First Calgary Petroleums Ltd. 2006 Year End Results



    TSX: FCP
    AIM: FPL

    CALGARY, March 28 /CNW/ - First Calgary Petroleums Ltd. (FCP or the
Company) announces its results for the year ended December 31, 2006.

    
    HIGHLIGHTS

    -   Approval by Government of Algeria for MLE field development

    -   Gas plant of up to 400 MMcf/d on track for late 2009 startup.

    -   Gas marketing agreement for Block 405b secured at competitive price

    -   Tendering of engineering and design contract underway - award planned
        for second quarter 2007

    -   Progressing financing plan including project debt for MLE
        development

    -   2006 drilling programme confirms a second and significant reserves
        area (the central area field complex), which is nearly double the
        size of the MLE proved and probable reserves

    -   Two year extension of the PSC granted for appraisal of the central
        area and to submit commerciality reports

    -   $90 million exploration and appraisal drilling programme scheduled
        for 2007

    Richard Anderson, President and CEO commented:

    "FCP is now firmly on the way to developing its large reserve base.
Following completion of the initial development we will have the necessary
infrastructure in place to expand this to the required capacity to develop
fully our reserves base, with the potential to generate material returns for
shareholders."

    There will be an analyst presentation on Wednesday 28th March 2007 at the
offices of Pelham PR at No1 Cornhill London, EC3V 3ND starting at 9:30 a.m.
The updated corporate presentation will be available from the Company's
website at www.fcpl.ca.
    FCP has scheduled a conference call on Wednesday 28th March 2007 at
3:00 p.m. BST for investors and analysts. To participate in the conference
call, please dial:

    UK:            +44 (0) 208 515 2305     (3:00 p.m. BST)
    North America: +1 480 293 1744          (10:00 a.m. ET)

    An archived recording of the conference call will be available for five
days by calling:

    UK:            +44 (0) 207 190 5901     Passcode: 135374
                                            followed by the number sign
    North America: +1 303 590 3030          Passcode: 3712507
                                            followed by the number sign

    First Calgary Petroleums Ltd. is an oil and gas exploration company
actively engaged in international exploration and development 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).

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

    PRESIDENT'S REPORT TO SHAREHOLDERS

    2006 was a very active year for FCP resulting in a number of significant
milestones being achieved as the Company continues to mature into a full cycle
exploration and production company. FCP's two principal initiatives for 2006
were:

    -   Establish commerciality for the Ledjmet Block 405b reserves
        commencing with the MLE field, and
    -   Increase proved and probable reserves through an active exploration
        and appraisal drilling programme.
    

    MLE Field Commercialisation and Development
    Mr. Shane O'Leary, FCP's Chief Operating Officer, joined the Company
early in 2006 with an initial mandate to advance the MLE reserves into a
commercial development. Over the past 15 months, Mr. O'Leary has assembled and
led a team of experienced professionals who have worked closely with
Sonatrach, Algeria's national oil company and FCP's partner in Block 405b. In
February 2007, the Government of Algeria granted formal consent to FCP and
Sonatrach to proceed with the development and production of the MLE field.
Achieving this milestone clears the path for FCP's transition into a full
cycle exploration and production company. The MLE development will give FCP a
significant revenue base.
    Another significant milestone achieved during 2006 and integral to the
MLE development application, was FCP's securing of a natural gas marketing
agreement for Block 405b, thereby crystallising the potential value of FCP's
gas. In November 2006, FCP signed a long term take or pay gas marketing
agreement with Sonatrach. Pursuant to the agreement, Sonatrach will market all
natural gas production from Block 405b and FCP will receive its revenues from
gas production using a pricing formula that is representative of natural gas
prices in southern Europe, less transportation charges. FCP is extremely
pleased with this arrangement and the competitive price it will receive.
    Other critical components of the commercialization process concluded
during 2006 included reaching agreement with Sonatrach and Algeria's oil
Ministry in respect of reserves, production profiles, general facilities
design and the block evacuation pipelines required to tie into Algeria's
national oil and natural gas pipeline grids.
    The MLE development approval represents a major accomplishment for FCP,
following our highly successful exploration programme since the acquisition of
the block in 2001. While the stand alone MLE gross reserves are large,
exceeding 1.3 trillion cubic feet of natural gas equivalent (Tcfe), or
223 million barrels of oil equivalent, the MLE development represents only the
first stage of a planned multi-phase development for Block 405b and gives FCP
the required launch-pad to develop fully its overall reserve base. Following
completion of the MLE development FCP together with Sonatrach will operate the
only cryogenic gas plant facility and gas export pipeline within the highly
prolific Berkine Basin.
    The front end engineering and design ("FEED") work was tendered in
January 2007 and the engineering, procurement and construction ("EPC")
contract is scheduled to be awarded by the end of 2007. This is truly an
exciting project for FCP and the Company is committed to achieving its
aggressive target of first production around the end of 2009.
    This facility should provide FCP a significant strategic advantage as the
Company pursues future growth opportunities within the basin and complementary
to Block 405b.

    Exploration and Appraisal Drilling Programme
    FCP undertook an active drilling programme during 2006, incurring capital
expenditures of $162 million and drilling nine wells on Block 405b acreage
situated west of the MLE field. Of the nine wells drilled, three locations
were exploratory and six were follow-up appraisal wells to prior discoveries
the Company made in the central area of the block.
    The 2006 drilling programme had two objectives. Firstly, it was designed
to complete an extensive exploration programme for the central, west and north
areas of the block prior to the end of the five year exploration period
(December 30, 2006), under the Production Sharing Contract. The exploration
results during 2006 did not add to the Block 405b reserves, although the ZER 2
well drilled in 2007 to the north of the block and currently being tested may
result in a new discovery.
    The second objective was to commence appraising the discovery wells
previously drilled in the central area of the Block, including the LEC, LES,
LEW, MZLN and MZLS fields.
    This programme has been successful. The six well programme has culminated
in the establishment of a second and significant reserves area outlined in the
central area of the block and referred to as the Central Area Field Complex
("CAFC"). The CAFC holds a number of segregated but contiguous reservoirs
containing an oil, gas condensate and dry gas reserve base that is
approximately double the size of the MLE reserves. FCP and Sonatrach have been
granted an additional two years to fully appraise the CAFC and submit a
commercial development plan. The Company plans to complete its appraisal of
the CAFC during 2007 and immediately thereafter prepare a commercial
development plan. Following the 'front-end' investment in MLE field plant and
pipelines, the CAFC development will very efficiently integrate with MLE and
enhance the block development economics.
    Also during 2006, FCP completed its geological review and assessment of
the reserve potential of Rhourde Yacoub Block 406a also in the Berkine Basin.
While the Block 406a drilling resulted in some interesting reserves
indications, management ranked the Block 405b reserve potential as being much
greater and therefore elected to relinquish all rights to Block 406a and focus
the Company's efforts and resources on Block 405b.

