First Calgary Petroleums Ltd. Announces Significant Milestones Achieved on the MLE and CAFC Developments in Algeria and 2008 Second Quarter Results



    Note: $ refers to the U.S. dollar and C$ refers to the Canadian dollar.

    TSX: FCP
    AIM: FPL

    CALGARY, July 31 /CNW/ - First Calgary Petroleums Ltd. (FCP or the
Company) announces its results for the three and six months ended June 30,
2008.

    President's Report

    We are pleased to update our shareholders on the Company's activities in
the last quarter. It was an active quarter and many key operational goals were
achieved.

    
    -   Four technical bids were received in response to our invitation for
        the Engineering, Procurement and Construction (EPC) contract for the
        development of the MLE area.

    -   Major contracts have been successfully placed for the MLE area
        development.

    -   The Final Discovery Report (FDR) for the Central Area Field Complex
        (CAFC) area has been completed and submitted to the Algerian
        government for approval, as a step towards commercialization of this
        area.

    -   Pre-Qualification from Algeria's Agence National pour la Valorisation
        des Resources en Hydrocarbures (ALNAFT) for the upcoming licensing
        round for oil and gas exploration acreage.

    -   Ongoing discussions with European banks indicate a high level of
        interest in a reserve based project financing for a high quality
        project. The Company will present its financing and detailed
        information package to the banks in September, targeting the
        obtaining of formal underwriting offers in the fourth quarter of 2008
    

    First Calgary has achieved major milestones, as we move towards
commercializing and securing first gas from our assets in Algeria. Technical
bids were received from each of the four pre-qualified contractors that were
sent an Invitation to Tender (ITT) for the EPC contract for the MLE area
development.
    Two successful bidders have been chosen to secure the long lead line pipe
items. As well, FCP and Sonatrach have also placed a contract with ENGCB, a
major Algerian civil contractor, for the early civil work required to prepare
the site for construction and field work and a contract for the procurement
and construction of the operation base in Hassi Messaoud was recently awarded
to RedSea Housing. Collectively, the cost of these combined awards is less
than the Front End Engineering and Design (FEED) cost estimates for these
items.
    First Calgary has completed the final draft of the Final Discovery Report
(FDR) for the CAFC area. This document outlines detailed development programs
for fields in the CAFC. The report has been delivered to the Algerian
authorities for approval, which is anticipated to be received by year end.
    FCP has received pre-qualification by Algeria's Agence National pour la
Valorisation des Resources en Hydrocarbures (ALNAFT) for the upcoming
licensing round of oil and gas exploration acreage. The pre-qualification will
allow participation as operator and investor for onshore permits. This is the
seventh Algerian licensing round since 2000, with 16 permits on offer across
many of the petroleum basins in the country, including the Berkine Basin where
FCP's prolific Block 405b is located. The bid round closes on December 17,
2008.
    I am very pleased with the progress being made in both the MLE and CAFC
developments. While project execution and debt financing remain a principal
focus, we continue to explore strategic and other options to maximize value
for shareholders.

    Shane P. O'Leary
    President and CEO


    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
unaudited interim financial statements for the six months ended June 30, 2008
and 2007 and the audited financial statements and MD&A for the year ended
December 31, 2007. In this discussion and analysis $ refers to U.S. dollars
unless otherwise indicated, and C$ refers to the Canadian dollar.

    THE COMPANY

    Readers are referred to the map which is available on the Company's
website at www.fcpl.ca.

    First Calgary Petroleums Ltd. is an international oil and gas exploration
and development company with assets located in the prolific Berkine Basin of
Algeria. FCP's interest in Block 405b focuses on two development areas -
Menzel Ledjmet East (MLE) and the Central Area Field Complex (CAFC).
    In February 2007, FCP received approval from the Algerian regulatory
authority (ALNAFT) for the development of the MLE oil and gas field on Block
405b. The first phase of the overall development plan 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. Three product pipelines are required to transport sales gas,
condensate and LPG products to the national grid system located 140 km west of
the Block. In addition, a fourth pipeline to transport oil will tie into
existing infrastructure within the Berkine Basin.
    FCP was granted an extension to December, 2008 to further appraise and
evaluate the ZER area and the CAFC area. FCP and Sonatrach have agreed to
modify the design of the product pipelines to accommodate increased volumes
from the development of the CAFC as part of an integrated block development
strategy. As a result, the current block development plans (MLE plus CAFC) are
targeting up to 300 MMCF/d sales gas with up to 40 Mb/d of liquids, based on
the recent CAFC development plan recently submitted to Sonatrach.

