Berkana Energy Corp. Announces Third Quarter Results



    TSX: BEC

    CALGARY, Nov. 9 /CNW/ - Berkana Energy Corp. ("Berkana" or the "Company")
is pleased to announce its financial and operating results for the three and
nine months ended September 30, 2007.

    
    -------------------------------------------------------------------------
                                                  Three Months   Nine Months
                                                         Ended         Ended
                                                  September 30  September 30
                                                          2007          2007
    -------------------------------------------------------------------------
    (unaudited, $ thousands,
     except where otherwise noted)

    Financial
    Petroleum and natural gas sales                     10,788        33,383
    Cash flow from operations(1)                         4,082        14,197
      Per share - basic and diluted                      $0.06         $0.21
    Net loss                                            (1,569)       (3,366)
      Per share - basic and diluted                     ($0.02)       ($0.05)
    Capital expenditures                                 5,968        18,161
    Working capital deficiency ("net debt")             (9,383)       (9,383)
    Shareholders' equity                                70,875        70,875
    -------------------------------------------------------------------------
    (No. thousands)

    Share Data
    Total shares outstanding                            67,497        67,497
    Total stock options outstanding                      4,487         4,487
    Weighted average shares outstanding
      Basic and diluted                                 67,497        67,497
    -------------------------------------------------------------------------

    Operating
    Production
      Natural gas (mcf/d)                               12,385        11,451
      Crude oil (bbls/d)                                   322           319
      Natural gas liquids (bbls/d)                         414           382
    -------------------------------------------------------------------------
      Total Production (boe/d)(6:1)                      2,800         2,610
    -------------------------------------------------------------------------
    Average sales prices
      Natural gas ($/mcf)                                 5.43          6.78
      Crude oil ($/bbl)                                  75.86         69.09
      Natural gas liquids ($/bbl)                        61.91         59.20
    -------------------------------------------------------------------------
      Total ($/boe)                                      41.88         46.86
    -------------------------------------------------------------------------
    Wells drilled - gross (net) (No.)
      Gas                                               4 (3.1)       8 (6.0)
      Oil                                               1 (0.5)       1 (0.5)
      D&A                                                    -        1 (1.0)
    -------------------------------------------------------------------------
      Total                                             5 (3.6)      10 (7.5)
    -------------------------------------------------------------------------
    (1) Cash flow from operations is a non-GAAP measure and is defined as
        cash provided by operations before changes in non-cash operating
        working capital.

    HIGHLIGHTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2007

    -   Board of Directors approves $9.0 million increase in 2007 capital
        budget.
    -   Production averaged 2,800 boe per day.
    -   On August 1, 2007, Berkana increased production at Kaybob under a
        3.5 mmcf/d firm service agreement - further increases are planned in
        the fourth quarter.
    -   Drilled five gross (3.6 net) wells.
    -   Commenced an eight well drilling program at Rimbey with good early
        results.
    -   Secured a farm-in with a third party operator at Red Earth to earn
        new lands and expand the production base in the area.
    -   Negotiated a joint venture and farm-in arrangement in the deep basin
        with the first well planned in Q4 of 2007.
    -   Renewed and expanded its $25 million credit facility to $40 million.
    -   Ended the quarter with net debt of $9.4 million and an annualized net
        debt to cash flow ratio of 0.57:1.
    

    A SPECIAL MESSAGE TO SHAREHOLDERS - OPERATING ENVIRONMENT REVIEW

    Berkana operates primarily in the Province of Alberta which is seen as a
province with many competitive advantages, including a proximity to consumer
markets, availability of capital investment and an educated and highly trained
population with an entrepreneurial spirit. These advantages have fostered a
healthy and growing junior energy industry and therefore provided for a
reliable energy supply for Alberta and Canada. These competitive advantages
will likely be negatively affected by the implementation of the Royalty Review
Report initiated by the Government of Alberta in its current form as it
appears to more heavily impact the small business in the energy environment.
    All Albertans have a responsibility to discuss and to question openly the
proposed Royalty Review Report. I refer you to our website at
www.berkanaenergy.com where I have posted three letters. A letter to Premier
Ed Stelmach, a letter to the Honourable Mel Knight, the Alberta energy
minister and a letter to you, our shareholders. My thoughts in these letters
should be reflected upon by all shareholders, Alberta citizens and your
respective MLA's.
    For the three months and the nine months ended September 30, 2007,
Berkana has delivered outstanding performance to you our shareholders
notwithstanding certain challenges in the market place. These challenges
include, the removal of the Alberta Royalty Tax credit, legislation affecting
the royalty trusts, a weakening of natural gas prices and our major
shareholders announcement to dispose of their interest in the Company in order
to re-deploy the capital. Even the uncertainty of the outcome of the royalty
review will create challenges with respect to our long term strategic plan and
capital commitments within Alberta. Through all this Berkana has taken and
will continue to take steps to meet these challenges to ensure we continue to
deliver positive results to our stakeholders.

    OPERATIONAL REVIEW

    In the face of these challenges - Berkana continues to build shareholder
value in the top of our class. Thus far this year we have drilled 10 gross
wells and added significant reserves and deliverability. Because of this we
are seeing Berkana's production and underlying value grow as a result. By
September, we were producing at over 3,000 boe/d - up from a sustainable rate
of 2,400 boe/d a mere nine months earlier. Production continues to grow. We
have the well capacity, but not the processing capacity, to produce at
3,500 boe/d or more.
    At the same time we have been challenged with declining gas prices and a
new royalty regime in the Province of Alberta. Perhaps it is two steps
forward, one back. For many of our peers, it is much more serious than that,
as they will see their balance sheets become stretched to an unmanageable
extent.
    We at Berkana have remained disciplined. We have a strong balance sheet.
We see falling land costs. We see a reduction in service costs. We see a
struggling peer group and perhaps out of all this there is opportunity.
Opportunity to recapture some of the ground lost recently through rule
changes.
    In August, Berkana increased its capital budget by $9.0 million to
$34 million for fiscal 2007. We felt the then current market environment
provided Berkana with an opportunity to take advantage of the slow down. The
$9.0 million in capital may be used to drill an additional 4-6 wells (operated
and farm-in wells), to purchase additional undeveloped lands in our core areas
and to engage in further seismic studies to expand on recent successes at Red
Earth, our light oil discovery. Much of this is under review now as we
evaluate the impact of the new royalties.
    We are on track to deliver that 25% to 30% per share production growth we
targeted for this year - and have completed our work on a 2008 capital budget
designed to deliver the same level or more of organic growth.

    Rimbey

    During the quarter, we drilled four gross (3.1 net) natural gas wells.
Three of the wells have been completed and one well is currently being
evaluated. The Company plans on drilling up to six gross wells in the Rimbey
area during the remainder of the year; most of these will be low risk
exploration and development wells. In addition, our geotechnical team has
reviewed approximately 30 standing wellbores for re-completion, and numerous
strategic farm-in and land opportunities.
    For the third quarter, net Rimbey area production averaged 2,025 boe/d
consisting of 9 mmcf/d of natural gas, 101 bbls/d of crude oil and 350 bbls/d
of natural gas liquids. The Company exited the quarter with 79 wells producing
in the Rimbey area.

    Kaybob

    On August 1, 2007, we began flowing over 500 boe/d of additional
production under a 3.5 mmcf/d firm service agreement. New production came
on-stream intermittently during August as our third party processors
commissioned new capacity. All committed gathering and processing capacity is
not operational yet, however, we are now experiencing increased facility
reliability and expect additional capacity to become available in the fourth
quarter to accommodate our behind pipe production and future drilling.
    We continue field work on an extensive geotechnical exploration effort at
Kaybob. During the year, there has been a significant increase in potential
land and farm-in opportunities in this area, and we believe we can capitalize
on these opportunities to expand our interests and facilitate future growth.
Crown land sales are far less competitive and other operators are slowing
their activities.
    Quarterly production, net to the company's interest, at Kaybob increased
to 455 boe/d (2,351 mcf/d of natural gas, 60 bbls/d of natural gas liquids and
3 bbls/d of crude oil) compared to 62 boe/d in the prior quarter. The Company
exited the quarter with eight wells producing or capable of production in the
Kaybob area.

    Red Earth

    During the quarter, as part of a farm-in agreement we participated in
drilling one light/medium oil well (0.5 net) which we are still evaluating.
Our Red Earth team continues to work on regional geological mapping of the
area and their evaluation of strategic land and farm-in opportunities. An
application has been submitted to regulators to provide for a "holding" for
our producing property. This will facilitate further drilling and proper
spacing and drainage of the Company's newly discovered Red Earth Granite Wash
pool. The holding application is consistent with offsetting Granite Wash
pools, however approval is not expected until mid-year 2008. The Red Earth
Area will continue to be the focus of an extensive geological and geophysical
review by Berkana as we explore for new pools similar to our current
discovery. In the third quarter, we significantly increased our land position
in the area and we commenced planning of a large 3D seismic program, to be
shot this coming winter.
    Red Earth production averaged 218 bbls/d (net) for the quarter.

    CREDIT FACILITY

    On August 1, 2007, Berkana renewed and expanded its $25 million credit
facility to $40 million. The terms and conditions of the new credit facility
are similar to the Company's previous credit facility. We believe the increase
in the credit facility reflects the continued strength of our Company and
provides us with increased financial flexibility for potential acquisitions
and/or increasing our capital budget.

