First Calgary Petroleums announces 2007 Year End Results and Conference Call



    CALGARY, March 19 /CNW/ - First Calgary Petroleums Ltd. (FCP, First
Calgary or the Company) announces its results for the year ended December 31,
2007. During 2007 FCP made significant progress in preparing for development
and production of its natural gas and natural gas liquids reserves underlying
its MLE field in Algeria. The Company also completed appraisal work in the
Central Area Field Complex (CAFC) and ZER structural areas. Based on data
compiled thorough the appraisal phase, FCP is currently evaluating
commerciality and development plans for these two areas.

    
    2007 HIGHLIGHTS

    MLE Activity:

    -   Approval by the Government of Algeria for MLE field development;
    -   Completion of the Front End Engineering and Design (FEED) project
        which defined the gas plant, pipeline and gathering systems required
        for production as well as a detailed cost estimate;
    -   Gas plant approval with a planned capacity of 260 million cubic feet
        per day (mmcf/d) of natural gas and 20 thousand barrels per day (b/d)
        of natural gas liquids (NGLs);
    -   Gas marketing terms with Sonatrach were agreed for an initial
        200 mmcf/d of natural gas at competitive prices;
    -   Engineering, Procurement and Construction (EPC) contracts tendered
        February 18, 2007, with four firms expressing an interest in
        submitting a bid and awarding of a contract is scheduled for July
        2008;
    -   Preparations for project financing progressing with FCP's project
        debt finance advisor Citibank; and
    -   Initiated development drilling within the MLE Field area with the
        spud of MLE-7.

    CAFC and ZER Activity:

    -   Granting of a two-year extension of the PSC for completion of the
        commerciality reports;
    -   Completion of appraisal program (drilling and testing) in CAFC and
        ZER areas; and
    -   Initiated studies and work program to complete commercialization
        evaluation, with the expectation of submitting development plans to
        the Algerian authorities by the end of the second quarter of 2008.
    

    "We are extremely pleased with the progress made during 2007," commented
President and Chief Executive Officer Richard G. Anderson. "We believe we are
30 months from production of reserves from Block 405b, which is the
culmination of six years of work by First Calgary. This represents a very
significant achievement for the Company and its shareholders."
    First Calgary Petroleum Ltd. is an oil and gas exploration and
development company actively engaged in international activities in Algeria.
The Company's common shares trade on the Toronto Stock Exchange in Canada
(FCP) and on the AIM market of the London Stock Exchange in the UK (FPL).
Further information is also available on the First Calgary Petroleums Ltd.
website: www.fcpl.ca.

    Note: Throughout this press release, $ refers to the U.S. dollar and C$
refers to the Canadian dollar.

    CONFERENCE CALL

    FCP has scheduled a conference call on Thursday, March 20, 2008 at 8:00
a.m. MDT for investors and analysts. To participate in the conference call,
please dial:

    
                              1-416-641-6131 or
                           Toll Free 1-866-862-3912
    

    An archived recording of the conference call will be available on the
Company's website at www. fcpl.ca.

    PRESIDENT'S REPORT TO THE SHAREHOLDERS

    Since I joined First Calgary Petroleums Ltd. in 1997, I have been
dedicated to building a business that will offer long-term value growth for
shareholders. Following a number of discoveries and subsequent developments on
Block 405b in Algeria, I believe that First Calgary is well positioned to
generate future growth and returns for investors.
    However, two shareholders with minority interests in First Calgary,
Waterford Finance & Investment Ltd. and Midocean Holdings Limited, have
presented resolutions that include a resolution for my removal as a director
of First Calgary. If adopted by shareholders, I believe these resolutions may
result in direct and significant delays to the Company's ability to develop
first production of the MLE field in 2010 and delay operational progress on
other areas on Block 405b that offer further upside for First Calgary. For
this reason, I urge you to vote against the minority shareholders'
resolutions. The future direction of your Company is dependent upon your vote.
    There are a number of reasons for shareholders to have confidence in the
future of our Company:

    
    -   First Calgary has developed a clear strategy under the leadership of
        an internationally experienced operational and financial management
        team. Briefly, this strategy includes positioning the Company:

        -  to fully develop Block 405b in a staged process commencing with
           first production from the MLE field in 2010 and progressing to the
           development of the central area of Block 405b (CAFC) about one
           year later;
        -  to finance the Block 405b development using the most cost-
           efficient funding and to retain maximum asset value for the
           Company; and
        -  to grow the Company's asset base beyond Block 405b.

    -   Regarding the Block 405b development, First Calgary has achieved a
        number of key milestones and is well along the path to first
        production. Significant achievements to date include:

        -  Working effectively with the Algerian authorities to obtain the
           required MLE development approvals in a reduced timeframe vis-à-
           vis a number of other Algeria projects.
        -  Negotiating natural gas marketing terms with the Algerian
           authorities which effectively gives First Calgary's Block 405b gas
           sales a European based natural gas price.
        -  Coordination and completion of the Front End Engineering and
           Design (FEED) work for the MLE development which has confirmed the
           scope and estimated cost of the production infrastructure.
        -  Completion of the Engineering, Procurement and Construction (EPC)
           bid documentation which is currently out to tender with a number
           of qualified and experienced contractors.
        -  Commercial analysis and detailed development studies are currently
           underway covering both the CAFC and ZER areas which will lead to
           the preparation of the Final Discovery Report (Development Plan).
           The report is expected to be submitted to the Algerian national
           energy company Sonatrach and the Algerian authorities for approval
           during the second quarter of 2008.

    -   Regarding financing, First Calgary has been successful at raising a
        significant amount of capital towards the exploration and development
        of Block 405b:

        -  Since acquiring Block 405b, First Calgary has raised approximately
           C$1 billion to fund its exploration, appraisal and development
           activities.
        -  First Calgary closed a convertible debt financing of $267 million
           in December 2007 which funds a portion of the MLE development cost
           (approximately 25%).
        -  For the balance of the required MLE funding, the Company has
           retained and is actively working with Citibank to arrange project
           debt financing. While First Calgary's central funding strategy is
           focused on funding the remaining capital requirements with project
           debt, the Company will continue to monitor and evaluate other
           potential funding options, if warranted. In this regard, First
           Calgary has also retained JPMorgan Cazenove and Canaccord Adams to
           assist and advise on other possible financing options.
    

    To grow the Company's asset base beyond Block 405b, First Calgary has
created a new ventures team having the mandate to identify and pursue new
growth opportunities. First Calgary's new ventures team is being led by Martin
Layzell, who was instrumental in the Company's historical drilling success on
Block 405b. We have submitted an application to the Algerian authorities to
participate in the next licensing round.

    Reserves

    The accompanying Management's Discussion and Analysis (MD&A) contains
details of the Company's gross and net proved, probable and possible reserves
as at December 31, 2007 based on the report from our independent engineering
consultants, DeGolyer & MacNaughton (D&M). The high level of drilling and
testing activity in 2007 has enabled a very rigorous reserves evaluation to be
conducted by D&M. More data has enabled D&M to apply more stringent parameters
to what qualifies as net pay and also better define field and reservoir
limits.
    The 2007 reserves summary can be summarized as follows. FCP realized a
3.2% increase in proved reserves; an 8.7% decrease in proved + probable
reserves; and a 3.9% decrease in proved + probable + possible reserves.
Effectively, the results of the 2007 drilling and testing program have seen
the proved reserves increase as a result of the drilling and, as reserve
definitions are more strictly constrained by test data and petrophysical
analysis, the possible and probable reserves have decreased.
    With 208 MMBoe of gross proved reserves and 586 gross MMBoe of proved +
probable reserves, the 405b block is a major development opportunity that is
being worked by FCP and Sonatrach at an accelerated pace for first production
in the second half of 2010.

    Financial Results

    The Company had working capital of $251.1 million at year end 2007 after
incurring capital expenditures of $184.7 million. Financing activity during
the year included a convertible debenture issue of $267 million and a
$135.7 million share issue. With the detailed engineering information provided
by the FEED program, FCP anticipates the cost of building the gas plant,
drilling development wells and constructing pipeline infrastructure required
to develop and produce the MLE assets is approximately $1.3 billion of which
FCP's share is 75%. As mentioned above, the Company has retained and is
actively working with Citibank to arrange project debt financing.

    Board and Management

    At every level of this organization we are ready to respond to the
opportunities and challenges that lie ahead. We have invited four accomplished
and well qualified individuals to join First Calgary's board at the upcoming
meeting. These new nominees are in addition to Garfield Emerson, Q.C., who has
recently joined the board and serves as the chairman. We have attracted a team
of highly experienced professionals to work with us as we develop the MLE
field. These individuals are working out of our London and Hassi Messaoud
offices. And we have bolstered the Company's investor communications by adding
Jeff Angel as Vice President, Corporate Communications and Investor Relations,
to the management team. Mr. Angel's primary responsibility is to ensure that
all shareholders are kept informed of First Calgary's activities. It is also
envisaged that David Savage, First Calgary's recently appointed Chief
Financial Officer, will devote a significant amount of time to investor
relations.