    OPERATIONAL UPDATE

    FCP's objectives remain to achieve first production in the shortest time
possible. Based on the technical bids received from EPC contractors we have
re-evaluated the MLE development timetable and now believe first production
from MLE will be achieved in second quarter of 2011. Current industry activity
levels are prolonging developments on a world wide basis as evidenced by the
EPC technical bids.

    Menzel Ledjmet East (MLE) Activities and Outlook

    Engineering, Procurement and Construction (EPC)
    -----------------------------------------------

    In the first quarter, four pre-qualified bidders were requested to submit
technical bids for the large EPC contract on the basis of a detailed
Invitation to Tender (ITT) document developed during the Front End Engineering
and Design (FEED) phase. The ITT scope included central processing facilities,
associated infrastructure and all related gathering and export pipelines. The
technical bids were received on the due date of July 16 and a rigorous
validation and analysis of each is under way by a joint Sonatrach-FCP
evaluation team based in Hassi Messaoud. The second phase of the tender
process requires qualified bidders to submit the commercial portion of their
bids at the end of the technical evaluation. FCP expects that the contract
will be awarded in the second half of this year conditionally upon securing
the project financing commitments. The process of awarding the EPC contract
will involve significant exercises in due diligence. All potential EPC
contractors must be able to deliver the completed facility for a lump sum
price with a guaranteed end date and performance at the specified level. The
assurances provided by the EPC contractor in meeting these obligations must
satisfy the financial requirements of the bankers as FCP simultaneously seeks
project financing.

    Long Lead Items
    ---------------

    In order to maintain the aggressive schedule needed to achieve first gas
in the second quarter of 2011, it is necessary to secure long lead items such
as line pipe. ITT packages for the gas gathering system and export system line
pipe were issued and ten bids were received. These bids have been evaluated
based on technical merit and commercial tender has been received. After
careful evaluation of the commercial bids, the two successful bidders were
selected on July 22, 2008. Despite the heated market and recent significant
rises in raw material and energy prices the project team was able to procure
the gathering systems and export systems line-pipe at a cost that is below the
independent Genesis FEED cost estimate for this long-lead procurement, and
within the timescales required by our aggressive schedule for first
production.
    During the FEED process, other equipment had been identified as potential
long lead items. Subsequent market evaluation resulted in this equipment being
rated 'non-schedule critical' and included within the EPC contract noted
above.

    Civil Engineering Works
    -----------------------

    To support the aggressive EPC schedule demanded from potential EPC
contractors, it is necessary to commence early civil engineering preparatory
works to enable the successful EPC contractor to commence work onsite shortly
after contract award.
    The contract for early civil works comprising the preparation of working
'platforms' for all temporary and permanent works including road
infrastructure was awarded to ENGCB (a local Algerian company) in early July
2008. ENGCB have commenced mobilization at the site and work is progressing.

    Joint Venture Organization
    --------------------------

    The Block 405b Base de Vie in Hassi Messaoud will provide housing and
offices for approximately 185 joint venture staff required to oversee the
day-to-day operations of the transitions from an exploration to a development
organization. The Hassi base staff will include management, contract
administration, logistics, human resources, IT and telecommunications, etc.
Working with Sonatrach, the base construction contract has been awarded, and
work has commenced. It is expected that by December 2008 some of the base will
be available for occupancy.

    Drilling Activities
    -------------------

    Development drilling continues in the MLE area utilizing one rig. These
development wells have been successful in further delineating the key zones
that will make up production for first gas. In the quarter, FCP stepped
outside the current mapped proven and probable reserves areas and drilled
MLE-10 to a depth of 3,660 metres. The MLE-10 well was located to test the
potential expansion of the key reservoir units to the south-western limit of
the MLE area within the Block. Unfortunately, the well was not successful in
delineating pool boundary extensions.
    MLE-9 was spudded and is expected to be drilled to total depth in the
Lower Devonian in August. The next well to be drilled after MLE-9 will be
MLE-11 which will test an extension of the structure on the key zones of
interest to the east of MLE-4. Currently, approval from Sonatrach is pending
for MLE-13, which is anticipated to be spud and drilled in the fourth quarter
of 2008.