    MAJORITY SHAREHOLDER

    On August 16, 2007, Berkana's majority shareholder, Murphy Oil Canada
("Murphy"), notified the public that it wishes to monetize its interest in the
Company in order to re-invest the proceeds in directly held opportunities in
Canada. Murphy has initiated a formal process to dispose of its 80% interest
in the Company.. The Board of Directors has formed an independent committee of
the Board to oversee this disposition from the perspective of Berkana and its
minority shareholders.

    OUTLOOK

    Berkana has already exceeded its year-end corporate production target
(previously estimated at 2,900 to 3,000 boe/d) as new production is brought
on-stream, primarily at Kaybob. We have now increased our estimated exit rate
for 2007 to between 3,000 to 3,100 boe/d with average production of between
2,700 to 2,800 boe/d for 2007. We had budgeted $34 million for capital
expenditures in calendar 2007 and planned to invest $16 million in the fourth
quarter. Depending on the results of our review of the new royalties, we now
expect to invest between $11 million to $16 million in the fourth quarter -
meaning a potential $5 million reduction in previously budgeted capital
expenditures. The majority of this is planned for the drilling of up to
13 gross wells in our core areas.
    At this time I would like to take the opportunity to thank, the
shareholders, for their patience and support through these difficult times. I
would hope the coming changes will result in increased opportunities for your
company. We have the vision, the capacity and the financial strength to grow
in this challenging environment.

    On behalf of the Board of Directors,
    (signed) "Glenn D. Gradeen"

    Glenn D. Gradeen
    President & Chief Executive Officer
    November 9, 2007

    Management's Discussion and Analysis

    This Management's Discussion and Analysis ("MD&A") has been prepared by
management as of November 8, 2007 and reviewed and approved by the Board of
Directors of Berkana Energy Corp. ("Berkana" or the "Company"). This MD&A is a
review of the operational and financial results of the Company based on
Canadian Generally Accepted Accounting Principles ("GAAP"). The reporting
currency is the Canadian dollar. This MD&A should be read in conjunction with
the unaudited interim consolidated financial statements and related notes for
the three and nine months ended September 30, 2007 and Berkana's audited
consolidated financial statements, related notes and MD&A for the one-month
period ended December 31, 2006.
    Basis of Presentation - On December 1, 2006, Berkana commenced operations
as an independent Canadian junior oil and gas exploration and production
company pursuant to an Acquisition Agreement (the "Acquisition") entered into
between Murphy Oil Canada ("Murphy"), Mach Resources Ltd. ("Mach") and Rosetta
Exploration Inc. ("Rosetta"). Murphy established and organized Mach pursuant
to an Asset Conveyance Agreement to transfer the Rimbey assets immediately
before the closing of the Acquisition. The transaction resulted in the
transfer of all the issued and outstanding common shares of Mach to Rosetta in
exchange for Rosetta issuing to Murphy 269,988,560 common shares. The
Acquisition was affected pursuant to the takeover bid provisions of applicable
securities legislation and has been accounted for as a reverse takeover. The
transaction is described in more detail in note 5 of the unaudited interim
consolidated financial statements for the three and nine months ended
September 30, 2007, the Information Circular dated October 26, 2006 and the
Acquisitions section of this MD&A. Historical financial information is not
available or required for comparative purposes for Berkana in these
circumstances under existing securities law, however, selected historical
information with respect to the Rimbey property is presented in the December
31, 2006 MD&A of Berkana.
    Non-GAAP Measures - This MD&A contains the term cash flow from operations
and operating netback, which are non-GAAP financial measures that do not have
any standardized meaning prescribed by GAAP and are, therefore, unlikely to be
comparable to similar measures presented by other issuers. Management believes
cash flow from operations and operating netback are relevant indicators of the
Company's financial performance, ability to fund future capital expenditures
and repay debt. Cash flow from operations and operating netback should not be
considered an alternative to or more meaningful than cash flow from operating
activities, as determined in accordance with GAAP, as an indicator of the
Company's performance. In the Operating Netback and Cash Flow from Operations
section of this MD&A, a reconciliation has been prepared of cash flow from
operations and operating netback to cash from operating activities, the most
comparable measure calculated in accordance with GAAP.
    Boe Presentation - Production information is commonly reported in units
of barrel of oil equivalent ("boe"). For purposes of computing such units,
natural gas is converted to equivalent barrels of oil using a conversion
factor of six thousand cubic feet to one barrel of oil. This conversion ratio
of 6:1 is based on an energy equivalent wellhead value for the individual
products. Such disclosure of boes may be misleading, particularly if used in
isolation. Readers should be aware that historical results are not necessarily
indicative of future performance.
    Forward-Looking Statements - Certain information regarding the Company
presented in this document, including management's assessment of the Company's
future plans and operations, may constitute forward-looking statements under
applicable securities law and necessarily involve risk associated with oil and
gas exploration, production, marketing and transportation such as loss of
market, volatility of commodity prices, currency fluctuations, imprecision of
reserve estimates, environmental risk, competition from other producers and
ability to access capital from internal and external resources, and as a
consequence, actual results may differ materially from those anticipated in
the forward-looking statements.

    Business of Berkana

    Berkana commenced operations on December 1, 2006 pursuant to the
Acquisition with over 2,400 boe/d of production (79% natural gas),
approximately 150,000 net undeveloped acres of land, marginal net debt and a
planned capital program of over $30 million to the end of 2007. Berkana's
capital program is balanced primarily between lower risk exploration and
development opportunities and acquisitions, with up to 20% of the capital
budget devoted to higher impact exploration. Lower risk growth will come
through a combination of the development of Berkana's three core properties:
Rimbey, Kaybob and Red Earth. Berkana will continue with Rosetta's leverage
approach to high impact exploration by bringing in joint venture drilling
partners and using geological studies conducted by Rosetta over the past five
years.

    Acquisitions

    Prior to the closing of the Acquisition and pursuant to the Asset
Conveyance Agreement, Murphy transferred the Rimbey assets to Mach in exchange
for 100 Mach common shares. As the acquisition of the Rimbey assets by Mach
from Murphy is between entities under common control, the net assets were
recorded at their carrying values as follows:

    
    -------------------------------------------------------------------------
    ($ thousands)
    -------------------------------------------------------------------------
    Consideration
      100 common shares of Mach                                       41,219
    -------------------------------------------------------------------------
    Net assets received:
      Petroleum and natural gas properties                            54,151
      Cash                                                             1,263
      Asset retirement obligations                                    (6,043)
      Future income taxes                                             (8,152)
    -------------------------------------------------------------------------
                                                                      41,219
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    As part of the Asset Conveyance Agreement, Mach assumed Murphy's
commitments for natural gas transmission and processing of production from the
Rimbey assets.
    At September 30, 2007, the Company had received two preliminary statement
of adjustments from Murphy for a total amount of $3.0 million. The Company
recorded the adjustments as a reduction to property, plant and equipment
($4.3 million) and future income tax liability ($1.3 million). As of November
8, 2007, the purchase price allocation is subject to change until such time as
the Company receives the final statement of adjustments from Murphy.
    Under the Acquisition, Rosetta acquired all of the issued and outstanding
shares of Mach from Murphy in exchange for 269,988,560 Rosetta common shares.
As such, Murphy owns approximately 80% of Rosetta's issued and outstanding
shares. The acquisition was accounted for under the purchase method as a
reverse takeover whereby Mach acquired Rosetta. Rosetta subsequently changed
its name to Berkana and consolidated all of its issued and outstanding common
shares on a five-for-one basis.
    The following table summarizes the consideration, purchase price
allocation and fair value of the Rosetta net assets acquired by Mach:

    
    -------------------------------------------------------------------------
    ($ thousands)
    -------------------------------------------------------------------------
    Consideration
      53,997,712(1) common shares of Rosetta                          29,024
      Transaction costs                                                1,898
    -------------------------------------------------------------------------
      Total consideration                                             30,922
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Purchase Price and Fair Value
    Net assets received:
      Petroleum and natural gas properties                            36,885
      Cash                                                                 9
      Working capital deficiency                                      (1,727)
      Revolving credit facility                                       (2,224)
      Asset retirement obligations                                    (1,034)
      Future income taxes                                               (987)
    -------------------------------------------------------------------------
                                                                      30,922
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Shares issued reflect the five-for-one share consolidation.



    Selected Financial Information

    -------------------------------------------------------------------------
                                                  Three Months   Nine Months
                                                         Ended         Ended
                                                  September 30  September 30
    ($ thousands, except where otherwise noted)           2007          2007
    -------------------------------------------------------------------------
    Production
      Natural gas (mcf/d)                               12,385        11,451
      Crude oil (bbls/d)                                   322           319
      Natural gas liquids (bbls/d)                         414           382
    -------------------------------------------------------------------------
      Total production (boe/d) (6:1)                     2,800         2,610
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average sales price
      Natural gas ($/mcf)                                 5.43          6.78
      Crude oil ($/bbl)                                  75.86         69.09
      Natural gas liquids ($/bbl)                        61.91         59.20
    -------------------------------------------------------------------------
      Total ($/boe)                                      41.88         46.86
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Petroleum and natural gas sales                     10,788        33,383
    Net loss                                            (1,569)       (3,366)
      Per share - basic and diluted                     ($0.02)       ($0.05)
    Capital expenditures                                 5,968        18,161
    Total assets                                       107,089       107,089
    Working capital surplus excluding
     revolving credit facility                           1,517         1,517
    Revolving credit facility                          (10,900)      (10,900)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating Netbacks
    -------------------------------------------------------------------------
                                                  Three Months   Nine Months
                                                         Ended         Ended
                                                  September 30  September 30
    ($/boe)                                               2007          2007
    -------------------------------------------------------------------------
    Total
      Sales price                                        41.88         46.86
      Royalties                                           9.81         10.81
      Operating expenses                                  6.46          6.90
      Transportation                                      0.84          0.82
    -------------------------------------------------------------------------
      Operating netback                                  24.77         28.33
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Berkana Operational Results for the Three Months Ended September 30, 2007

    For the three months ended September 30, 2007 (the "third quarter"),
Berkana's operational focus was directed towards resolving facility
constraints at Kaybob, and the commencement of the Company's fall drilling
program.