    Outlook

    The medium to long term outlook for your company is extremely promising.
We are 30 months away from production and realizing the reward of the past six
years of effort. And yet, I believe that actions by the dissident shareholders
pose a significant threat to realizing that promise. While the dissident
minority shareholders have raised concerns about my leadership, they have
provided no strategy of their own. I believe there is a significant risk that
with my removal and their lack of a clearly articulated strategy and business
plan, First Calgary's operations will experience serious delays and
disruptions, thereby diminishing the value of First Calgary's assets.
    It is extremely important for you to fully understand what may happen to
First Calgary and your investment if the dissident minority shareholders gain
approval for their proposals. For this reason, I urge you to carefully read
our information circular and cast your vote in support of First Calgary's
existing management team and proposed board of directors.
    As a fellow First Calgary shareholder, my aims and ambitions for First
Calgary are completely aligned with yours and I am determined to continue to
lead First Calgary's dedicated and talented management team in building the
Company and creating sustained growth.

    Sincerely,

    Richard G. Anderson
    President and Chief Executive Officer
    March 19, 2008



    First Calgary Petroleums Ltd.
    Management's Discussion and Analysis
    For the year ended December 31, 2007
    -------------------------------------------------------------------------

    MANAGEMENT'S DISCUSSION AND ANALYSIS

    Management's discussion and analysis (MD&A) is a review of operations,
current financial position and outlook for First Calgary Petroleums Ltd.
(First Calgary, FCP or the Company). It should be read in conjunction with the
audited financial statements for the years ended December 31, 2007 and 2006.
In this discussion and analysis $ refers to U.S. dollars, unless otherwise
indicated, and C$ refers to the Canadian dollar.

    OPERATIONAL REVIEW

    In December 2001, First Calgary Petroleums Ltd. (FCP) entered into a
Production Sharing Contract with Sonatrach, the Algerian national oil company
to explore Ledjmet Block 405b, which initially covered 273,000 acres and
includes the Menzel Ledjmet East (MLE) Field. In the six years since that
initial contract was signed, FCP has progressively and successfully executed
an exploration and development program on the MLE field that has defined
reserves of crude oil and liquids rich natural gas underlying this region. The
prospective areas have been extended beyond the MLE defined area to the block
immediately west, the Central Area Field Complex (CAFC) and the ZER area to
the north of the MLE field.

    Block 405b Commercialization

    FCP received approval in February 2007 from the Algerian regulatory
authority (ALNAFT) for the Development Plan for the MLE oil and gas field on
Block 405b. Phase 1 of this development design includes construction of a gas
plant and field gathering system and facilities designed to produce up to
260 million cubic feet of sales gas per day (MMCF/d) and 20 thousand barrels
per day (MB/D) of associated natural gas liquids and oil, on a gross basis.
The initial gas sales volume agreed with Sonatrach is for 200 million cubic
feet per day of sales gas. Three product pipelines are required to transport
sales gas, condensate and LPG products to the national grid system that lies
140 km to the west of the block. A fourth product pipeline to transport an oil
stream will tie into existing infrastructure within the Berkine basin. FCP and
Sonatrach subsequently agreed to modify the design of the product pipelines to
accommodate increased volumes from the planned second and third phases of
development in the CAFC as part of an integrated block development strategy.
Current development plans are targeting in excess of 300 MMCF/D sales gas with
up to 65 MB/D of liquids.

    Development Schedule

    Contracts for the Engineering, Procurement and Construction (EPC) phase
have been tendered and we expect to select the EPC firm by July 2008. The EPC
process is scheduled to take close to two years, with gas production expected
in the second half of 2010. The gas production facilities will be constructed
in modules or trains to allow for a phased program of plant expansion. Phase 1
is the approved MLE development including the single 260 MMCF/D train and
export pipelines. Phase 2 includes planned development of the TAGI oil pool,
dry gas in the MZL area and initial development of discovered gas condensate
pools. Phase 3 will include full development of remaining discoveries on the
block. The development plan for Phases 2 and 3 is expected to be submitted to
the authorities for approval by the second quarter of 2008.
    Take or pay gas marketing terms (the "Gas Marketing Agreement") were
agreed with Sonatrach in November 2006 and were attached to the MLE
development plan. The purpose of the Gas Marketing Agreement is to specify and
clarify the terms of the PSC relating to the long-term marketing of quantities
of dry gas from Block 405b. It is proposed that the key commercial terms
contained in the Gas Marketing Agreement will be incorporated into a
definitive gas agreement (the "Gas Agreement") to be entered into between the
Company and Sonatrach which will replace the Gas Marketing Agreement. FCP has
entrusted the marketing of all gas from the 405b block to Sonatrach and in
return will receive a well head price net of transportation costs based on a
southern European gas pricing formula. FCP is in discussions with Sonatrach
for all liquids production from Block 405b to be marketed by Sonatrach.
Liquids are anticipated to be sold at international product prices less a
marketing fee. The Gas Agreement will be subject to certain conditions
precedent, including securing financing satisfactory to FCP, the arrangement
by Sonatrach of firm pipeline capacity downstream of the point of transmission
and the execution of certain collateral agreements such as project contracts
and liquids and condensate sales agreements.

    
    CURRENT OUTLOOK

    First Calgary is making excellent progress in moving the MLE project
forward and the overall block 405b monetization plan is on schedule:

    -   The Front End Engineering and Design (FEED) work for MLE gas plant,
        pipeline and gathering systems was completed in December 2007. The
        FEED was carried out by Genesis, a subsidiary of Technip, an
        international expert in the engineering, technology and construction
        services for oil and gas and petrochemical industries. Genesis was
        awarded the contract by tender in May 2007 and completed the project
        on budget and schedule. One of the key deliverables of the FEED was
        to establish an accurate cost estimate for the facilities. The
        estimate confirmed the expected capital cost from earlier conceptual
        work.

    -   The FEED study also identified the critical path for two categories
        of items requiring long lead times. Inquires will be issued by the
        end of March, 2008 for the purchase of gas compressors and turbo
        expanders. The advanced ordering of these long lead items is
        necessary to meet the project schedule to achieve the production
        commencement date in the second half of 2010.

    -   Four world class EPC contractors have signalled their interest in
        bidding for the main construction of the gas plant and pipeline
        infrastructure work. We expect to award the EPC contract by July
        2008.

    -   A Joint Operating Agreement with Sonatrach was negotiated to
        establish the principles of the Joint Operating Body that will
        operate the MLE Development and Exploitation.

    -   Both FCP and Sonatrach have been successful in staffing key
        disciplines in the project team with high calibre professionals. The
        fact that we have been able to attract highly skilled staff in a very
        competitive market environment is a reflection of the quality of the
        resource and interest in the scale and challenge of the project. In
        addition to a core Calgary based staff, a facilities and
        management team, under the leadership of the Vice President Projects,
        has been mobilized in London and Hassi Messaoud to manage and execute
        the development of Block 405b. FCP's drilling team in Algeria has set
        new benchmarks for drilling efficiency and performance and is often
        referred to by Sonatrach as one of the top performing drilling teams
        in the country.

    -   FCP has appointed its first expatriate Country Manager based in
        Algiers, reflecting the ramp up in activity with the 405b
        development. Claude Courtemanche is a Canadian who brings 35 years of
        diverse international experience to the position including
        considerable experience in Algeria. Claude will be FCP's principal
        point of contact with Sonatrach and the Ministry going forward.
    

    FCP is now well positioned for the project execution phase and has a
skilled and experienced team in place to focus on the quality of the project,
delivery of all required materials and services, meeting the schedule and
maintaining cost control. We continue to enjoy a productive relationship with
Sonatrach within a cohesive joint venture structure, all of which will allow
us to achieve production of natural gas, natural gas liquids and crude oil
from Block 405b.

    Completion of CAFC and ZER Appraisal Program:

    With the completion of testing operations on LES-9 in December 2007, FCPL
has completed 100% of the planned exploration and appraisal drilling program
in the Central Area Field Complex (CAFC) and on the ZER structure. The total
number of wells drilled in support of evaluating this key component of our
Block 405b asset was 25 wells, of which 23 were drilled to the F6-3 horizon
and two were terminated after drilling through the TAGI zone only. In excess
of 101,000 m of hole was drilled during this program, and 90 individual well
tests have been conducted and evaluated. As reported earlier, the anchor
project for the CAFC development is expected to be the LES/LEC TAGI oil pool.
    By December 2007, FCP felt that it had sufficiently appraised the CAFC
and the ZER areas such that the assessment of the commerciality of the areas
could be evaluated and development plans reviewed. This work has been ongoing
since January 2008 and will culminate with the submission of a formal
development plan, or "Final Discovery Report" to the appropriate authorities
by the end of Q2 2008. The Final Discovery Report, or FDR, is designed to
outline the detailed development plans for the commercialization of the
reserves and is the process document required to secure an exploitation
license.