    Central Area Field Complex (CAFC) and ZER Activities and Outlook

    FCP was granted an extension to December 30, 2008 to further appraise and
evaluate the ZER area and the CAFC area. Upon completion of the appraisal and
testing program of the CAFC within the first quarter, FCP focussed efforts on
the subsurface studies that would constitute the technical components of the
Final Discovery Report (FDR). After numerous technical workshops and
discussions with Sonatrach, the final draft of the FDR was completed on
July 19, 2008 and delivered to the Algerian authorities. The FDR contains the
development and commercialization plans of the CAFC area, the next area of
development in Block 405b. On-going discussions with Sonatrach will lead to
further refinement of the report, and approval of the development plan is
anticipated to be received by year end.
    After careful consideration and analysis, it has been determined that
further pursuit of commercial development of the ZER area would not be
economical. The ZER area will be relinquished so that the Company can focus
resources on developing the MLE and the CAFC area.

    Financing Activities and Outlook

    Continued discussions held between FCP and a number of banks, primarily
European, indicate that while the current overall bank market environment is
challenging, interest in financing for quality projects is still high in
general, and that there continues to be strong interest in FCP's Algerian
project. The Company expects that its share of MLE development costs can be
principally financed via reserve based debt financing and the available cash
on hand. If necessary, the Company will raise additional equity; the amount of
which is dependent upon a number of factors including the final cost of the
EPC contract and the amount of project debt financing raised. The project's
debt financing capacity will depend on the forward commodity price curve when
the financing is set in place, among other factors.
    The Company will present its financing package to the banks in September
and anticipates formal underwriting offers in the fourth quarter of 2008.
Financing for CAFC development will follow that of MLE, and is expected to
benefit from the MLE financing process.
    Banks require that as a precondition to financing, all key project
related commercial and technical agreements are in place, including among
others, product marketing/off-take agreements, EPC contractual arrangements,
technical, environmental and legal due diligence reports, and comprehensive
legal credit documentation. FCP is working closely with its principal legal
advisor, Clifford Chance, and financial advisor, Citigroup, to ensure that all
necessary agreements and documentation related to the project financing are
delivered within the requisite time frame. Excellent progress has been made in
this regard during the second quarter, building momentum towards completion of
the debt finance underwriting process in the fourth quarter.

    New Ventures

    FCP has received pre-qualification by ALNAFT for the upcoming licensing
round for oil and gas exploration acreage. FCP's pre-qualification will allow
participation as operator and investor for onshore permits. This is the
seventh Algerian licensing round since 2000, with 16 permits on offer across
many of the petroleum basins in the country, including the Berkine Basin where
FCP's prolific Block 405b is located. The bid round closes on December 17,
2008.

    
    FINANCIAL REVIEW

                                       Three months ended   Six months ended
                                             June 30             June 30
    -------------------------------------------------------------------------
    ($ thousands)                         2008      2007      2008      2007
    -------------------------------------------------------------------------

    Net loss                          $ 14,636  $  1,613  $ 26,614  $  4,010
    

    The net loss for the quarter was $14.6 million, compared to $1.6 million
in 2007, primarily due to the onset of interest expense on the convertible
debentures issued in December 2007, and higher G&A costs as outlined below.

    
                                       Three months ended   Six months ended
                                             June 30             June 30
    -------------------------------------------------------------------------
    ($ thousands)                         2008      2007      2008      2007
    -------------------------------------------------------------------------

    Interest Income                   $  1,553  $  1,502  $  3,785  $  2,493
    

    Interest income for the quarter is even with 2007, but has increased for
the six month period over 2007 due to higher average cash and cash equivalent
balances on hand during comparable periods.

    
                                       Three months ended   Six months ended
                                             June 30             June 30
    -------------------------------------------------------------------------
    ($ thousands)                         2008      2007      2008      2007
    -------------------------------------------------------------------------

    Interest Expense                  $  8,066  $      -  $ 16,139  $      -
    

    Interest expense represents interest incurred on the $267 million
convertible debentures which were issued in December 2007. The debentures bear
interest at 9 percent, payable semi-annually, with the first interest payment
made May 29, 2008.

