) 389,000 563,000 1,104,000 Future site restoration costs 1,591,000 74,000 1,686,000 232,000 Site restoration expenditures (3,070) - (169,023) 127 Funds provided from operations 15,983,354 1,566,916 21,215,828 4,626,129 Change in current assets and liabilities: Accounts receivable (25,088,189) 1,241,361 (25,581,828) 1,573,131 Other assets (475,137) (183,116) (332,021) (141,040) Accounts payable 32,172 14,142 (164,557) (301,616) Accrued liabilities (1,582,225) 164,815 (396,910) 216,051 Accrued income taxes payable 10,821,303 - 10,821,303 - Net cash provided from (used in) operations (308,722) 2,804,118 5,561,815 5,972,655 Cash flows from investing activities: Additions to oil and gas properties (189,150) (187,557) (1,281,768) (264,184) Net cash used in investing activities (189,150) (187,557) (1,281,768) (264,184) Cash flows from financing activities: - - - - Increase (decrease) in cash and cash equivalents (497,872) 2,616,561 4,280,047 5,708,471 Cash and cash equivalents at the beginning of period 24,232,372 16,196,567 19,454,453 13,104,666 Cash and cash equivalents at the end of period $23,734,500 $18,813,137 $23,734,500 $18,813,137 CANADA SOUTHERN PETROLEUM LTD. Supplementary Oil and Gas Data (Expressed in Canadian dollars) (unaudited) Nine month periods ended September 30, Total Sales Volumes (before royalties) 2003 2002 Change % Change Carried interests (mcf) 1,694,506 2,523,258 (828,752) (33%) Carried interests (bbls) 99 477 (378) (79%) Natural gas (mcf) 534,248 445,852 88,396 20% Oil and liquids (bbls) 7,700 6,213 1,487 24% boe's (6 mcf = 1 boe) 379,258 501,542 (122,284) (24%) boe's per day 1,389 1,837 (448) (24%) mcfe's (1 bbl = 6 mcfe) 2,275,548 3,009,250 (733,702) (24%) mcfe's per day 8,335 11,023 (2,688) (24%) Netback Analysis Carried interests (per mcfe) Sales $6.07 $3.28 $2.79 85% Royalties (.78) (.37) (.41) 111% Transportation (.55) (.45) (.10) 22% Net Sales 4.74 2.46 2.28 93% Lease operating (.36) (.17) (.19) 112% expenses Carried interest capital (.00) (.05) .05 (100%) Field netback $4.38 $2.24 $2.14 96% The corporate netback analysis for working and royalty interest sales is as follows: Working and royalty interests (per mcfe) Sales $6.13 $3.20 $2.93 92% Royalties (1.47) (.80) (.67) 84% Net Sales 4.66 2.40 2.26 94% Lease operating (1.51) (1.27) (.24) 19% expenses Field netback $3.15 $1.13 $2.02 179% Definition of Terms boe = barrel of oil equivalent bbl = barrel of oil mcf = thousand cubic feet of natural gas mcfe = thousand cubic feet equivalent DATASOURCE: Canada Southern Petroleum Ltd. CONTACT: Randy Denecky, Acting President and CFO of Canada Southern Petroleum Ltd., +1-403-269-7741

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