    Rimbey

    During the third quarter, the Company drilled four gross (3.1 net) wells.
Subsequent to quarter end, the Company completed three of the wells, two of
which are currently awaiting tie-in and one is being evaluated. In the fourth
quarter of 2007, the Company plans on drilling up to 6 gross wells in the
Rimbey area, most of which will be low risk development and exploratory wells.
    For the third quarter, Rimbey area production averaged 2,025 boe/d
consisting of 9 mmcf/d of natural gas, 101 bbls/d of crude oil and 350 bbls/d
of natural gas liquids. The Company exited the quarter with 79 wells producing
in the Rimbey area.

    Kaybob

    For the third quarter, Kaybob area production increased to 455 boe/d
(2 mmcf/d of natural gas, 60 bbls/d of natural gas liquids and 3 bbls/d of
crude oil) compared to 62 boe/d in the prior quarter. On August 1, 2007,
Berkana began flowing approximately 500 boe/d of additional production under a
3.5 mmcf/d firm service agreement, however, the Company was not able to
produce at optimal rates under the agreement until September because of
temporary compressor issues and delays in installing of permanent facilities
at the third party operated Bigstone/Jupiter plant. Management expects
additional facility capacity to become available in the fourth quarter to
accommodate future drilling. The Company exited the quarter with eight wells
producing or capable of production in the Kaybob area.

    Red Earth

    During the third quarter, Berkana participated in a farm-in to drill one
light/medium oil well (0.5 net) which is currently being evaluated. In
addition, the Company continued regional geological mapping and the evaluation
of strategic land and farm-in opportunities in the Red Earth area. Berkana has
up to four follow-up drilling locations planned for the 2007/2008 winter
drilling season. An application has been submitted for a holding on Berkana's
producing property, which will facilitate further drilling and proper spacing
and drainage of the Company's Red Earth Granite Wash pool. The holding
application is consistent with offsetting Granite Wash pools however approval
is not expected prior to next winter.
    For the third quarter, Red Earth area production averaged 218 bbls/d of
crude oil. The Company exited the quarter with four wells producing or capable
of production in the Red Earth area.

    
    Production

    -------------------------------------------------------------------------
                                                  Three Months   Nine Months
                                                         Ended         Ended
                                                  September 30  September 30
                                                          2007          2007
    -------------------------------------------------------------------------
    Rimbey
      Natural gas (mcf/d)                                9,444         9,768
      Crude oil (bbls/d)                                   101           116
      Natural gas liquids (bbls/d)                         350           351
    -------------------------------------------------------------------------
      Production (boe/d) (6:1)                           2,025         2,095
    -------------------------------------------------------------------------
    Kaybob
      Natural gas (mcf/d)                                2,351         1,187
      Crude oil (bbls/d)                                     3             4
      Natural gas liquids (bbls/d)                          60            27
    -------------------------------------------------------------------------
      Production (boe/d) (6:1)                             455           229
    -------------------------------------------------------------------------
    Red Earth
      Crude oil (bbls/d)                                   218           199
    -------------------------------------------------------------------------
      Production (boe/d) (6:1)                             218           199
    -------------------------------------------------------------------------
    Other
      Natural gas (mcf/d)                                  590           496
      Natural gas liquids (bbls/d)                           4             4
    -------------------------------------------------------------------------
      Production (boe/d) (6:1)                             102            87
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total Berkana
      Natural gas (mcf/d)                               12,385        11,451
      Crude oil (bbls/d)                                   322           319
      Natural gas liquids (bbls/d)                         414           382
    -------------------------------------------------------------------------
      Total Production (boe/d) (6:1)                     2,800         2,610
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Berkana's production for the third quarter averaged 2,800 boe/d
consisting of 12,385 mmcf/d of natural gas, 322 bbls/d of crude oil and
414 bbls/d of natural gas liquids. Average production for the nine months
ended September 30, 2007 was 2,610 boe/d. The Company continued to experience
operational challenges in the Kaybob area due to third party facility
constraints. On August 1, 2007, Berkana began flowing approximately 500 boe/d
of additional production under a 3.5 mmcf/d firm service agreement, however,
the Company was not able to produce at optimal rates under the agreement until
September because of temporary compressor issues and delays in installing
permanent facilities at the third party operated Bigstone/Jupiter plant.

    
    Petroleum and Natural Gas Sales

    -------------------------------------------------------------------------
                                                  Three Months   Nine Months
                                                         Ended         Ended
                                                  September 30  September 30
    ($ thousands, except where otherwise noted)           2007          2007
    -------------------------------------------------------------------------
    Petroleum and Natural Gas Sales
      Natural gas                                        6,184        21,208
      Crude oil                                          2,247         6,011
      Natural gas liquids                                2,357         6,164
    -------------------------------------------------------------------------
      Total                                             10,788        33,383
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Sales Price
      Crude oil ($/bbl)                                  75.86         69.09
      Natural gas liquids ($/bbl)                        61.91         59.20
    -------------------------------------------------------------------------
      Average liquids price ($/bbl)                      68.01         63.70
      Natural gas ($/mcf)                                 5.43          6.78
    -------------------------------------------------------------------------
      Total ($/boe)                                      41.88         46.86
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Benchmark Pricing
      Edmonton par price ($/bbl)                         80.70         73.69
      AECO-C spot ($/mmbtu)                               5.18          6.55
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Petroleum and natural gas sales for the third quarter were $10.8 million,
consisting of $6.2 million of natural gas sales, $2.2 million of crude oil
sales and $2.4 million of natural gas liquid sales. For the nine months ended
September 30, 2007, petroleum and natural gas sales were $33.4 million.
    Berkana realized natural gas prices of $5.43/mcf for the third quarter
and $6.78/mcf for the nine months ended September 30, 2007. Berkana realizes a
higher price than the AECO-C spot, due to the higher energy content of
Berkana's natural gas production.
    Berkana's realized price for its crude oil production was $75.86/bbl for
the third quarter and $69.09/bbl for the nine months ended September 30, 2007,
compared to the Edmonton par daily index average of $80.70/bbl and $73.69/bbl,
respectively.
    All the Company's production is currently sold on the spot market.
Management is currently evaluating different hedging strategies to decrease
the volatility of sales price and fluctuations in cash flow from operations.

    
    Royalties

    -------------------------------------------------------------------------
                                                  Three Months   Nine Months
                                                         Ended         Ended
                                                  September 30  September 30
    ($ thousands, except where otherwise noted)           2007          2007
    -------------------------------------------------------------------------
    Royalties
      Crown                                              1,770         5,169
      Freehold and overriding                              756         2,534
    -------------------------------------------------------------------------
      Total                                              2,526         7,703
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Royalties per boe
      Natural gas ($/boe)                                 8.75         10.47
      Crude oil ($/bbl)                                   8.47          8.77
      Natural gas liquids ($/bbl)                        16.13         14.25
    -------------------------------------------------------------------------
      Total ($/boe)                                       9.81         10.81
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average royalty rate (%)                              23.4          23.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Berkana pays royalties to the provincial governments, freehold landowners
and overriding royalty owners. Royalties are calculated and paid based on
petroleum and natural gas sales net of transportation. Natural gas and liquids
royalties for the third quarter were $2.5 million or 23.4% of total petroleum
and natural gas sales. For the nine months ended September 30, 2007, natural
gas and liquids royalties were $7.7 million or 23.1% of total petroleum and
natural gas sales.

    Operating and Transportation Expenses

    For the nine months ended September 30, 2007, operating expenses net of
processing were $4.9 million or $6.90/boe of which $1.7 million or $6.46/boe
was incurred in the third quarter. The majority of the Company's operating
expenses were for compression and gathering of natural gas production, repairs
and maintenance, and contract operating costs.
    Transportation expenses were $0.2 million or $0.84/boe for the third
quarter. For the nine months ended September 30, 2007, transportation expenses
averaged $0.82/boe or $0.6 million. The Company incurs transportation charges
primarily for natural gas transmission of Rimbey production and oil hauling at
Red Earth.
    Management anticipates 2007 operating expenses including transportation
expenses and net of processing revenues to be in the $6.50/boe to $8.50/boe
range.