    
                                       Three months ended   Six months ended
                                             June 30             June 30
    -------------------------------------------------------------------------
    ($ thousands)                         2008      2007      2008      2007
    -------------------------------------------------------------------------

    General and administrative        $ 11,564  $  4,394  $ 19,434  $  8,616
    Less capitalized amount             (4,260)   (1,108)   (7,177)   (2,366)
    -------------------------------------------------------------------------
    Expensed                          $  7,304  $  3,286  $ 12,257  $  6,250
    

    General and administrative costs have increased $6.0 million over the six
month period, due to increased staffing costs and professional fees required
to manage and operate the Algerian project, plus additional costs related to
the recent shareholder motions and resulting proxy contest. These latter costs
include executive severance and remuneration payments and a provision for
reimbursement of shareholder requisition meeting expenses.

    
                                       Three months ended   Six months ended
                                             June 30             June 30
    -------------------------------------------------------------------------
    ($ thousands)                         2008      2007      2008      2007
    -------------------------------------------------------------------------

    Stock-based compensation          $  1,720  $  2,144  $  4,038  $  3,155
    Less capitalized amount             (1,135)   (1,303)   (2,778)   (2,081)
    -------------------------------------------------------------------------
    Expensed                          $    585  $    841  $  1,260  $  1,074
    

    Stock-based compensation was lower in Q2 due to fewer option grants and
more cancellations but higher for the six months due to more options being
granted than prior year, with a corresponding increase in the amount of stock
based compensation capitalized.

    
                                       Three months ended   Six months ended
                                             June 30             June 30
    -------------------------------------------------------------------------
    ($ thousands)                         2008      2007      2008      2007
    -------------------------------------------------------------------------

    Capital Expenditures

    Exploration & Appraisal
    -----------------------
    Geological and geophysical        $  1,019  $    891  $  1,829  $  1,669
    Drilling, completion and testing       517    30,147       862    69,862
    CAFC commercialization                 420         -       723         -

    Development
    -----------
    Geological and geophysical        $    266  $    187  $    710  $  2,926
    Drilling, completion and testing    14,945        56    34,656       153
    MLE commercialization                5,921     3,365    14,615     7,670
                                     ----------------------------------------
                                      $ 23,088  $ 34,646  $ 53,395  $ 82,280
    Block management, administration
     and corporate                       3,892     3,858     6,786     7,131
                                     ----------------------------------------
    Total capital expenditures        $ 26,980  $ 38,504  $ 60,181  $ 89,411

    Less non-cash expenditures
     (stock-based compensation,
     asset retirement provisions)        1,158     1,358     2,894     2,268
                                     ----------------------------------------

    Net capital expenditures          $ 25,822  $ 37,146  $ 57,287  $ 87,143
    -------------------------------------------------------------------------
    

    Capital expenditures are lower in 2008 over 2007 due to the greater level
of drilling activity of the appraisal drilling program in the first half of
2007. In 2008, FCP's focus has shifted from exploration and appraisal to a
development drilling focus. As well, in the first half of 2008, FCP used one
drilling rig compared to two rigs in the same period in 2007. MLE
commercialization costs are higher over prior period and prior year largely as
a result of the increased volume of development activity, including costs
associated with the finalization of the FEED study.

    Liquidity and Capital Resources

    First Calgary had $197.0 million of working capital on hand as at
June 30, 2008 compared with $274.1 million at the end of 2007. Cash balances
and short-term investments were $217.6 million at the end of the first half of
2008.
    Development of the Ledjmet Block 405b reserves through to commercial
production will require significant funding, with 75 percent being FCP's
share. Development funding continues to focus on project debt. The gross
development cost of the MLE Field is currently estimated at approximately
$1.3 billion, and will mainly be incurred over the 2008 - 2010 period.
    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:

    
                                         July 31,      June 30,  December 31,
                                            2008          2008          2007
    -------------------------------------------------------------------------
    Common shares                    254,939,030   254,939,030   254,619,030
    Issuable on conversion of
     debentures                       63,571,428    63,571,428    63,571,428
    Employee stock options            16,529,747    16,607,747    16,806,747
    -------------------------------------------------------------------------
    Diluted shares outstanding       335,040,205   335,118,205   334,997,205
    -------------------------------------------------------------------------