    Reserves
    Outlined in the Management's Discussion and Analysis are details of the
Company's gross and net proved, probable and possible reserves as at December
31, 2006. The independent engineering estimates for gross proved and probable
reserves are broadly unchanged from 2005 at approximately 4 Tcfe (or 640
million of barrels of oil equivalent), a large accumulation of reserves by
virtually any standard.

    Finance
    The Company finished 2006 with working capital of $83 million after
incurring capital expenditures during the year totaling $162 million, and an
equity raising which provided net proceeds of $142 million. FCP's capital
expenditure for the current year is estimated at approximately $150 million,
comprising drilling and seismic appraisal activity in the central area,
together with FEED work and the purchase of certain long-lead items for the
MLE development. Subject to the outcome of the FEED work, the gross cost of
the MLE field development is estimated at $1.0-1.3 billion of which FCP's
share is 75%. The range of costs depends upon the capacities of plant and
pipelines ultimately agreed upon.
    Prior to awarding the EPC contract, the Company needs to have cash and
financing commitments in place of up to $1 billion to fund its share of the
MLE development. The significant capital requirements are reflective of the
Company's large reserve base and the outstanding drilling success it has
achieved. Securing these financing requirements is a priority for 2007, and
accordingly work is well underway on the financing plan. Potential financing
sources are being reviewed and evaluated with the Company's financial advisor
Deutsche Bank and debt advisor Citigroup, and include project debt, the
issuance of new equity and other securities and joint venture arrangements.

    Board and Management
    As FCP continues to progress from an exploration company to a full cycle
exploration and production company it has been reviewing the structure of its
Board and Management.
    Regarding the Board, a number of changes are planned. Chief Operating
Officer Mr. Shane O'Leary will be invited to join the Board at the forthcoming
Annual Meeting of shareholders in June this year. In addition, the Board is
reviewing the appointment of new independent non-executive directors.
    Earlier in the year, a restructuring of senior management was undertaken,
in line with the changing emphasis of the Company's activities. Under Mr.
O'Leary's direction, Mr. Martin Layzell heads up a new ventures group, Mr.
Roger Whittaker heads up our subsurface exploration and development group, Mr.
Garry Worth leads our business services groups and Mr. Jim Corbett heads up
our projects group.

    Outlook
    The next couple of years promise to be very exciting for the Company. The
MLE development is now underway and proceeding rapidly. We have made great
strides in getting the team in place to execute the project successfully with
our partner Sonatrach. What FCP has achieved is unique in Algeria,
particularly for a small upstream company - discovery, successful appraisal
and now the approval and commencement of development of a major gas and
liquids project of strategic significance in the region.
    We are looking at innovative financing solutions to facilitate the block
development whilst maximizing value for shareholders; in addition we are
increasing our focus on seeking new venture opportunities to ensure we can
continue to grow.

    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, 2006 and 2005.
In this discussion and analysis $ refers to the U.S. dollar and C$ refers to
the Canadian dollar.

    OPERATIONAL REVIEW
    2006 was a year of achievement of key milestones towards
commercialisation and intense drilling activity on Block 405b in the Berkine
Basin of Algeria.
    The Ledjmet Block 405b will be developed in two or more stages, starting
with the MLE Field, followed by the commercial discoveries in the central and
potentially northern part of the block.

    Commercialisation - MLE
    This past year's commercialisation activities culminated in FCP receiving
approval from the Algerian regulatory authority ALNAFT for the Development
Plan for the MLE oil and gas field on Block 405b. This approval signifies a
key milestone reached for First Calgary as it grows into an oil and gas
development and production company in addition to its focus on exploration.
During the year and the subsequent period to date, some of the key activities
that contributed to our progress were the finalization of the development
plan, negotiation of a gas marketing contract, and the continued building of a
strong project development team.
    The long term take or pay Gas Marketing Agreement with Sonatrach, signed
in November 2006, provides First Calgary with the commercial basis to realize
revenues from the gas production on Block 405b by providing a fair market
price for FCP's interest in gas production. Under the agreement, Sonatrach
will market the total natural gas production from Block 405b using a price
formula linked to the price of European oil products. The graph in Figure 1
plots some key historical published European benchmark gas prices with Brent
oil. The Block 405b price that FCP will receive is net of transportation costs
to these European markets.
    Readers are referred to Figure 1 in the press release which is available
on the Company's website at www.fcpl.ca.
    The MLE Field is the first stage of an overall integrated Block 405b
development plan.
    The gross reserves associated with the MLE Field, as estimated by
independent oil and gas engineers, are shown in Figure 2. MLE represents
approximately one-third of the proved and probable reserves of the block, with
the balance expected to be developed in later stages.

    
    Figure 2: Gross MLE Reserves as at December 31, 2006


                            Gross Recoverable Reserves
                            --------------------------
                                        Total Equivalent
                          Gas  Liquids      Gas      Oil
                         (Bcf) (MMBbls)   (Bcfe) (MMBoes)
    -----------------------------------------------------
    Proved Undeveloped    402       52      714      119
    Probable              376       41      622      104
    -----------------------------------------------------
    Proved and Probable   778       93    1,336      223
    Possible              567       73    1,005      168
    -----------------------------------------------------
    Proved, Probable
     and Possible       1,345      166    2,341      390
    -----------------------------------------------------
    -----------------------------------------------------
    Notes:
    (1)  The gross and net recoverable reserves volumes are estimated under
         the constant price case. The constant product prices were based on
         the December 31, 2006 spot price of Brent oil, which was $58.93 per
         barrel.
    (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 liquids and
         MMBoes means millions of barrels of oil equivalent.
    