    2007 Operational (Subsurface) Review:

    The subsurface operations during 2007 represented a two pronged approach
to evaluation work; to appraise further the LES/LES and MZLN TAGI oil and gas
pools discovered 2006, and secondly, to further push out the limits of known
pool boundaries.
    In an effort to appraise fully the acreage granted to FCP as part of the
Exploration Phase Extension, or "Appraisal Period" within the CAFC prior to
its expiry on December 30, 2008 FCP undertook an aggressive drilling,
completion and testing program. This program saw over 29,000 meters of hole
drilled and 18 well tests completed and evaluated - a level of activity that
we believe will enable maximum retention of acreage in the
development/production phase for further exploitation drilling.
    The wellbores drilled and tested at MZLN-4, MZLN-5 and MZLN-6 evaluated
and tested the limits of TAGI and Lower Devonian pools discovered by MZLN-2
and MZLN-3 in 2006. The well bores drilled and tested at LES-6, LEC-2, LES-7
and LES- 8 successfully appraised the LES/LEC TAGI oil and gas pool, verifying
structure and reservoir continuity. This TAGI oil pool will form the anchor
for the CAFC development.
    The well at LEW-3 was completed as an appraisal well to LEW-1. LES-9
tested a potential extension to the LES/LEC structural trend, unfortunately
this well did not test commercial volumes. ZER-2 was a successful appraisal
well to ZER-1 further evaluating the TAGI and Lower Devonian zones.
    In addition to the appraisal drilling and testing program in 2007, FCP
also initiated a 250 Km2 high resolution seismic acquisition program covering
all of MLE and the northern half of the CAFC. The purpose of this seismic
program is to delineate further structural details and to define better
geological trends which will aid in the placement of the development wells in
both the CAFC and MLE field development areas. So far we are encouraged by the
information we are getting from this new generation of seismic and a
potentially significant southern extension to the MLE field has been
identified with this new data - a concept that will be tested with the MLE-10
well which will be spud shortly.
    FCP also initiated the MLE drilling program with the spud of MLE-7 in
November 2007. The drilling of MLE-7 represents a significant milestone in
FCP's history: the start up of the development program that leads to first gas
in 2010.

    
    The 2007 drilling program results can be summarized in the following
table;

    -------------------------------------------------------------------------
    Location                 Completion Status                        Zone(s)
    --------                 -----------------                        -------
    LES-6                 Suspended Multi-zone Gas + Oil            TAGI, F6
    -------------------------------------------------------------------------
    LEC-2                 Suspended Multi-zone Gas + Oil            TAGI, F2
    -------------------------------------------------------------------------
    ZER-2                 Suspended Multi-zone Oil                  TAGI, F6
    -------------------------------------------------------------------------
    LEW-3                 Suspended Multi-zone Oil                TAGI, F6-2
    -------------------------------------------------------------------------
    LES-7                 Suspended Multi-zone Gas + Oil            TAGI, F2
    -------------------------------------------------------------------------
    MZLN-4                Suspended Gas Show                            TAGI
    -------------------------------------------------------------------------
    LES-8                 Suspended Oil                                 TAGI
    -------------------------------------------------------------------------
    MZLN-5                Suspended Gas + Oil                           TAGI
    -------------------------------------------------------------------------
    LES-9                 Suspended Oil Show                              F2
    -------------------------------------------------------------------------
    MZLN-6                Suspended Gas Show                              F2
    -------------------------------------------------------------------------
    MLE-7                 Suspended Multi-zone Gas + Oil    TAGI, F1, F2, F6
                           (2008 rig release)
    -------------------------------------------------------------------------
    

    New Ventures

    Along with the block 405b development, a key growth initiative for FCP
includes identifying new opportunities in Algeria and elsewhere. We have
recently submitted the prescribed application to the Algerian authorities to
participate in their next licensing round. First Calgary's success on Block
405b clearly demonstrates this management's ability to execute this strategy
and we expect to continue to build shareholder value through it.

    Year End 2007 Reserves Summary:

    For the purposes of this MD&A:

    "Gross" reserves are defined as the total estimated petroleum to be
produced after December 31, 2007 and before the end of the applicable
exploitation licence periods for Block 405b, and before any allocation of
production to Sonatrach or the Algerian State; and
    "Net" reserves for Block 405b are defined as the volume of the estimated
recoverable reserves attributable to First Calgary's potential interest in the
PSC based upon certain assumptions respecting production volumes, product
prices, development costs and rates of inflation.

    The high level of drilling and testing activity in 2007 has enabled a
very rigorous reserves evaluation to be conducted by our independent oil and
gas engineers, DeGoyler and MacNaughton (D&M). More data has enabled D&M to
apply more stringent parameters to what qualifies as net pay and also better
define field and reservoir limits.
    The 2007 Reserves Summary compiled by D&M can be summarized as follows;
FCP has realized a 3.2% increase in Gross Proved, an 8.7% decrease in Gross
Proved + Probable and a 3.9% decrease in Gross Proved + Probable + Possible.
In effect, the results of the 2007 drilling and testing program have seen the
Gross Proved reserves increase as a result of the drilling, and as reserve
definitions are more strictly constrained by test data and petrophysical
analysis, the Gross Possible and Probable reserves have decreased.

    The total block reserves and present values of future net revenues were
estimated by DeGolyer and MacNaughton, independent oil and gas engineers.


    
    Block 405b Reserves as at December 31, 2007:

                                              Gross Recoverable Reserves
                                              --------------------------
                                                            Total Equivalent
                                            Gas    Liquids    Gas      Oil
                                           (Bcf)   (MMBbls)  (Bcfe)  (MMBoes)
    -------------------------------------------------------------------------
    Proved Undeveloped                      651.8     98.9  1,245.2    207.5
    Probable                              1,110.0    193.0  2,268.1    378.0
    -------------------------------------------------------------------------
    Proved and Probable                   1,761.8    291.9  3,513.3    585.5
    Possible                              2,369.0    448.9  5,061.5    843.7
    -------------------------------------------------------------------------
    Proved, Probable and Possible         4,130.8    740.8  8,574.8  1,429.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                Net Recoverable Reserves
                                                ------------------------
                                                            Total Equivalent
                                            Gas    Liquids    Gas      Oil
                                           (Bcf)   (MMBbls)  (Bcfe)  (MMBoes)
    -------------------------------------------------------------------------
    Proved Undeveloped                      172.3     26.1    329.1     54.8
    Probable                                169.5     30.5    352.4     58.8
    -------------------------------------------------------------------------
    Proved and Probable                     341.8     56.6    681.5    113.6
    Possible                                345.0     66.5    744.1    124.0
    -------------------------------------------------------------------------
    Proved, Probable and Possible           686.8    123.1  1,425.6    237.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Notes:
    (1) The gross and net recoverable reserves volumes are based on forecast
        price and cost assumptions, details of which can be found in the
        Company's Annual Information Form for the year ended December 31,
        2007, which is expected to be filed no later than March 30, 2008.
    (2) Liquids consist of Oil, Condensate and LPG.
    (3) FCP's net reserves allocations are based on the PSC where production
        is allocated annually based upon a sliding scale formula that
        considers capital investment, production levels and product prices.
        Accordingly, the net allocation can vary annually and will be
        dependant upon the costs, production levels and product prices
        realized.
    (4) Gas and Oil equivalents have been calculated by the Company at one
        barrel (bbl) for six thousand cubic feet of gas equivalent. Using
        gas and oil equivalent units may be misleading, particularly if used
        in isolation. A conversion ratio of one barrel to six thousand cubic
        feet of gas is based on an energy equivalency conversion method
        primarily applicable at the burner tip and does not represent a value
        equivalency at the wellhead.
    (5) Bcf means billion cubic feet of gas, Bcfe means billion cubic feet of
        gas equivalent, MMBbls means millions of barrels of liquid and MMBoes
        means millions of barrels of oil equivalent.

    With 208 MMBoe of Gross Proved reserves and 586 MMBoe of Gross Proved plus
Probable, the 405b block is a major development opportunity - one that is
being worked by FCP and Sonatrach at an accelerated pace for first production
in the second half of 2010.