    
    General and Administrative Expenses

    -------------------------------------------------------------------------
                                                  Three Months   Nine Months
                                                         Ended         Ended
                                                  September 30  September 30
    ($ thousands, except where otherwise noted)           2007          2007
    -------------------------------------------------------------------------
    Gross general and administrative expense             1,835         5,673
    Overhead recoveries                                    (94)         (401)
    -------------------------------------------------------------------------
    Net general and administrative expense               1,741         5,272
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    General and administrative ($/boe)                    6.76          7.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    For the nine months ended September 30, 2007, general and administrative
expenses ("G&A") was $5.3 million or $7.40/boe. The majority of the Company's
gross G&A expenses are incurred for salaries and benefits and rent for office
premises. Berkana incurred increased G&A during the first half of 2007 due to
additional hiring of personnel attributed to increased operations and drilling
activities. In addition, during the second quarter the Company incurred
non-recurring costs from third parties with respect to the review of corporate
growth initiatives, the Company's graduation to the Toronto Stock Exchange and
for corporate governance purposes with respect to internal controls. Berkana's
G&A per boe decreased in the third quarter to $6.76/boe compared to $9.45/boe
in the prior quarter. The decrease was mainly due to increased sales volumes
and lower non-recurring costs being incurred during the third quarter. The
Company recovers a portion of its gross G&A costs from its partners based on
its capital spending during the period and does not capitalize G&A.

    Exploration and Dry Hole Costs

    Exploration expenses for the nine months ended September 30, 2007 were
$1.6 million of which $1.1 million was incurred during the third quarter.
Exploration expenses were incurred primarily for geological and geophysical
costs in the Company's core areas.
    During the second quarter of 2007, the Company completed its evaluation
of the 100% working interest Red Earth oil well that was drilled in the first
quarter of 2007. Based on the evaluation the Company decided to abandon the
well as it was not commercially successful to tie-in. A total of $1.4 million
was recorded to dry hole costs for this well.
    Berkana expenses all exploration dry hole and geological and geophysical
costs in accordance with successful efforts accounting.

    Stock Based Compensation

    During the nine months ended September 30, 2007, Berkana incurred stock
based compensation expenses of $1.6 million related to the amortization of the
fair value attributed to the issuance of 4,547,750 stock options and the
cancellation of 61,000 options.

    Depletion, Depreciation and Accretion

    Depletion, depreciation and accretion ("DD&A") was $14.4 million or
$20.28/boe for the nine months ended September 30, 2007 of which $5.1 million
or $19.85/boe was incurred in the third quarter. In determining the Company's
depletion and depreciation, salvage values of $8.8 million, undeveloped land
costs of $10.3 million and $8.7 million of costs on unevaluated wells were
excluded from the costs subject to depletion.

    Income Taxes

    Berkana's current and future income taxes are dependent on factors such
as production, commodity prices and tax classification of drilled exploration
and development wells. The Company had a future income tax recovery for the
third quarter of $0.6 million and $0.8 million for the nine months ended
September 30, 2007.
    At September 30, 2007, the Company had $68.0 million in tax pools and
$7.6 million in non-capital losses that are available for future deduction
against taxable income.

    
    -------------------------------------------------------------------------
                                                                September 30
    ($ thousands)                                                       2007
    -------------------------------------------------------------------------
    Canadian exploration expense                                      18,326
    Canadian oil and gas property expense                              6,027
    Canadian development expense                                      17,356
    Undepreciated capital costs                                       23,984
    Share issue costs                                                  2,237
    Other                                                                 92
    -------------------------------------------------------------------------
    Total                                                             68,022
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Non-capital losses expire as follows:

    -------------------------------------------------------------------------
    ($ thousands)
    -------------------------------------------------------------------------
    2007                                                                 586
    2008                                                               1,392
    2009                                                               1,234
    2010 and thereafter                                                4,390
    -------------------------------------------------------------------------
                                                                       7,602
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Operating Netback and Cash Flow From Operations
    -------------------------------------------------------------------------
                                                  Three Months   Nine Months
                                                         Ended         Ended
                                                  September 30  September 30
    ($ thousands)                                         2007          2007
    -------------------------------------------------------------------------
    Revenue
      Petroleum and natural gas sales                   10,788        33,383
      Royalties                                          2,526         7,703
      Interest and other income                              -           455
    -------------------------------------------------------------------------
                                                         8,262        26,135
      Operating expenses                                 1,665         4,914
      Transportation expenses                              216           582
    -------------------------------------------------------------------------
    Operating netback(1)                                 6,381        20,639
      General and administrative                         1,741         5,272
      Asset retirement expenditures                        320           690
      Interest                                             238           480
    -------------------------------------------------------------------------
    Cash flow from operations(1)                         4,082        14,197
      Changes in non-cash working capital                1,937         1,159
    -------------------------------------------------------------------------
    Cash provided by operating activities                6,019        15,356
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Non-GAAP measure

    Cash flow from operations was $14.2 million ($0.21 per share basic and
diluted) for the nine months ended September 30, 2007 of which $4.1 million
($0.06 per share basic and diluted) was generated in the third quarter.

    Capital Expenditures

    -------------------------------------------------------------------------
                                                  Three Months   Nine Months
                                                         Ended         Ended
                                                  September 30  September 30
    ($ thousands)                                         2007          2007
    -------------------------------------------------------------------------
    Land                                                 2,908         4,008
    Drilling and completions                             2,924         9,282
    Tangible equipment                                     136         3,328
    Acquisitions                                             -         1,316
    Other                                                    -           227
    -------------------------------------------------------------------------
    Net capital expenditures                             5,968        18,161
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The Company invested $6.0 million for capital expenditures during the
third quarter of which the majority was spent to drill 5 gross (3.6 net) wells
and purchase Crown land at the Red Earth area. During the nine months ended
September 30, 2007, the Company expended $18.2 million to drill 10 gross
(7.5 net) wells, complete nine gross (6.6 net) wells and tie-in eight gross
(7.1 net) wells.
    Subsequent to quarter end, the Board of Directors approved the purchase
of certain petroleum and natural gas properties from an officer of the
Company. The transaction was incurred in the normal course of operations and
will be recorded at the exchange amount of $0.4 million.

    
    Well Count

    -------------------------------------------------------------------------
                                                             Net
                                                -----------------------------
    As at Septmeber 30, 2007              Gross  Before Payout  After Payout
    -------------------------------------------------------------------------
    (No. of wells)
    Gas                                      86           50.1          51.2
    Oil                                      14           12.1          11.8
    Drilling                                  -              -             -
    Standing(1)                              20           14.1          14.4
    -------------------------------------------------------------------------
    Total                                   120           76.3          77.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    NCGORR(2)                                 6              -             -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Standing indicates wells that have been cased and awaiting
        evaluation.
    (2) Non-convertible gross overriding royalty wells.



    Land Holdings

    -------------------------------------------------------------------------
    As at September 30, 2007                Net            Net
                                    Undeveloped      Developed         Total
    -------------------------------------------------------------------------
    (acres)
    Rimbey                                9,398         19,307        28,705
    Kaybob                               30,832          3,524        34,356
    Red Earth                            72,241            376        72,617
    Other exploration areas              45,099          2,150        47,249
    -------------------------------------------------------------------------
    Total                               157,570         25,357       182,927
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Liquidity and Capital Resources

    -------------------------------------------------------------------------
                                                         As at         As at
                                                  September 30   December 31
    ($ thousands)                                         2007          2006
    -------------------------------------------------------------------------
    Working capital (surplus) deficiency
     excluding revolving credit facility                 1,517        (3,734)
    Revolving credit facility                          (10,900)       (3,100)
    -------------------------------------------------------------------------
    Working capital deficiency ("net debt")             (9,383)       (6,834)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    As at September 30, 2007, Berkana had a working capital surplus excluding
the revolving credit facility (the "credit facility") of $1.5 million, letters
of guarantee totaling $0.3 million and $10.9 million drawn against the
$40 million credit facility at a variable interest rate of 6.25%. The increase
in the Company's net debt position is mainly due to increased drilling
activity during the nine months ended September 30, 2007. On August 1, 2007,
Berkana renewed and expanded its $25 million credit facility to $40 million.
The terms and conditions of the new credit facility are similar to the
Company's previous credit facility. The credit facility is secured by a fixed
and floating charge on the assets of the Company. The credit facility has a
financial covenant that requires the Company to maintain its working capital
ratio at 1:1 or greater while the credit facility is outstanding. The working
capital ratio is defined as current assets plus the unutilized portion of the
credit facility divided by current liabilities less the balance drawn against
the credit facility. The borrowing base of the credit facility is subject to
an annual review by the lender. As at September 30, 2007, the Company was in
compliance with all covenants required in the agreement.
    The Company generally relies on cash flow from operations and credit
facility availability to fund its capital requirements and to provide
liquidity. Cash is primarily used, and will continue to be used, to fund
acquisitions, exploration and development of petroleum natural gas properties,
expenses for continued operations, G&A costs and/or repayment of principal and
interest outstanding on the credit facility.
    The Company's cash flow from operations is directly related to underlying
commodity prices and production volumes. A significant decrease in commodity
prices could materially impact the Company's future cash flow from operations
and liquidity. In addition, a substantial decrease in commodity prices could
impact the Company's borrowing base under the credit facility, therefore
reducing the credit facility available, and in some instances, require a
portion of the credit facility to be repaid. Berkana has not entered into any
risk management contracts to mitigate its commodity price risk, however
management is currently considering various options. The Company's future
liquidity is also dependent on its ability to increase reserves and production
through successful drilling activity and acquisitions.
    Management feels that the Company currently has sufficient liquidity and
capital resources available to fund continued operations and future capital
expenditures. In the long-term, the Company may consider issuing new equity or
debt, on favourable terms, to fund the continued growth of the Company through
acquisitions, exploration and development of petroleum and natural gas
properties. The Company's future liquidity is dependent on cash flow from
operations, the credit facility and its ability to access capital markets.