    Summary of Quarterly Results

                              2008                          2007
    -------------------------------------------------------------------------
                         Q2         Q1         Q4       Q3       Q2       Q1
    -------------------------------------------------------------------------
    Interest income  $1,553     $2,232     $1,372   $1,511   $1,502     $991

    Income (loss)   (14,636)   (11,978)    (5,940)  (1,745)  (1,613)  (2,397)
    Income (loss)
     per share        (0.06)     (0.05)     (0.02)   (0.01)   (0.01)   (0.01)

    Total assets  1,022,233  1,034,599  1,031,916  788,554  775,867  643,642
    -------------------------------------------------------------------------


                              2006
    -----------------------------------
                         Q4         Q3
    -----------------------------------
    Interest income  $1,633     $2,052

    Income (loss)   (19,706)      (266)
    Income (loss)
     per share        (0.09)      0.00

    Total assets    650,053    649,354
    -----------------------------------
    

    The net loss in 2008 relates mainly to interest on the convertible debt
issued in December 2007, and general and administrative expenses.

    CHANGE IN ACCOUNTING POLICIES

    Financial Instruments - Recognition and Measurement

    Two new Canadian accounting standards have been issued which required
additional disclosure in the Company's financial statements commencing
January 1, 2008, pertaining to the Company's use of financial instruments as
well as its capital and how it is managed. These standards have been adopted
in the Company's unaudited statements.

    BUSINESS RISKS AND UNCERTAINTIES

    The MD&A and Annual Information Form (AIF) for the year ended
December 31, 2007 includes an overview of certain business risks and
uncertainties facing the Company. Those risks remain in effect as at June 30,
2008.

    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
jurisdictions with less developed legal systems than in the case of 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.

    July 31, 2008


    
    Consolidated Balance Sheets

                                                         As at         As at
    (in thousands of U.S. dollars)                     June 30,  December 31,
    (unaudited)                                           2008          2007
    -------------------------------------------------------------------------

    Assets
      Current assets
        Cash and cash equivalents                     $217,575      $275,270
        Accounts receivable                                723         1,222
        Deposits and prepaid expenses                      956         1,333
        Other assets (note 2)                           12,106        23,048
    -------------------------------------------------------------------------
                                                       231,360       300,873
      Property, plant and equipment                    790,873       731,043
    -------------------------------------------------------------------------

                                                    $1,022,233    $1,031,916
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
      Current liabilities
        Accounts payable and accrued liabilities       $34,382       $26,763
      Convertible debentures (note 3)                  226,746       222,589
      Asset retirement obligations                       3,526         3,225
      Future income taxes                               18,548        18,548
    -------------------------------------------------------------------------

    Shareholders' equity
      Capital stock (note 4)                           764,678       763,257
      Contributed surplus (note 4)                      29,388        25,955
      Equity portion of convertible debentures
       (note 3)                                         30,453        30,453
      Accumulated other comprehensive income             6,502         6,502
      Deficit                                          (91,990)      (65,376)
    -------------------------------------------------------------------------
                                                       739,031       760,791
    Operations and commitments (note 1)
    -------------------------------------------------------------------------

                                                    $1,022,233    $1,031,916
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    Consolidated Statements of Operations and Deficit

    (in thousands of U.S. dollars)     Three months ended   Six months ended
                                             June 30,            June 30,
    (unaudited)                           2008      2007      2008      2007
    -------------------------------------------------------------------------

    Revenue
      Interest                          $1,553    $1,502    $3,785    $2,493
    Expenses
      Interest expense                   8,066         -    16,139         -
      General and administrative         7,304     3,286    12,257     6,250
      Stock-based compensation (note 4)    585       841     1,260     1,074
      Foreign exchange loss (gain)         (37)   (1,169)      205    (1,108)
      Depreciation and accretion           271       157       538       287
    -------------------------------------------------------------------------
                                        16,189     3,115    30,399     6,503
    Net loss and comprehensive loss
     for the period                    (14,636)   (1,613)  (26,614)   (4,010)
    Deficit, beginning of period       (77,354)  (56,078)  (65,376)  (53,681)
    -------------------------------------------------------------------------

    Deficit, end of period            $(91,990) $(57,691) $(91,990) $(57,691)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per share (note 4)
      Basic and diluted                 $(0.06)   $(0.01)   $(0.10)   $(0.02)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    Consolidated Statements of Cash Flows