    Block 405b Present Value of Future Net Revenues:

                                       Discounted at (%/year)
                        -----------------------------------------------------
                           0        5        8        10       15       20
                        -------  -------  -------  -------  -------  --------
    ($ millions)
                        -----------------------------------------------------
    Proved Undeveloped  1,387.5    732.5    464.0    321.5     57.6   (114.7)
    Probable            2,687.6  1,595.2  1,177.9    965.4    592.0    364.6
    -------------------------------------------------------------------------
    Total Proved and
     Probable           4,075.1  2,327.7  1,641.9  1,286.9    649.6    249.9
    Possible            4,578.6  2,109.0  1,315.8    953.0    400.4    135.8
    -------------------------------------------------------------------------
    Total Proved,
     Probable and
     Possible           8,653.7  4,436.7  2,957.7  2,239.9  1,050.0    385.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Notes:
    (1) The present value of future net revenues are based on forecast
        price and cost assumptions, details of which can be found in the
        Company's Annual Information Form for the year ended December 31,
        2007.
    (2) Refer to the Company's AIF for details on the assumptions made in
        determining the future net revenues.
    (3) The estimated future net revenues do not represent fair market value.


    Gross MLE Reserves as at December 31, 2007:

                                              Gross Recoverable Reserves
                                              --------------------------
                                                            Total Equivalent
                                            Gas    Liquids    Gas      Oil
                                           (Bcf)   (MMBbls)  (Bcfe)  (MMBoes)
    -------------------------------------------------------------------------
    Proved Undeveloped                      402.2     52.0    714.2    119.0
    Probable                                375.7     41.4    624.1    104.0
    -------------------------------------------------------------------------
    Proved and Probable                     777.9     93.4  1,338.3    223.0
    Possible                                567.6     73.0  1,005.6    167.6
    -------------------------------------------------------------------------
    Proved, Probable and Possible         1,345.5    166.4  2,343.9    390.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Note: The notes pertaining to reserves in the table of the "Block 405b
          Reserves as at December 31, 2007" apply to the reserves in this
          table, as applicable.


    Gross CAFC Reserves as at December 31, 2007:

                                              Gross Recoverable Reserves
                                              --------------------------
                                                            Total Equivalent
                                            Gas    Liquids    Gas      Oil
                                           (Bcf)   (MMBbls)  (Bcfe)  (MMBoes)
    -------------------------------------------------------------------------
    Proved Undeveloped                      249.6     46.9    531.0     88.5
    Probable                                725.8    143.2  1,584.8    264.1
    -------------------------------------------------------------------------
    Proved and Probable                     975.4    190.1  2,115.9    352.6
    Possible                              1,669.7    270.1  3,290.2    548.4
    -------------------------------------------------------------------------
    Proved, Probable and Possible         2,645.1    460.2  5,406.1    901.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Note: The notes pertaining to reserves in the table of the "Block 405b
          Reserves as at December 31, 2007" apply to the reserves in this
          table, as applicable.


    Gross ZER Reserves as at December 31, 2007:

                                              Gross Recoverable Reserves
                                              --------------------------
                                                            Total Equivalent
                                            Gas    Liquids    Gas      Oil
                                           (Bcf)   (MMBbls)  (Bcfe)  (MMBoes)
    -------------------------------------------------------------------------
    Proved Undeveloped                        0.0      0.0      0.0      0.0
    Probable                                  8.6      8.4     59.1      9.9
    -------------------------------------------------------------------------
    Proved and Probable                       8.6      8.4     59.1      9.9
    Possible                                131.7    105.7    766.1    127.7
    -------------------------------------------------------------------------
    Proved, Probable and Possible           140.3    114.2    825.2    137.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Note: The notes pertaining to reserves in the table of the "Block 405b
          Reserves as at December 31, 2007" apply to the reserves in this
          table, as applicable.


    FINANCIAL REVIEW

    ($ thousands)                           2007          2006          2005
    -------------------------------------------------------------------------
    Net income (loss) before taxes   $   (11,347)  $     3,492   $    (7,571)
    Future income taxes                     (348)      (18,200)            -
                                     ----------------------------------------
    Net loss                         $   (11,695)  $   (14,708)  $    (7,571)
    

    First Calgary realized a net loss before taxes of $11.3 million in 2007,
compared to income of $3.5 million in 2006, and a net loss of $7.6 million in
2005, due to higher stock-based compensation costs and higher G&A costs,
offset by a foreign exchange gain realized in 2006.
    Foreign exchange gains were $6.8 million in 2006, resulting in income
before taxes for the year. The majority of these gains were realized in the
second quarter from converting the April equity financing proceeds
(denominated in C$ and British pounds) into U.S. dollars.
    Future income tax provisions were recorded in 2007 and 2006 as a result
of a determination that the tax basis of the costs pertaining to Block 406a
(relinquished) have been impaired.

    
    ($ thousands)                           2007          2006          2005
    -------------------------------------------------------------------------
    Interest                         $     5,376   $     6,473   $     3,013

    Interest income has decreased from 2006 due to lower average cash and cash
equivalent balances on hand. Declining interest rates in the 4th quarter of
2007 also contributed to this decline in revenue.

    ($ thousands)                           2007          2006          2005
    -------------------------------------------------------------------------
    General and administrative       $    20,803   $    10,154   $     5,908
    Less capitalized amount                7,506         3,000         1,162
                                     ----------------------------------------
    Expensed                         $    13,297   $     7,154   $     4,746

    The increase in 2007 general and administrative costs of $10.6 million, or
105%, is primarily the result of rising employee levels required to manage and
operate the Algerian project. The increased capitalized G&A is consistent with
this heightened activity. Additionally, costs related to project financing
have increased over prior years.

    ($ thousands)                           2007          2006          2005
    -------------------------------------------------------------------------
    Stock-based compensation         $     7,456   $     6,316   $     5,514
    Less capitalized amount                4,294         3,668             -
                                     ----------------------------------------
    Expensed                         $     3,162   $     2,648   $     5,514

    Stock-based compensation increased by $1.1 million due to additional
option grants in 2007. FCP began to capitalize certain stock-based
compensation costs relating to Algerian project personnel in 2006.

    Capital Expenditures ($ thousands)      2007          2006          2005
    -------------------------------------------------------------------------
    Drilling, completion and testing $   117,962   $   130,952   $    50,587
    Geological and geophysical             2,167         3,745         1,605
    MLE commercialisation                 61,326         7,907         5,501
                                     ----------------------------------------
                                     $   181,455   $   142,604   $    57,693
    Block management, administration
     and corporate                        10,062        23,571         6,487
                                     ----------------------------------------
    Total capital expenditures       $   191,517   $   166,175   $    64,180
    Less non-cash expenditures
     (stock-based compensation,
     asset retirement provisions)          6,771         3,882            70
                                     ----------------------------------------

    Net capital expenditures         $   184,746   $   162,293   $    64,110
    -------------------------------------------------------------------------
    

    Capital expenditures of $184.7 million in 2007 reflect a significant
level of activity undertaken by the Company in its field operations,
commercialisation and block management efforts. Field activities for 2007
included the drilling of 10 wells and the completion and testing of 11 wells.
During the year, FCP decreased from three drilling rigs to one rig and
utilized one testing unit. Commercialisation activities include receiving
approval for the Development Plan, completing the Front End Engineering &
Design (FEED) contract, and executing a Joint Operating Agreement.
    Capital expenditures are higher in 2006 over 2005 due to increased
activity. Field activities for 2006 included the drilling of ten wells and the
completion and testing of nine wells, utilizing three drill rigs and two
testing units. In 2005, FCP used one drilling rig to drill five wells.

    Liquidity and Capital Resources

    First Calgary had $251.1 million of working capital on hand as at
December 31, 2007 compared with $82.7 million at the end of 2006. Cash
balances and short-term investments were $275.3 million at the end of the
year.
    In April 2007 FCP raised C$145 million net of expenses from the issue of
30,000,000 common shares at a price of C$5.08 per common share. Together with
existing resources, this financing provided the Company with the working
capital needed to appraise the CAFC and invest in MLE field pre-development
expenditures.
    On December 14, 2007, the Company closed a $267 million convertible bonds
bought deal entered into with Canaccord Adams Ltd. and J.P. Morgan Securities
Ltd. The Company issued 2,670 nominal nine per cent unsecured convertible
bonds due November 29, 2012 with an initial conversion price of $4.20 (C$4.05)
at a price of $0.1 million per convertible bond. The net proceeds will be used
to implement the Company's independent development strategy in respect of its
Algerian assets over the short to medium term and for working capital
purposes. The convertible bond has been structured to complement future
project finance debt, in that it would remain subordinated to such a
financing.
    Development of the Ledjmet Block 405b reserves through to commercial
production will require significant funding, with 75% being FCP's share.
Development funding is expected to be in the form of project debt, equity,
joint venture farm-out arrangements or some combination thereof. First Calgary
has been approached by a number of parties seeking to fund the block
development and has appointed Citigroup as sole advisor to the Company on
project debt for the MLE Field development. The gross development cost of the
MLE Field is currently estimated at $1.3 billion and will mainly be incurred
over the 2008 - 2010 period. These cost estimates are supported by the MLE
FEED work completed during the year. The Company is listed on the Toronto
Stock Exchange and the AIM market of the London Stock Exchange. The shares and
other equity instruments outstanding at the following dates were:

    
                                                      March 19,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------
    Common shares                                  254,639,030   254,619,030
    Issuable on conversion of debentures            63,571,428    63,571,428
    Employee stock options                          16,660,080    16,806,747
    -------------------------------------------------------------------------
    Total                                          334,870,538   334,997,205
    -------------------------------------------------------------------------

    Contractual Obligations

    The Company had the following contractual obligations outstanding as at
    December 31, 2007:
                                              Payments Due by Period
                                     ----------------------------------------
    Contractual
     Obligations                       less than
     ($ thousands)           Total        1 year     1-3 years     4-5 years
    -------------------------------------------------------------------------
    Operating leases     $   5,522     $   2,466     $   3,056     $       -
    Drill rig
     contracts(1)        $  12,360     $   9,531     $   2,829     $       -
    Consulting
     agreements          $   3,000     $   1,500     $   1,500     $       -
    -------------------------------------------------------------------------
                         $  20,882     $  13,497     $   7,385     $       -
    -------------------------------------------------------------------------

    (1) Amounts are the minimum payments required under the rig contracts.