    Commitments

    During the third quarter, Berkana entered into a third party contract to
use up to 3.5 mmcf/d of gas processing plant capacity for a fixed fee. Under
the contract, Berkana has a use-or-pay obligation for the remainder of 2007 of
2.5 mmcf/d, 1.7 mmcf/d for 2008 and 1.2 mmcf/d for first seven months of 2009.
    At the time of formation of Berkana, the Board of Directors implemented a
bonus plan determined based on various indicators. The amount of the bonus, if
any, will be determined after the completion of the year and no amounts have
been accrued in these financial statements. On the basis of the terms of the
plan, the amounts are not expected to exceed $1.5 million.

    Off-Balance Sheet Arrangements

    The Company has no off-balance sheet arrangements.

    Share Capital

    As at November 8, 2007, the Company had 67,497,140 (2006 - 67,497,140)
Class A common shares and 4,486,750 (2006 - nil) stock options issued and
outstanding.
    August 16, 2007, Berkana's majority shareholder, Murphy Oil Canada,
announced that it is considering alternatives to maximize the value of its
interest in Berkana in order to re-invest the proceeds in directly held
opportunities in Canada. At September 30, 2007, Murphy Oil Canada directly
owned 80% of the Company. The Board of Directors has formed an independent
committee of the Board to oversee this disposition from the perspective of
Berkana and its minority shareholders.

    Outlook

    Due to the resolution of facility constraints at Kaybob, management has
revised their 2007 outlook. Management now expects 2007 production to average
between 2,700 to 2,800 boe/d and to exit the year between 3,000 to
3,100 boe/d. During the third quarter, the Company increased its budget for
2007 capital expenditures to $34 million. The Company now expects to spend
between $11.6 million to $15.8 million in the fourth quarter, however this is
dependent on natural gas prices and the Company's assessment of the Alberta
Royalty Review. The Company expects to drill up to 13 wells in the fourth
quarter, the majority of which will be low risk development and exploratory
wells.

    Financial Instruments

    Fair Value of Financial Assets and Liabilities

    Financial instruments of the Company consist primarily of bank overdraft,
accounts receivable, note receivable, accounts payable and the credit
facility. As at September 30, 2007 and December 31, 2006, there were no
significant differences between the carrying amounts reported on the balance
sheet and their estimated fair values.

    Credit Risk

    The Company's accounts receivable are with customers and joint venture
partners in the petroleum and natural gas business under normal industry sale
and payment terms and are subject to normal credit risks. Management believes
the risk is mitigated by the size and reputation of the companies to which
they extend credit.

    Interest Rate Risk

    The Company is exposed to interest rate risk as the credit facility bears
interest at floating market interest rates. The Company has no interest rate
swaps or hedges at September 30, 2007.

    Adoption of New Accounting Policies

    On January 1, 2007, Berkana adopted the following new accounting
standards issued by the Canadian Institute of Chartered Accountants ("CICA"):
Comprehensive Income (Section 1530), Financial Instruments - Recognition and
Measurement (Section 3855) and Hedges (Section 3865). In accordance with the
new standards, changes are adopted retroactively without restatement of prior
period information. The Company's adoption of these new standards had no
impact on reported net loss or cash flows. The other effects of the
implementation of these new standards are discussed below.

    Comprehensive Income

    Section 1530 provides for a new Statement of Comprehensive Income and
establishes Accumulated Other Comprehensive Income ("AOCI") as a separate
component of shareholders' equity. The Statement of Comprehensive Income is
defined as a change in net assets arising from transactions and other events
from non-owner sources. The statement would present net income and each
component recognized in other comprehensive income ("OCI") when such amounts
exist. For the nine months ended September 30, 2007, the Company did not
recognize any OCI. Any future OCI recognized by the Company will be recognized
in AOCI.

    Financial Instruments - Recognition and Measurement

    Section 3855 requires all financial assets and liabilities, including
derivatives, to be carried at fair value on the Company's balance sheet with
the exception of loans and receivables, investments that are intended to be
held to maturity and non-trading financial liabilities which are carried at
cost or amortized cost.
    Realized and unrealized gains and losses on financial assets and
liabilities that are carried at fair value are recognized in net earnings or
loss unless they are designated as hedges and meet the requirements for hedge
accounting, in which case the realized and unrealized gains and losses are
recorded to OCI. Transaction costs incurred by the Company related to these
financial assets and liabilities will be expensed when incurred. Unrealized
gains or losses on financial assets and liabilities carried at cost or
amortized costs are recognized when the assets and liabilities settle.

    Derivatives and Hedge Accounting

    Derivatives may be embedded in other financial instruments (the "host
instruments"). Prior to the adoption of the new standards, such embedded
derivatives were not accounted for separately from the host instrument. Under
the new standard, embedded derivatives are treated as separate derivatives
when their economic characteristics and risks are not clearly and closely
related to those of the host instrument, the terms of the embedded derivative
are the same as those of the stand-alone derivative, and the combined contract
is not held for trading or designated at fair value. A review of the Company's
financial contracts determined that there were no embedded derivatives. In the
event that the Company enters into a contract that contains an embedded
derivative, the embedded derivative will be measured at fair value with
subsequent changes recognized in earnings or loss.
    At January 1, 2007 no transitional adjustments were required to the
opening balance of retained earnings or to the opening balance of AOCI arising
from the adoption of sections 1530, 3855, and 3865.

    New Accounting Pronouncements

    The Company has assessed new and revised accounting pronouncements that
have been issued that are not yet effective and determined that the following
may have a significant impact on the Company:
    As of January 1, 2008, the Company will be required to adopt the
following two new CICA standards: Financial Instruments - Disclosures (Section
3862) and Financial Instruments - Presentation (Section 3863), which will
replace Financial Instruments - Disclosure and Presentation (Section 3861).
The new disclosure standard increases the emphasis on the risks associated
with both recognized and unrecognized financial instruments and how those
risks are managed. The new presentation standard carries forward former
presentation requirements.
    As of January 1, 2008, the Company will be required to adopt CICA
standards, Capital Disclosures (Section 1535), which will require companies to
disclose their objectives, policies and processes for managing capital. In
addition, disclosures are to include whether companies have complied with
externally imposed capital requirements.
    Both new standards were issued in December 2006 and the Company is
assessing the impact on its financial statements.

    Sensitivities

    The following sensitivity analysis is provided to demonstrate the impact
of changes in commodity prices on 2007 petroleum and natural gas sales and is
based on the balances disclosed in this MD&A and the unaudited interim
consolidated financial statements for the nine months ended September 30,
2007:

    
    -------------------------------------------------------------------------
                                                               Petroleum and
                                                                 Natural Gas
    ($ thousands)                                                    Sales(1)
    -------------------------------------------------------------------------
    Change in average sales price for natural gas by $1.00/mcf         3,127
    Change in the average sales price for crude oil by $1.00/bbl          87
    Change in natural gas production by 1 mmcf/d (2)                   1,851
    Change in crude oil production by 100 bbls/d (2)                   1,886
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1)  Reflects the change in petroleum and natural gas sales for the
         nine months ended September 30, 2007.  Balances have not been
         annualized.
    (2)  Reflects the change in production multiplied by the Company's
         average sales prices for the nine month period ended September 30,
         2007.

    Quarterly Financial Summary

    -------------------------------------------------------------------------
                                                         2007
    -------------------------------------------------------------------------
    For the three months ended          March 31    June 30     September 30
    -------------------------------------------------------------------------
    ($ thousands, except where
     otherwise noted)
    Petroleum and natural gas sales       11,514     11,081           10,788
    Net earnings (loss)                       38     (1,835)          (1,569)
      Per share - basic and diluted            -     ($0.03)          ($0.02)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Disclosure Controls and Procedures

    Disclosure controls and procedures are designed to provide reasonable
assurance that material information is gathered and reported to senior
management, including the Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO"), as appropriate to permit timely decisions regarding public
disclosure.
    Management, including the CEO and CFO, has evaluated the effectiveness of
the design and operation of the Company's disclosure controls and procedures.
Based on this evaluation as of the end of the period covered by the interim
filings, the CEO and CFO have concluded that the Company's disclosure controls
and procedures, as defined in MI 52-109 Certification of Disclosures in
Issuers' Annual and Interim Filings, are effective to ensure that the
information required to be disclosed in reports that are filed or submitted
under Canadian securities legislation are recorded, processed, summarized and
reported within the time period specified in those rules.
    During the process of management's review and evaluation of the design of
the Company's internal control over financial reporting, it was determined
that a certain weakness existed in internal controls over financial reporting
("ICOFR"). As indicative of many small companies, the lack of segregation of
duties was identified as an area where weakness exists. Some of the risks
associated with lack of segregation of duties are misappropriation of assets,
misstated financial statements and errors and/or irregularities in financial
information. The existence of this weakness is compensated for by senior
management monitoring the areas in which it exists and through the performance
of audits and quarterly reviews of financial statements by the Company's
external auditors. The Company is taking steps to augment and improve the
design of procedures and controls impacting this area of weakness over ICOFR.
It should be noted that a control system, no matter how well conceived or
operated, can only provide reasonable assurance, not absolute assurance, that
the objectives of the control system are met.

    Alberta Royalty Review

    The Government of Alberta has completed a comprehensive review of the
province's oil and natural gas royalty structure. The Company is currently
evaluating how the potential changes may impact the Company's operations.

