Great Plains Reports 2006 Year-End Reserves, Operational and Financial Results



    CALGARY, March 30 /CNW/ - Great Plains Exploration Inc. (TSX - GPX)
(Great Plains) is pleased to announce its year-end reserves, operational
review and audited financial results for the year ended December 31, 2006.

    
    The highlights for 2006 are as follows:

    Operations
    ----------

    -   Increased production 17% to a 2006 average of 1,474 boe/d from
        1,260 boe/d for the same period in 2005

    -   Invested $39.9 million ($18.6 million, net of dispositions) in the
        Company's capital expenditure program;

        -  Drilled 30 wells (8.9 net) comprised of 15 (3.1 net) gas wells,
           7 (2.6 net) oil wells, 5 (1.7 net) suspended and 3 (1.5 net) dry
           and abandoned.

        -  Invested in infrastructure and facilities in core areas at
           Randell and Pembina to help ensure cost effective operations for
           the long term.

    -   Highgraded drilling prospect inventory to focus on light oil targets,
        with greater growth potential

    -   Oil and gas sales of $27.5 million, a 2% decrease from $28.2 million
        in 2005, primarily as a result of lower average natural gas prices
        which have declined by 28% over the last year

    -   Cash flow of $11.6 million, representing $0.31 per share

    Reserves (evaluated by GLJ based on forecast prices and costs)
    --------------------------------------------------------------

    -   Total proved reserves of 3.0 mmboe, total proved plus probable
        reserves of 4.6 mmboe, comprised of 43% oil and NGLs and 57% natural
        gas

    -   Net present value of total proved plus probable reserves discounted
        at 10% before income taxes of $83.0 million

    -   Year-end net asset value (NAV) less debt, of $2.06 per share based on
        above with land valued at $15.1 million

    Corporate
    ---------

    -   Streamlined operating base and strengthened balance sheet through the
        disposition of $21.3 million of non-core assets

    -   One-time write down of previously acquired goodwill of $26.9 million,
        as a result of reduction in market values

    -   Completed $8.0 million bought deal, private placement of flow through
        common shares at $2.15 per share

    -   Tax pools of $55.9 million to assist in sheltering income

    Subsequent to year-end
    ----------------------

    -   On March 20, 2007 completed oversubscribed $10.0 million flow through
        financing at $1.50 per share indicating a strong interest in Great
        Plains and confidence in our team's ability to execute on our long-
        term growth strategy

    President's Message
    -------------------

    Year End Review

    Since inception, Great Plains' corporate strategy has been comprised of
the following elements:

        -  Growth from corporate mergers and acquisitions
        -  Value creation through drilling and exploitation
        -  Operating focus through profitable rationalization
        -  Maintaining conservative capital structure with a strong balance
           sheet

    The challenges which our industry faced in 2006 required that Great Plains
focus on the latter two elements of our strategy at the expense of growth and
value creation. The record high activity levels in the industry that were seen
in the first half of 2006, prevented us from executing our planned drilling
program, while unprecedented increases in service costs combined with
weakening commodity prices for the second half of 2006 dictated that we
decelerate our capital program and reassess our entire project inventory. We
reached a prudent decision to refocus our operations by:

        -  Reallocating resources to projects and areas which have the
           highest potential to create value
        -  Reallocating capital to oil weighted projects
        -  Reducing our exposure to non-operated projects where we lack
           meaningful input and budgetary control
        -  Consolidating the number of areas in which we actively operate
        -  Rationalizing non-core assets which had reached a logical
           monetization point
        -  Reassessing and strengthening our team
    

    In retrospect our decision to sell a combined 170 boe of daily production
for aggregate proceeds of $18.3 million was timely given the speed and
magnitude of the subsequent downturn in valuations. These transactions were
good business and we will continue to take advantage of similar opportunities.
Our technical team continues to scrutinize our non-core properties and we
anticipate that we will be actively engaged in buying, selling and swapping
our various interests throughout the coming year. In addition to the asset
dispositions, we will also look at opportunities that will increase our
operatorship in various properties thereby improving our ability to control
timing and costs on our existing projects. With the successful equity
financings undertaken we are well-positioned to take advantage of corporate
opportunities which are expected to emerge in the junior market over the
coming year.

    Operations Review

    Operationally, 2006 was marked by a combination of successes and
disappointments. Altares and Athabasca consumed a combined 33 percent of our
capital expenditure budget for the year with results that did not match
initial expectations. Altares was subsequently sold while our plans for
Athabasca have been substantively scaled back given the apparent reserve size
and weakness in natural gas pricing. Randell accounted for 27 percent of 2006
spending including $5.7 million for facilities, land and seismic which did not
provide any production additions for the past year but have allowed our 2007
winter program to be accelerated with a total of ten exploratory wells drilled
this season. Six wells have been cased and are being placed on production;
three wells are considered either marginal or dry holes and one well was
drilled as an earning well to acquire 11 sections of new land. Net production
additions for this project are estimated at 300 boe/d of light crude which is
subject to a one-year royalty holiday. This is expected to bring total
corporate production to approximately 1,500 boe/d heading into Q2 2007. These
additional production volumes, along with extensive optimization work on older
wells, will play a significant role in reducing operating costs on a go
forward basis. Approximately 70 percent of our operating expense at Randell is
fixed which results in high leverage on per barrel costs depending upon
production volumes and facility utilization. Operating costs at Pembina and
Spirit River were similarly affected by reduced volumes against fixed costs
and are expected to show improvement in 2007 with new volumes coming on in
both areas.

    Outlook

    In terms of new exploration initiatives for 2007 and 2008, we are very
excited about our expanding operations at Crossfire which is the newest
extension of the highly prolific Pembina Nisku oil play. Earlier this year,
Great Plains and its joint venture partner completed a large proprietary three
dimensional seismic survey which has revealed some of the best seismic
anomalies along the entire Nisku trend. With subsequent land sale success and
various farm-in agreements in place, our land position at Crossfire now
includes interests in 30 sections of land with working interests up to
40 percent. We expect to participate in the drilling of six to eight wells in
the Pembina/Crossfire area over 2007 with the potential for one to three mmbbl
pool sizes per discovery. Early indications are that well licensing at
Crossfire should be a more expedited process based upon a much lower sour gas
content than previously seen in the early Nisku fairway.
    Great Plains is in the midst of fine tuning its capital expenditure plans
for the balance of 2007. Subject to adjustments for timing and capital
availability, we expect to spend approximately $25 million in 2007 with
40 percent allocated for Pembina/Crossfire. Randell will likely account for
30 percent of capital spending for the year, with various projects at Puskwa
and Morinville accounting for the balance. Expenditures to date for 2007 are
estimated at approximately $13.5 million which includes $3.5 million for land
and seismic at Crossfire.
    Beyond our new exploration initiatives, we are very optimistic about the
prospects for renewed growth based on both near and long term industry trends.
Natural gas inventories, while still high, have been reduced and drilling
activity has dropped, suggesting strengthening prices for 2008. Service costs
have started to respond to reduced demand, land costs are lower and farm-in
deals are now generally available on more reasonable terms. Perhaps most
importantly merger and acquisition ideas are now surfacing with metrics that
offer the opportunity for profitable returns. We are actively evaluating
opportunities for expansion in current core areas as well as new projects
which could provide an exploitation balance to our exploration weighted
capital expenditure program. We are also excited about surfacing new
opportunities where we can take advantage of the skills and experience of our
newly revamped team. Our geological and geophysical team which is now
comprised of six seasoned professionals, has specific expertise in deeper high
impact Devonian plays as well as shallower Cretaceous plays in West Central
Alberta and the Peace River Arch where we have chosen to focus our efforts.
The energy levels and enthusiasm which our new people have brought to Great
Plains is much appreciated.
    In closing I would like to acknowledge the support of our shareholders
and the contribution of all our employees and Board of Directors for the
wealth of talent and commitment they bring to our company. In addition I would
like to acknowledge Mr. Jules Poscente, our director and founder who passed
away in December 2006. Jules provided great insight helping to found and guide
Great Plains and his expertise, integrity and sense of humor is deeply missed.
    Although our plans for Great Plains continue to evolve, our corporate
objectives remain unchanged - to balance our growth, acquire wisely and drill
and explore. We are optimistic that the changes we have made coupled with a
solid financial base will allow us to take advantage of the improving
opportunities in our business. Our refocused exploration program has the
potential for high impact discoveries which could add significantly to our
production and reserve base. This in turn would improve all financial aspects
of our operations, from operating expense to netbacks to bottom line
performance. We are confident that our balanced approach to the business along
with an improvement in market conditions will ultimately generate the sort of
returns expected by both management and shareholders.

    On behalf of the Board of Directors,

    (Signed)"Stephen P. Gibson"

    Stephen P. Gibson
    President and CEO
    March 30, 2007



    
    FINANCIAL AND OPERATIONAL HIGHLIGHTS

    -------------------------------------------------------------------------
                                                  Year       Year
    For the Period Ended December 31             Ended      Ended          %
    ($000s except per unit amounts)               2006       2005     Change
    -------------------------------------------------------------------------

    Oil and gas sales                           27,473     28,167         (2)
    Cash flow                                   11,554     15,993        (28)
      Per share (basic)                           0.31       0.66        (53)
      Per share (diluted)                         0.31       0.65        (52)
    Net earnings (loss)                        (28,635)     3,215        n/a
      Per share (basic and diluted)              (0.76)      0.13        n/a
    Capital expenditures, net                   18,557     22,863        (19)
    Bank debt and working capital deficit       13,911     14,790         (6)
    Common shares outstanding (000s) (basic)    40,958     37,066         11
    -------------------------------------------------------------------------

    Production
      Oil (bbls/d)                                 451        313         44
      NGLs (bbls/d)                                 74         65         14
      Natural gas (mcf/d)                        5,692      5,291          8
    -------------------------------------------------------------------------
      Total (boe/d)                              1,474      1,260         17

    Commodity Pricing
      Oil ($/bbl)                                69.19      72.74         (5)
      NGLs ($/bbl)                               65.33      62.27          5
      Natural gas ($/mcf)                         6.89       9.53        (28)
    -------------------------------------------------------------------------
      Average ($/boe)                            51.06      61.30        (17)

    Netbacks ($/boe)
      Oil and gas sales                          51.06      61.30        (17)
      Royalties, net of ARTC                     (9.93)    (12.23)       (19)
      Operating costs                           (12.44)     (8.55)        46
      Transportation                             (0.98)     (0.97)         1
      Asset retirement expenditures              (0.59)     (0.09)       556
    -------------------------------------------------------------------------
      Operating netback                          27.12      39.46        (31)
      Other income                                1.66       0.69        141
      General and administrative                 (5.11)     (4.11)        24
      Interest                                   (2.24)     (0.98)       129
      Capital taxes                               0.05      (0.26)       n/a
    -------------------------------------------------------------------------
      Cash flow netback                          21.48      34.80        (38)
    -------------------------------------------------------------------------
    

    OIL AND GAS RESERVES REVIEW

    Great Plains' reserves have been evaluated by independent reserve
evaluators, GLJ Petroleum Consultants Ltd. (GLJ), as at December 31, 2006, in
accordance with National Instrument 51-101 Standards of Disclosure of Oil and
Gas Activities (NI 51-101).
    The following tables summarize certain information contained in this
reserve report. Additional reserve disclosure tables, as required under NI
51-101, are contained in the Annual Information Form which will be filed on
SEDAR by March 30, 2007. The reserve estimates contained in the following
tables are working interest reserves before the Company's royalty interest,
and before the deduction of royalties.