    Summary of Quarterly Results

    ($ thousands, except                       2007
     per share amounts)         Q4            Q3            Q2            Q1
    -------------------------------------------------------------------------
    Interest income      $   1,372     $   1,511     $   1,502     $     991

    Income (loss)        $  (5,940)    $  (1,745)    $  (1,613)    $  (2,397)
    Income (loss)
     per share           $   (0.02)    $   (0.01)    $   (0.01)    $   (0.01)

    Total assets        $1,031,916     $ 788,554     $ 775,867     $ 643,642


    ($ thousands, except                       2006
     per share amounts)         Q4            Q3            Q2            Q1
    -------------------------------------------------------------------------
    Interest income      $   1,633     $   2,052     $   1,902     $     886

    Income (loss)        $ (19,706)    $    (266)    $   6,577     $  (1,313)
    Income (loss)
     per share           $   (0.09)    $    0.00     $    0.03     $   (0.01)

    Total assets         $ 650,053     $ 649,354     $ 641,938     $ 491,776
    

    The net loss in Q4 2007 relates to increased G&A costs including
personnel and professional costs required to manage and operate the Algerian
assets. It also relates to interest on the convertible debt issue in December
2007.
    Total assets have increased over the third quarter due to the convertible
bond financing that raised net proceeds of $252 million (after issue costs).

    DISCLOSURE CONTROLS AND PROCEDURES

    An evaluation was performed under the supervision and with the
participation of the Company's management, including the Chief Executive
Officer (CEO) and the Chief Financial Officer (CFO), of the effectiveness of
the design and the operation of the Company's disclosure controls and
procedures, as defined in Multilateral Instrument 52-109. Based on that
evaluation, the Company's management, including the CEO and CFO, concluded
that the Company's disclosure controls and procedures were effective as of
December 31, 2007. It should be noted that while the Company's CEO and CFO
believe that the Company's disclosure controls and procedures provide a
reasonable level of assurance that they are effective, they do not expect that
the disclosure controls and procedures or internal controls over financial
reporting will prevent all errors and fraud. A control system, no matter how
well conceived or operated, can provide only reasonable, not absolute,
assurance that the objective of the control system is met.

    CRITICAL ACCOUNTING POLICIES AND ESTIMATES

    Petroleum and Natural Gas Operations

    FCP follows the full cost method to account for its petroleum and natural
gas operations, whereby all costs of exploring for and developing petroleum
and natural gas reserves are capitalized and accumulated in country-by-country
cost centres. These capitalized costs will be depleted using the
unit-of-production method based on estimates of proved reserves. The costs in
cost centres from which there has been no commercial production are not
subject to depletion until commercial production commences. These capitalized
costs are assessed to determine whether it is likely such costs will be
recovered in the future. Costs which are not likely to be recovered in the
future are written-off.
    Petroleum and natural gas reserves form the basis for a number of
accounting estimates and support for the carrying amount of petroleum and
natural gas properties. The estimation of reserves is a subjective process.
Forecasts are based on engineering data, projected future rates of production,
estimated commodity price forecasts and the timing of future expenditures, all
of which are subject to numerous uncertainties and various interpretations.
The Company expects that its estimates of reserves will change to reflect
updated information. Reserve estimates can be revised upward or downward based
on the results of future drilling, testing, production levels and economics of
recovery based on cash flow forecasts.

    CHANGE IN ACCOUNTING POLICIES

    Financial Instruments - Recognition and Measurement

    On January 1, 2007, the Company adopted new accounting standards with
respect to accounting for financial instruments as discussed in note 1. Under
the new standards, cumulative translation adjustments are included in
accumulated other comprehensive income. As a result, the Company's cumulative
translation adjustment at December 31, 2006 of $6.5 million has been
reclassified to accumulated other comprehensive income in shareholders'
equity.

    Accounting Policies not yet Adopted

    Two new Canadian accounting standards have been issued which will require
additional disclosure in the Company's financial statements commencing
January 1, 2008, about the Company's financial instruments as well as its
capital and how it is managed.

    BUSINESS RISKS AND UNCERTAINTIES

    The Company's business is subject to risks inherent in oil and gas
exploration and development operations. In addition, there are risks
associated with the Company's development stage of operations and the foreign
jurisdiction in which it operates. The Company has identified certain risks
pertinent to its business including: exploration and reserve risks, drilling
and operating risks, costs and availability of materials and services, capital
markets and the requirement for additional capital, loss of or changes to
production sharing, joint venture or related agreements, economic and
sovereign risks, possibility of less developed legal systems, reliance on
strategic relationships, market risk, volatility of future oil and gas prices
and foreign currency risk.
    FCP attempts to monitor, assess and mitigate certain of these risks by
retaining an experienced team of professionals and using modern technology.
Further, the Company has focused its activities in a known hydrocarbon basin
in a jurisdiction that has previously established long-term oil and gas
ventures with foreign oil and gas companies, existing infrastructure of
services and oil and gas transportation facilities, and reasonable proximity
to markets. The Company also retains consultants resident in Algeria to
monitor economic and political developments and to assist with operating,
administrative and legal matters. There are certain risks, however, over which
the Company has little or no control.

    ADVISORY REGARDING FORWARD-LOOKING STATEMENTS

    Certain information with respect to the Company contained in this report,
including management's assessment of future plans and operations, contains
forward-looking statements. These forward-looking statements are based on
assumptions and are subject to numerous risks and uncertainties, some of which
are beyond FCP's control, including the timing and receipt of joint venture
and governmental approvals, the impact of general economic conditions,
industry conditions, volatility of commodity prices, currency exchange rate
fluctuations, reserve estimates, environmental risks, competition from other
explorers, stock market volatility and ability to access sufficient capital.
In addition, actual results may vary because FCP principally operates in less
developed legal systems than jurisdictions with more established economies and
relies on continuing existing strategic relationships and forming new ones
with other entities in the oil and gas industry, such as joint venture parties
and farm-in partners. FCP's actual results, performance or achievement could
differ materially from those expressed in, or implied by, these
forward-looking statements and, accordingly, no assurance can be given that
any events anticipated by the forward-looking statements will transpire or
occur.

    Company Information

    Additional information related to FCP, including the Company's Annual
Information Form, is available on FCP's website at www.fcpl.ca or on SEDAR's
website at www.sedar.com.

    March 19, 2008


    
    FIRST CALGARY PETROLEUMS LTD.

    Consolidated Balance Sheets

    As at December 31

    ($ thousands)                                         2007          2006
    -------------------------------------------------------------------------
    Assets
      Current assets
        Cash and cash equivalents                  $   275,270   $   108,489
        Accounts receivable                              1,222           738
        Deposits and prepaid expenses                    1,333           707
    -------------------------------------------------------------------------
                                                       277,825       109,934
      Other assets (note 4)                             23,048             -
      Property, plant and equipment (note 5)           731,043       540,119

    -------------------------------------------------------------------------
                                                   $ 1,031,916   $   650,053
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity
      Current liabilities
        Accounts payable and accrued liabilities   $    26,763   $    27,226

      Convertible debentures (note 6)                  222,589             -
      Asset retirement obligations (note 7)              3,225           687

      Future income taxes (note 9)                      18,548        18,200
    Shareholders' equity
      Capital stock (note 8)                           763,257       631,933
      Contributed surplus (note 8)                      25,955        19,186
      Equity portion of convertible debentures
       (note 6)                                         30,453             -
      Accumulated other comprehensive income             6,502         6,502
      Deficit                                          (65,376)      (53,681)
    -------------------------------------------------------------------------
                                                       760,791       603,940
    Operations and commitments (note 3)
    -------------------------------------------------------------------------
                                                   $ 1,031,916   $   650,053
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    FIRST CALGARY PETROLEUMS LTD.