    
    BERKANA ENERGY CORP.
    CONSOLIDATED BALANCE SHEETS
    (Unaudited)

    -------------------------------------------------------------------------
                                                         As at         As at
                                                  September 30   December 31
    ($ thousands)                                         2007          2006
    -------------------------------------------------------------------------
    Assets (note 7)
    Current
      Cash                                               2,187             -
      Accounts receivable                                6,934         4,573
      Note receivable (note 4)                               -           534
      Prepaid expenses and deposits                      2,624           177
    -------------------------------------------------------------------------
                                                        11,745         5,284
    Property, plant and equipment (note 6)              95,344        96,467
    -------------------------------------------------------------------------
                                                       107,089       101,751
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Current
      Bank overdraft                                         -           164
      Accounts payable and accrued liabilities          10,228         8,854
      Revolving credit facility (note 7)                10,900         3,100
    -------------------------------------------------------------------------
                                                        21,128        12,118
    Asset retirement obligations (note 8)                7,718         7,585
    Future income taxes (note 10)                        7,368         9,435
    -------------------------------------------------------------------------
                                                        36,214        29,138
    -------------------------------------------------------------------------
    Commitments (note 11)

    Shareholders' Equity
    Share capital (note 9)                              72,141        72,141
    Contributed surplus (note 9)                         1,628             -
    (Deficit) retained earnings                         (2,894)          472
    -------------------------------------------------------------------------
                                                        70,875        72,613
    -------------------------------------------------------------------------
                                                       107,089       101,751
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited interim consolidated financial
    statements.



    BERKANA ENERGY CORP.
    CONSOLIDATED STATEMENT OF LOSS, COMPREHENSIVE LOSS AND DEFICIT
    For the Three and Nine Months Ended September 30, 2007
    (Unaudited)

    -------------------------------------------------------------------------
                                                  Three months   Nine months
                                                         ended         ended
                                                  September 30  September 30
     ($ thousands, except per share amounts)              2007          2007
    -------------------------------------------------------------------------

    Revenue
      Petroleum and natural gas sales                   10,788        33,383
      Royalties                                          2,526         7,703
    -------------------------------------------------------------------------
                                                         8,262        25,680
      Interest and other income                              -           455
    -------------------------------------------------------------------------
                                                         8,262        26,135
    -------------------------------------------------------------------------

    Expenses
      Operating                                          1,665         4,914
      Transportation                                       216           582
      General and administrative                         1,741         5,272
      Stock based compensation (note 9)                    324         1,628
      Exploration                                        1,087         1,574
      Dry hole costs                                         -         1,388
      Depletion, depreciation and accretion              5,114        14,449
      Interest                                             238           480
    -------------------------------------------------------------------------
                                                        10,385        30,287
    -------------------------------------------------------------------------
    Loss before income taxes                            (2,123)       (4,152)
    Future income tax recovery (note 10)                  (554)         (786)
    -------------------------------------------------------------------------
    Net loss and comprehensive loss                     (1,569)       (3,366)
    (Deficit) retained earnings, beginning of period    (1,325)          472
    -------------------------------------------------------------------------
    Deficit, end of period                              (2,894)       (2,894)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted loss per share (note 9)           ($0.02)       ($0.05)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited interim consolidated financial
    statements.



    BERKANA ENERGY CORP.
    CONSOLIDATED STATEMENT OF CASH FLOWS
    For the Three and Nine Months Ended September 30, 2007
    (Unaudited)

    -------------------------------------------------------------------------
                                                  Three months   Nine months
                                                         ended         ended
                                                  September 30  September 30
     ($ thousands)                                        2007          2007
    -------------------------------------------------------------------------

    Cash provided by (used in):

    Operating
      Net loss                                          (1,569)       (3,366)
      Items not involving cash:
        Future income recovery                            (554)         (786)
        Stock based compensation                           324         1,628
        Dry hole costs                                       -         1,388
        Depletion, depreciation and accretion            5,114        14,449
    Exploration                                          1,087         1,574
    Asset retirement expenditures (note 8)                (320)         (690)
    -------------------------------------------------------------------------
                                                         4,082        14,197
    Changes in non-cash working capital (note 13)        1,937         1,159
    -------------------------------------------------------------------------
                                                         6,019        15,356
    -------------------------------------------------------------------------

    Financing
      Collection of note receivable (note 4)                 -           534
      Revolving credit facility (repayments) advances   (3,600)        7,800
    -------------------------------------------------------------------------
                                                        (3,600)        8,334
    -------------------------------------------------------------------------

    Investing
      Capital expenditures                              (5,968)      (18,161)
      Purchase price adjustment (note 5(a))                989         2,989
      Exploration                                       (1,087)       (1,574)
      Change in non-cash working capital (note 13)       4,698        (4,593)
    -------------------------------------------------------------------------
                                                        (1,368)      (21,339)
    -------------------------------------------------------------------------
    Increase in cash                                     1,051         2,351
    Bank overdraft, beginning of period                  1,136          (164)
    -------------------------------------------------------------------------
    Cash, end of period                                  2,187         2,187
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited interim consolidated financial
    statements.



    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    September 30, 2007
    (Unaudited)
    (all tabular amounts in $ thousands, except where otherwise noted)

    1.  Nature of Operations and Basis of Presentation

        Berkana Energy Corp. ("Berkana" or the "Company") was incorporated
        under the laws of the Province of Alberta and commenced commercial
        operations on December 1, 2006 pursuant to an Acquisition Agreement
        between Murphy Oil Canada ("Murphy"), Mach Resources Ltd. ("Mach")
        and Rosetta Exploration Inc. ("Rosetta"). Under the Acquisition
        Agreement, Mach acquired certain petroleum and natural gas assets
        (the "Rimbey Assets") owned by Murphy in exchange for 100 Mach common
        shares, and Rosetta acquired all of the issued and outstanding shares
        of Mach from Murphy in exchange for 269,988,560 Rosetta common
        shares. As such, Murphy owns approximately 80% of Rosetta's issued
        and outstanding shares. For accounting purposes, the acquisition was
        recorded as a reverse takeover whereby Mach is deemed to have
        acquired Rosetta. As the acquisition of the Rimbey Assets by Mach
        from Murphy is between entities under common control, the net assets
        were recorded at their carrying values as reported by Murphy. Rosetta
        subsequently changed its name to Berkana and consolidated all of its
        issued and outstanding common shares on a five-for-one basis.

        Berkana is engaged in the exploration for, and acquisition,
        development and production of petroleum and natural gas predominantly
        in Western Canada.

    2.  Summary of Accounting Policies

        These unaudited interim consolidated financial statements are stated
        in Canadian dollars and have been prepared in accordance with
        Canadian Generally Accepted Accounting Principles, following the same
        accounting policies and methods of computation as the audited
        consolidated financial statements of Berkana for the one-month period
        ended December 31, 2006, except as disclosed in note 3. In these
        financial statements, certain disclosures that are required to be
        included in the notes to the December 31, 2006 audited consolidated
        financial statements, have been condensed or omitted. These interim
        consolidated financial statements should be read in conjunction with
        the audited consolidated financial statements and notes thereto in
        Berkana's annual report as at and for the one-month period ending
        December 31, 2006.

        Certain comparative amounts have been reclassified to conform to
        current period presentation.

    3.  Adoption of New Accounting Policies

        On January 1, 2007, Berkana adopted the following new accounting
        standards issued by the Canadian Institute of Chartered Accountants
        ("CICA"): Comprehensive Income (Section 1530), Financial Instruments
        - Recognition and Measurement (Section 3855), Financial Instruments -
        Disclosure and Presentation (Section 3861) and Hedges (Section 3865).
        In accordance with the new standards, changes are adopted
        retroactively without restatement of prior period information. The
        Company's adoption of these new standards had no impact on reported
        net loss or cash flows. The other effects of the implementation of
        these new standards are discussed below.

        a)    Comprehensive Income

              Section 1530 provides for a new Statement of Comprehensive
              Income and establishes Accumulated Other Comprehensive Income
              ("AOCI") as a separate component of shareholders' equity. The
              Statement of Comprehensive Income is defined as a change in net
              assets arising from transactions and other events from non-
              owner sources. The statement would present net income and each
              component recognized in other comprehensive income ("OCI") when
              such amounts exist. For the nine months ended September 30,
              2007, the Company did not recognize any OCI. Any future OCI
              recognized by the Company will be recognized in AOCI.

        b)    Financial Instruments - Recognition and Measurement

              Section 3855 requires all financial assets and liabilities,
              including derivatives, to be carried at fair value on the
              Company's balance sheet with the exception of loans and
              receivables, investments that are intended to be held to
              maturity and non-trading financial liabilities which are
              carried at cost or amortized cost.

              Realized and unrealized gains and losses on financial assets
              and liabilities that are carried at fair value are recognized
              in net earnings or loss unless they are designated as hedges
              and meet the requirements for hedge accounting, in which case
              the realized and unrealized gains and losses are recorded to
              OCI. Transaction costs incurred by the Company related to these
              financial assets and liabilities will be expensed when
              incurred. Unrealized gains or losses on financial assets and
              liabilities carried at cost or amortized costs are recognized
              when the assets and liabilities settle.

        c)    Derivatives and Hedge Accounting

              Derivatives may be embedded in other financial instruments (the
              "host instruments"). Prior to the adoption of the new
              standards, such embedded derivatives were not accounted for
              separately from the host instrument. Under the new standard,
              embedded derivatives are treated as separate derivatives when
              their economic characteristics and risks are not clearly and
              closely related to those of the host instrument, the terms of
              the embedded derivative are the same as those of the stand-
              alone derivative, and the combined contract is not held for
              trading or designated at fair value. A review of the Company's
              financial contracts determined that there were no embedded
              derivatives. In the event that the Company enters into a
              contract that contains an embedded derivative, the embedded
              derivative will be measured at fair value with subsequent
              changes recognized in earnings or loss.