    
    Summary of Oil, Natural Gas and NGL Reserves Based on Forecast Price and
     Cost Assumptions
    Effective as of December 31, 2006

    -------------------------------------------------------------------------
                                                         Natural
    Reserves Category             Light/     Natural       Gas     Total Oil
                                Medium Oil     Gas       Liquids   Equivalent
                                  (mbbl)      (mmcf)      (mbbl)     (mboe)

    -------------------------------------------------------------------------
    Proved
      Developed Producing            603       7,668          97       1,978
      Developed Non-Producing        235       1,948          12         571
      Undeveloped                    329         491          10         421
    Total Proved                   1,167      10,108         119       2,970
    -------------------------------------------------------------------------
    Probable                         660       5,474          47       1,619
    -------------------------------------------------------------------------
    Total Proved Plus Probable     1,826      15,582         166       4,589
    -------------------------------------------------------------------------


    -------------------------------------------------------------
                                Net Present Value of Future Net
    Reserves Category              Revenue Before Income Taxes
                                    Discounted at (%/year)
                                              ($M)
                                    0           5           10
    -------------------------------------------------------------
    Proved
      Developed Producing         57,272      48,178      41,938
      Developed Non-Producing     15,303      12,515      10,505
      Undeveloped                 11,896       9,240       7,440
    Total Proved                  84,471      69,933      59,882
    -------------------------------------------------------------
    Probable                      46,869      31,600      23,110
    -------------------------------------------------------------
    Total Proved Plus Probable   131,340     101,532      82,992
    -------------------------------------------------------------



    Summary of Oil, Natural Gas and NGL Reserves Based on Constant Price
    and Cost Assumptions
    Effective as of December 31, 2006

    -------------------------------------------------------------------------
                                                         Natural
    Reserves Category             Light/     Natural       Gas     Total Oil
                                Medium Oil     Gas       Liquids   Equivalent
                                  (mbbl)      (mmcf)      (mbbl)     (mboe)

    -------------------------------------------------------------------------
    Proved
      Developed Producing            609       7,581          96       1,969
      Developed Non-Producing        235       1,936          12         569
      Undeveloped                    329         493          10         421
    Total Proved                   1,172      10,011         119       2,959
    -------------------------------------------------------------------------
    Probable                         663       5,420          46       1,613
    -------------------------------------------------------------------------
    Total Proved Plus Probable     1,835      15,431         165       4,572
    -------------------------------------------------------------------------


    -------------------------------------------------------------
                                Net Present Value of Future Net
    Reserves Category              Revenue Before Income Taxes
                                    Discounted at (%/year)
                                              ($M)
                                    0           5           10
    -------------------------------------------------------------
    Proved
      Developed Producing         47,560      40,596      35,658
      Developed Non-Producing     13,388      10,934       9,163
      Undeveloped                 11,803       9,185       7,398
    Total Proved                  72,751      60,715      52,220
    -------------------------------------------------------------
    Probable                      38,326      26,589      19,752
    -------------------------------------------------------------
    Total Proved Plus Probable   111,077      87,304      71,972
    -------------------------------------------------------------



    GLJ's January 1, 2007 price forecasts are shown below:

    -------------------------------------------------------------------------
    Year          WTI Crude Oil   Edmonton Light Crude   Natural Gas at AECO
                    (US $/bbl)       Oil (CDN$/bbl)          (CDN$/mmbtu)
    -------------------------------------------------------------------------
    2007              62.00               70.25                  7.20
    2008              60.00               68.00                  7.45
    2009              58.00               65.75                  7.75
    2010              57.00               64.50                  7.80
    2011              57.00               64.50                  7.85
    2012              57.50               65.00                  8.15
    2013              58.50               66.25                  8.30
    2014              59.75               67.75                  8.50
    2015              61.00               69.00                  8.70
    2016              62.25               70.50                  8.90
    2017              63.50               71.75                  9.10
    Escalate
     thereafter   2.0% per year       2.0% per year         2.0% per year
    -------------------------------------------------------------------------



    GLJ's December 31, 2006 constant prices are shown below:

    -------------------------------------------------------------------------
    Year          WTI Crude Oil   Edmonton Light Crude   Natural Gas at AECO
                    (US $/bbl)       Oil (CDN$/bbl)          (CDN$/mmbtu)
    -------------------------------------------------------------------------
    2007              60.85               67.58                  6.07
    -------------------------------------------------------------------------


    Net Asset Value at December 31, 2006

    In the following table, Great Plains' net asset value (NAV) is measured
with reference to the present value of future net cash flows from reserves, as
estimated by GLJ. The calculation is shown using forecast pricing.

    -------------------------------------------------------------------------
                                                                      NAV at
                                                                 December 31,
    ($ thousands, except per share amount)                              2006
    -------------------------------------------------------------------------
    Value of Proved plus Probable Reserves (PV 10%)             $     82,992
    Undeveloped lands(1)                                              15,359
    Debt plus working capital deficit                                (13,911)
    -------------------------------------------------------------------------
    Net Asset Value                                                   84,440
    Common Shares Outstanding (000s)                                  40,958
    -------------------------------------------------------------------------
    Net Asset Value per Common Share                            $       2.06
    -------------------------------------------------------------------------

    Notes:
    (1) Great Plains internal estimate based on $100 per net undeveloped acre
    

    Investors should note that boes may be misleading, particularly if used
    in isolation. A boe conversion rate of 6 Mcf: 1bbl is based on an energy
    equivalency conversion method primarily applicable at the burner tip and
    does not represent a value equivalency at the wellhead.

    Forward-Looking Information
    ---------------------------

    This press release contains forward-looking statements which include, but
are not limited to: operations plans and outlook, expectations, opinions,
forecasts, projections, guidance or other statements that are not statements
of fact, including statements regarding potential pool sizes per discovery in
the Pembina/Crossfire area and the expedited licensing process therefore, the
Company's projected spending in 2007 and its approximate allocations, the
Company's prospects for renewed growth, the Company's opportunities for
mergers and acquisitions, expansion, and new project opportunities, the
potential for high impact discoveries adding to the Company's production and
reserve basis, and the prospects for improving all financial aspects of the
Company's operations. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it cannot give
any assurance that such expectations will prove to be correct. Results of the
Company, its outlook and forward-looking statements summarized above may be
affected by a variety of variables and risks associated with oil and gas
exploration, production and transportation, such as loss of market, volatility
of oil and gas prices, currency fluctuations, imprecision of reserve
estimates, environmental risks, competition from other producers, ability to
access sufficient debt and equity capital from internal and external sources,
ability to replace and expand oil and gas reserves, ability to generate
sufficient cash flow from operations to meet its current and future
obligations, and risks associated with existing and potential future lawsuits
and regulatory actions made against the Company; as a consequence, actual
results could differ materially from those anticipated or implied in the
forward-looking statements.
    The Company's forward-looking statements are expressly qualified in their
entirety by this cautionary statement and are made as of the date of this new
release. Unless otherwise required by applicable securities laws, the Company
does not intend nor does it undertake any obligation to update or review any
forward-looking statements to reflect subsequent information, event, results
or circumstances or otherwise.



    
                     MANAGEMENT'S DISCUSSION AND ANALYSIS
    

    The following Management's Discussion and Analysis of financial results
as provided by the management of Great Plains Exploration Inc. ("Great Plains"
or the "Corporation") should be read in conjunction with the audited
consolidated financial statements of Great Plains for the years ended
December 31, 2006 and 2005. This Management's Discussion and Analysis has been
prepared effective March 27, 2007.
    The following information has been prepared by management in accordance
with Canadian generally accepted accounting principles ("GAAP"). All financial
results are reported in Canadian dollars and production and reserve numbers
are stated before crown or lessor royalties. Natural gas reserves and volumes
are converted to barrels of oil equivalent (boe) on the basis of six thousand
cubic feet (mcf) of gas to one barrel (bbl) of oil. Included in the MD&A are
references to terms commonly used in the oil and gas industry such as cash
flow and cash flow per share. Cash flow as used in this report represents cash
flow from operating activities before changes in non-cash working capital and
asset retirement obligations. The Corporation believes that cash flow
represents an indicator of the Corporation's performance. The Corporation also
discloses cash flow per share, where cash flow is divided by the weighted
average number of common shares outstanding. These terms are not defined by
Canadian GAAP and therefore are referred to as non-GAAP measures and therefore
may not be comparable with the calculation of similar measures for other
companies.

    The information contained herein contains forward-looking statements and
assumptions, such as those relating to results of operations and financial
condition, capital spending, financing sources, commodity prices and costs of
production. By their nature, forward-looking statements are subject to
numerous risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, actual results may differ materially
from those predicted. Readers are cautioned that the assumptions used in the
preparation of such information, although considered reasonable at the time of
preparation, may prove to be imprecise and, as such, undue reliance should not
be placed on forward-looking statements.

    Great Plains Exploration Inc. is a Canadian-based company whose common
shares are traded on The Toronto Stock Exchange (TSX) under the symbol "GPX".
Additional information relating to the Corporation can be found on the SEDAR
website at www.sedar.com or on the Corporation's website at
www.greatplainsexp.com.

    Corporate Vision, Core Businesses and Strategy

    Great Plains is an oil and gas company engaged in the exploration for,
and development and production of, oil and natural gas in Western Canada.
Great Plains was formed through the division of Eurogas Corporation under a
Plan of Arrangement dated April 5, 2004. The Corporation will focus on the
Western Canada Sedimentary Basin and intends to pursue a strategy of growth
through corporate acquisitions and value creation from full-cycle exploration.

    Disclosure Controls

    Disclosure controls and procedures are designed to provide reasonable
assurance that all relevant information is gathered and reported on a timely
basis to senior management, so that appropriate decisions can be made
regarding public disclosure. As at the end of the period covered by this
management's discussion and analysis, management evaluated the effectiveness
of the Corporation's disclosure controls and procedures as required by
Canadian securities laws.
    Based on that evaluation, management has concluded that, as of the end of
the period covered by this MD&A, the disclosure controls and procedures,
subject to certain limitations indicated below, were effective to provide
reasonable assurance that information required to be disclosed in the
Corporation's annual filings and interim filings (as such terms are defined
under Multilateral Instrument 52-109 - Certification of Disclosure in Issuers'
Annual and Interim Filings) and other reports filed or submitted under
Canadian securities laws is recorded, processed, summarized and reported
within the time periods specified by those laws, and that material information
is accumulated and communicated to management as appropriate to allow timely
decisions regarding required disclosure.

    Internal Controls Over Financial Reporting

    The Chief Executive Officer and the Chief Financial Officer of Great
Plains are responsible for designing a system of internal controls over
financial reporting, or causing them to be designed under their supervision,
in order to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
reporting purposes in accordance with Canadian generally accepted accounting
principles.
    We have designed and implemented a system of internal controls over
financial reporting which we believe is effective for a company of our size.
During the review of the design of the Corporation's control system over
financial reporting it was noted that due to the limited number of staff at
Great Plains, there is an inherent weakness in the system of internal controls
due to our inability to achieve appropriate segregation of duties. The limited
number of staff may also result in identifying weaknesses with respect to
accounting for complex and non-routine transactions due to a lack of technical
resources, and a lack of controls governing our computer systems and
applications within the Corporation. While management of Great Plains has put
in place certain procedures to mitigate the risk of a material misstatement in
the Corporation's financial reporting, there is no assurance that this risk
can be reduced to less than a remote likelihood of a material misstatement.

    Production

    Production volumes averaged 1,265 and 1,474 boe per day during the three
months and twelve month periods ended December 31, 2006. This compares to an
average of 1,604 and 1,260 boe per day average in the same periods of 2005.
The 17 percent increase in annual 2006 production is primarily attributable to
the acquisition of Rock Creek Resources Ltd. ("Rock Creek") in July 2005,
while noting that expected production gains during early 2006 from Randell,
which is a winter access only area, were delayed into 2007 due to lack of rig
availability. In the second half of 2006, Great Plains disposed of certain
non-core producing properties for proceeds of $18.3 million. The daily
production from these assets, at their date of disposition, totalled
approximately 170 boe per day.

    
    -------------------------------------------------------------------------
                                  Three months ended     Twelve months ended
                                      December 31             December 31
                                    2006        2005        2006        2005
    -------------------------------------------------------------------------
    Oil (bbls/d)                     376         579         451         313
    NGLs (bbls/d)                     55          69          74          65
    Natural gas (mcf/d)            5,002       5,733       5,692       5,291
    -------------------------------------------------------------------------
    boe/d (6:1)                    1,265       1,604       1,474       1,260
    -------------------------------------------------------------------------
    % natural gas production          66          60          64          70
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Crude oil and natural gas liquids sales volumes increased in 2006 by
39 percent to an average of 525 bbls/d annually, compared to 378 bbls/d on
average for 2005.
    Natural gas sales volumes, which averaged 5,692 mcf/d during the year
ended December 31, 2006 increased by 8 percent when compared to 2005 volumes.
    The Corporation's strategy implemented in the second half of 2006 is to
focus on four key areas in Alberta, and target a more balanced production base
between oil and gas.

    Commodity Pricing

    
    -------------------------------------------------------------------------
                                  Three months ended     Twelve months ended
                                      December 31             December 31
                                    2006        2005        2006        2005
    -------------------------------------------------------------------------
    Oil ($/bbl)                    58.17       71.38       69.19       72.74
    NGLs ($/bbl)                   57.78       75.62       65.33       62.27
    Natural gas ($/mcf)             7.26       12.58        6.89        9.53
    -------------------------------------------------------------------------
    $/Boe                          48.54       73.99       51.06       61.30
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Great Plains sells all its petroleum products to Canadian marketers at
spot reference prices based on US$ WTI for oil and Cdn$ AECO for natural gas
which are subject to general market conditions. Great Plains has not entered
into any commodity hedges to date.
    During 2006 commodity prices received by the Corporation decreased by
17 percent overall annually when compared to 2005. Oil was 5 percent lower,
NGLs were 5 percent higher and natural gas prices declined by 28 percent over
2006 compared to 2005.