    The recent development plan approval is for the construction and
operation of a gas plant and facilities, field gathering system and export
pipelines designed to process 230 million cubic feet of raw gas per day on a
gross basis and associated natural gas liquids and oil. This first stage is
planned on a reserve base approximately equivalent to the MLE Field's proved
and probable reserves of 1.3 trillion cubic feet of gas equivalent, or
approximately 223 million barrels of oil equivalent.
    Readers are referred to Figure 3 which is available on the Company's
website at www.fcpl.ca.
    Given the significant amount of recoverable reserves on the block in
addition to the MLE Field, First Calgary is currently evaluating gas plant
expansion up to 460 million cubic feet per day of raw gas and associated
natural gas liquids and oil. This expansion will either be included in the
initial plant design or the existing plant will be duplicated as a second
train. The macroeconomic factors are in FCP's favor to produce more gas. On
the demand side, the appetite for gas in Europe is increasing, and is expected
to continue this trend. The chart in Figure 4 shows a sizable gap between
supply and demand opening up in the European Gas Trading Area by 2010. On the
supply side, Algeria is a key supplier into the southern European gas market
through trans-Mediterranean pipelines and its LNG capabilities. The
trans-Mediterranean pipeline system has plans for new pipelines and expansion
to existing ones. Coupled with increased export pipeline capacity is Algeria's
stated objective to increase its annual gas export from 63 billion cubic
metres per year currently to 85 billion cubic metres by 2010.
    Readers are referred to Figure 4 which is available on the Company's
website at www.fcpl.ca.
    The Block 405b gas plant will be the first cryogenic extraction facility
and gas export system in the Berkine Basin. FCP believes there is important
strategic value to this plant, given the significant undeveloped gas reserves
in the basin and favorable macroeconomics regarding future natural gas in the
region.
    In order to achieve first production by the end of 2009 FCP has
established an aggressive project timeline, as shown in Figure 5. Some of the
key project deliverables for 2007 are completing the front end engineering and
design (FEED) work, identifying and ordering long-lead items, and tendering
and awarding the engineering, construction and procurement (EPC) contract.
    Readers are referred to Figure 5 which is available on the Company's
website at www.fcpl.ca.

    Commercialisation - Central Area Field Complex
    In December 2006 First Calgary received an extension under the PSC to
complete its appraisal activities of the Central Area Field Complex ("CAFC")
and to submit commerciality reports and apply for exploitation permits
thereon. The CAFC is a series of discoveries in the central part of the block
aggregated as one potential commercial development. FCP has an aggressive plan
to complete substantially the appraisal of the CAFC in 2007 and will be
utilizing two rigs for an appraisal drilling programme of up to nine wells.
    FCP has formulated a preliminary development plan, based on information
to date, that envisages the construction of oil facilities to handle the
liquids production, and gathering facilities to bring the CAFC gas into the
MLE gas plant. FCP believes production from the CAFC will commence at or
around the same time as first production from the MLE Field. FCP is currently
in discussions with its partner, Sonatrach, on a Synergy Development Plan to
integrate the exploitation of the CAFC and MLE Field.

    Block 405b Reserves
    The total block reserves and present values of future net revenues, as
estimated by DeGolyer and MacNaughton, independent oil and gas engineers, are
shown in Figures 6 and 7.

    
    Figure 6: Block 405b Reserves as at December 31, 2006

                              Gross Recoverable Reserves
                              --------------------------
                                        Total Equivalent
                          Gas  Liquids      Gas      Oil
                         (Bcf) (MMBbls)   (Bcfe) (MMBoes)
    -----------------------------------------------------
    Proved Undeveloped    657       92    1,206      201
    Probable            1,328      218    2,641      440
    -----------------------------------------------------
    Proved and Probable 1,985      310    3,847      641
    Possible            2,303      463    5,078      846
    -----------------------------------------------------
    Proved, Probable
     and Possible       4,288      773    8,925    1,487
    -----------------------------------------------------
    -----------------------------------------------------


                                Net Recoverable Reserves
                                ------------------------
                                        Total Equivalent
                          Gas  Liquids      Gas      Oil
                         (Bcf) (MMBbls)   (Bcfe) (MMBoes)

    -----------------------------------------------------
    Proved Undeveloped    170       24      313       52
    Probable              231       39      464       77
    -----------------------------------------------------
    Proved and Probable   401       63      777      130
    Possible              262       57      603      100
    -----------------------------------------------------
    Proved, Probable
     and Possible         663      119    1,380      230
    -----------------------------------------------------
    -----------------------------------------------------
    Note: The notes pertaining to reserves in Figure 2
          apply to the reserves in Figure 6.
    

    First Calgary completed an aggressive drilling programme in 2006. The
drilling programme was executed in the CAFC and on the ZER Structure in the
northwest corner of Block 405b. The programme was designed to fulfill two
objectives: to appraise previous discoveries and to test new exploration
concepts. As a result of the drilling programme FCP was able to define the
limits of its previous discoveries and successfully test new exploration
concepts, especially for the TAGI zone which had not been a primary focus for
exploration in previous years. Prior years' drilling focused on drilling key
structural elements in the central area and as such was very successful at
identifying a large hydrocarbon potential. The 2006 drilling and testing
programme, which consisted of nine wells drilled and 54 production tests,
effectively constrained the hydrocarbon potential of the CAFC and greatly
improved FCP's understanding of the reserve potential and deliverability of
the key reservoirs. An interesting aspect, that is a direct result of the
drilling and testing programme, was the recognition that the CAFC is more oil
and condensate rich than previously envisioned. In summary, during 2006, new
pools were added, existing pools were either expanded or contracted, and some
reservoirs were downgraded in reserve potential due to the results of the
testing programme. Proved reserves increased due to new pools in MZL and LES
TAGI. Probable 2P reserves did not move much year over year as downgraded
reservoirs were offset by new pool discoveries. The possible reserves
decreased due to recalibration of reservoir parameters and removal of
non-commercial reservoirs from reserve status.