              At January 1, 2007 no transitional adjustments were required to
              the opening balance of retained earnings or to the opening
              balance of AOCI arising from the adoption of sections 1530,
              3855, and 3865.

        In addition, the Company has assessed new and revised accounting
        pronouncements that have been issued that are not yet effective and
        determined that the following may have a significant impact on the
        Company:

        As of January 1, 2008, the Company will be required to adopt the
        following two new CICA standards: Financial Instruments - Disclosures
        (Section 3862) and Financial Instruments - Presentation (Section
        3863), which will replace Financial Instruments - Disclosure and
        Presentation (Section 3861). The new disclosure standard increases
        the emphasis on the risks associated with both recognized and
        unrecognized financial instruments and how those risks are managed.
        The new presentation standard carries forward former presentation
        requirements.

        As of January 1, 2008, the Company will be required to adopt CICA
        standards, Capital Disclosures (Section 1535), which will require
        companies to disclose their objectives, policies and processes for
        managing capital. In addition, disclosures are to include whether
        companies have complied with externally imposed capital requirements.

        Both new standards were issued in December 2006 and the Company is
        assessing the impact on its financial statements.

    4.  Note Receivable

        As at December 31, 2006, the Company had a $0.5 million note
        receivable that beared interest at a rate of 10% and was due on
        demand. On January 10, 2007, the note receivable was collected in
        full.

    5.  Acquisitions

        (a)   Prior to the closing of the Acquisition Agreement and pursuant
              to an Asset Conveyance Agreement, Murphy transferred the Rimbey
              Assets to Mach in exchange for 100 Mach common shares. As the
              acquisition of the Rimbey Assets by Mach from Murphy is between
              entities under common control, the net assets were recorded at
              their carrying values as follows:

              ---------------------------------------------------------------
              Consideration
                100 common shares of Mach (note 9)                    41,219
              ---------------------------------------------------------------
              ---------------------------------------------------------------
              Net assets received:
                Petroleum and natural gas properties                  54,151
                Cash                                                   1,263
                Asset retirement obligations                          (6,043)
                Future income taxes                                   (8,152)
              ---------------------------------------------------------------
                                                                      41,219
              ---------------------------------------------------------------
              ---------------------------------------------------------------

              As part of the Asset Conveyance Agreement, Mach assumed
              Murphy's commitments for natural gas transmission and
              processing of production from the Rimbey assets.

              At September 30, 2007, the Company had received two preliminary
              statement of adjustments from Murphy for a total amount of
              $3.0 million. The Company recorded the adjustments as a
              reduction to property, plant and equipment ($4.3 million) and
              future income tax liability ($1.3 million). As of November 8,
              2007, the purchase price allocation is subject to change until
              such time as the Company receives the final statement of
              adjustments from Murphy.

        (b)   Under the Acquisition Agreement, Rosetta acquired all of the
              issued and outstanding shares of Mach from Murphy in exchange
              for 269,988,560 Rosetta common shares. As such, Murphy owns
              approximately 80% of Rosetta's issued and outstanding shares.
              The acquisition was accounted for under the purchase method as
              a reverse takeover whereby Mach acquired Rosetta. Rosetta
              subsequently changed its name to Berkana and consolidated all
              of its issued and outstanding common shares on a five-for-one
              basis.

              The following table summarizes the consideration, purchase
              price allocation and fair value of the Rosetta net assets
              acquired by Mach:

              ---------------------------------------------------------------
              Consideration
                53,997,712 (1) common shares of Rosetta (note 9)      29,024
                Transaction costs                                      1,898
              ---------------------------------------------------------------
                Total consideration                                   30,922
              ---------------------------------------------------------------
              ---------------------------------------------------------------
              Purchase Price and Fair Value
              Net assets received:
                Petroleum and natural gas properties                  36,885
                Cash                                                       9
                Working capital deficiency                            (1,727)
                Revolving credit facility                             (2,224)
                Asset retirement obligations                          (1,034)
                Future income taxes                                     (987)
              ---------------------------------------------------------------
                                                                      30,922
              ---------------------------------------------------------------
              ---------------------------------------------------------------
              (1) Shares issued reflect the five-for-one share consolidation.

    6.  Property, Plant and Equipment

        ---------------------------------------------------------------------
                                                  September 30   December 31
                                                          2007          2006
        ---------------------------------------------------------------------
        Petroleum and natural gas properties           110,433        97,677
        Corporate assets                                   543           316
        Accumulated depletion and depreciation         (15,632)       (1,526)
        ---------------------------------------------------------------------
        Net book value                                  95,344        96,467
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        As at September 30, 2007, salvage values of $8.8 million (2006 -
        $8.9 million), undeveloped land costs of $10.3 million (2006 -
        $7.5 million) and $8.7 million (2006 - $6.5 million) of costs on
        unevaluated wells have been excluded from the costs subject to
        depletion.

        The Company applied an impairment test to its petroleum and natural
        gas properties at September 30, 2007 and determined that there was no
        impairment.

        Subsequent to September 30, 2007, the Board of Directors approved the
        purchase of certain petroleum and natural gas properties from an
        officer of the Company. The transaction was incurred in the normal
        course of operations and will be recorded at the exchange amount of
        $0.4 million.

    7.  Revolving Credit Facility

        The Company has a $40 million demand revolving operating credit
        facility (the "credit facility"). The credit facility is secured by a
        fixed and floating charge on the assets of the Company. The credit
        facility has a covenant that requires the Company to maintain its
        working capital ratio at 1:1 or greater while the credit facility is
        outstanding. The working capital ratio is defined as current assets
        plus the unutilized portion of the credit facility divided by current
        liabilities less the balance drawn against the credit facility. The
        borrowing base of the credit facility is subject to an annual review
        by the lender. As at September 30, 2007, the Company had letters of
        guarantee totaling $0.3 million and had drawn $10.9 million against
        the credit facility at a variable interest rate of 6.25% (2006 -
        $3.1 million).

    8.  Asset Retirement Obligations

        The following table presents the reconciliation of the carrying
        amount of the obligations associated with the retirement of the
        property, plant and equipment:
        ---------------------------------------------------------------------
                                                   Nine Months     One Month
                                                         Ended         Ended
                                                  September 30   December 31
                                                          2007          2006
        ---------------------------------------------------------------------
        Balance, beginning of period                     7,585         6,043
        Liabilities settled                               (690)            -
        Asset retirement obligations acquired (note 5(b))    -         1,034
        Liabilities incurred                               480           470
        Accretion expense                                  343            38
        ---------------------------------------------------------------------
        Balance, end of period                           7,718         7,585
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The following significant assumptions were used to estimate the asset
        retirement obligation:

        ---------------------------------------------------------------------
                                                   Nine Months     One Month
                                                         Ended         Ended
                                                  September 30   December 31
                                                          2007          2006
        ---------------------------------------------------------------------
        Undiscounted cash flows                         11,694        11,119
        Credit adjusted discount rate (%)                  6.0           6.0
        Inflation rate (%)                                 3.0           3.0
        Weighted average expected timing of
         cash flows (years)                               10.6          10.6
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    9.  Share Capital

        (a)   Authorized

              Unlimited number of Class A and B common shares, no par value.

              Unlimited number of Class A preferred shares, issuable in
              series, no par value.

              On December 1, 2006, the Company's shareholders approved a
              consolidation of its common shares on a five-for-one basis.
              All common shares and per share amounts are presented to
              reflect the share consolidation.

        (b)   Issued

              ---------------------------------------------------------------
              ($ thousands - except share amounts)      Number        Amount
              ---------------------------------------------------------------
              Class A Common Shares
              Balance, December 1, 2006             13,499,428        41,219
              Issued upon acquisition (note 5(b))   53,997,712        30,922
              ---------------------------------------------------------------
              Balance, December 31, 2006 and
               September 30, 2007                   67,497,140        72,141
              ---------------------------------------------------------------
              ---------------------------------------------------------------

              On December 1, 2006, Rosetta shareholders held a total of
              13,499,428 common shares, which were subsequently exchanged
              pursuant to the acquisition agreement for an equivalent number
              of Berkana common shares.

              August 16, 2007, Berkana's majority shareholder, Murphy Oil
              Canada, announced that it is considering alternatives to
              maximize the value of its interest in Berkana in order to re-
              invest the proceeds in directly held opportunities in Canada.
              At September 30, 2007, Murphy Oil Canada directly owned 80% of
              the Company. The Board of Directors has formed an independent
              committee of the Board to oversee this disposition from the
              perspective of Berkana and its minority shareholders.


        (c)   Stock options

              The Company has a stock option plan (the "Plan"), administered
              by the Board of Directors, in which up to 10% of the issued and
              outstanding common shares are reserved for issuance. Under the
              Plan, the options that have been granted vest at varying times
              ranging from vesting on the date of grant to vesting over a
              period of three years. All options expire on the earlier of
              five years from grant date or 30 days from the date from which
              the optionee ceases to be a director, officer, employee or
              consultant of the Company.