    Oil & Gas Sales

    
    -------------------------------------------------------------------------
                            Three months ended         Twelve months ended
                               December 31                 December 31
                            2006          2005          2006          2005
    -------------------------------------------------------------------------
                         $000    %     $000    %     $000    %     $000    %
    -------------------------------------------------------------------------
    Oil                 2,013   36    3,804   35   11,399   42    8,300   29
    NGLs                  293    5      480    4    1,766    6    1,467    5
    Natural gas         3,342   59    6,633   61   14,308   52   18,400   66
    -------------------------------------------------------------------------
    Total               5,648  100   10,917  100   27,473  100   28,167  100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Production volumes, which increased annually by 17 percent in 2006,
mostly offset the 17 percent decline in commodity prices during the year
leaving total oil and gas sales revenue relatively flat when compared to the
twelve months ended December 31, 2005. During the fourth quarter of 2006
however, total oil and gas sales revenue declined by 48 percent compared to
the same period of 2005. Commodity prices declined by 34 percent and
production volumes were 21 percent lower than the three month period ended
December 31, 2005.

    Royalties

    
    -------------------------------------------------------------------------
                             Three months ended        Twelve months ended
                                 December 31                December 31
    $000s                  2006     2005  % Change    2006     2005  % Change
    -------------------------------------------------------------------------
    Crown royalties         826    1,982      (58)   4,430    5,046      (12)
    Other                   222      221        0    1,350    1,109       22
    Alberta Royalty
     Tax Credit             (70)    (162)     (57)    (438)    (536)     (18)
    -------------------------------------------------------------------------
    Total                   978    2,041      (52)   5,342    5,619       (5)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                                  Three months ended     Twelve months ended
                                      December 31             December 31
    Royalties (% of sales)          2006        2005        2006        2005
    -------------------------------------------------------------------------
    Crown royalties                   15          18          16          18
    Other                              4           2           5           4
    Alberta Royalty Tax Credit        (1)         (1)         (2)         (2)
    -------------------------------------------------------------------------
    Total                             18          19          19          20
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    For the twelve month period ended December 31, 2006, total royalties were
$5.3 million, representing a decrease of 5 percent over the $5.6 million
incurred in 2005. As a percentage of sales, total royalty expense decreased to
19 percent in 2006 compared to 20 percent in 2005, primarily the result of
decreased commodity prices and production volumes, which result in a lower
Crown royalty rate. Effective January 1, 2007 the Alberta government
eliminated the Alberta Royalty Tax Credit Program ("ARTC").

    Processing and Other Income

    
    -------------------------------------------------------------------------
                             Three months ended        Twelve months ended
                                 December 31                December 31
    $000s                  2006     2005  % Change    2006     2005  % Change
    -------------------------------------------------------------------------
    Processing income       133      187      (29)     688      245      181
    -------------------------------------------------------------------------
    Other income              3       19      (84)     203       74      174
    -------------------------------------------------------------------------
                            136      206      (34)     891      319      179
    $/boe                  1.17     1.40      (16)    1.66     0.69      141
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Processing and other income for the three and twelve month periods ended
December 31, 2006 were $136 thousand and $891 thousand ($1.17 and
$1.66 per boe respectively), compared to $206 thousand and $319 thousand
($1.40 and $0.69 per boe respectively) for the same periods in 2005. The
increase in processing income is primarily due to the purchase of an ownership
interest in a battery located in the Pembina, Alberta region in December,
2005. Other income, totalling $203 thousand for the year ended December 31,
2006, relates primarily to interest income associated with the property
dispositions completed during the year.

    Operating Expenses and Transportation Costs

    
    -------------------------------------------------------------------------
                             Three months ended        Twelve months ended
                                 December 31                December 31
                         ----------------------------------------------------
                           2006     2005  % Change    2006     2005  % Change
    -------------------------------------------------------------------------
    Operating expenses
     ($000s)              1,879    1,178       60    6,694    3,928       70
    -------------------------------------------------------------------------
    Operating expenses
     ($/boe)              16.15     7.98      103    12.44     8.55       46
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Transportation costs
     ($000s)                137      181      (24)     525      444       18
    -------------------------------------------------------------------------
    Transportation costs
     ($/boe)               1.18     1.23       (4)    0.98     0.97        1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Operating expenses for the three and twelve month periods ended
December 31, 2006, were $1.9 million and $6.7 million ($16.15 and $12.44 per
boe respectively), compared with $1.2 million and $3.9 million ($7.98 and
$8.55 per boe respectively) for the same periods in 2005 representing an
annual increase of 46 percent on a per boe basis. Generally, the industry has
experienced significant cost increases with respect to labour and materials,
applicable to all properties.
    In addition, several factors led to the increase in the Corporation's
operating expenses. Certain non-core properties, with little or no production,
had associated operating costs totalling $650 thousand (approximately
$1.23 per boe) in 2006. These properties will comprise part of Great Plains'
planned dispositions in 2007 as the Corporation continues to sharpen its
focus. Operating costs for Pembina represented approximately 29% of all
operating costs, and while relatively constant in total they were higher on a
per boe basis as average boe per day decreased from 531 boe/d to 330 boe/d due
to expected increased water cuts, without new wells being brought on to
replace this natural decline. The Corporation expects that its drilling
efforts in 2007 will augment production. Furthermore, approximately $190
thousand of the Pembina operating costs relate directly to the battery
operations that the Corporation has an ownership interest in and can be
related to the increased Processing income noted above. In Randell, another
core area, approximately $134 thousand of operating costs were related to new
battery facilities that were established for a larger production base.
Accordingly costs per boe were adversely affected due to delays in obtaining a
drilling rig in early 2006 in Randell. The Corporation expects that successful
drilling and optimization efforts in Randell in early 2007 will lead to
reduced unit costs. Finally, there were one-time repair and maintenance costs,
at several locations, totalling $387 thousand in 2006.
    Transportation costs totalled $137 thousand and $525 thousand for the
three and twelve months ended December 31, 2006, compared to $181 thousand and
$444 thousand during the same periods of 2005 representing a relatively
constant annual cost on a per boe basis.

    General & Administrative Expenses

    
    -------------------------------------------------------------------------
                             Three months ended       Twelve months ended
                                 December 31               December 31
    $000s                  2006     2005  % Change    2006     2005  % Change
    -------------------------------------------------------------------------
    Gross costs             998      934        7    3,794    2,850       33
    Capitalized            (153)    (241)     (37)  (1,043)    (963)      (8)
    -------------------------------------------------------------------------
    Net costs               845      693       22    2,751    1,887       46
    -------------------------------------------------------------------------
    

    General and administrative costs (net of capitalization) averaged $7.26
and $5.11 per boe for the three and twelve months ended December 31, 2006, an
increase of 54 percent and 24 percent when compared to $4.70 and $4.11 per boe
during the same periods of 2005. The increase in gross general and
administrative costs is primarily related to increased staff costs necessary
to attract and retain qualified personnel in a highly competitive market. The
Corporation also incurred one-time costs of $517 thousand ($0.97 per boe) in
2006 related to organizational restructuring. In the three and twelve month
periods ended December 31, 2006, the Corporation has capitalized $153 thousand
and $1.04 million of general and administrative expenses (2005 - $241 thousand
and $963 thousand).

    Stock Based Compensation

    
    -------------------------------------------------------------------------
                             Three months ended       Twelve months ended
                                 December 31               December 31
    $000s                  2006     2005  % Change    2006     2005  % Change
    -------------------------------------------------------------------------
    Gross costs             225      379      (33)   1,139    1,516      (25)
    Capitalized            (148)       -        -     (228)       -        -
    -------------------------------------------------------------------------
    Net costs               107      379      (72)     911    1,516      (40)
    -------------------------------------------------------------------------
    

    Stock based compensation expense totaled $107 thousand and $911 thousand
for three and twelve month periods ended December 31, 2006 compared to
$379 thousand and $1.5 million for the three and twelve month periods ended
December 31, 2005. In addition, the Corporation has capitalized $227 thousand
and $345 thousand of stock based compensation during the three and twelve
month periods ended December 31, 2006. No amounts were capitalized in 2005.
Total compensation expense is amortized over the vesting period of the stock
options. Compensation expense is based on the estimated fair value of the
options on the grant date in accordance with the fair value method of
accounting for stock based compensation.

    Interest Expense

    
    -------------------------------------------------------------------------
                             Three months ended       Twelve months ended
                                 December 31               December 31
                         ----------------------------------------------------
                           2006     2005  % Change    2006     2005  % Change
    -------------------------------------------------------------------------
    Interest expense
     ($000s)                176      164        7    1,207      452      167
    -------------------------------------------------------------------------
    Interest expense
     ($/boe)               1.51     1.11       36     2.24     0.98      129
    -------------------------------------------------------------------------
    

    Interest expense for the three and twelve month periods ended
December 31, 2006, was $176 thousand and $1.21 million compared with $164
thousand and $452 thousand for the same periods in 2005. The increase is due
to (i) higher interest rates charged by the Corporation's lender, reflecting
the increase in the prime rate, (ii) an increase in the amount drawn against
the Corporation's credit facility, and (iii) interest charged in 2006 pursuant
to obligations arising from the flow through share issuance in December, 2005.
Interest expense per boe was $1.51 and $2.24 respectively for the three and
twelve months ended December 31, 2006. For the same periods in 2005 the
interest expense per boe was $1.11 and $0.98.

    Depletion, Depreciation and Accretion

    
    -------------------------------------------------------------------------
                             Three months ended        Twelve months ended
                                 December 31                December 31
    $000s                  2006     2005  % Change    2006     2005  % Change
    -------------------------------------------------------------------------
    Depletion and
     depreciation
     expense              4,374    3,510       24   15,501    9,205       68
    -------------------------------------------------------------------------
    Accretion expense        52       58      (10)     193      147       31
    -------------------------------------------------------------------------
    Total                 4,426    3,568       24   15,694    9,352       68
    $/boe                 38.04    24.18       57    29.17    20.35       43
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Depletion, depreciation and accretion expense has increased from
$3.6 million and $9.4 million for the three and twelve month periods ended
December 31, 2005, to $4.4 million and $15.7 million for the three and
twelve month periods ended December 31, 2006. The increase is due to an
aggressive capital program over the twelve months of 2006 which includes
significant seismic and facilities costs which have no reserves associated
with them in the depletion calculation.

    Goodwill Writedown

    Under GAAP goodwill is assessed for impairment at least annually.
Goodwill, which represents the excess of the purchase price over the fair
value of net assets acquired, is not amortized and is assessed by the
Corporation for impairment at least annually. Impairment is assessed based on
a comparison of the fair value of the net assets to the carrying value of the
net assets, including goodwill. Any excess of carrying value over and above
fair value is the impairment amount, and is charged to earnings in the period
identified. Great Plains has assessed goodwill for impairment at December 31,
2006 and has recorded a writedown of $26.9 million (2005 - Nil). The following
table reconciles the goodwill balance:

    
    -------------------------------------------------------------------------
                                                                     ($000's)
    -------------------------------------------------------------------------
    Balance, December 31, 2004                                  $      2,923
    Goodwill on acquisition of Rock Creek                             23,983
    Balance, December 31, 2005                                        26,906
    Goodwill writedown                                               (26,906)
    -------------------------------------------------------------------------
    Balance, December 31, 2006                                  $          0
    -------------------------------------------------------------------------
    

    Taxes

    There is no Federal Large Corporations Tax for 2006 due to legislation
enacted in June, 2006 eliminating the Federal Large Corporations Tax
retroactive to January 1, 2006. In the three and twelve month periods ended
December 31, 2005 the Corporation recorded Federal Large Corporations Tax of
$38 thousand and $120 thousand. A future income tax recovery of $1.2 million
and $3.0 million was recorded for the three and twelve month period ended
December 31, 2006, compared to a future income tax expense of $729 thousand
and $2.0 million for the same periods in 2005. Great Plains management
believes that no cash income tax will be payable in 2007, although current tax
horizons will depend on commodity prices, production levels and the nature,
magnitude and timing of capital expenditures.
    In November of 2006, Great Plains issued a total of 3.75 million
flow-through shares at an issue price of $2.15 per flow-through share. Total
proceeds from the issuance (before expenses) was $8.06 million. As at
December 31, 2006, the Corporation had approximately $6.9 million of eligible
exploration expenditures left to incur to satisfy its obligations. The
Corporation was required to incur these expenditures by December 31, 2007 and
is expected to achieve this by April 2007.
    On March 20, 2007 the Corporation closed a private placement for the
issuance of 6,667,000 flow-through common shares at $1.50 per share for gross
proceeds of $10,000,500 less agent's commission of 6%. The Corporation is
required to incur and renounce eligible exploration expenditures equal to the
gross amount of the issuance on or prior to December 31, 2008.
    Great Plains and its subsidiaries have combined tax pools of
approximately $55.9 million of which $5.5 million is available for deduction
against Alberta income tax only, as follows:

    
    -------------------------------------------------------------------------
                                                                     ($000's)
    -------------------------------------------------------------------------
    CEE                                                                1,200
    CDE                                                               18,813
    COGPE                                                              3,345
    UCC                                                               25,087
    Financing costs                                                    2,044
    Attributed Canadian Royalty Income                                 5,460
    -------------------------------------------------------------------------
    Total, December 31, 2006                                    $     55,949
    -------------------------------------------------------------------------
    

    Cash Flow

    Cash flow from operations for the three and twelve month periods ended
December 31, 2006, totalled $1.6 million ($0.04 per basic and diluted share)
and $11.6 million ($0.31 per basic share and diluted share). For the same
three and twelve month periods ended December 31, 2005, cash flow totalled
$6.8 million ($0.19 per basic and diluted share) and $16.0 million ($0.66 per
basic share and $0.65 per diluted share).
    As a result of weaker commodity prices and increased operating costs,
cash flow totalled $13.37 and $21.48 per boe for the three and twelve month
periods ended December 31, 2006, compared to $46.28 and $34.80 per boe
recorded for the same period in 2005.

