Economy-Finance

HIGHLIGHTS:

- Revenue from oil and gas production increased 30.5% to $6,114,831 in 2007 compared to 2006. At $1,838,801, revenue for the fourth quarter more than doubled over the same period last year.

- In 2007, year-over-year revenue from midstream processing increased 40.2% to $1,253,197. Revenue of $386,701 in the fourth quarter increased by 53.1% from the fourth quarter of 2006.

- The Company established a strong position in the growing Bakken-like non-conventional Shaunavon horizontal oil play in southwest Saskatchewan, with as many as 12 multi-frac horizontal well locations to be drilled.

- The Company drilled two oil wells, which are presently shut-in, on its 12,000 gross acre land base at Judy Creek in central Alberta. It has since farmed out a further $500,000 3-D seismic program and two Swan Hills exploration wells to an Alberta based third party drilling fund.

“Higher oil prices and to a lesser extent production increases from Breton and Frontier, together with a stronger contribution from our processing operations, have led to a significant increase in 2007 revenues compared to 2006,” said Owen Pinnell, Chairman and CEO. “This trend is expected to continue in 2008 as we pursue our oil and gas exploration and development projects.

“At the same time, the Company’s 2007 financial and operating results did not meet management’s expectations, primarily because by raising flow-through capital during the year, we allocated more than 70% of our capital expenditure program to longer term, high-impact exploration projects in Alberta where new production is not anticipated until late 2008 or 2009. Given our 2007 results and the size of our capital base, we have arranged as previously announced for third parties to carry the bulk of our high-impact drilling. By retaining our own capital for more repeatable and predictable projects, we will be well positioned to deliver on our long term vision of steadily increasing shareholder value. The predictability of our new Shaunavon project in southwest Saskatchewan, where we plan to drill several long leg multi-stage frac horizontal wells in the upcoming year, provides a firm foundation for the Company’s future growth.”

FINANCIAL RESULTS

Net Income and Funds Flow

In the fourth quarter of 2007, the Company’s net income was $157,413, reflecting a future tax recovery of $327,982, compared to a loss of $48,014 in the third quarter of 2007 and a loss of $313,877 in the fourth quarter of 2006. The operating margin for the fourth quarter of 2007 was $1,090,992, compared to $974,212 in the third quarter of 2007 and $249,832 in the fourth quarter of 2006. Overall, the Company’s net loss for 2007 was $27,102, after a future tax recovery for the year of $421,754, compared to a net loss of $571,352 in 2006.

Oil and gas Operating Costs

Total operating costs for the fourth quarter of 2007 were $722,991 or $28.20 per boe, including $75,976 for well repairs and maintenance. Operating costs were $696,660 for the third quarter of 2007 or $27.31 per boe, including $90,360 for repairs and maintenance. Operating costs for the fourth quarter of 2006 year were $637,218 or $38.81 per boe, including $188,313 for repairs and maintenance. Year end operating costs for 2007 were $2,393,354, or $25.13 per boe, including $257,457 for repairs and maintenance. Operating costs for 2006 were $2,125,445 or $27.22 per boe, including $147,982 for inter-divisional processing charges and $445,572 for repairs and maintenance. — www.cnxmarketlink.com