              The following table sets forth a reconciliation of the stock
              option plan activity for the nine months ended September 30,
              2007:
              ---------------------------------------------------------------
                                                Number of  Weighted average
                                                  options  exercise price ($)
              ---------------------------------------------------------------
              Balance, beginning of
               period                                   -                  -
              Granted                           4,547,750               1.61
              Cancelled                           (61,000)              1.47
              ---------------------------------------------------------------
              Balance, end of period            4,486,750               1.61
              ---------------------------------------------------------------
              ---------------------------------------------------------------

              The following table summarizes stock options outstanding under
              the plan at September 30, 2007:

              ------------------------------------------------------
              Exercise price  Number outstanding  Average remaining
                    ($)          at period end     contractual life
              ------------------------------------------------------
                   1.60            4,083,750                   4.3
                   1.80              330,000                   4.3
                   1.51               30,000                   4.6
                   1.48               28,000                   4.9
                   1.10               15,000                   4.5
              ------------------------------------------------------
                   1.61            4,486,750                   4.3
              ------------------------------------------------------

        (d)   Stock based compensation

              The Company uses the fair value method to account for its stock
              based compensation plan.  Under this method, compensation costs
              are charged over the vesting period for stock options granted
              to directors, officers, employees and consultants, with a
              corresponding increase to contributed surplus.

              The following table reconciles the Company's contributed
              surplus:

              ---------------------------------------------------------------
                                                  Three months   Nine months
                                                         ended         ended
                                                  September 30  September 30
                                                          2007          2007
              ---------------------------------------------------------------
              Balance, beginning of period               1,304             -
              Stock based compensation expense             324         1,628
              ---------------------------------------------------------------
              Balance, end of period                     1,628         1,628
              ---------------------------------------------------------------

              The fair value of options granted during the period was
              estimated based on the date of grant using the Black-Scholes
              option pricing model with weighted average assumptions and
              resulting values for grants as follows:

              ---------------------------------------------------------------
                                                  Three months   Nine months
                                                         ended         ended
                                                  September 30  September 30
                                                          2007          2007
              ---------------------------------------------------------------
              Risk free interest rate (%)                  4.1           4.1
              Expected life (years)                        3.0           3.0
              Expected dividend yield (%)                    -             -
              Expected volatility (%)                       51            51
              Weighted average fair value of
               options granted ($)                        0.57          0.62
              ---------------------------------------------------------------

        (e)   Employee stock purchase plan

              The Company has an employee stock purchase plan ("ESPP") in
              which employees are provided the opportunity to receive up to
              10% of their salary in common shares, which is then matched on
              a share for share basis by the Company. The Company purchased
              163,959 shares under the ESPP during the nine months ended
              September 30, 2007 (2006 - nil).

        (f)   Basic and diluted loss per share

              The Company used the treasury stock method to calculate net
              loss per common share.

              ---------------------------------------------------------------
                                                  Three months   Nine months
                                                         ended         ended
                                                  September 30  September 30
                                                          2007          2007
              ---------------------------------------------------------------

              Weighted average common shares -
               Basic and Diluted                    67,497,140    67,497,140

              Basic and diluted loss per share          ($0.02)       ($0.05)
              ---------------------------------------------------------------

              For the calculation of diluted net loss per share the Company
              excluded 4,486,750 stock options that are anti-dilutive.

    10. Future Income Taxes

        The Company's computation of future income tax expenses is as
        follows:
        ---------------------------------------------------------------------
                                                  Three months   Nine months
                                                         ended         ended
                                                  September 30  September 30
                                                          2007          2007
        ---------------------------------------------------------------------
        Expected income tax at 32.12%                     (683)       (1,334)
        Non-deductible items - stock based
         compensation                                      104           523
        Rate adjustment - reversal of temporary
         differences                                        25            25
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
                                                          (554)         (786)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The net future tax liability is comprised of:

        ---------------------------------------------------------------------
                                                          September 30, 2007
        ---------------------------------------------------------------------
        Non-capital loss carryforwards                                 2,281
        Asset retirement obligations                                   2,238
        Share issue costs                                                671
        Net book value of assets in excess of tax basis               (8,895)
        Deferred partnership income                                   (3,690)
        Other                                                             27
        ---------------------------------------------------------------------
                                                                      (7,368)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        As at September 30, 2007, the Company had approximately $68.0 million
        in tax pools and $7.6 million in non-capital losses available for
        deduction against future taxable income.

        Non-capital losses expire as follows:

        ---------------------------------------------------------------------
        2007                                                             586
        2008                                                           1,392
        2009                                                           1,234
        2010 and thereafter                                            4,390
        ---------------------------------------------------------------------
                                                                       7,602
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    11. Commitments

        (a)   During the third quarter, Berkana entered into a third party
              contract to use up to 3.5 mmcf/d of gas processing plant
              capacity for a fixed fee. Under the contract, Berkana has a
              use-or-pay obligation for the remainder of 2007 of 2.5 mmcf/d,
              1.7 mmcf/d for 2008 and 1.2 mmcf/d for first seven months of
              2009.

        (b)   At the time of formation of Berkana, the Board of Directors
              implemented a bonus plan determined based on various
              indicators. The amount of the bonus, if any, will be determined
              after the completion of the year and no amounts have been
              accrued in these financial statements. On the basis of the
              terms of the plan, the amounts are not expected to exceed
              $1.5 million.

    12. Financial Instruments

        (a)   Fair value of financial assets and liabilities

              Financial instruments of the Company consist primarily of bank
              overdraft, accounts receivable, note receivable, accounts
              payable and the credit facility. As at September 30, 2007 and
              December 31, 2006, there were no significant differences
              between the carrying amounts reported on the balance sheet and
              their estimated fair values.

        (b)   Credit risk

              The Company's accounts receivable are with customers and joint
              venture partners in the petroleum and natural gas business
              under normal industry sale and payment terms and are subject to
              normal credit risks. Management believes the risk is mitigated
              by the size and reputation of the companies to which they
              extend credit.

        (c)   Interest rate risk

              The Company is exposed to interest rate risk as the credit
              facility bears interest at floating market interest rates. The
              Company has no interest rate swaps or hedges at September 30,
              2007.

    13. Supplemental Cash Flows Information

        (a)   Changes in non-cash working capital

              ---------------------------------------------------------------
                                                  Three months   Nine months
                                                         ended         ended
                                                  September 30  September 30
                                                          2007          2007
              ---------------------------------------------------------------
              Accounts receivable                        3,948        (2,361)
              Prepaid expenses and deposits               (999)       (2,447)
              Accounts payable and accrued
               liabilities                               3,686         1,374
              ---------------------------------------------------------------
                                                         6,635        (3,434)
              ---------------------------------------------------------------
              ---------------------------------------------------------------

              The change in non-cash working capital has been allocated to
              the following activities:

              ---------------------------------------------------------------
                                                  Three months   Nine months
                                                         ended         ended
                                                  September 30  September 30
                                                          2007          2007
              ---------------------------------------------------------------
              Operating                                  1,937         1,159
              Investing                                  4,698        (4,593)
              ---------------------------------------------------------------
                                                         6,635        (3,434)
              ---------------------------------------------------------------
              ---------------------------------------------------------------

        (b)   Interest

              ---------------------------------------------------------------
                                                  Three months   Nine months
                                                         ended         ended
                                                  September 30  September 30
                                                          2007          2007
              ---------------------------------------------------------------
              Interest paid                                184           408
              ---------------------------------------------------------------
              ---------------------------------------------------------------
    

    Additional Information

    Berkana Energy Corp. is a Calgary based public resource company actively
pursuing crude oil and natural gas through exploration, development,
production and strategic acquisitions in key focus areas located in energy
company with a mission to grow shareholder wealth by adding reserves and
production through a balanced mix of low risk drilling opportunities, high
impact exploration and strategic acquisitions. The Company's common shares
trade on the TSX under the symbol BEC.

    Additional information relating to Berkana is filed on SEDAR and can be
viewed at www.sedar.com. Information can also be obtained by contacting the
Company at Berkana Energy Corp., Suite 2100, 801 Sixth Avenue S.W., Calgary,
Alberta, Canada T2P 3W2 or by e-mail at info @berkanaenergy.com. Information
is also accessible on the Company's website at www.berkanaenergy.com.

    Statements in this press release may contain forward-looking statements
including management's assessment of Berkana's future plans and operations.
Information concerning reserves may also be deemed to be forward-looking
statements as such estimates involve the implied assessment that the resources
described can be profitably produced in future. These statements are based on
current expectations that involve a number of risks and uncertainties, which
could cause actual results to differ from those anticipated. These risks
include, but are not limited to: the background risks of the oil and gas
industry (e.g., operational risks in development, exploration and production;
potential delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of reserve
estimates; the uncertainty of estimates and projections relating to
production, costs and expenses, and health, safety and environmental risks),
and uncertainties resulting from potential delays or changes in plans with
respect to exploration, development projects, capital expenditures or
partners.
    Per barrel of oil equivalent ("boe") amounts may be misleading,
particularly if used in isolation. A boe conversion ratio has been calculated
using a conversion rate of six thousand cubic feet of natural gas to one
barrel of oil (6 mcf:1 bbl) and is based on an energy equivalency conversion
method applicable at the burner tip and does not represent a value equivalency
at the wellhead.

    
      THE TORONTO STOCK EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE
                    ADEQUACY OR ACCURACY OF THIS RELEASE.
    

    %SEDAR: 00002141E




For further information:

For further information: Glenn Gradeen, CEO, ggradeen@berkanaenergy.com;
Robb Thompson, CFO, rthompson@berkanaenergy.com

Organization Profile

BERKANA ENERGY CORP.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890