    (in thousands of U.S. dollars)     Three months ended   Six months ended
                                             June 30,            June 30,
    (unaudited)                           2008      2007      2008      2007
    -------------------------------------------------------------------------

    Operating activities
      Net loss for the period         $(14,636)  $(1,613) $(26,614)  $(4,010)
      Items not involving cash
        Accretion on convertible
         debentures                      2,085         -     4,157         -
        Stock-based compensation           585       841     1,260     1,074
        Foreign exchange gain             (422)   (1,487)     (653)   (1,548)
        Depreciation and accretion         271       157       538       287
    -------------------------------------------------------------------------
                                       (12,117)   (2,102)  (21,312)   (4,197)
        Change in non-cash working
         capital                         7,463     (624)    12,570    (1,243)
    -------------------------------------------------------------------------
                                        (4,654)   (2,726)   (8,742)   (5,440)
    Financing activities
    Proceeds from issuance of shares         -   135,671         -   135,671
    Proceeds from exercise of options      768     1,142       816     1,281
    Issue costs                              -    (6,549)        -    (6,549)
    -------------------------------------------------------------------------
                                           768   130,264       816   130,403
    Investing activities
      Expenditures on property,
       plant and equipment             (25,822)  (37,146)  (57,287)  (87,143)
      Interest on restricted cash          (53)        -       (72)        -
      Change in non-cash working
       capital                           2,236       514     7,275    (4,039)
    -------------------------------------------------------------------------
                                       (23,639)  (36,632)  (50,084)  (91,182)
    -------------------------------------------------------------------------

    Change in cash and cash
     equivalents                       (27,525)   90,906   (58,010)   33,781
      Exchange rate fluctuations
       on cash and cash equivalents         45     1,533       315     1,518
      Cash and cash equivalents,
       beginning of period             245,055    51,349   275,270   108,489
    -------------------------------------------------------------------------

    Cash and cash equivalents,
     end of period                    $217,575  $143,788  $217,575  $143,788
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    Notes to the Consolidated Financial Statements

    Six months ended June 30, 2008 (unaudited)
    (in thousands of U.S. dollars unless otherwise indicated)

    These interim consolidated financial statements of First Calgary
    Petroleums Ltd. (First Calgary, FCP or the Company) have been prepared by
    management in accordance with accounting principles generally accepted in
    Canada following the same accounting policies as the consolidated
    financial statements for the year ended December 31, 2007. The
    disclosures included below are incremental to those included with the
    annual consolidated financial statements. The interim consolidated
    financial statements should be read in conjunction with the consolidated
    financial statements and the notes thereto for the year ended
    December 31, 2007.

    1.  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 summarized
    below.

    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 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 was made early in third quarter 2008. Approval for the
    development plan is expected prior to the end of 2008.

    The first phase of the overall Block 405b development plan 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 is
    anticipated to 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 additional
    development in the CAFC as part of an integrated block development
    strategy. Current development plans are targeting up to 300 MMCF/D sales
    of gas with up to 40 MB/D of liquids.

    Gas marketing terms were agreed with Sonatrach in November 2006 and were
    attached to the MLE development plan. The gas terms specify and clarify
    the provisions of the PSC relating to the long-term marketing of
    quantities of dry gas from Block 405b. It is proposed that the gas terms
    will be incorporated into the long form Gas Agreement entered into
    between the Company and Sonatrach. 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 long term 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 the 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.

    2.  Other assets

    Cash was placed in an escrow account equal to the first year's interest
    payments on the convertible debentures. The funds are released to the
    convertible debenture holders for 2008 interest payments. The Company
    will use the remaining balance for the second interest payment in
    November 2008.

    3.  Convertible debentures:

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

                                                     Liability        Equity
                                                     Component     Component
    -------------------------------------------------------------------------
    Balance, December 31, 2007                        $222,589   $    30,453
    Accretion of non cash interest expense               4,157             -
    -------------------------------------------------------------------------
    Balance, June 30, 2008                            $226,746   $    30,453
    -------------------------------------------------------------------------

        Interest of $11,013,750 was paid during the period.