    
    -------------------------------------------------------------------------
                                  Three months ended     Twelve months ended
                                      December 31             December 31
    $/Boe                           2006        2005        2006        2005
    -------------------------------------------------------------------------
    Oil & gas sales                48.54       73.99       51.06       61.30
    Royalties, net of ARTC         (8.40)     (13.83)      (9.93)     (12.23)
    Operating costs               (16.15)      (7.98)     (12.44)      (8.55)
    Transportation                 (1.18)      (1.23)      (0.98)      (0.97)
    Asset retirement
     expenditures                  (1.84)          -       (0.59)      (0.09)
    -------------------------------------------------------------------------
    Operating netback              20.97       50.95       27.12       39.46
    Other income                    1.17        1.40        1.66        0.69
    General and administrative     (7.26)      (4.70)      (5.11)      (4.11)
    Interest                       (1.51)      (1.11)      (2.24)      (0.98)
    Capital taxes                      -       (0.26)       0.05       (0.26)
    -------------------------------------------------------------------------
    Cash flow                      13.37       46.28       21.48       34.80
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Net Earnings (loss)

    Net loss for the twelve month period ended December 31, 2006, totalled
$28.6 million ($0.76 per share basic and diluted) compared to earnings of
$3.2 million ($0.13 per share basic and diluted) for the same period of 2005.
Excluding the one-time goodwill writedown, net loss for the twelve month
period was $1.7 million ($0.05 per share basic and diluted).

    Capital Expenditures

    Capital expenditures, net of dispositions and excluding actual
abandonment and site restoration costs, totalled $5.5 million and
$18.6 million in the three and twelve month periods ended December 31, 2006.
This compares to $9.9 million and $22.8 million during the three and twelve
month periods ended December 31, 2005. A total of 30 wells (8.9 net) were
drilled in the year ended December 31, 2006. Of this total, 15 wells (3.1 net)
are classified as gas wells, 7 wells (2.6 net) are classified as oil wells, 5
wells (1.7 net) are suspended and 3 wells (1.5 net) are dry and abandoned.
Drilling and completing costs totalled $16.2 million, equipping and facilities
totalled $13.2 million, land costs were $3.0 million and geological and
geophysical costs were $3.5 million. The Corporation also capitalized
$1.0 million of general and administrative costs. In addition, the Corporation
disposed of various non-core properties, comprising 170 boe/d for total
proceeds of $18.3 million. The Corporation also expended $3.0 million on the
assembly of a drilling rig in the year, which it subsequently sold in July
2006 for that amount.
    A total of $317 thousand was incurred with respect to abandonment and
site restoration activities in 2006, compared with $43 thousand for the year
ended December 31, 2005.
    In 2007, the Corporation plans to drill up to 21 operated wells and 25
non-operated wells (a total of up to 21 net wells) in the next year, spending
a total of approximately $25 million. Drilling is planned for most of the
Corporation's properties with the largest areas of activity being Randell,
Pembina, Athabasca/Morinville and the Peace River Arch.

    Liquidity and Capital Resources

    At December 31, 2006, Great Plains' total debt and working capital
deficiency totalled $13.9 million compared to $14.8 million at the end of
2005. The Corporation has a revolving demand credit facility with a Canadian
chartered bank with a balance drawn at December 31, 2006 of $6.7 million. The
facility is for $33,550,000 with interest charged at the bank's prime rate per
annum. Collateral for the facility consists of a general security agreement,
providing a security interest over all present and after acquired personal
property and a floating charge on all present and after acquired land
interests of the Corporation. In addition, a $14,000,000 revolving acquisition
credit facility is available. Standby fees associated with the facilities are
0.10% per annum on the undrawn portion of each facility. The lending base will
be subject to review by the bank on May 31, 2007.
    The Corporation expects to fund its 2007 capital expenditure program
using cash flow, available credit facilities and the proceeds received from
the private placement flow-through share issuance, which closed on March 20,
2007.

    Commitments

    At December 31, 2006, in connection with the issuance of flow-through
shares in 2006, the Corporation was required to expend a balance of
$6.9 million of eligible exploration expenditures by December 31, 2007 to
satisfy its obligations. This amount is expected to be satisfied by April
2007. Furthermore, in connection with the private placement for the issuance
of flow-through shares that closed on March 20, 2007, the Corporation is
required to expend a further $10.0 million of eligible exploration
expenditures by December 31, 2008.
    The Corporation has entered into lease arrangements for office space to
March 31, 2010. The future minimum lease payments total $889,704.
    The Corporation also enters into various contractual obligations in the
normal course of its operations, including the purchase of various operational
services, operating agreements, and office equipment. These contractual
obligations were entered into in the ordinary course of business and the terms
reflect market conditions.

    Capitalization

    Share capital totalled $86.76 million at December 31, 2006. At the end of
December 2006, there was a total of 40.96 million Class "A" common shares
outstanding.

    
    -------------------------------------------------------------------------
                                                             2006
                                                             ----
    -------------------------------------------------------------------------
                                                       Number
                                                       ------
    Issued and outstanding Class "A"                of shares         Amount
     common shares                                  ---------         ------
    -------------------------------------------------------------------------
    Balance, beginning of period                   37,065,612   $ 81,247,050
    -------------------------------------------------------------------------
    Flow-through shares issued for cash
     on private placement                           3,750,000      8,062,500
    -------------------------------------------------------------------------
    Share issue costs, net of future taxes,
     totalling $177,994 (2005-$211,782)                     -       (352,696)
    -------------------------------------------------------------------------
    Tax effect on flow-through shares                       -     (2,601,694)
    -------------------------------------------------------------------------
    Issued on exercise of stock options               142,060        350,518
    -------------------------------------------------------------------------
    Transfer from contributed surplus to
     share capital on exercise of options                   -         54,544
    -------------------------------------------------------------------------
    Balance, end of period                         40,957,672   $ 86,760,222
    -------------------------------------------------------------------------
    

    The market value of the common shares was $56.93 million based on a
closing price at December 31, 2006 of $1.39 per common share. In addition, at
December 31, 2006 the Corporation had a total of 3.09 million stock options
outstanding with a weighted average exercise price of $2.50 per common share.
    As of March 27, 2007 the Corporation has 47,624,672 common shares
outstanding and 2.84 million stock options outstanding with a weighted average
exercise price of $2.50 per common share.

    Related Party Transactions

    The Corporation had transactions with a law firm in which a director of
the Corporation is a partner, as follows:

    
    -------------------------------------------------------------------------
    Recorded as:                                         2006           2005
    -------------------------------------------------------------------------
    General and Administrative Expenses          $     78,915   $     34,625
    -------------------------------------------------------------------------
    Share Issue Costs                            $     27,686   $     24,503
    -------------------------------------------------------------------------
    Property and Equipment                       $     94,656              -
    -------------------------------------------------------------------------

    As at December 31, 2006, there was a payable to the law firm of $55,093
    (2005 - $31,362).
    

    The above transactions are in the normal course of business and have been
valued in these financial statements at the exchange amount which is the
amount of consideration established and agreed to by the related parties.

    Off Balance Sheet Arrangements

    The Corporation has certain lease agreements that are entered into in the
normal course of operations. All leases are treated as operating leases
whereby lease payments are included in operating expenses or general and
administrative expenses depending on the nature of the lease. No asset or
liability value has been assigned to these leases in the balance sheet as of
December 31, 2006.
    The Corporation has not entered into any commodity hedges to date.

    Critical Accounting Estimates

    Oil and gas properties

    The Corporation follows the full cost method of accounting whereby all
costs related to the exploration for and development of oil and gas reserves
are accumulated in one Canadian cost centre. Costs include lease acquisition,
geological and geophysical expenditures, carrying costs of non-productive
properties, the drilling of productive and non-productive wells and related
plant and production equipment costs, and that portion of general and
administrative expenses directly attributable to exploration and development
activities. Proceeds received from the disposal of properties are normally
deducted from the full cost pool without recognition of a gain or loss, unless
such sale results in a change in the rate of depletion of 20% or more.

    Depletion and depreciation

    Depletion and depreciation of oil and gas properties and equipment is
computed using the unit-of-production method where the ratio of production to
proved reserves, before royalties, determines the proportion of depletable
costs to be expensed in each period. Undeveloped properties are excluded from
the depletion calculation until quantities of proved reserves are found or
impairment occurs. Volumes are converted to equivalent units using the ratio
of one barrel of oil to six mcf of natural gas. Depreciation of office
equipment and computer equipment is provided for on a 10% and 35% per annum
straight-line basis respectively.

    Recovery of capitalized costs

    The Corporation performs a cost recovery test which recognizes impairment
when the carrying amount of the oil and gas properties, by cost centre,
exceeds its undiscounted future cash flows from proved reserves based on
estimated future commodity prices. If impairment is recognized, the amount of
impairment is determined as the excess of the carrying amount over the fair
value. Fair value is based on the present value of expected cash flows,
reflecting discounting at the risk-free rate of interest. Both proved and
probable reserves and undeveloped land are used in estimating fair value. This
cost centre impairment test is conducted at each annual balance sheet date or
more frequently if conditions indicating potential impairment are present.

    Measurement uncertainty

    The full cost method of accounting, which is used to account for oil and
gas activities, relies on estimates of proved reserves that will ultimately be
recoverable from the properties. These estimates are utilized in calculating
depletion and any potential impairment of assets. The process of estimating
reserves requires significant judgement, based on available geological,
geophysical, engineering and economic data.
    Reserves are evaluated at year-end by an independent engineering firm.
New reserves from wells drilled in the current year are estimated by the
Corporation's engineers.
    Although efforts are made to ensure that the critical estimates are
accurate, changing economic and operational conditions, as well as changes to
government regulations may significantly affect these estimates, which may
cause fluctuations in future earnings and cash flows.

    Goodwill

    Goodwill, which represents the excess of purchase price over fair value
of net assets acquired, is not amortized and is assessed by the Corporation
for impairment at least annually. Impairment is assessed based on a comparison
of the fair value of the net assets acquired to the carrying value of the net
assets acquired, including goodwill. Any excess of carrying value over and
above fair value is the impairment amount, and is charged to earnings in the
period identified.

    Asset retirement obligations

    The present value of expected future abandonment and reclamation costs is
recorded on the balance sheet as both a liability and a charge to oil and gas
properties at the time the obligation is incurred. The amount included as
property and equipment is depleted over the life of the reserves by the
unit-of-production method. The liability accretes until the Corporation
settles the retirement obligation. Actual reclamation and abandonment costs
incurred are charged against the liability.
    Estimates for future abandonment and reclamation costs are based on
historical costs to abandon and reclaim similar sites, taking into
consideration current costs. The liability is based on the Corporation's net
interest in the respective sites.

    Flow-through shares

    The Corporation and its wholly-owned subsidiary financed a portion of its
exploration and development activities through the issuance of flow-through
shares. Under the terms of the flow-through share agreements, the tax
attributes of the related expenditures are renounced to subscribers. To
recognize the foregone tax benefits to the Corporation, the carrying value of
the shares issued is reduced by the tax effect of the tax benefits renounced
to subscribers.

    Stock-based compensation

    The Corporation recognizes compensation expense using the fair value
method when stock options with no cash settlement features are granted to
employees and directors under the fixed share option plan. Under this method,
compensation expense is measured at the grant date and recognized as a charge
to earnings over the vesting period with a corresponding credit to contributed
surplus. The fair value of the options is determined using the Black-Scholes
option pricing model. Consideration paid on the exercise of the stock option
and associated contributed surplus recorded is credited to share capital.

    Earnings per share

    Basic earnings per common share is computed by dividing the net earnings
available to common shareholders by the weighted average number of common
shares outstanding during the period. The weighted average number of common
shares outstanding for the three and twelve months ended December 31, 2006 was
39,144,483 and 37,678,939 respectively). Diluted earnings per common share are
calculated using the treasury stock method to determine the dilutive effect of
stock options. The treasury stock method assumes that the proceeds received
from the exercise of "in the money" stock options are used to repurchase
common shares at the average market price during the period. The diluted
weighted average common shares for the three and twelve month periods ended
December 31, 2006 was 39,144,483 and 37,678,939, respectively. For the three
and twelve month periods ended December 31, 2005, the weighted average number
of shares assumed to be outstanding was 35,064,184 and 24,206,685 (diluted -
35,295,482 and 24,550,186).