    
    Figure 7:  Block 405b Present Value of Future Net Revenues

    -------------------------------------------------------------------------
                                         Discounted at (%/year)
                        -----------------------------------------------------
                            0        5        8        10       15       20
                        -------- -------- -------- -------- -------- --------
                         (M US$)  (M US$)  (M US$)  (M US$)  (M US$)  (M US$)
                        -----------------------------------------------------
    Proved Undeveloped    1,255      711      493      379      173       43
    Probable              2,172    1,309      963      783      455      247
    -------------------------------------------------------------------------
    Total Proved and
     Probable             3,427    2,020    1,456    1,162      628      290
    Possible              3,173    1,978    1,518    1,277      842      561
    -------------------------------------------------------------------------
    Total Proved,
     Probable
     and Possible         6,600    3,998    2,974    2,439    1,470      851
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Notes:
    (1)  The present values of future net revenues are estimated under the
         constant price case. The constant product prices were based on the
         December 31, 2006 spot price of Brent oil, which was $58.93 per
         barrel.
    (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.
    (4)  Present values stated before Algerian Windfall Profits Tax.
    

    It is important to note that the present values of future net revenues
associated with Block 405b are directly related and highly sensitive to
commodity prices. In addition, since the Block 405b Production Sharing
Contract (PSC) includes a rate of return mechanism, the present values of
future net revenues are less sensitive to changes in capital costs.
    Given the uncertainty around how the Algerian Windfall Profits Tax (WPT)
and FCP's compensating stabilization rights under the PSC will apply to Block
405b, these items have been excluded from the calculations of the present
values of future net revenues.
    The present value of FCP's share of proved and probable reserves
discounted at 10% per annum was 1,162 million, down from 1,462 million at the
end of 2005 on the constant price case. The reduction is primarily due to a
lower gas price and a flatter but longer production plateau. Also, higher
capital costs are now assumed due to inclusion of export pipelines as a
project asset, and rising industry costs. These higher costs were partially
offset by higher net reserves allocated under the PSC production entitlement
mechanism.

    Exploration and Appraisal
    -------------------------
    The following table summarises the wells and related activity in 2006.


    Figure 8: 2006 Exploration and Appraisal Well Activities

    
    Well                Target                           Results
    ----                ------                           -------
    LES-3   -  Spud in 2005 as a TAGI and    -  New pool discoveries in TAGI
               Lower Devonian test, and         and Lower Devonian
               reached final depth of 4480
               metres in 2006
    LEW-2   -  TAGI and Lower Devonian       -  Tested northern limit of
               test, drilled to a depth of      LEW-1 structure. Results of
               4532 metres                      well significantly limited
                                                the reserve potential of the
                                                structure
    ZER-1   -  Drilled to a depth of         -  Tested hydrocarbons in Lower
               4462 metres as a TAGI and        Devonian
               Lower Devonian test           -  Decision to drill ZER-2
                                                appraisal well to be drilled
                                                to evaluate commerciality was
                                                confirmed based on results
    GSME-1  -  TAGI and Lower Devonian       -  Hydrocarbons were tested in
               test, drilled to a depth         two zones at non-commercial
               of 4373 metres with the          flow rates
               objective of testing a        -  Confirmed hydrocarbon
               structure in the south           saturation within a Lower
               eastern limit of the block       Devonian stratigraphic play
                                                southward to the block
                                                boundary that is being
                                                considered for future
                                                appraisal work
    GSM-1   -  TAGI and Lower Devonian       -  Hydrocarbons tested from
               test, drilled to a depth of      multiple geological zones
               4463 metres with the          -  New oil pool discovery in the
               objective of testing a           Devonian F6-1 zone
               separate structure at the
               south limit of the block
    LES-4   -  TAGI and Lower Devonian       -  Hydrocarbons tested from
               test, drilled to a depth of      multiple geological zones;
               4466 metres, specifically        TAGI zone wet due to
               targeting the TAGI               faulted section
    MZLS-2  -  TAGI and Lower Devonian       -  Hydrocarbons tested from
               test, drilled to a depth of      the TAGI zone, representing
               4492 metres                      new pool discovery
                                             -  Defined western flank limit
                                                of the Lower Devonian pool
                                                discovered in MZLS-1
    MZLN-2  -  TAGI and Lower Devonian       -  Defined two new pool
               test, drilled to a depth of      discoveries in TAGI and
               4473 metres                      Lower Devonian
    MZLN-3  -  Drilled to a depth of         -  Testing is now in progress
               4471 metres                      on this recently cased well
                                             -  Six zones identified for
                                                testing
    ZER-2   -  TAGI and Lower Devonian       -  Testing is now in progress
               test, drilled to a depth of      on this recently cased well
               4562 metres in 2007, based    -  Five zones identified for
               on results of shows in ZER-1     testing
    LES-6   -  TAGI and Lower Devonian test, -  Testing is now in progress
               drilled to a depth of            on this recently cased well
               4519 metres, primarily as an
               appraisal well to LES-3 TAGI
               discovery
    LEC-2   -  TAGI and Lower Devonian       -  Testing programme is
               test, drilled to a depth of      currently being designed
               4491 metres
    LEW-3   -  TAGI and Lower Devonian       -  Testing programme is
               test, drilled to a depth of      currently being designed
               4520 metres
    

    Readers are referred to Figure 9: Menzel Ledjmet Block 405b which is
available on the Company's website at www.fcpl.ca.
    As defined within the Block 405b PSC, it is stipulated that FCP can apply
for a work extension, for up to two years, to complete the appraisal of
discoveries made during the exploration phase of the PSC. The primary
exploration phase on Block 405b expired on December 31, 2006. During the
fourth quarter of 2006, FCP made application and was successful in acquiring
an appraisal area (Exploration Phase Extension) west of MLE, which has
subsequently been defined as the CAFC Appraisal Area.
    In addition, FCP was granted a work extension beyond the primary
exploration phase of Block 405b to complete the evaluation work on the ZER-2
wellbore. Upon successfully demonstrating a new pool(s) potential for
commercial development on the ZER structure, FCP will be allowed to apply for
and will be granted a discovery status and field outline to commence either
further appraisal or development work.

