But stock of tiny Canada Southern shot higher than the price offered by Canadian Oil Sands, suggesting that some investors believe another bid could follow. Petro-Canada, which offered $113-million in May, and whose hostile bid expires today, said late yesterday it was still evaluating the situation. The third suitor is Canadian Superior Energy Inc., a small Calgary company that announced an offer in early June, and made its formal filing yesterday. Canadian Oil Sands Trust owns 35 per cent of Syncrude Canada Ltd., the second largest oil sands producer. Some investors and analysts are confused as to why it is bidding for Canada Southern, which produces nominal amounts of natural gas but has stakes in seven large, undeveloped and remote discoveries in the Arctic. Marcel Coutu, chief executive officer of the Calgary-based trust, said gas accounts for about one-quarter of Syncrude's operating costs, and buying Canada Southern would provide a long-term hedge against changes in gas prices. Mr. Coutu called it a "unique opportunity to support our oil sands business. "The acquisition is very compatible with our business model and strategy," he said during a conference call yesterday. This is the second time in three weeks that an oil sands company has made a surprise move. Calgary- based Western Oil Sands Inc. told investors in late May that it planned to spend $45-million exploring in northern Iraq. Units of Canadian Oil Sands fell $1.25 (Canadian) or 4 per cent to $29.94 yesterday on the Toronto Stock Exchange, down more than the energy index, which fell 3.2 per cent as the price of oil slid. Canada Southern's board has endorsed the Canadian Oil Sands offer, and has recommended that shareholders reject Petrocan's bid. Canadian Oil Sands management fielded several critical questions during the conference call. One person asked whether the trust is allowed to make such a move under its trust indenture, the rules governing the entity. Mr. Coutu said the indenture doesn't prohibit the acquisition. Analyst Mark Friesen of FirstEnergy Capital Corp. said that Canadian Oil Sands told investors last week at a conference in Calgary that it didn't intend to look beyond the oil sands region in northern Alberta for potential deals. "I didn't like the way the [Canadian Oil Sands] transaction came about," said Mr. Friesen, who rates units of Canadian Oil Sands "underperform" because of questions of valuation and near-term growth. But he said the price tag is low, and because of this investors are unlikely to rethink their views about Canadian Oil Sands. On the Nasdaq Stock Market yesterday, Canada Southern stock rose $1.60 (U.S.) or 18.2 per cent to $10.37 -- higher than Canadian Oil Sands' offer of $9.75 a share. The Petrocan cash bid is worth $7.50. Canadian Superior's stock-and-cash offer was worth about $7.78 a share or a total of $117-million at yesterday's close. Rick Watkins, a Canadian Superior director, said his company's bid could offer Canada Southern shareholders potential gains if Canadian Superior's exploration plans are successful. Canadian Oil Sands said its offering price for Canada Southern is about equivalent to the funds it generates in one month of Syncrude operations. Based on estimates, but not official reserves, Calgary-based Canada Southern is sitting on almost one trillion cubic feet of gas, an amount that rivals some of the biggest fields in the country. Canadian Oil Sands said it doesn't expect development of those reserves for at least a decade, and noted it is mostly buying what are called carried interests, meaning the trust wouldn't be responsible for development costs. PIN/GLOBE&MAIL