    New Accounting Pronouncements

    Accounting Changes in the Current Period

    Non-Monetary Transactions:

    Effective for non-monetary transactions initiated in periods beginning on
or after January 1, 2006 the new Handbook Section 3831 "Non-Monetary
Transactions" requires all non-monetary transactions to be measured at fair
value, subject to certain exceptions. Commercial substance replaces
culmination of the earnings process as the test for fair value measurement and
is a function of the cash flows expected from the exchanged assets. Adopting
the provisions of this standard in 2006 did not have an impact on the
Corporation's consolidated financial statements.

    Future Accounting Changes

    Financial Instruments - Recognition and Measurement

    Effective for interim and annual financial statements beginning on or
after October 1, 2006, the new Handbook Section 3855 "Financial Instruments -
Recognition and Measurement" prescribes that all financial instruments within
the scope of this standard, including derivatives, be included on a
corporation's balance sheet. Contracts that can be settled by receipt or
delivery of a commodity will also be included in the scope of the section.
These financial instruments must be measured, either at their fair value or,
in limited circumstances when fair value may not be considered the most
relevant measurement method, at cost or amortized cost. It also specifies when
gains or losses as a result of changes in fair value are to be recognized in
the income statement. This new Handbook section will be adopted by the
Corporation as of January 1, 2007 on a prospective basis. The Corporation does
not expect this new requirement to have a significant impact on the
Corporation's consolidated financial statements.

    Hedges

    Effective for interim and annual financial statements for fiscal years
beginning on or after October 1, 2006, the new Handbook Section 3865 "Hedges"
specifies the circumstances under which hedge accounting is permissible, how
hedge accounting may be performed, and where the impacts should be recorded.
The provisions of this standard introduce three specific types of hedging
relationships: fair value hedges, cash flow hedges and hedges of a net
investment in self-sustaining foreign operations. This new Handbook section
will be adopted by the Corporation as of January 1, 2007 on a prospective
basis. The Corporation does not expect this new requirement to have a
significant impact on the Corporation's consolidated financial statements.

    Comprehensive Income

    Effective for interim and annual financial statements for fiscal years
beginning on or after October 1, 2006, the new Handbook Section 1530
"Comprehensive Income" requires that an enterprise present comprehensive
income and its components in a separate financial statement that is displayed
with the same prominence as other financial statements. This Section
introduces a new requirement to present certain gains and losses temporarily
outside net income. This Handbook section will be adopted by the Corporation
as of January 1, 2007 on a prospective basis. The Corporation does not expect
this new requirement to have a significant impact on the Corporation's
consolidated financial statements.

    Business Risks

    An investment in Great Plains should be considered highly speculative due
to the nature of Great Plains' involvement in the exploration for, and the
acquisition, development, production and marketing of, oil and natural gas
reserves and its current stage of development. Oil and gas operations involve
many risks which even a combination of experience and knowledge and careful
evaluation may not be able to overcome. There is no assurance that further
commercial quantities of oil and natural gas will be discovered or acquired by
Great Plains.

    Exploration, Development and Production Risks

    Oil and natural gas exploration involves a high degree of risk, which
even a combination of experience, knowledge and careful evaluation may not be
able to overcome. There is no assurance that expenditures made on future
exploration by Great Plains will result in new discoveries of oil or natural
gas in commercial quantities. It is difficult to project the costs of
implementing an exploratory drilling program due to the inherent uncertainties
of drilling in unknown formations, the costs associated with encountering
various drilling conditions such as over pressured zones, tools lost in the
hole and changes in drilling plans and locations as a result of prior
exploratory wells or additional seismic data and interpretations thereof.
    The long-term commercial success of Great Plains will depend on its
ability to find, acquire, develop and commercially produce oil and natural gas
reserves. No assurance can be given that Great Plains will be able to locate
satisfactory properties for acquisition or participation. Moreover, if such
acquisitions or participations are identified, Great Plains may determine that
current markets, terms of acquisition and participation or pricing conditions
make such acquisitions or participations uneconomic.
    Future oil and gas exploration may involve unprofitable efforts, not only
from dry wells, but from wells that are productive but do not produce
sufficient net revenues to return a profit after drilling, operating and other
costs. In addition, drilling hazards or environmental damage could greatly
increase the cost of operations and various field operating conditions may
adversely affect the production from successful wells. These conditions
include delays in obtaining governmental approvals or consents, shut-ins of
connected wells resulting from extreme weather conditions, insufficient
storage or transportation capacity or other geological and mechanical
conditions. While diligent well supervision and effective maintenance
operations can contribute to maximizing production rates over time, production
delays and declines from normal field operating conditions cannot be
eliminated and can be expected to adversely affect revenue and cash flow
levels to varying degrees.
    In addition, oil and gas operations are subject to the risks of
exploration, development and production of oil and natural gas properties,
including encountering unexpected formations or pressures, premature declines
of reservoirs, blow-outs, cratering, sour gas releases, fires and spills.
Losses resulting from the occurrence of any of these risks could have a
materially adverse effect on future results of operations, liquidity and
financial condition.

    Prices, Markets and Marketing of Crude Oil and Natural Gas

    Oil and natural gas are commodities whose prices are determined based on
world demand, supply and other factors, all of which are beyond the control of
Great Plains. World prices for oil and natural gas have fluctuated widely in
recent years. Any material decline in prices could result in a reduction of
net production revenue. Certain wells or other projects may become uneconomic
as a result of a decline in world oil prices and natural gas prices. All of
these factors could result in a material decrease in Great Plains' future net
production revenue, causing a reduction in its oil and gas acquisition and
development activities. In addition, bank borrowings available to Great Plains
are expected to be determined in part by the borrowing base of Great Plains. A
sustained material decline in prices from historical average prices could
limit Great Plains' borrowing base, therefore reducing the bank credit
available to Great Plains, and could require that a portion of any existing
bank debt of Great Plains be repaid.
    In addition to establishing markets for its oil and natural gas, Great
Plains must also successfully market its oil and natural gas to prospective
buyers. The marketability and price of oil and natural gas which may be
acquired or discovered by Great Plains will be affected by numerous factors
beyond its control. Great Plains will be affected by the differential between
the price paid by refiners for light quality oil and the grades of oil
produced by Great Plains. The ability of Great Plains to market its natural
gas may depend upon its ability to acquire space on pipelines which deliver
natural gas to commercial markets. Great Plains will also likely be affected
by deliverability uncertainties related to the proximity of its reserves to
pipelines and processing facilities and related to operational problems with
such pipelines and facilities and extensive government regulation relating to
price, taxes, royalties, land tenure, allowable production, the export of oil
and natural gas and many other aspects of the oil and natural gas business.
Great Plains has limited direct experience in the marketing of oil and natural
gas.

    Substantial Capital Requirements: Liquidity

    Great Plains anticipates that it will make substantial capital
expenditures for the acquisition, exploration and development and production
of oil and natural gas reserves in the future. If Great Plains' revenues or
reserves decline, as a result of lower oil and natural gas prices or
otherwise, Great Plains may have limited ability to expend the capital
necessary to undertake or complete future drilling programs to replace its
reserves or to maintain its production. There can be no assurance that debt or
equity financing, or cash generated by operations will be available or
sufficient to meet these requirements or for other corporate purposes or, if
debt or equity financing is available, that it will be on terms acceptable to
Great Plains. The inability of Great Plains to access sufficient capital for
its operations could have a material adverse effect on Great Plains' financial
condition, results of operations or prospects.

    Additional Funding Requirements

    From time to time, Great Plains may require additional financing in order
to carry out its oil and gas acquisitions, exploration and development
activities. Failure to obtain such financing on a timely basis could cause
Great Plains to forfeit its interest in certain properties, miss certain
acquisition opportunities and reduce or terminate its operations. Moreover,
future activities may require Great Plains to alter its capitalization
significantly, which may impact its financial condition.

    Insurance

    Oil and natural gas exploration operations are subject to all the risks
and hazards typically associated with such operations, including hazards such
as fire, explosion, blowouts, cratering and oil spills, each of which could
result in substantial damage to oil and natural gas wells, production
facilities or other property and the environment or in personal injury. In
accordance with industry practice, Great Plains is not fully insured against
all of these risks, nor are all such risks insurable. Although Great Plains
maintains liability insurance in an amount which it considers adequate and
consistent with industry practice, the nature of these risks is such that
liabilities could exceed policy limits, in which event Great Plains could
incur significant costs that could have a material adverse effect upon its
financial condition.

    Competition

    The petroleum industry is competitive in all its phases. Great Plains
competes with numerous other participants in the search for the acquisition of
oil and natural gas properties and in the marketing of oil and natural gas.
Great Plains' competitors include oil companies which have greater financial
resources, staff and facilities than those of Great Plains. Great Plains'
ability to increase reserves in the future will depend not only on its ability
to develop its present properties, but also on its ability to select and
acquire suitable producing properties or prospects for exploratory drilling.
Competitive factors in the distribution and marketing of oil and natural gas
include price and methods of reliability of delivery.

    Environmental Risks

    All phases of the oil and natural gas business present environmental
risks and hazards and are subject to environmental regulation pursuant to a
variety of international conventions and state and/or provincial and municipal
laws and regulations. Environmental legislation provides for, among other
things, restrictions and prohibitions on spills, releases or emissions of
various substances produced in association with oil and gas operations. The
legislation also requires that wells and facility sites be operated,
maintained, abandoned and reclaimed to the satisfaction of the applicable
regulatory authorities. Compliance with such legislation can require
significant expenditures and a breach may result in the imposition of fines
and penalties, some of which may be material. Environmental legislation is
evolving in a manner expected to result in stricter standards and enforcement,
larger fines and liability and potentially increased capital expenditures and
operating costs. The discharge of oil, natural gas or other pollutants into
the air, soil or water may give rise to liabilities to foreign governments and
third parties and may require Great Plains to incur costs to remedy such
discharge. No assurance can be given that environmental laws will not result
in a curtailment of production or a material increase in the costs of
production, development or exploration activities or otherwise adversely
affect Great Plains' financial condition, results of operations or prospects.

    Kyoto Protocol

    Canada is signatory to the United Nations Framework Convention on Climate
Change. Canada has ratified the Kyoto Protocol established thereunder. Annex B
parties to the Kyoto Protocol, which includes Canada, are required to
establish legally binding targets to reduce nation-wide emissions of carbon
dioxide, methane, nitrous oxide and other so-called "greenhouse gases". Great
Plains' exploration and production facilities and other operations and
activities emit a small amount of greenhouse gases which may subject Great
Plains to legislation in Canada regulating emissions of greenhouse gases. The
Government of Canada has put forward a Climate Change Plan for Canada which
suggests further legislation to set greenhouse gases emission reduction
requirements for various industrial activities, including oil and gas
exploration and production. Future Canadian federal legislation, together with
provincial emission reduction requirements, such as those proposed in the
Climate Change and Emissions Management Act (Alberta), may require the
reduction of emissions or emissions intensity from Great Plains' operations
and facilities. The direct and indirect costs of complying with these
emissions regulations may adversely affect the business of Great Plains.

    Reserve Replacement

    Great Plains' future oil and natural gas reserves, production and cash
flows to be derived therefrom are highly dependent on Great Plains
successfully acquiring or discovering new reserves. Without the continual
addition of new reserves, any existing reserves Great Plains may have at any
particular time and the production therefrom will decline over time as such
existing reserves are exploited. A future increase in Great Plains' reserves
will depend not only on Great Plains' ability to develop any properties it may
have from time to time, but also on its ability to select and acquire suitable
producing properties or prospects. There can be no assurance that Great
Plains' future exploration and development efforts will result in the
discovery and development of additional commercial accumulations of oil and
natural gas.

    Reliance on Operators and Key Employees

    To the extent that Great Plains is not the operator of its oil and gas
properties, Great Plains will be dependent on such operators for the timing of
activities related to such properties and will largely be unable to direct or
control the activities of the operators. In addition, Great Plains' success
depends in large measure on certain key executive personnel. The loss of the
services of such key personnel could have a material adverse affect on Great
Plains. Great Plains does not have key person insurance in effect for
management. The contributions of these individuals to the immediate operations
of Great Plains are likely to be of central importance. In addition, the
competition for qualified personnel in the oil and natural gas industry is
intense and there can be no assurance that Great Plains will be able to
continue to attract and retain all personnel necessary for the development and
operation of its business. Investors must rely upon the ability, expertise,
judgment, discretions, integrity and good faith of the management of Great
Plains.

    Permits and Licenses

    The operations of Great Plains may require licenses and permits from
various governmental authorities. There can be no assurance that the issuer
will be able to obtain all necessary license and permits that may be required
to carry out exploration and development at its projects.

    Issuance of Debt

    From time to time Great Plains may enter into transactions to acquire
assets or the shares of other corporations. These transactions may be financed
partially or wholly with debt, which may increase Great Plains' debt levels
above industry standards. Depending on the future exploration and development
plans, Great Plains may require additional equity and/or debt financing which
may not be available or if available, may not be available on favourable
terms.

    Dilution

    Great Plains may make future acquisitions or enter into financings or
other transactions involving the issuance of securities of Great Plains which
may be dilutive.