    FINANCIAL REVIEW

    
                                                2006        2005        2004
    -------------------------------------------------------------------------
    Net income (loss) before taxes          $  3,492    $ (7,571)   $ (6,565)
    Future income taxes                      (18,200)          -           -
                                      ---------------------------------------
    Net Loss                                 (14,708)     (7,571)     (6,565)
    

    First Calgary earned net income before taxes of $3.5 million in 2006
compared to losses in previous years due to the net result of a foreign
exchange gain, lower stock-based compensation costs expensed, and higher
interest income earned, offset by higher general and administrative costs, as
described in the following.
    The foreign exchange gain was $6.8 million and the majority of which was
realized in the second quarter of 2006 from converting the April equity
financing proceeds (denominated in C$ and British pounds) into U.S. dollars.
    A future income tax provision was recorded in the fourth quarter as a
result of a determination that the tax basis of Block 406a costs in FCP's
Algerian subsidiary have been impaired.

    
                                                2006        2005        2004
    -------------------------------------------------------------------------
    Interest                                $  6,473    $  3,013    $  1,290

    Interest income has trended higher over the last three years due to higher
market interest rates earned on short-term deposits and higher average cash
and cash equivalent balances on hand.


                                                2006        2005        2004
    -------------------------------------------------------------------------
    General and administrative              $ 10,154    $  5,908    $  4,648
    Less capitalized amount                    3,000       1,162         621
                                      ---------------------------------------
    Expensed                                $  7,154    $  4,746    $  4,027


    The increase in 2006 general and administrative costs of $4.2 million, or
72%, is primarily the result of rising employee levels required to manage and
operate the Algerian project and increasing project activities.
    The increase in 2005 general and administrative costs of $1.3 million, or
27%, primarily related to costs associated with the 2005 strategic review
process. In mid-2004 FCP began to capitalize certain general and
administrative costs incurred outside of Algeria.


                                                2006        2005        2004
    -------------------------------------------------------------------------
    Stock-based compensation                $  6,316    $  5,514    $  5,181
    Less capitalized amount                    3,668           -           -
                                      ---------------------------------------
    Expensed                                $  2,648    $  5,514    $  5,181


    Stock-based compensation increased by $0.8 million despite granting fewer
options in 2006 due to a higher value attached to options granted in 2006
compared to 2005. The Company's market price of its shares at the time of an
option grant has a significant effect on the value of a stock option. The
market price of FCP's shares was higher on average for option grants in 2006
compared to 2005. In addition, FCP began to capitalize certain stock-based
compensation costs relating to Algerian project personnel in 2006.


    Capital Expenditures                        2006        2005        2004
    -------------------------------------------------------------------------

    Drilling, completion and testing        $130,952    $ 50,587    $ 91,799
    Geological and geophysical                 3,745       1,605      10,690
    MLE commercialisation                      7,907       5,501         823
                                      ---------------------------------------
                                             142,604      57,693     103,312
    Block management, administration
     and corporate                            23,571       6,487       5,501
                                      ---------------------------------------
    Total capital expenditures               166,175      64,180     108,813

    Less non-cash expenditures
     (stock-based compensation, asset
     retirement provisions)                    3,882          70         204
                                      ---------------------------------------

    Net cash expenditures                   $162,293    $ 64,110    $108,609
    -------------------------------------------------------------------------
    

    Capital expenditures of $162.3 million in 2006 reflect a significant
level of activity undertaken by the Company in its field operations,
commercialisation and block management efforts. 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. Commercialisation
activities included the completion of various studies, commercialisation
proposals and time invested in reaching agreements with Sonatrach.
    The 2005 capital expenditures are lower than 2004 due to fewer rigs in
operation, one rig in 2005 (drilled five wells) compared with two in 2004
(drilled eight wells) and in 2004 FCP completed a 3D seismic programme over
the central area of the block.

    Liquidity and Capital Resources

    First Calgary had $82.7 million of working capital on hand as at
December 31, 2006 compared with $92.9 million at the end of 2005. Cash
balances and short-term investments were $108.5 million at the end of the
year. The Company has no credit or debt agreements in place.
    Given the nature of an exploration company, FCP's financial resources
fluctuate with the amount and timing of equity financings and its capital
programme. The change in the Company's working capital from December 31, 2005
is mainly the result of:

    
    -   Financing activities that generated $145.7 million from an April
        equity financing of 19,445,636 common shares ($142.9 million net of
        expenses) and the issue of 1,393,100 common shares (net proceeds of
        $2.7 million) from the exercise of employee stock options;
    -   Capital activities that used $162.3 million primarily for exploration
        and appraisal in Algeria; and
    -   A $6.8 million foreign exchange gain the majority of which was
        realized in the second quarter on the conversion of the April equity
        financing proceeds into U.S. dollars.
    

    Development of the Ledjmet Block 405b reserves through to commercial
production will require significant funding, with 75 percent being FCP's
share. To date, FCP has relied upon equity to fund its short-term operations
and capital programmes. 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 $1.0 - $1.3 billion (depending
on plant and pipeline sizes), and will mainly be incurred over the 2008 - 2009
period. These cost estimates will be refined by the MLE FEED work due to
commence shortly. Development cost estimates for the CAFC will be developed
during the year as appraisal work is completed. To date, no financing
arrangements have been entered to fund the Ledjmet development.
    The Company is listed on the Toronto Stock Exchange and the AIM market of
the London Stock Exchange. The diluted numbers of shares outstanding at the
following dates were:

    
                                          March 26, 2007   December 31, 2006
    -------------------------------------------------------------------------
    Common shares                            223,886,330         223,686,330
    Employee stock options                     9,035,600           9,135,600
    -------------------------------------------------------------------------
    Diluted shares outstanding               232,921,930         232,821,930
    -------------------------------------------------------------------------

    CONTRACTUAL OBLIGATIONS

    The company has the following contractual obligations outstanding as at
December 31, 2006:
                                           Payments Due by Period
    Contractual Obligations               (less than)
                                   Total      1 year   1-3 years   4-5 years
    -------------------------------------------------------------------------
    Operating Leases            $  2,156    $    689    $  1,260    $    207
    Drill Rig Contracts (1)        6,120       5,370         750           -
    Consulting Agreements          3,360       3,360           -           -
    -------------------------------------------------------------------------
                                $ 11,636    $  9,419    $  2,010    $    207
    -------------------------------------------------------------------------
    (1) Amounts are the minimum payments required under the rig contracts.