    Consolidated Statements of Operations and Deficit

    Years ended December 31

    ($ thousands)                                         2007          2006
    -------------------------------------------------------------------------
    Revenue
      Interest                                     $     5,376   $     6,473
    Expenses
      General and administrative                        13,297         7,154
      Stock-based compensation (note 8)                  3,162         2,648
      Interest Expense (note 6)                          1,812             -
      Foreign exchange gain                             (2,166)       (6,806)
      Depreciation and accretion                           654           262
      Capital tax recovery                                 (36)         (277)
    -------------------------------------------------------------------------
                                                        16,723         2,981
    -------------------------------------------------------------------------
    Income (loss)  before taxes                        (11,347)        3,492

    Future income taxes (note 9)                          (348)      (18,200)
    -------------------------------------------------------------------------
    Net loss for the year                              (11,695)      (14,708)
    Deficit, beginning of year                         (53,681)      (38,973)

    -------------------------------------------------------------------------
    Deficit, end of year                           $   (65,376)  $   (53,681)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Loss per share (note 8)
      Basic and diluted                            $     (0.05)  $     (0.07)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    FIRST CALGARY PETROLEUMS LTD.

    Consolidated Statements of Cash Flows

    Years ended December 31

    ($ thousands)                                         2007          2006
    -------------------------------------------------------------------------
    Operating activities
      Net loss for the year                        $   (11,695)  $   (14,708)
      Items not involving cash
        Accretion on convertible debentures                691             -
        Future income taxes                                348        18,200
        Stock-based compensation                         3,162         2,648
        Foreign exchange gain                           (1,358)         (720)
        Depreciation and accretion                         654           262
    -------------------------------------------------------------------------
                                                        (8,198)        5,682
        Change in non-cash working capital                 741         3,200
    -------------------------------------------------------------------------
                                                        (7,457)        8,882
    Financing activities
      Proceeds from issuance of convertible
       debentures                                      267,000             -
      Financing costs                                  (14,649)            -
      Proceeds from issuance of shares                 135,672       150,941
      Proceeds from exercise of options                  1,516         2,735
      Issue costs                                       (6,551)       (7,997)
    -------------------------------------------------------------------------
                                                       382,988       145,679
    Investing activities
      Expenditures on property, plant and equipment   (184,746)     (162,293)
        Restricted cash (note 4)                       (23,048)            -
        Change in non-cash working capital              (2,244)        8,226
    -------------------------------------------------------------------------
                                                      (210,038)     (154,067)
    -------------------------------------------------------------------------
    Change in cash and cash equivalents                165,493           494
      Exchange rate fluctuations on cash and
       cash equivalents                                  1,288           113
      Cash and cash equivalents, beginning of year     108,489       107,882
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year         $   275,270   $   108,489
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    Notes to Consolidated Financial Statements
    For the years ended December 31, 2007 and 2006
    (in thousands of U.S. dollars unless otherwise indicated)

    First Calgary Petroleums Ltd. ("First Calgary", "FCP" or the "Company")
    is incorporated in Alberta under the Business Corporations Act (Alberta)
    and its primary business activity is the exploration for and development
    of petroleum and natural gas in Algeria.

    1.  Significant accounting policies:

    (a) Basis of presentation:

    The consolidated financial statements have been prepared using Canadian
    generally accepted accounting principles and include the accounts of the
    Company and its wholly owned subsidiaries.

    (b) Cash and cash equivalents:

    Cash consists of cash on hand and balances invested in short-term
    securities with original maturities less than 90 days at the date of
    acquisition.

    (c) Petroleum and natural gas operations:

    The Company follows the full cost method of accounting for petroleum and
    natural gas operations, whereby all costs of exploring for and developing
    petroleum and natural gas reserves are capitalized and accumulated in
    country-by-country cost centres. Such costs include land acquisition
    costs, geological and geophysical costs, carrying charges on
    non-producing properties, costs of drilling both productive and
    non-productive wells, interest costs on major development projects and
    overhead charges directly related to acquisition, exploration and
    development activities.

    The costs (including exploratory dry holes) in cost centres from which
    there has been no commercial production are not subject to depletion
    until commercial production commences. The capitalized costs are
    periodically assessed, using a ceiling test, to determine whether it is
    likely such costs will be recovered in the future. To the extent there
    are costs which are not likely to be recovered in the future, they are
    written-off.

    Petroleum and natural gas properties are subject to a two-step ceiling
    test in each reporting period to determine if the costs are recoverable
    and do not exceed the fair value of the properties. First, the costs are
    assessed to be recoverable if the sum of the undiscounted cash flows
    expected from the production of proved reserves and the lower of cost and
    market of unproved properties exceed the carrying values of the petroleum
    and natural gas properties. If the carrying value of the petroleum and
    natural gas properties is not assessed to be recoverable, the second step
    is completed whereby an impairment loss is recognized to the extent that
    the carrying value exceeds an estimated fair value. The fair value
    estimate is normally based on the sum of the discounted cash flows
    expected from the production of proved and probable reserves and the
    lower of cost and market of unproved properties. The cash flows are
    estimated using forecast product prices and costs and are discounted
    using a risk-free interest rate.

    (d) Convertible debentures:

    The Company's convertible debentures are classified as debt with a
    portion of the proceeds allocated to equity representing the value of the
    conversion option. If the debentures are converted to shares, the debt
    and equity components are transferred to common shares. The debt balance
    associated with the convertible debentures accretes over time to the
    amount owing on maturity with such increases reflected as non-cash
    interest expense in the statement of earnings.

    (e) Asset retirement obligations:

    The Company recognizes the estimated fair value of legal obligations
    associated with the retirement of petroleum and natural gas properties in
    the period in which they are incurred. The obligation is recorded as a
    liability with a corresponding increase in the carrying amount of the
    petroleum and natural gas properties. The incremental capitalized amount
    will be depleted on a unit-of-production basis over the life of the
    proved reserves. The obligation is increased each period, or accretes,
    due to the passage of time and is recorded in the statement of
    operations. Revisions to the estimated fair value would result in an
    adjustment to the obligation and carrying amount of the petroleum and
    natural gas properties.

    (f) Foreign currency:

    All of the Company's operations are considered financially and
    operationally integrated. The U.S. dollar is the Company's functional
    currency. As a result, monetary assets and liabilities denominated in
    foreign currencies are translated at exchange rates in effect at the
    balance sheet date and non-monetary assets and liabilities are translated
    at rates in effect when the assets were acquired or liabilities incurred.
    Revenues and expenses are translated at rates of exchange prevailing on
    the transaction dates. Foreign exchange gains and losses are recorded in
    the statement of operations.

    (g) Stock-based compensation:

    The Company accounts for all stock options granted using the fair value
    method. Under this method, compensation expense is measured at fair value
    at the grant date using the Black-Scholes option pricing model and
    recognized over the vesting period with a corresponding credit to
    contributed surplus.

    Consideration received upon the exercise of stock options together with
    the amount of non-cash compensation expense recognized in contributed
    surplus is recorded as share capital.

    (h) Income taxes:

    The Company uses the asset and liability method of accounting for income
    taxes. Under this method current income taxes are recognized for the
    estimated income taxes payable for the current year. Future income taxes
    are recognized for temporary differences between the tax and accounting
    bases of assets and liabilities and for the benefit of losses available
    to be carried forward for tax purposes that are likely to be realized.
    Future tax assets and liabilities are measured using substantively
    enacted tax rates expected to apply to taxable income in the years in
    which those temporary differences are expected to be recovered or
    settled. The effect on future tax assets and liabilities of a change in
    tax rates is recognized in income in the period that includes the date of
    enactment or substantive enactment.

    (i) Use of estimates:

    The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect the reported amounts of assets, liabilities,
    revenues and expenses. The ceiling test is based upon estimates of market
    values of unproved properties, proved and probable reserves, petroleum
    and natural gas prices, future costs and other assumptions.

    (j) Per share amounts:

    Basic per share amounts are computed by dividing the earnings or loss by
    the weighted average shares outstanding during the reporting period.
    Diluted amounts are computed using the treasury stock method. The
    treasury stock method assumes that proceeds received from the exercise of
    in-the-money options are used to repurchase shares at the average market
    price for the period. The difference between the number of shares that
    could have been purchased at market prices in the period and the number
    of in-the-money options is added to the weighted average shares
    outstanding. Convertible debentures are included in the calculation of
    diluted earnings per share based on the number of shares that would be
    issued on conversion of the convertible debentures at the end of the year
    and an add-back of the associated interest expense for the year as long
    as the conversion is dilutive.

    (k) Financial instruments:

    The Company recognized all financial instruments, including embedded
    derivatives that are not clearly and closely related to the host
    contract, on the balance sheet initially at fair value. Measurement in
    subsequent periods depends on whether the financial instrument has been
    classified as "held-for-trading", "available-for-sale", "other accounts
    receivable or payable" or "held-to-maturity".