    Title of Properties

    Although title reviews will be done according to industry standards prior
to the purchase of most oil and natural gas producing properties or the
commencement of drilling wells, such reviews do not guarantee or certify that
an unforeseen defect in the chain of title will not arise to defeat the claim
of Great Plains which could result in a reduction of the revenue received by
Great Plains.

    Aboriginal Claims

    Aboriginal peoples have claimed aboriginal title and rights to portions
of western Canada. Great Plains is not aware that any claims have been made in
respect of its assets, however, if a claim arose and was successful this could
have an adverse effect on Great Plains and its operations.

    Delays in Business Operations

    In addition to the usual delays in payments by purchasers of oil and
natural gas to Great Plains or to the operator, and the delays by operators in
remitting payment to Great Plains, payments between these parties may be
delayed due to restrictions imposed by lenders, accounting delays, delays in
the sale or delivery of products, delays in the connections of wells to a
gathering system, adjustment for prior periods, or recovery by the operator of
expenses incurred in the operation of the properties. Any of these delays
could reduce the amount of cash flow available for the business of Great
Plains in a given period and expose Great Plains to additional third party
credit risks.

    Changes in Legislation

    The return on an investment in securities of Great Plains is subject to
changes in Canadian federal and provincial tax laws and government incentive
programs and there can be no assurance that such laws or programs will not be
changed in a manner that adversely affects Great Plains of the holding and
disposing of the securities of Great Plains.

    Seasonality

    The level of activity in the Canadian oil and gas industry is influenced
by seasonal weather patterns. Wet weather and spring thaw may make the ground
unstable. Consequently, municipalities and provincial transportation
departments enforce road bans that restrict the movement of rigs and other
heavy equipment, thereby reducing activity levels. Also, certain oil and gas
producing areas are located in areas that are inaccessible other than during
the winter months because the ground surrounding the sites in these areas
consists of swampy terrain. Seasonal factors and unexpected weather patterns
may lead to declines in exploration and production activity and corresponding
declines in the demand for the goods and services of Great Plains.

    Income Taxes

    Great Plains will file all required income tax returns and believes that
it will be in full compliance with the provisions of the Income Tax Act
(Canada) and all applicable provincial tax legislation. However, such returns
are subject to reassessment by the applicable taxation authority. In the event
of a successful reassessment of Great Plains, whether by re-characterization
of exploration and development expenditures or otherwise, such reassessment
may have an impact on current and future taxes payable.

    Assessments of Value of Acquisitions

    Acquisitions of oil and gas issuers and oil and gas assets are typically
based on engineering and economic assessments made by independent engineers
and Great Plains' own assessments. These assessments both will include a
series of assumptions regarding such factors and recoverability and
marketability of oil and gas, future prices of oil and gas and operating
costs, future capital expenditures and royalties and other government levies
which will be imposed over the producing life of the reserves. Many of these
factors are subject to change and are beyond Great Plains' control. In
particular, the prices of and markets for oil and natural gas products may
change from those anticipated at the time of making such assessment. In
addition, all such assessments involve a measure of geologic and engineering
uncertainty which could result in lower production and reserves than
anticipated. Initial assessments of acquisitions may be based on reports by a
firm of independent engineers that are not the same as the firm Great Plains
uses for its year end reserve evaluations. Because each of these firms may
have different evaluation methods and approaches, these initial assessments
may differ significantly from the assessments of the firm used by Great
Plains. Any such instance may offset the return on and value of the Common
Shares.

    Borrowing

    Great Plains' lenders will be provided with security over substantially
all of the assets of Great Plains. If Great Plains becomes unable to pay its
debt service charges or otherwise commits an event of default, such as
bankruptcy, these lenders may foreclose on or sell Great Plains' properties.
The proceeds of such sale would be applied to satisfy amounts owed to Great
Plains' lenders and other creditors and only the remainder, if any, would be
available to Great Plains.

    Third Party Credit Risk

    Great Plains is or may be exposed to third party credit risk through its
contractual arrangements with its current or future joint venture partners,
marketers or its petroleum and natural gas production and other parties. In
the event such entities fail to meet their contractual obligations to Great
Plains, such failures could have a material adverse effect on Great Plains and
its cash flow from operations.

    Reserves and Estimated Future Net Cash Flows

    There are numerous uncertainties inherent in estimating quantities of
reserves and cash flows to be derived therefrom, including many factors that
are beyond the control of Great Plains. The reserve and cash flow information
set forth herein represent estimates only. The reserves and estimated future
net cash flow from Great Plains' oil and gas assets have been independently
evaluated effective December 31, 2006 by GLJ. These evaluations include a
number of assumptions relating to factors such as initial production rates,
production decline rates, ultimate recovery of reserves, timing and amount of
capital expenditures, marketability of production, future prices of oil and
natural gas, operating costs and royalties and other government levies that
may be imposed over the producing life of the reserves. These assumptions were
based on price forecasts in use at the date the relevant evaluations were
prepared and many of these assumptions are subject to change and are beyond
the control of Great Plains. Actual production and cash flows derived
therefrom will vary from these evaluations, and such variations could be
material. The foregoing evaluations are based in part on the assumed success
of exploitation activities intended to be undertaken in future years. The
reserves and estimated cash flows to be derived therefrom contained in such
evaluations will be reduced to the extent that such exploitation activities do
not achieve the level of success assumed in the evaluations.
    Additional information concerning the oil, NGL and natural gas reserves
of the Corporation is provided in the Corporations Annual Information Form for
the year ended December 31, 2006. The Annual Information Form is available for
review on SEDAR.

    Selected Annual and Quarterly Information ($000s)

    
    -------------------------------------------------------------------------
                                                    2006
                                ---------------------------------------------
                                    Q4          Q3          Q2          Q1
    -------------------------------------------------------------------------
    Average daily production
     (boe/d)                       1,265       1,455       1,598       1,583
    -------------------------------------------------------------------------
    Oil and gas sales              5,648       6,820       7,065       7,940
    -------------------------------------------------------------------------
    Cash flow                      1,556       2,682       3,211       4,105
    -------------------------------------------------------------------------
    Basic cash flow per share   $   0.04    $   0.07    $   0.09    $   0.11
    -------------------------------------------------------------------------
    Net earnings (loss)          (28,432)       (836)        609          24
    -------------------------------------------------------------------------
    Basic earnings (loss) per
     share                     ($   0.73)  ($   0.02)   $   0.02    $   0.00
    -------------------------------------------------------------------------
    Total assets                 105,270     132,400     148,378     141,593
    -------------------------------------------------------------------------
    Long term liabilities         20,883      22,002      22,356      23,841
    -------------------------------------------------------------------------
    Capital expenditures,net       5,536     (10,601)      9,560      14,062
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                    2005
                                ---------------------------------------------
                                    Q4          Q3          Q2          Q1
    -------------------------------------------------------------------------
    Average daily production
     (boe/d)                       1,604       1,591         902         929
    -------------------------------------------------------------------------
    Oil and gas sales             10,917       9,606       3,903       3,741
    -------------------------------------------------------------------------
    Cash flow                      6,828       5,845       1,712       1,609
    -------------------------------------------------------------------------
    Basic cash flow per share   $   0.19    $   0.20    $   0.11    $   0.10
    -------------------------------------------------------------------------
    Net earnings (loss)            2,153         838          63         160
    -------------------------------------------------------------------------
    Basic earnings (loss) per
     share                      $   0.06    $   0.03    $   0.00    $   0.01
    -------------------------------------------------------------------------
    Total assets                 131,189     125,058      43,947      43,844
    -------------------------------------------------------------------------
    Long term liabilities         21,238      20,829       6,528       6,334
    -------------------------------------------------------------------------
    Capital expenditures,net       9,882       5,447       3,735       3,773
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note: The increase in quarterly amounts for the second half of 2005
    mainly reflects the acquisition of Rock Creek Resources Ltd., effective
    July 27, 2005.



                        GREAT PLAINS EXPLORATION INC.

                      Consolidated Financial Statements

               For the years ended December 31, 2006 and 2005



    GREAT PLAINS EXPLORATION INC.
    Consolidated Balance Sheets
    For the years ended December 31, 2006 and 2005
    -------------------------------------------------------------------------

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

    ASSETS

    Current
      Accounts receivable                        $  4,462,351   $  7,862,434
      Prepaid expenses and deposits                 1,562,916        811,589
    -------------------------------------------------------------------------
                                                    6,025,267      8,674,023
    Property and equipment (Note 5)                99,244,372     95,608,464
    Goodwill (Note 6)                                       -     26,906,343
    -------------------------------------------------------------------------
                                                 $105,269,639   $131,188,830
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES

    Current
      Bank debt (Note 8)                         $  6,695,392   $ 12,033,732
      Accounts payable and accrued liabilities     13,240,928     11,430,099
    -------------------------------------------------------------------------
                                                 $ 19,936,320   $ 23,463,831
    Asset retirement obligations (Note 7)           3,838,758      3,728,173
    Future income taxes (Note 13)                  17,044,252     17,509,623
    -------------------------------------------------------------------------
                                                 $ 40,819,330   $ 44,701,627

    SHAREHOLDERS' EQUITY

    Share capital (Note 9)                         86,760,222     81,247,050
    Contributed surplus (Note 12)                   3,177,263      2,092,185
    Retained earnings (deficit)                   (25,487,176)     3,147,968
    -------------------------------------------------------------------------
                                                 $ 64,450,309   $ 86,487,203
    Commitments and Contingencies (Note 15)
    Subsequent Event (Note 18)
    -------------------------------------------------------------------------
                                                 $105,269,639   $131,188,830
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes


             "Signed"
    -----------------
    Garth A.C. MacRae
    Director


             "Signed"
    -----------------
    Daryl H. Connolly
    Director



    GREAT PLAINS EXPLORATION INC.
    Consolidated Statements of Operations and Retained Earnings (Deficit)
    For the years ended December 31, 2006 and 2005
    ------------------------------------------------------------------------

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

                                                         2006           2005
    -------------------------------------------------------------------------
    Revenues
    Oil and gas sales                            $ 27,473,423   $ 28,166,946
    Royalty expense, net of ARTC                   (5,342,168)    (5,618,721)
    Processing and other                              891,328        318,962
    -------------------------------------------------------------------------
                                                 $ 23,022,583   $ 22,867,187
    -------------------------------------------------------------------------
    Expenses
    Operating                                       6,693,612      3,927,603
    Transportation                                    524,691        443,600
    General and administrative                      2,751,374      1,886,503
    Stock based compensation (Note 10)                911,485      1,515,690
    Interest                                        1,207,174        452,427
    Depletion, depreciation and accretion          15,694,224      9,352,337
    Goodwill writedown (Note 6)                    26,906,343              -
    -------------------------------------------------------------------------
                                                 $ 54,688,903   $ 17,578,160
    -------------------------------------------------------------------------
    Earnings (loss) before taxes                  (31,666,320)     5,289,027

    Taxes
    Provision for (reduction of) future
     income taxes (Note 13)                        (3,005,668)     1,954,000
    Capital taxes (recovery)                          (25,508)       120,268
    -------------------------------------------------------------------------
                                                   (3,031,176)     2,074,268
    -------------------------------------------------------------------------
    Net earnings (loss)                           (28,635,144)     3,214,759

    Retained earnings (deficit), beginning
     of year                                        3,147,968        (66,791)
    -------------------------------------------------------------------------
    Retained earnings (deficit), end of year     $(25,487,176)  $  3,147,968
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net earnings (loss) per share (basic
     and diluted) (Note 9)                       $      (0.76)  $       0.13
    -------------------------------------------------------------------------
    See accompanying notes



    GREAT PLAINS EXPLORATION INC.
    Consolidated Statements of Cash Flows
    For the years ended December 31, 2006 and 2005
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                         2006           2005
    -------------------------------------------------------------------------
    Operating Activities
    Net earnings (loss)                           (28,635,144)  $  3,214,759
    Stock based compensation                          911,485      1,515,690
    Depletion, depreciation and accretion          15,694,224      9,352,337
    Goodwill writedown                             26,906,343              -
    Provision for/(reduction of) future
     income taxes                                  (3,005,668)     1,954,000
    Expenditures on asset retirement
     obligations                                     (317,475)       (43,480)
    -------------------------------------------------------------------------
                                                   11,553,765     15,993,306
    Changes in non-cash working capital
     balances relating to operating
     activities (Note 14)                            (138,295)    (2,182,171)
    -------------------------------------------------------------------------
    Cash provided by operating activities          11,415,470     13,811,135
    -------------------------------------------------------------------------
    Financing activities
    Increase (decrease) in bank debt               (5,338,340)    12,033,732
    Issue of share capital, net of issue costs      7,882,328      8,675,360
    Changes in non-cash working capital
     balances relating to financing
     activities (Note 14)                             (14,204)         8,661
    -------------------------------------------------------------------------
    Cash provided by financing activities           2,529,784     20,717,753
    -------------------------------------------------------------------------
    Investing activities
    Acquisition of Rock Creek Resources Ltd.
     (Note 4)                                               -    (12,400,561)
    Cash assumed on acquisition of Rock Creek
     Resources Ltd. (Note 4)                                -        668,127
    Property and equipment expenditures           (39,855,480)   (25,383,234)
    Proceeds  from asset dispositions              21,298,142      2,564,055
    Changes in non-cash working capital
     balances relating to investing
     activities (Note 14)                           4,612,084     (3,721,389)
    -------------------------------------------------------------------------
    Cash used in investing activities             (13,945,254)   (38,273,002)
    -------------------------------------------------------------------------
    Decrease in cash and cash equivalents                   -     (3,744,114)
    Cash and cash equivalents, beginning
     of year                                                -      3,744,114
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year       $          -   $          -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes



    GREAT PLAINS EXPLORATION INC.
    Notes to the Consolidated Financial Statements
    For the years ended December 31, 2006 and 2005
    -------------------------------------------------------------------------

    1.  DESCRIPTION OF BUSINESS

        Great Plains Exploration Inc. ("Great Plains" or the "Corporation")
        was incorporated under the Canada Business Corporations Act on
        March 4, 2004, and commenced operations on June 11, 2004. Its
        principal business activity is petroleum and natural gas exploration,
        development and production in Western Canada. Great Plains is listed
        on the TSX under the symbol "GPX".