    SUMMARY OF QUARTERLY RESULTS

                                                     2006
    (000's of U.S. dollars)           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


                                                     2005
    (000's of U.S. dollars)           Q4          Q3          Q2          Q1
    -------------------------------------------------------------------------
    Interest income             $    887    $  1,039    $    428    $    659
    Income (loss)                 (4,181)      1,797      (2,467)     (2,720)
    Income (loss) per share        (0.02)       0.01       (0.01)      (0.01)

    Total Assets                 482,776     478,103     475,286     375,384
    

    The net loss in Q4 2006 relates to an $18.2 million future income tax
provision recorded as a result of a determination that the tax basis of Block
406a costs in FCP's Algerian subsidiary have been impaired.

    OUTLOOK

    First Calgary's primary objective is to commercialise Block 405b,
starting with the MLE Field, then expanding the development to incorporate the
CAFC on the block. In addition, new exploration acreage will be sought to
utilize the Company's experienced exploration team and expand its exploration
portfolio.

    In the short-term, activities include:
    
    -   Award a FEED contract for MLE;
    -   Identify and order long lead items necessary for the MLE Field
        development;
    -   Tender and award an EPC contract for the MLE development;
    -   Finalise appraisal drilling of the CAFC and continue to formulate a
        second stage development plan for the CAFC;
    -   Obtaining financing for the MLE Field development and ongoing
        activities in the CAFC; and
    -   Continue to seek attractive new exploration acreage opportunities.
    

    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 are effective as of
December 31, 2006. 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
    Effective January 1, 2007, First Calgary will be required to
prospectively adopt new Canadian accounting standards relating to accounting
for financial instruments. Under the new standards, the Company must recognize
all financial instruments and non-financial derivatives, including embedded
derivatives, as assets or liabilities and report them in its financial
statements. Fair value accounting is deemed to be the most relevant measure
for financial instruments and the only relevant measure for derivative
financial instruments. Fair value accounting involves recording the financial
instrument in the balance sheet as either an asset or a liability with changes
in fair value reflected in net earnings, regardless of whether the change in
fair value have been realized or not. In addition, the new standard provides
that hedge accounting treatment is available for items designated as being
part of an effective hedging relationship. Management is continuing to assess
the impact but to date do not anticipate a significant effect on the Company's
financial statements on the adoption of this policy.

    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
development 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 26, 2007



    
    FIRST CALGARY PETROLEUMS LTD.
    Consolidated Balance Sheets
    December 31

    (in thousands of U.S. dollars)                          2006        2005
    -------------------------------------------------------------------------

    Assets
      Current assets
        Cash and cash equivalents                      $ 108,489   $ 107,882
        Accounts receivable                                  738         338
        Deposits and prepaid expenses                        707         387
    -------------------------------------------------------------------------
                                                         109,934     108,607

      Property, plant and equipment (note 3)             540,119     374,169

    -------------------------------------------------------------------------
                                                       $ 650,053   $ 482,776
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
      Current liabilities
        Accounts payable and accrued liabilities       $  27,226   $  15,687

      Asset retirement obligations (note 4)                  687         436

      Future income taxes (note 6)                        18,200           -

    Shareholders' equity
      Capital stock (note 5)                             631,933     484,694
      Contributed surplus (note 5)                        19,186      14,430
      Cumulative translation adjustment                    6,502       6,502
      Deficit                                            (53,681)    (38,973)
    -------------------------------------------------------------------------
                                                         603,940     466,653
      Operations and commitments (note 2)
    -------------------------------------------------------------------------
                                                       $ 650,053   $ 482,776
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    FIRST CALGARY PETROLEUMS LTD.
    Consolidated Statements of Operations and Deficit
    Years ended December 31

    (in thousands of U.S. dollars)                          2006        2005
    -------------------------------------------------------------------------

    Revenue
      Interest                                         $   6,473   $   3,013

    Expenses
      General and administrative                           7,154       4,746
      Foreign exchange loss (gain)                        (6,806)        208
      Stock-based compensation (note 5)                    2,648       5,514
      Capital taxes (recovery)                              (277)         25
      Depreciation and accretion                             262          91
    -------------------------------------------------------------------------
                                                           2,981      10,584

    Income (loss) for the year before taxes                3,492      (7,571)

    Future income taxes (note 6)                         (18,200)          -

    Net loss for the year                                (14,708)     (7,571)

    Deficit, beginning of year                           (38,973)    (31,402)

    -------------------------------------------------------------------------
    Deficit, end of year                               $ (53,681)  $ (38,973)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per share (note 5)
      Basic and diluted                                $   (0.07)  $   (0.04)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    FIRST CALGARY PETROLEUMS LTD.
    Consolidated Statements of Cash Flows
    Years ended December 31

    (in thousands of U.S. dollars)                          2006        2005
    -------------------------------------------------------------------------

    Operating activities
      Net loss for the year                            $ (14,708)  $  (7,571)
      Items not involving cash
        Future income taxes                               18,200           -
        Stock-based compensation                           2,648       5,514
        Foreign exchange loss (gain)                        (720)        398
        Depreciation and accretion                           262          91
    -------------------------------------------------------------------------
                                                           5,682      (1,568)
        Change in non-cash working capital                 3,200      (3,220)
    -------------------------------------------------------------------------
                                                           8,882      (4,788)

    Financing activities
      Proceeds from issuance of shares                   150,941     110,502
      Proceeds from exercise of options and warrants       2,735       2,271
      Issue costs                                         (7,997)     (5,892)
    -------------------------------------------------------------------------
                                                         145,679     106,881

    Investing activities
      Expenditures on property, plant and equipment     (162,293)    (64,110)
      Change in non-cash working capital                   8,226     (11,821)
    -------------------------------------------------------------------------
                                                        (154,067)    (75,931)

    -------------------------------------------------------------------------
    Change in cash and cash equivalents                      494      26,162

      Exchange rate fluctuations on change in cash
       and cash equivalents                                  113        (154)

      Cash and cash equivalents, beginning of year       107,882      81,874

    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year             $ 108,489   $ 107,882
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    First Calgary Petroleums Ltd.
    Years ended December 31, 2006 and 2005
    (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) 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.