    Held-for-trading financial assets (cash and cash equivalents) are
    recorded at fair value with changes in fair value included in earnings.
    Available-for-sale financial assets (none at December 31, 2007) are
    recorded at fair value with changes in fair value included in other
    comprehensive income. Amounts included in other comprehensive income are
    reclassified to earnings when the related asset is derecognized or
    impaired. Other accounts receivable and payable (accounts receivable,
    accounts payable, accrued liabilities, and convertible debentures) are
    recorded at amortized cost. Held-to-maturity investments (none at
    December 31, 2007) are recorded at amortized cost.

    Transaction costs associated with the Company's financial instruments are
    shown net of the related financing and accreted using the effective
    interest rate method.

    For the years ended December 31, 2007 and 2006, there are no amounts that
    would be included in other comprehensive income except the net loss.

    2.  Changes in accounting policies:

    (a) Financial instruments

    On January 1, 2007, the Company adopted new accounting standards with
    respect to accounting for financial instruments as discussed in note 1.
    Under the new standards, cumulative translation adjustments are included
    in accumulated other comprehensive income. As a result, the Company's
    cumulative translation adjustment at December 31, 2006 of $6.5 million
    has been reclassified to accumulated other comprehensive income in
    shareholders' equity.

    (b) Accounting policies not yet adopted

    Two new Canadian accounting standards have been issued which will require
    additional disclosure in the Company's financial statements commencing
    January 1, 2008, about the Company's financial instruments as well as its
    capital and how it is managed.

    3.  Operations and commitments:

    First Calgary currently has the rights to appraise and develop Ledjmet
    Block 405b (Block 405b) in Algeria. The Company's rights and obligations
    on Block 405b are set out in a Production Sharing Contract (PSC) with
    Sonatrach, the national oil company of Algeria. The nature of current
    operations and the terms or commitments under the PSC are summarised as
    follows.

    The five year exploration period of the PSC ended on December 29, 2006.
    All exploration work commitments under the PSC were completed.

    FCP has retained two main acreage parcels for further appraisal and
    potential development, the MLE field and the Central Area Field Complex
    (CAFC).

    FCP received approval in February 2007 from the Algerian regulatory
    authority ALNAFT for the Development Plan for the MLE oil and gas field
    on Block 405b. The submission of a development plan for the remaining
    appraisal areas is planned for Q2 2008. We expect to receive approval on
    the development plan prior to December 30, 2008 - the end of the
    appraisal phase.

    Phase 1 of the MLE development design includes construction of a gas
    plant and field gathering system and facilities designed to produce up to
    260 million cubic feet of sales gas per day (MMCF/d) and
    20 thousand barrels per day (MB/D) of associated natural gas liquids and
    oil, on a gross basis. The initial gas sales volume agreed with Sonatrach
    is for 200 million cubic feet per day of sales gas. Three product
    pipelines are required to transport sales gas, condensate and LPG
    products to the national grid system that lies 140 km to the west of the
    block. A fourth product pipeline to transport an oil stream will tie into
    existing infrastructure within the Berkine basin. FCP and Sonatrach
    subsequently agreed to modify the design of the product pipelines to
    accommodate increased volumes from the planned second and third phases of
    development in the CAFC as part of an integrated block development
    strategy. Current development plans are targeting in excess of 300 MMCF/D
    sales gas with up to 65 MB/D of liquids.

    The Gas Marketing Agreement was agreed with Sonatrach in November 2006
    and was attached to the MLE development plan. The purpose of the Gas
    Marketing Agreement is to specify and clarify the terms of the PSC
    relating to the long-term marketing of quantities of dry gas from
    Block 405b. It is proposed that the key commercial terms contained in the
    Gas Marketing Agreement will be incorporated into the Gas Agreement to be
    entered into between the Company and Sonatrach which will replace the Gas
    Marketing Agreement. FCP has entrusted the marketing of all gas from the
    405b block to Sonatrach and in return will receive a well head price net
    of transportation costs based on a southern European gas pricing formula.
    FCP is in discussions with Sonatrach for all liquids production from
    Block 405b to be marketed by Sonatrach. Liquids are anticipated to be
    sold at international product prices less a marketing fee. The Gas
    Agreement will be subject to certain conditions precedent, including
    securing financing satisfactory to FCP, the arrangement by Sonatrach of
    firm pipeline capacity downstream of the point of transmission and the
    execution of certain collateral agreements such as project contracts and
    liquids and condensate sales agreements.

    The Front End Engineering and Design (FEED) work for MLE gas plant,
    pipeline and gathering systems was completed in December 2007. One of the
    key deliverables of the FEED was to establish a cost estimate for the
    plant facility and pipelines, currently estimated at $1.0 billion gross
    (not including development drilling).

    4.  Other Assets

    Cash was placed in an escrow account equal to 12 months of interest
    payments on the convertible debentures. The funds are required to be
    released to the convertible debenture holders if the Company is unable to
    meet its interest obligations, otherwise the cash will remain in escrow
    for the life of the debentures. The Company does not expect to draw on
    these funds in 2008.

    5.  Property, plant and equipment:

                                                      Accumulated   Net Book
    ($ thousands)                              Cost   Depreciation     Value
    -------------------------------------------------------------------------
    2007
      Petroleum and natural gas
       properties                          $ 727,863   $       -   $ 727,863
      Office furniture and equipment           4,264       1,084       3,180
    -------------------------------------------------------------------------
                                             732,127       1,084     731,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    2006
      Petroleum and natural gas
       properties                          $ 537,772   $       -   $ 537,772
      Office furniture and equipment           2,840         493       2,347
    -------------------------------------------------------------------------
                                             540,612         493     540,119
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the year, the Company capitalized $13.7 million (2006 -
    $10.1 million) of overhead charges relating directly to the exploration
    and development activities in Algeria.

    6.  Convertible debentures:

    On December 14, 2007, the Company issued $267,000,000 of convertible
    debentures with a face value of $100,000 per convertible debenture that
    mature on November 29, 2012, and bear interest at 9% per annum paid
    semi-annually on May 29 and November 29 of each year with the first
    payment occurring in 2008. The convertible debentures are convertible at
    the option of the holder into shares at the conversion price of $4.20
    (C$4.06) per share. During 2007, no convertible debentures were
    converted.

    The convertible debentures are not redeemable on or before December 28,
    2010. On or after December 29, 2010 and prior to maturity, the
    convertible debentures may be redeemed in whole or in part from time to
    time at the option of the company if the market price of the shares
    exceeds 145% of the conversion price for more than 20 out of
    30 consecutive trading days plus accrued interest.

    The following table sets forth a reconciliation of the convertible
    debentures activity:

                                                       Liability     Equity
    ($ thousands)                                      Component   Component
    -------------------------------------------------------------------------
    December 14, 2007 issuance                         $ 267,000   $       -
    Portion allocated to equity                          (32,220)     32,220
    Issue costs                                          (12,882)     (1,767)
    Accretion of non cash interest expense                   691           -
    -------------------------------------------------------------------------
    Balance, December 31, 2007                         $ 222,589   $  30,453
    -------------------------------------------------------------------------

    No cash interest was paid during the period.

    7.  Asset retirement obligations:

    The Company has an obligation to abandon its petroleum and natural gas
    wells at the end of their useful lives provided Sonatrach does not elect
    to continue production after the hydrocarbon contract expiry date. The
    current present value of this obligation has been projected using
    estimates of the future costs and the timing of abandonment. At
    December 31, 2007 the Company estimated the present value of its asset
    retirement obligations to be $3.2 million (2006 - $0.7 million) based on
    a future liability of $25.1 million (2006 - $2.8 million). These costs
    are expected to be incurred around 2030 near the end of the exploitation
    phase under the Algerian hydrocarbon contract. To calculate the present
    value, a credit-adjusted risk-free discount rate of 7% was used to
    September 30, 2007 and 12% from October 1, 2007, with an inflation rate
    of 2%.

    The following table sets forth a reconciliation of the asset retirement
    obligation:

    ($ thousands)                                           2007        2006
    -------------------------------------------------------------------------
    Balance, beginning of year                         $     687   $     436
    Increases due to:
      Additions                                              353         215
      Revisions                                            2,123           -
      Accretion                                               62          36
    -------------------------------------------------------------------------
    Balance, end of year                               $   3,225   $     687
    -------------------------------------------------------------------------

    8.  Capital stock:

    (a) Issued share capital:

                                                      Number of     Amount
                                                        Shares  ($ thousands)
    -------------------------------------------------------------------------
    Common shares:
      Balance, December 31, 2005                     202,847,594   $ 484,694
        Issued on public offering(i)                  19,445,636     150,941
        Issued on exercise of employee stock options   1,393,100       2,735
        Transfer from contributed surplus on
         exercise of stock options                             -       1,560
        Issue costs                                            -      (7,997)
    -------------------------------------------------------------------------

      Balance, December 31, 2006                     223,686,330   $ 631,933
        Issued on public offering(ii)                 30,000,000     135,672
        Issued on exercise of employee
         stock options                                   932,700       1,516
        Transfer from contributed surplus on
         exercise of stock options                             -         687
        Issue costs                                            -      (6,551)
    -------------------------------------------------------------------------
      Balance, December 31, 2007                     254,619,030   $ 763,257
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i)  In April 2006, the Company issued 19,445,636 common shares for gross
         proceeds of $150.9 million (9,990,178 common shares at
         (pnds stlg) 4.40 per share and 9,545,458 common shares at C$9.00 per
         share). The issue costs were $8.0 million.

