While commodity prices are only up about 10% year-over-year, acquisition prices are up by one-third, a reality in the Canadian market that was puzzling to Steven I. Paget, an analyst with FirstEnergy Capital. "On a quarterly basis, acquisition prices paid by Canadian E&P companies and trusts rose from C$16.36 per proved-plus-probable (2P) barrel of oil equivalent (BOE) in the first quarter of 2005 to C$21.91 per 2P BOE in the first quarter of 2006, a gain of 34%," Paget says. "Over the same time period, Edmonton Light Sweet prices rose by 12% and Bow River heavy oil prices rose 6%, and AECO spot natural gas prices rose by 8.8%." Companies are willing to pay so much more for assets than current commodity prices is due to future prices: the Nymex 12-month strip for crude rose 26% from first-quarter 2005 to first-quarter 2006 and the 12-month strip for gas rose 23%. "It is the longer-term commodity prices and the confidence they inspire that have made E&P companies and trusts pay more for assets." For more on this, see the June issue of Oil and Gas Investor. For a subscription, call 713-260-6441.