        (c) 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.

        (d) 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.

        (e) 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.

        (f) 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 enacted or
            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.

        (g) 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. These estimates are subject
            to measurement uncertainty and the effect on the financial
            statements of changes in such estimates could be significant.

        (h) 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.

    2.  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 PSC and its history are described in the Company's Annual
        Information Form. The nature of current operations and the terms or
        commitments under the PSC are summarised in the following.

        (a) Block 405b:

            The five year exploration period of the PSC ended on December 26,
            2006. During the year FCP fulfilled its remaining exploration
            work commitment under the PSC by drilling the ZER-1 well.

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

            In February 2007, First Calgary received approval from the
            Algerian regulatory authority ALNAFT for the Development Plan for
            the MLE oil and gas field. The total gross cost of the MLE
            development is currently estimated at $1.0 - $1.3 billion, and
            will be mainly incurred over the 2008 - 2009 period. The costs
            will be funded 75% by FCP and 25% by Sonatrach. The total project
            cost estimate will be refined during the year as engineering and
            design plans are completed. In addition to the development costs,
            FCP has obligations to Sonatrach for the MLE Access Fee and
            annual training bonuses. The MLE Access Fee is compensation for
            the right to develop the MLE reserves discovered with the
            pre-existing MLE-1 well, and will result in FCP paying the first
            $45 million of Sontrach's development costs. The annual training
            bonus is $150 thousand for the duration of the contract.

            Sonatrach agreed to extend the Block 405b exploration period for
            24 months commencing December 26, 2006 in order to complete the
            appraisal of the CAFC and to submit commerciality reports and
            apply for exploitation permits thereon. Following the appraisal
            of the CAFC, the remaining lands not subject to an exploitation
            permit will be returned to the government.

            First Calgary has committed its revenue interest in the natural
            gas production on Block 405b to Sonatrach through a long term
            take or pay gas marketing agreement signed in November 2006.
            Pursuant to the agreement, Sonatrach will market the total
            natural gas production from Block 405b using a price formula
            linked to the price of European oil products. During the
            exploitation period, the PSC allocates hydrocarbon production
            between FCP, Sonatrach and the Algerian State in accordance with
            a sliding scale formula based on such factors as production
            levels, product prices, project investments and rates of
            inflation. Pursuant to the formula, the Company's annual share of
            production may range from 27.72 to 8.16 percent. All Algerian
            state royalties and income taxes are paid by Sonatrach from its
            share of hydrocarbon production. In 2006 the Algerian government
            announced a new Windfall Profits Tax. FCP is reviewing the
            detailed rules published in December 2006 and evaluating the
            impact on its production share. Exploitation periods for each
            commercial oil and natural gas discovery are 25 and 30 years,
            respectively.

            The development of the Block 405b reserves through to commercial
            production will require additional funding in the form of project
            debt, equity, joint ventures, farm-outs or some combination
            thereof. In July 2006 First Calgary appointed Citigroup as sole
            financial advisor to the Company on raising project debt for the
            development of the MLE Field on Ledjmet Block 405b.

        (b) Block 406a:

            First Calgary was party to a joint venture agreement for Rhourde
            Yacoub Block 406a in Algeria ("Block 406a"). During 2006 the
            Company relinquished its interests in Block 406a in accordance
            with the terms of the joint venture agreement. FCP has no future
            commitments on this block.

    3.  Property, plant and equipment:
                                                      Accumulated   Net Book
                                              Cost   Depreciation     Value
        ---------------------------------------------------------------------
        2006
          Petroleum and natural gas
           properties                      $ 537,772   $       -   $ 537,772
          Office furniture and equipment       2,840         493       2,347
        ---------------------------------------------------------------------
                                             540,612         493     540,119
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        2005
          Petroleum and natural gas
           properties                        373,809           -     373,809
          Office furniture and equipment         626         266         360
        ---------------------------------------------------------------------
                                           $ 374,435   $     266   $ 374,169
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        During the year, the Company capitalized $10.1 million (2005 -
        $6.1 million) of overhead charges relating directly to the
        exploration and development activities in Algeria.

    4.  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, 2006 the Company estimated the present
        value of its asset retirement obligations to be $0.7 million (2005 -
        $0.4 million) based on a future liability of $2.8 million (2005 -
        $1.9 million). These costs are expected to be incurred around 2030
        near the end of the exploitation phase under the Algerian hydrocarbon
        contract. A credit-adjusted risk-free discount rate of seven percent
        and an inflation rate of two percent were used to calculate the
        present value.

    5.  Capital stock:

        (a) Issued share capital:
                                                      Number of
                                                        Shares       Amount
        ---------------------------------------------------------------------
        Common shares:
          Balance, December 31, 2004                 183,086,675   $ 377,288
          Issued on public offering(i)                16,925,000     110,502
          Issued on exercise of share purchase
           warrants                                       68,785         177
          Issued on exercise of employee
           stock options                               1,867,134       1,576
          Issued on exercise of non-employee
           stock options(ii)                             900,000         518

          Transfer from contributed surplus on
           exercise of stock options and warrants              -         525
          Issue Costs                                          -      (5,892)
        ---------------------------------------------------------------------
          Balance, December 31, 2005                 202,847,594   $ 484,694
          Issued on public offering(iii)              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
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

            (i)   In June 2005, the Company issued 16,925,000 common shares
                  for gross proceeds of $110.5 million (10,577,100 common
                  shares at C$8.10 per share and 6,347,900 common shares at
                  GBP3.59 per share). The issue costs were $5.9 million.