    2.  BASIS OF PRESENTATION

        These consolidated financial statements include the financial
        position, results of operations and cash flows of its wholly owned
        subsidiaries Great Plains Oil & Gas Partnership and 1196823 Alberta
        Ltd.

    3.  SIGNIFICANT ACCOUNTING POLICIES

        Property and equipment

        The Corporation follows the full cost method of accounting whereby
        all costs related to the exploration for and development of oil and
        gas reserves are accumulated in one Canadian cost centre. Costs
        include lease acquisition, geological and geophysical expenditures,
        carrying costs of non-productive properties, the drilling of
        productive and non-productive wells and related plant and production
        equipment costs, asset retirement costs, and that portion of general
        and administrative expenses directly attributable to exploration and
        development activities. Proceeds received from the disposal of
        properties are normally deducted from the full cost pool without
        recognition of a gain or loss, unless such sale results in a change
        in the rate of depletion of 20% or more.

        Depletion and depreciation

        Depletion and depreciation of oil and gas properties and equipment is
        computed using the unit-of-production method where the ratio of
        production to proved reserves, before royalties, determines the
        proportion of depletable costs to be expensed in each period.
        Undeveloped properties are excluded from the depletion calculation
        until quantities of proved reserves are found or impairment occurs.
        Volumes are converted to equivalent units using the ratio of one
        barrel of oil to six mcf of natural gas. Depreciation of office
        equipment and computer equipment is provided for on a 10% and 35% per
        annum straight-line basis respectively.

        Recovery of capitalized costs

        The Corporation performs a cost recovery test which recognizes
        impairment when the carrying amount of the property and equipment, by
        cost centre, exceeds its undiscounted future cash flows from proved
        reserves based on estimated future commodity prices. If impairment is
        recognized, the amount of impairment is determined as the excess of
        the carrying amount over the fair value. Fair value is based on the
        present value of expected cash flows, reflecting discounting at the
        risk-free rate of interest. Both proved and probable reserves and
        undeveloped land are used in estimating fair value. This cost centre
        impairment test is conducted at each balance sheet date, or more
        frequently if conditions indicating potential impairment are present.

        Joint interest activities

        Substantially all of the Corporation's exploration, development and
        production activities are conducted jointly with other entities and
        accordingly the consolidated financial statements reflect only the
        Corporation's proportionate interest in such activities.

        Goodwill

        Goodwill, which represents the excess of the purchase price over the
        fair value of net assets acquired, is not amortized and is assessed
        by the Corporation for impairment at least annually. Impairment is
        assessed based on a comparison of the fair value of the net assets to
        the carrying value of the net assets, including goodwill. Any excess
        of carrying value over and above fair value is the impairment amount,
        and is charged to earnings in the period identified.

        Revenue recognition

        Oil and natural gas sales are recognized when commodities are sold
        and title passes to the customer.

        Asset Retirement Obligations

        The present value of expected future abandonment and reclamation
        costs is recorded on the balance sheet as both a liability and a
        charge to property and equipment at the time the obligation is
        incurred. The amount included as property and equipment is depleted
        over the life of the reserves by the unit-of-production method. The
        liability accretes until the Corporation settles the retirement
        obligation. Actual reclamation and abandonment costs incurred are
        charged against the liability.

        Estimates for future abandonment and reclamation costs are based on
        historical costs to abandon and reclaim similar sites, taking into
        consideration current costs. The liability is based on the
        Corporation's net interest in the respective sites.

        Use of estimates

        The amounts recorded for depletion and depreciation of property and
        equipment, the accretion expense associated with the asset retirement
        obligation and the cost recovery assessments for property and
        equipment are based on estimates of proven reserves, production and
        discount rates, oil and natural gas prices, future costs and other
        relevant assumptions. By their nature, these estimates are subject to
        measurement uncertainty and the effect on the consolidated financial
        statements of changes in such estimates in future years could be
        significant.

        Income taxes

        Income taxes are recorded using the liability method of accounting.
        Under this method, future income taxes are recorded for the effect of
        any difference between the accounting and income tax basis of an
        asset and liability using substantively enacted income tax rates and
        laws that will be in effect when the differences are expected to
        reverse. A valuation allowance is recorded against any future income
        tax assets if it is more likely than not that the asset will not be
        realized.

        Flow-through shares

        The Corporation financed a portion of its exploration and development
        activities through the issuance of flow-through shares. Under the
        terms of the flow-through share agreements, the tax attributes of the
        related expenditures are renounced to subscribers. To recognize the
        foregone tax benefits to the Corporation, the carrying value of the
        shares issued is reduced by the tax effect of the tax benefits when
        renounced to subscribers.

        Cash and cash equivalents

        The Corporation considers all highly liquid investments with
        maturities of three months or less at the time of purchase to be cash
        equivalents and therefore classifies them with cash.

        Stock-based compensation

        The Corporation recognizes compensation expense using the fair value
        method when stock options with no cash settlement features are
        granted to employees and directors under the fixed share option plan.
        Under this method, compensation expense is measured at the grant date
        and recognized as a charge to earnings over the vesting period with a
        corresponding credit to contributed surplus. The fair value of the
        options is determined using the Black-Scholes option pricing model.
        Consideration paid on the exercise of the stock option and the
        associated contributed surplus recorded is credited to share capital.