    4.  Capital stock:

    (a) Issued share capital:

                                                     Number of
                                                        Shares        Amount
    -------------------------------------------------------------------------
    Balance, December 31, 2007                     254,619,030   $   763,257
      Issued on exercise of employee stock options     320,000           816
      Transfer from contributed surplus on
       exercise of stock options                             -           605
    -------------------------------------------------------------------------
      Balance, June 30, 2008                       254,939,030   $   764,678
    -------------------------------------------------------------------------

    (b) Employee stock options:

    The Company has up to 10 percent 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 summarizes the changes in stock options
    outstanding during the period ended June 30, 2008:

                                                                    Weighted
                                                                         Avg.
                                                     Number of      Exercise
                                                       Options         Price
    -------------------------------------------------------------------------
    Outstanding, December 31, 2007                  16,806,747       C$ 4.90
      Granted                                        2,770,000          2.79
      Exercised                                       (320,000)         2.60
      Forfeited                                     (2,649,000)         4.20
    -------------------------------------------------------------------------
    Outstanding, June 30, 2008                      16,607,747       C$ 4.71
    -------------------------------------------------------------------------

    The following table summarizes information about the options outstanding
    and exercisable at June 30, 2008:

                               Options Outstanding        Options Exercisable
                        -----------------------------------------------------
                                     Weighted
                                     Average    Weighted            Weighted
                                    Remaining    Average             Average
       Range of                    Contractual  Exercise            Exercise
    Exercise Price        Options      Life       Price    Options     Price
    -------------------------------------------------------------------------
    C$ 2.78 - 2.98       6,579,667   4.6 years   C$2.78     276,667   C$2.79
    C$ 4.72 - 4.72       1,817,500   0.3 years     4.72   1,817,500     4.72
    C$ 5.08 - 6.39       6,669,915   3.2 years     5.64   4,339,077     5.89
    C$ 7.22 - 8.59         650,000   2.5 years     7.58     388,335     7.72
    C$ 8.65 - 10.50        716,665   2.7 years     9.30     556,668     9.37
    C$11.10 - 15.77        174,000   1.0 years    12.17     174,000    12.17
    -------------------------------------------------------------------------
                        16,607,747   3.4 years   C$4.71   7,552,247   C$5.99
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the six months ended June 30, 2008, the Company recorded $4.0 million
    (2007 - $3.2 million) of stock-based compensation expense with a
    corresponding increase in contributed surplus (three months ended
    June 30, 2008 - $1.7 million; 2007 - $2.1 million). Of the total stock-
    based compensation expense, the Company has capitalized $1.1 million and
    $2.8 million for the three and six month periods ended June 30, 2008
    (2007 - $1.3 million and $2.1 million respectively).

    The fair value of the options granted in the three months ended June 30,
    2008 was estimated to be C$1.25 (2007 - C$2.44) per option, and was
    determined using the Black-Scholes option pricing model with the
    following assumptions: expected volatility of 63 percent (2007 -
    59 percent), risk-free interest rate of 3 percent (2007 - 3 percent),
    and expected lives of 4 years (2007 - 4 years).

    The fair value of the options granted in the six months ended June 30,
    2008 was estimated to be C$1.28 (2007 - C$2.49) per option, and was
    determined using the Black-Scholes option pricing model with the
    following assumptions: expected volatility of 63 percent (2007 -
    59 percent), risk-free interest rate of 3 percent (2007 - 3 percent),
    and expected lives of 4 years (2007 - 4 years).

    (c) Contributed surplus:

    The changes in the contributed surplus balance are as follows:

    ($ thousands)                                         2008          2007
    -------------------------------------------------------------------------
    Balance, beginning of period                   $    25,955   $    19,186
      Stock based compensation                           4,038         3,155
      Options exercised                                   (605)         (687)
    -------------------------------------------------------------------------
    Balance, end of period                         $    29,388   $    21,654
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (d) Per share amounts:

    The loss per share is based on the weighted average shares outstanding
    for the period. The basic and diluted weighted average shares outstanding
    for the three and six months ended June 30, 2008 were 254,881,887 and
    254,759,689 respectively (2007 - 246,479,389 and 235,214,160).

    5.  Financial instruments and capital

    Fair Value

    At June 30, 2008 and December 31, 2007 the carrying values of cash and
    cash equivalents, accounts receivable, accounts payable and accrued
    liabilities approximate their fair values due to their short terms to
    maturity. The fair value of the convertible debentures at June 30, 2008
    was approximately $267 million.