            (ii)  Relates to stock options granted to consultants in 2002.
                  All options were exercised in 2005.

            (iii) In April 2006, the Company issued 19,445,636 common shares
                  for gross proceeds of $150.9 million (9,900,178 common
                  shares at GBP4.40 per share and 9,545,458 common shares at
                  C$9.00 per share). The issue costs were $8.0 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, 2006 and 2005:

                                                                    Weighted
                                                                       Avg.
                                                       Number of    Exercise
                                                        Options       Price
        ---------------------------------------------------------------------
        Outstanding, December 31, 2004                 7,629,501   C$   3.47
          Granted                                      3,563,000        6.34
          Exercised                                   (1,867,134)       1.01
          Forfeited                                     (193,334)      10.03
        ---------------------------------------------------------------------
        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
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

            The following table summarises information about the options
            outstanding and exercisable at December 31, 2006:

                              Options Outstanding         Options Exercisable
                              -------------------         -------------------
                                   Weighted
                                    Average     Weighted             Weighted
          Range of                 Remaining     Average              Average
          Exercise                Contractual   Exercise             Exercise
            Price       Options      Life         Price    Options     Price
        ---------------------------------------------------------------------
        C$  0.82-1.25    582,700   0.5 years    C$ 1.10     582,700  C$ 1.10
        C$  2.36-2.60    745,000   1.1 years       2.59     745,000     2.59
        C$  4.72-4.72  2,167,500   1.8 years       4.72   2,167,500     4.72
        C$  6.21-6.39  3,267,400   3.9 years       6.28   2,141,400     6.28
        C$  7.22-8.59  1,034,000   3.4 years       7.64     524,002     7.69
        C$ 8.65-10.95  1,025,000   4.2 years       9.42      73,335     9.77
        C$11.10-15.77    314,000   3.0 years      11.87     225,668    11.78
        ---------------------------------------------------------------------
                       9,135,600   2.9 years    C$ 5.98   6,459,605  C$ 5.21
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (c) Stock-based compensation expense:

            For the year ended December 31, 2006, the Company recorded
            $6.3 million (2005 - $5.5 million) of stock-based compensation
            expense with a corresponding increase in contributed surplus. Of
            the total stock-based compensation expense, the Company has
            capitalized $3.7 for the year ended December 31, 2006 (2005 -
            nil).

            The fair value of the options granted for the year ended
            December 31, 2006 was estimated to be C$4.54 (2005 - C$2.98) per
            option and was determined using the Black-Scholes option pricing
            model with the following assumptions: expected volatility of
            64 percent (2005 - 67 percent), risk-free interest rate of
            4.0 percent (2005 - 3.7 percent) and expected lives of 4 years
            (2005 - 3 years).

        (d) Contributed surplus:

            The changes in the contributed surplus balance are as follows:

                                                            2006        2005
        ---------------------------------------------------------------------
        Balance, December 31, 2005                     $  14,430   $   9,441
        Options granted                                    6,316       5,514
        Options exercised                                 (1,560)       (525)
        ---------------------------------------------------------------------
        Balance, December 31, 2006                     $  19,186   $  14,430
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (e) Per share amounts:

            The income (loss) per share is based on the weighted average
            shares outstanding for the year. The weighted average shares
            outstanding for the year ended December 31, 2006 was
            217,281,211 (2005 - 192,873,482).

    6.  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:

                                                            2006        2005
        ---------------------------------------------------------------------

        Income (loss) for the year before taxes        $   3,492   $  (7,571)

        Statutory tax rate                                  34.5%       37.6%

        Expected income tax expense (recovery)             1,205      (2,848)
        Increase (decrease) resulting from:
          Future income tax liability on Algerian
           subsidiary                                     18,200           -
          Non-deductible stock-based compensation
           expense                                           914       2,074
          Change in valuation allowance and other         (2,119)        774
        ---------------------------------------------------------------------
                                                       $  18,200   $       -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

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

                                                            2006        2005
        ---------------------------------------------------------------------
        Net future income tax asset:
          Property, plant and equipment                $   7,200   $   8,062
          Operating losses                                 4,829       5,850
          Share issue costs                                3,818       5,236
        ---------------------------------------------------------------------
                                                          15,847      19,148
          Less: valuation allowance                      (15,847)    (19,148)
        ---------------------------------------------------------------------
                                                               -           -
        ---------------------------------------------------------------------

        Net future income tax liability:
          Property, plant and equipment                  (18,200)          -
        ---------------------------------------------------------------------
                                                       $ (18,200)  $       -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The operating losses expire over the following years:

        2007                                                       $     390
        2008                                                           1,010
        2009                                                           1,250
        2010                                                           5,200
        Thereafter                                                     8,800

    7.  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 the Company's financial instruments, including cash
        and cash equivalents, accounts receivable and accounts payable and
        accrued liabilities approximate their carrying values due to their
        short terms to maturity.

    8.  Leases:

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

        2007                                                       $     689
        2008                                                             431
        2009                                                             419
        2010                                                             410
        2011                                                             207

    9.  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.

                                             Canada     Algeria       Total
        ---------------------------------------------------------------------
        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

        2005
          Revenue                          $   3,013   $       -   $   3,013
          Expenses and taxes                  10,584           -      10,584
        ---------------------------------------------------------------------
          Loss for the year                   (7,571)          -   $  (7,571)
        ---------------------------------------------------------------------

          Capital expenditures                    35      64,075      64,110

          Assets                           $ 108,732   $ 374,044   $ 482,776
    





For further information:

For further information: First Calgary Petroleums Ltd., Richard G.
Anderson, President and CEO or John van der Welle, Finance Director and CFO,
Tel: (403) 264-6697, Website: www.fcpl.ca; Other contacts: James Henderson,
Pelham Public Relations, Tel: +44 (0) 207 743 6673; Carina Corbett, 4C -
Burvale Limited, Tel: +44 (0) 207 907 4761; David Nabarro, Nabarro Wells & Co
Limited, Tel + 44 (0) 207 710 7400

Organization Profile

FIRST CALGARY PETROLEUMS LTD.

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