    (ii) On April 24, 2007 the Company issued 30,000,000 common shares for
         gross proceeds of $135.7 million at a price of C$5.08 per common
         share. The issue costs were $6.5 million.


    (b) Employee stock options:

    The Company has up to 10% of its issued and outstanding common shares
    available for issuance pursuant to its Stock Option Plan. Stock options
    granted under the plan have a term of five years and vesting terms are
    determined at the discretion of the Board, ranging between two and three
    years. The exercise price of each option is equal to the closing market
    price of the shares on the date preceding the date of the grant. The
    following table summarises the changes in stock options outstanding
    during the years ended December 31, 2007 and 2006:

                                                                    Weighted
                                                                      Avg.
                                                       Number of    Exercise
                                                        Options      Price
    -------------------------------------------------------------------------
    Outstanding, December 31, 2005                     9,132,033     C$ 4.95
      Granted                                          1,546,000        9.00
      Exercised                                       (1,393,100)       2.21
      Forfeited                                         (149,333)       9.75
    -------------------------------------------------------------------------
    Outstanding, December 31, 2006                     9,135,600     C$ 5.98
      Granted                                         10,097,180        4.02
      Exercised                                         (932,700)       1.78
      Forfeited                                       (1,493,333)       7.41
    -------------------------------------------------------------------------
    Outstanding, December 31, 2007                    16,806,747     C$ 4.90
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following table summarizes information about the options outstanding
    and exercisable at December 31, 2007:

                             Options Outstanding         Options Exercisable
                    ---------------------------------------------------------
                                  Weighted
                                   Average     Weighted              Weighted
                                  Remaining    Average               Average
       Range of                  Contractual   Exercise              Exercise
    Exercise Price    Options       Life        Price     Options     Price
    -------------------------------------------------------------------------
    C$ 2.36- 2.98    5,388,000    4.6 years      2.77      445,000      2.59
    C$ 4.72- 4.72    2,117,500    0.8 years      4.72    2,117,500      4.72
    C$ 5.07- 6.39    7,616,580    3.7 years      5.59    3,010,734      6.26
    C$ 7.22- 8.59      744,000    2.7 years      7.60      507,335      7.70
    C$ 8.65-10.50      766,667    3.2 years      9.34      340,004      9.34
    C$11.10-15.77      174,000    1.5 years     12.17      174,000     12.17
    -------------------------------------------------------------------------
                    16,806,747    3.5 years    C$4.90    6,594,573    C$5.94
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (c) Stock-based compensation expense:

    For the year ended December 31, 2007, the Company recorded $7.5 million
    (2006 - $6.3 million) of stock-based compensation expense with a
    corresponding increase in contributed surplus. Of the total stock-based
    compensation expense, the Company has capitalized $4.3 million for the
    year ended December 31, 2007 (2006 - $3.7 million).

    The fair value of the options granted for the year ended December 31,
    2007 was estimated to be C$1.95 (2006 - C$4.54) per option and was
    determined using the Black-Scholes option pricing model with the
    following assumptions: expected volatility of 61% (2006 - 64%), risk-free
    interest rate of 3.2% (2006 - 4.0%) and expected lives of 4 years (2006 -
    4 years).

    (d) Contributed surplus:

    The changes in the contributed surplus balance are as follows:

    ($ thousands)                                           2007        2006
    -------------------------------------------------------------------------
    Balance, beginning of year                         $  19,186   $  14,430
      Options granted                                      7,456       6,316
      Options exercised                                     (687)     (1,560)
    -------------------------------------------------------------------------
    Balance, end of year                               $  25,955   $  19,186
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (e) Per share amounts:

    The income (loss) per share is based on the weighted average shares
    outstanding for the year. The basic and diluted weighted average shares
    outstanding for the year ended December 31, 2007 was 244,973,961 (2006 -
    217,281,211).

    9.  Income taxes:

    Income tax expense differs from the amount that would be computed by
    applying the Canadian federal and provincial statutory income tax rates
    to the loss for the year as follows:

    ($ thousands)                                           2007        2006
    -------------------------------------------------------------------------

    Income (loss) for the year before taxes            $ (11,347)  $   3,492

    Statutory tax rate                                     32.1%       34.5%

    Expected income tax expense (recovery)                (3,645)      1,205
    Increase (decrease) resulting from:
      Future income tax liability on
       Algerian subsidiary                                   348      18,200
      Non-deductible stock-based compensation expense      1,017         914
      Change in valuation allowance and other              2,628      (2,119)
    -------------------------------------------------------------------------
                                                       $     348   $  18,200
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The components of the net future income tax asset and liability at
    December 31 are summarised below:

    ($ thousands)                                           2007        2006
    -------------------------------------------------------------------------
    Net future income tax asset:
      Property, plant and equipment                    $   4,742   $   7,200
      Asset retirement obligations                           806           -
      Operating losses                                     8,084       4,829
      Issue costs                                          6,704       3,818
    -------------------------------------------------------------------------
                                                          20,336      15,847
      Less: valuation allowance                          (20,336)    (15,847)
    -------------------------------------------------------------------------
                                                               -           -
    Net future income tax liability:
      Property, plant and equipment                      (18,548)    (18,200)
    -------------------------------------------------------------------------
                                                       $ (18,548)  $ (18,200)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The operating losses expire over the following years:

                                                                ($ thousands)

    2008                                                           $     351
    2009                                                                 912
    2010                                                               2,081
    2011                                                               4,691
    Thereafter                                                     $  24,389


    10. Financial instruments:

    The Company is exposed to foreign currency fluctuations as it holds
    Canadian dollar, British pound and Euro cash and short-term deposits and
    accounts payable. In addition, a portion of the Company's operating
    activities are conducted in Canadian dollars. There are no exchange rate
    contracts in place.

    The fair value of cash and cash equivalents, accounts receivable and
    accounts payable and accrued liabilities approximate their carrying
    values due to their short terms to maturity. The fair value of the
    convertible debentures at December 31, 2007 was approximately
    $267.0 million.

    11. Leases:

    The Company is committed to office and equipment leases over the next
    five years as follows:

                                                                ($ thousands)

    2008                                                           $   2,466
    2009                                                               1,928
    2010                                                                 868
    2011                                                                 260
    2012                                                                   -

    In addition, the Company is obligated to pay an annual training bonus in
    the amount of $150 thousand for the duration of the contract, including
    exploitation periods.

    12. Segmented information:

    The Company's activities are conducted in two geographic segments: Canada
    and Algeria. All activities relate to exploration and development of
    petroleum and natural gas in Algeria.

    ($ thousands)                             Canada     Algeria       Total
    -------------------------------------------------------------------------
    2007
      Revenue                             $    5,376  $        -  $    5,376
      Expenses and taxes                      17,071           -      17,071
    -------------------------------------------------------------------------
      Loss for the year                   $  (11,695) $        -  $  (11,695)
    -------------------------------------------------------------------------
      Capital expenditures                $    1,172  $  183,574  $  184,746

      Assets                              $  299,715  $  732,201  $1,031,916

    2006
      Revenue                             $    6,473  $        -  $    6,473
      Expenses and taxes                      21,181           -      21,181
    -------------------------------------------------------------------------
      Loss for the year                   $  (14,708) $        -  $  (14,708)
    -------------------------------------------------------------------------
      Capital expenditures                $    1,941  $  160,352  $  162,293

      Assets                              $  110,486  $  539,567  $  650,053

    





For further information:

For further information: First Calgary Petroleums Ltd.: Jeffrey P.
Angel, Vice President Corporate Communications and Investor Relations, Tel:
(403) 264-6697; Other Contacts: James Henderson, Pelham Public Relations, Tel:
+44 (0) 20 7743 6673; Carina Corbett, 4C - Burvale Limited, Tel: +44 (0) 20
7559 6710; Mandy Dinning, Hill & Knowlton Canada, Tel: (403) 268-7858;
Nominated Advisers: Richard Swindells/David Nabarro, Nabarro Wells & Co.
Limited, Tel: +44 (0) 20 7710 7400; Further information is also available on
the First Calgary Petroleums Ltd. website: www.fcpl.ca

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FIRST CALGARY PETROLEUMS LTD.

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