    Foreign Currency Risk

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

    The following balances are denoted in foreign currencies:

                                      Canadian  Algerian             Pounds
    (thousands)                        dollar     dinar      Euro   sterling
    -------------------------------------------------------------------------
    June 30, 2008
    Cash and cash equivalents            1,178    30,006        68       912
    Less: Accounts payable                 121   358,985       135        74
                                     ----------------------------------------
    Net foreign exchange exposure        1,057  (328,979)      (67)      838

    December 31, 2007
    Cash and cash equivalents           10,365   238,389       145       310
    Less: Accounts payable                 539   367,921         5       123
                                     ----------------------------------------
    Net foreign exchange exposure        9,826  (129,532)      140       187


    A change in the U.S. dollar compared to the currency in which the above
    items are denominated results in an increase or decrease in foreign
    exchange gains or losses. A change in the exchange rates would affect the
    loss, holding all other variables constant, as follows:

                                      Effect of a $0.01 exchange rate change:

                                        U.S.-     U.S.-     U.S.-     U.S.-
                                      Canadian    Dinar     Euro     Pounds
                                     ----------------------------------------
    Change in the foreign exchange
     gain (loss)
     2008                             $     10  $     53  $      1  $     17

    Commodity Risk

    FCP's net loss is not currently exposed to commodity risk, as the Company
    is in the pre-production phase. The overall development of Block 405b is
    exposed to oil, gas and NGL price risks as a significant decrease in
    prices would affect the economic returns of the Company in the long run.

    Interest Rate Risk

    A significant portion of cash and cash equivalents is held in interest
    bearing investments; a 100 basis point drop in interest rates would
    decrease interest income in the quarter by approximately $230,000.

    The convertible debentures bear fixed interest and therefore earnings are
    not exposed to interest risk. The fair value of the debentures is
    affected by changes in interest rates.

    Credit Risk

    Cash and cash equivalents and accounts receivable, which is predominantly
    interest earned on cash and cash equivalents, are held in credit rated
    institutions. Credit risk is assessed to be low given the financial
    institutions that hold the funds.

    Liquidity Risk

    FCP maintains sufficient cash on hand to meet current and forecasted
    commitments. Spending is increased or decreased to match available funds.

    Capital Management

    FCP's capital consists of funds raised through share and debenture
    issues, and is used to fund the current operations of the Company. The
    Company monitors forecasted spending, and will raise additional funds as
    required. FCP is actively seeking project financing for the development
    of Block 405b.

    6.  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.

    Three months ended June 30, 2008
    ($ thousands)                             Canada     Algeria       Total
    -------------------------------------------------------------------------
    Capital Expenditures
    -------------------------------------------------------------------------
      2008                                $      107  $   25,715  $   25,822
      2007                                $      404  $   36,742  $   37,146

    -------------------------------------------------------------------------


    Six months ended June 30, 2008
    ($ thousands)                             Canada     Algeria       Total
    -------------------------------------------------------------------------
    Capital Expenditures
    -------------------------------------------------------------------------
      2008                                $      211  $   57,076  $   57,287
      2007                                $      573  $   86,570  $   87,143

    -------------------------------------------------------------------------
    Total Assets
    -------------------------------------------------------------------------
      2008                                $  233,198  $  789,035  $1,022,233
      2007                                $  146,293  $  629,574  $  775,867

    7.  Commitments

    As part of the development activity on Block 405b, the Company, through
    its association with Sonatrach, has entered into contractual commitments
    with various vendors, as follows:
    -  Line pipe orders for approximately $141 million; a $28 million
       deposit is anticipated to be paid in the third quarter of 2008;
    -  Civil engineering work for field facilities for approximately
       $35 million; and
    -  Construction of an office and residential facility in Hassi Messaoud
       for approximately $16 million; a $1.6 million deposit is anticipated
       to be paid in the third quarter of 2008.

    As with other development costs, the Company's share is 75%, with
    responsibility for the remaining 25% residing with Sonatrach
    





For further information:

For further information: Patricia Lew-Lapointe, Manager, Investor
Relations, Tel: (403) 450-2030; Other Contacts: James Henderson, Pelham Public
Relations, Tel: +44 (0)20 7743 6673; Nominated Advisers: Richard
Swindells/David Nabarro, Nabarro Wells & Co. Limited, Tel: +44 (0)20 7634
4705

Organization Profile

FIRST CALGARY PETROLEUMS LTD.

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