    4.  ACQUISITION OF ROCK CREEK RE

SOURCES LTD. On July 27, 2005, the Corporation acquired all of the issued and outstanding shares of Rock Creek Resources Ltd. ("Rock Creek") and its wholly owned subsidiary, OMI Resources Ltd ("OMI"). The acquisition was accounted for using the purchase method and shares were acquired for $11.8 million in cash before transaction costs, and $44.5 million payable by the issuance of 18,162,658 common shares of Great Plains at a fair value of $2.45 per common share. The share value of $2.45 per share was based upon the weighted average market price of the Corporation's common shares at the time the offer to purchase Rock Creek was entered into. During 2005, adjustments were made to finalize the purchase price equation. The results of operations and cash flows of Rock Creek from the date of acquisition are reflected in the consolidated financial statements from the date of acquisition. Details of the acquisition are as follows: --------------------------------------------------------------------- Calculation of Purchase price: --------------------------------------------------------------------- Fair value of cash and shares issued $ 56,288,698 Transaction costs 601,286 Fair value of warrants 123,713 --------------------------------------------------------------------- $ 57,013,697 --------------------------------------------------------------------- --------------------------------------------------------------------- Allocated as follows: Property and equipment (including unproved properties totalling $9,245,000) $ 48,963,747 Goodwill 23,983,789 Cash, net of working capital (3,081,236) Future income taxes (11,811,242) Asset retirement obligations (1,041,361) --------------------------------------------------------------------- $ 57,013,697 --------------------------------------------------------------------- --------------------------------------------------------------------- On December 16, 2005, Rock Creek, OMI, and Energy Explorer Inc., a company acquired by Great Plains in 2004, amalgamated with Great Plains to form Great Plains Exploration Inc. 5. PROPERTY AND EQUIPMENT --------------------------------------------------------------------- December 31 December 31 2006 2005 --------------------------------------------------------------------- Petroleum and natural gas properties and related equipment $152,350,112 $132,463,972 Accumulated depletion and depreciation (53,105,740) (37,604,104) --------------------------------------------------------------------- 99,244,372 94,859,868 Drilling rig acquisition(i) - 748,596 --------------------------------------------------------------------- Net book value $ 99,244,372 $ 95,608,464 --------------------------------------------------------------------- --------------------------------------------------------------------- (i) On July 19, 2006, the Corporation closed the sale of equipment to be assembled into a drilling rig for proceeds totalling $3,019,829. The equipment was sold at its approximate cost resulting in no loss or gain on the disposition. (ii) During the year ended December 31, 2006, the Corporation sold certain oil and gas properties for approximately $18.3 million. As the change in depletion rate was less than 20 percent, no gain or loss has been recognized on these dispositions. At December 31, 2006, property and equipment includes approximately $12.6 million (December 31, 2005 - $15.0 million) relating to unproved properties which have been excluded from the depletion calculation. Future development costs relating to proved undeveloped reserves of approximately $6.3 million (December 31, 2005 - $6.6 million) are included in the depletion and ceiling test calculations. During the year ended December 31, 2006, the Corporation has capitalized $1,042,734 of general and administrative expenses (year ended December 31, 2005 - $962,733). The Corporation has also capitalized stock based compensation expense of $344,733 for the year ending December 31, 2006 (December 31, 2005 - $nil). As a result of the ceiling test calculation at December 31, 2006, there was no impairment to the carrying amount of property and equipment. The future prices used for the next five years in the ceiling test evaluation of the Corporation's proved reserves at December 31, 2006, were as follows: --------------------------------------------------------------------- Alberta Plant Gate Natural Foreign Oil Gas Exchange WTI (Cdn. $/bbl) (Cdn. $/mcf) $1 US/Cdn.$ US $ --------------------------------------------------------------------- 2007 70.25 7.00 1.15 62.00 2008 68.00 7.25 1.15 60.00 2009 65.75 7.55 1.15 58.00 2010 64.50 7.60 1.15 57.00 2011 64.50 7.65 1.15 57.00 --------------------------------------------------------------------- --------------------------------------------------------------------- Prices assumed to escalate at approximately 2% thereafter and the foreign exchange rate is expected to remain unchanged. 6. GOODWILL --------------------------------------------------------------------- December 31 December 31 2006 2005 --------------------------------------------------------------------- Balance, beginning of year $ 26,906,343 $ 2,922,554 Assumed on acquisition of Rock Creek Resources Ltd. (Note 4) - 23,983,789 Goodwill impairment (26,906,343) - --------------------------------------------------------------------- Balance, end of year $ - $ 26,906,343 --------------------------------------------------------------------- --------------------------------------------------------------------- During the year ended December 31, 2006, the Corporation reviewed the valuation of goodwill. Based upon this review, an impairment of goodwill of $26,906,343 has been recorded as a non-cash charge to the statement of retained earnings (deficit) as of December 31, 2006. 7. ASSET RETIREMENT OBLIGATIONS The following table provides a reconciliation of the beginning and ending aggregate carrying amount of the obligation associated with the retirement of property and equipment: --------------------------------------------------------------------- December 31 December 31 2006 2005 --------------------------------------------------------------------- Balance, beginning of year $ 3,728,173 $ 2,107,511 Assumed on acquisition of Rock Creek Resources Ltd. - 1,041,361 Liabilities incurred 299,901 493,436 Change in estimate 335,246 - Liabilities settled (317,475) (43,480) Liabilities eliminated with property sale (399,675) - Accretion expense 192,588 129,345 --------------------------------------------------------------------- Balance, end of year $ 3,838,758 $ 3,728,173 --------------------------------------------------------------------- --------------------------------------------------------------------- The present value of the asset retirement obligation is determined using an inflation rate of 2% per annum and an annual credit adjusted discount rate of between 5 and 7.5% per annum (2005 - 5 and 6.5% per annum). The Corporation estimates the total undiscounted amount of cash flows required to settle its asset retirement obligations is approximately $7.0 million which will be incurred between 2006 and 2028, with the majority of the costs to be incurred by 2018. 8. BANK DEBT At December 31, 2006, the Corporation had a revolving demand credit facility with an authorized borrowing amount of $33.55 million, with interest charged at the bank's prime rate per annum. In addition, a $14 million non-revolving acquisition/development credit facility is available, with interest charged at the bank's prime rate. Standby fees associated with the facilities are 0.10% per annum on the undrawn portion of each of the facilities. Collateral for the facility consists of a general security agreement, providing a security interest over all present and after acquired personal property and a floating charge on all present and after acquired land interests of the Corporation. The lending base will be subject to review by the bank on May 31, 2007. At December 31, 2006, $6,425,000 (December 31, 2005 - $11,775,000) was drawn against the revolving demand credit facility with an additional $270,392 due in respect of outstanding cheques (December 31, 2005 - $258,732). 9. SHARE CAPITAL Authorized: Unlimited number of Class "A" Common Shares without nominal or par value Unlimited number of Class "B" Non-Voting Common Shares without nominal or par value Unlimited number of Preferred Shares without nominal or par value Issued: --------------------------------------------------------------------- 2006 2005 --------------------------------------------------------------------- Issued and outstanding Class "A" Number Number common shares of shares Amount of shares Amount Balance, beginning of year 37,065,612 $81,247,050 15,735,203 $29,593,532 Issued pursuant to private placement to officers and employees of the Corporation - - 75,117 200,000 Flow-through shares issued for cash on private placement 3,750,000 8,062,500 2,420,000 7,502,000 Share issue costs, net of future taxes, totalling $177,994 (2005--$211,782) - (352,696) - (356,711) Tax effect on flow through shares - (2,601,694) - (1,897,644) Issued on exercise of stock options (Note 10) 142,060 350,518 394,070 808,255 Issued on exercise of agent's options, net of issue costs (Note 11) - - 55,831 121,082 Issued on exercise of warrants (Note 11) - - 222,733 612,516 Issued on acquisition of Rock Creek Resources Ltd. (Note 5) - - 18,162,658 44,489,423 Transfer from contributed surplus to share capital on exercise of options - 54,544 - 174,597 --------------------------------------------------------------------- Balance, end of year 40,957,672 $86,760,222 37,065,612 $81,247,050 --------------------------------------------------------------------- --------------------------------------------------------------------- No amounts were issued to directors, officers, and employees as part of the flow through share issuance in 2006. Of the flow-through shares issued in 2005, there were 284,137 issued to directors, officers and employees of the Corporation for proceeds of $880,825. Basic earnings per common share is computed by dividing the net earnings available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per common share is calculated using the treasury stock method to determine the dilutive effect of stock options. The treasury stock method assumes that the proceeds received from the exercise of "in the money" stock options are used to repurchase common shares at the average market price during the period. --------------------------------------------------------------------- Three months ended Twelve months ended December 31 December 31 2006 2005 2006 2005 --------------------------------------------------------------------- Basic 39,144,483 35,064,184 37,678,939 24,206,685 Diluted 39,144,483 35,295,482 37,678,939 24,550,186 --------------------------------------------------------------------- --------------------------------------------------------------------- Options to purchase 3,090,865 common shares were not included in the computation of diluted earnings per share because they were anti- dilutive. 10. STOCK OPTIONS The Corporation has established a stock option plan whereby options may be granted to the Corporation's directors, officers, employees and consultants. The number of common shares issuable under the Corporation's share option plan cannot exceed 10% of the issued and outstanding common shares of the Corporation. The number of common shares issuable to any one person under the plan cannot exceed 5% of the total number of common shares outstanding from time to time. The exercise price of each option equals the market price of the Corporation's stock on the date of the grant and the maximum life of the options is ten years. The vesting period is determined by the Board of Directors. Options issued by the Corporation to date vest one-third immediately, one-third after one year following the date of grant, and one-third two years following the date of grant. The following table sets forth a reconciliation of the stock option activity for the period: --------------------------------------------------------------------- Weighted Average Number of Exercise 2005 Options Price --------------------------------------------------------------------- Balance at beginning of year 1,701,289 $2.17 Options granted 2,431,360 $2.64 Options exercised (394,070) $2.05 Options cancelled (66,376) $2.24 --------------------------------------------------------------------- Stock options outstanding, end of year 3,672,203 $2.50 --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- Weighted Average Number of Exercise 2006 Options Price --------------------------------------------------------------------- Balance at beginning of year 3,672,203 $2.50 Options granted - Options exercised (142,060) $2.47 Options cancelled (439,278) $2.49 --------------------------------------------------------------------- Stock options outstanding, end of year 3,090,865 $2.50 --------------------------------------------------------------------- --------------------------------------------------------------------- During the year ended December 31, 2004 Agent's options to purchase 55,831 common shares were issued. These options were exercised during the year ended December 31, 2005. There are no outstanding agent options at December 31, 2006. At December 31, 2006, stock options to purchase common shares were exercisable as follows: --------------------------------------------------------------------- Number of Options Contractual Exercise Price Outstanding Exercisable Life (Years) --------------------------------------------------------------------- $1.60 to $2.00 375,587 375,589 2.5 $2.01 to $2.50 414,552 414,552 0.5 to 2.9 $2.51 to $3.00 2,300,726 1,615,987 2.9 to 4.0 --------------------------------------------------------------------- 3,090,865 2,406,128 3.4 --------------------------------------------------------------------- --------------------------------------------------------------------- Total compensation expense is amortized over the vesting period of the option. Compensation expense of $1,139,622 has been recognized during the year ended December 31, 2006, ($1,515,690 for the year ended December 31, 2005) based on the estimated fair value of the options on the grant date in accordance with the fair value method of accounting for stock-based compensation, of which $228,137 has been capitalized (December 31, 2005 - $nil). The estimated weighted average fair value of share options granted during 2005 was determined using the Black-Scholes model using the following weighted average assumptions: --------------------------------------------------------------------- Risk-free interest rate 4 to 5% Expected hold period to exercise lesser of 5 years and expiry date of options Volatility in the Corporation's share price 37 to 40% Dividend yield 0% Weighted average fair value of options, per share: Options granted by the Corporation in 2005 $1.14 --------------------------------------------------------------------- --------------------------------------------------------------------- 11. SHARE PURCHASE WARRANTS Pursuant to the acquisition of Rock Creek as described in Note 4, 487,034 share purchase warrants of Rock Creek were converted to 487,034 share purchase warrants of the Corporation. The share purchase warrants, allowing for the purchase of 487,034 common shares of the Corporation, had an exercise price of $2.75 each and an expiry date of October 31, 2005. The fair value determined per warrant was $0.25 using the same Black-Scholes calculation and assumptions as outlined in Note 10. A total of 222,733 warrants were exercised for proceeds of $612,516 in 2005. The remaining 264,301 expired on October 31, 2005 without being exercised. 12. CONTRIBUTED SURPLUS The following summarizes the continuity of contributed surplus: --------------------------------------------------------------------- Twelve months ended December 31 2006 2005 --------------------------------------------------------------------- Balance, beginning of year $ 2,092,185 $ 627,379 Stock-based compensation 1,139,622 1,515,690 Fair value of warrants assumed on the acquisition of Rock Creek Resources Ltd. (Note 4) - 123,713 Transfer to share capital on exercise of options and warrants (54,544) (174,597) --------------------------------------------------------------------- Balance, end of year $ 3,177,263 $ 2,092,185 --------------------------------------------------------------------- --------------------------------------------------------------------- 13. FUTURE INCOME TAXES The components of the future income tax liability are as follows: --------------------------------------------------------------------- December 31 December 31 2006 2005 --------------------------------------------------------------------- Temporary differences related to: Property and equipment $ 15,476,016 $ 15,024,300 Asset retirement obligations (1,191,550) (1,211,656) Non-capital losses - (871,443) Share issue costs (647,232) (926,490) Attributed Canadian royalty income (546,001) (584,943) Partnership deferral 3,953,019 6,079,855 --------------------------------------------------------------------- Future income tax liability $ 17,044,252 $ 17,509,623 --------------------------------------------------------------------- --------------------------------------------------------------------- The provision for future income taxes is determined as follows: --------------------------------------------------------------------- Twelve months ended December 31 2006 2005 --------------------------------------------------------------------- Combined federal and provincial corporate tax rate 34.65% 37.62% Earnings (loss) before taxes $(31,666,320) $ 5,289,027 Expected tax provision/(reduction) (10,972,380) 1,989,732 Add (deduct) income tax effect of: Non-deductible crown royalties, net of ARTC 87,656 1,114,215 Resource allowance (6,772) (1,279,405) Stock compensation expense 315,830 570,203 Non-deductible goodwill writedown 9,323,048 - Rate adjustment and other (1,753,050) (440,745) --------------------------------------------------------------------- Provision for future income taxes $ (3,005,668) $ 1,954,000 --------------------------------------------------------------------- --------------------------------------------------------------------- The rate adjustment for the year ended December 31, 2006 is due to reductions in the Federal and Alberta corporate income tax rates that were enacted during the year. At December 31, 2006, the Corporation and its subsidiaries have combined tax pools of approximately $55.9 million of which $5.5 million is available for deduction against Alberta income tax only. 14. SUPPLEMENTAL CASH FLOW INFORMATION (i) Changes in non-cash working capital, excluding bank debt: --------------------------------------------------------------------- December 31 2006 2005 --------------------------------------------------------------------- Accounts receivable $ 3,400,083 $ (2,981,110) Accounts payable and accrued liabilities 1,810,829 1,280,550 Prepaid expenses and deposits (751,327) (444,976) Working capital deficit acquired - Rock Creek Resources Ltd. - (3,749,363) --------------------------------------------------------------------- Change in non-cash working capital $ 4,459,585 $ (5,894,899) --------------------------------------------------------------------- Relating to: Operating activities $ (138,295) $ (2,182,171) Financing activities (14,204) 8,661 Investing activities 4,612,084 (3,721,389) --------------------------------------------------------------------- Change in non-cash working capital $ 4,459,585 $ (5,894,899) --------------------------------------------------------------------- --------------------------------------------------------------------- (ii) The Corporation made the following cash outlays in respect of interest expense and capital taxes: --------------------------------------------------------------------- Twelve months ended December 31 2006 2005 --------------------------------------------------------------------- Interest expense $ 1,037,803 $ 358,653 Capital tax $ 122,473 $ 15,000 --------------------------------------------------------------------- --------------------------------------------------------------------- 15. COMMITMENTS AND CONTINGENCIES (i) At December 31, 2006, in connection with the issuance of flow- through shares by the Corporation and its subsidiaries, the Corporation is required to expend $8,062,500 of eligible exploration expenditures by December 31, 2007. As at December 31, 2006 the Corporation incurred expenditures of approximately $1.18 million towards this commitment. (ii) The Corporation has entered into lease arrangements for office space to March 31, 2010. The future minimum lease payments for the next four years are as follows: 2007 $ 273,755 2008 273,755 2009 273,755 2010 68,439 -------------- $ 889,704 -------------- -------------- (iii) As a result of a dispute with a former contractor for the construction of a drilling rig (Note 5(i)) the Corporation provided a Letter of Guarantee totalling $450,000 to the Province of Alberta. The Guarantee is provided as security for costs incurred by the former contractor of the drilling rig until actual costs can be determined. No amount has been claimed on this Letter of Guarantee. The Guarantee expires February 16, 2008. Management is of the opinion that the $450,000 claim made by the former contractor is without merit. Amounts paid, if any, by the Corporation to settle this dispute will be recorded when the amounts become known. 16. FINANCIAL INSTRUMENTS The Corporation's financial instruments consist of cash and cash equivalents, accounts receivable, bank debt, accounts payable and accrued liabilities. For all periods presented, the fair value of financial instruments approximated their book values due to their near term maturity or their variable interest rate terms. Interest Rate Risk As at December 31, 2006, the Corporation was exposed to changes in floating interest rates with respect to its bank debt. Credit Risk The Corporation's accounts receivable are primarily with customers in the oil and gas industry and government agencies and are subject to normal industry credit risks. Foreign Currency Exchange Risk The Corporation is exposed to foreign currency fluctuations as crude oil and natural gas prices received are referenced to United States dollar-denominated prices. 17. RELATED PARTY TRANSACTIONS The Corporation had transactions with a law firm in which a director of the Corporation is a partner, as follows: --------------------------------------------------------------------- Recorded as: 2006 2005 --------------------------------------------------------------------- General and Administrative Expenses $ 78,915 $ 34,625 --------------------------------------------------------------------- Share Capital Issuance Costs $ 27,686 $ 24,503 --------------------------------------------------------------------- Property and Equipment $ 94,656 - --------------------------------------------------------------------- As at December 31, 2006, there was a payable to the law firm of $55,093 (2005 - $31,362). The above transactions are in the normal course of business and have been valued in these financial statements at the exchange amount which is the amount of consideration established and agreed to by the related parties. 18. SUBSEQUENT EVENT On March 20, 2007 the Corporation closed a private placement for the issuance of 6,667,000 flow-through common shares at $1.50 per share for gross proceeds of $10,000,500 less agent's commission of 6%. The Corporation is required to incur and renounce eligible exploration expenditures equal to the gross amount of the issuance on or prior to December 31, 2008. %SEDAR: 00020740E

For further information:

For further information: Great Plains Exploration Inc., Stephen P.
Gibson, President and CEO, Sean Bovingdon, VP Finance and CFO, Tel: (403)
262-9620, Fax: (403) 262-9622, Website: www.greatplainsexp.com, Email:
info@greatplainsexp.com

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GREAT PLAINS EXPLORATION INC.

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