Solana Resources Limited ("Solana" or the "Company") - Financial report for the nine month period ended September 30, 2007



    CALGARY and LONDON, Nov. 28 /CNW/ - Solana Resources Limited (TSX-V: SOR;
AIM: SORL) the Colombia focused independent oil and gas exploration and
production company, today announces its results for the nine month period
ended September 30, 2007. These results should be read in conjunction with the
Company's audited consolidated financial statements for the years ended
December 31, 2006 and 2005. All numbers in this report are expressed in US
dollars unless otherwise indicated.
    Solana (www.solanaresources.com) is an international resource company
engaged in the acquisition, exploration, development and production of oil and
natural gas. The Company's properties are located in Colombia, South America
and are held through its wholly owned subsidiary, Solana Petroleum Exploration
(Colombia) Limited. The company is headquartered in Calgary, Alberta, Canada.
    Additional information (which does not form part of this announcement) is
available on the Company's website at www.solanaresources.com and the Sedar
website at www.sedar.com.

    
    HIGHLIGHTS

    -   On September 11, 2007 Solana successfully completed drilling the Tres
        Curvas-1 well, located in the Catguas Block, Catatumbo Basin, north
        eastern Colombia, resulting in a new field discovery. Tres Curvas-1
        yielded a combined 180 barrels of oil per day (Bopd) from 61 feet of
        perforations in two Catatumbo formation zones. Solana is the operator
        of the Catguas Block with a 100% working interest. Trayectoria Oil
        and Gas, Sucursal Colombia holds a 15% beneficial interest in the
        portion of the block containing the Tres Curvas-1 well.

    -   In September 2007, long term production testing was initiated at
        Costayaco-1. Solana's share of these test volumes helped boost its
        total Q3 exit production rate to 1,472 barrels of oil equivalent per
        day (Boepd) net of royalties - a 943 Boepd increase over the previous
        quarter. Solana averaged 818 Boepd net of royalties over the entire
        third quarter of 2007.

    -   At September 30, 2007 the Company had a cash balance of
        $11.8 million.

    -   Subsequent to the end of the third quarter, on November 13, 2007, a
        declaration of commerciality for the Juanambu field was obtained (35%
        net working interest to Solana). Juanambu-1 was immediately placed on
        production and is currently producing in the range of 450 Bopd net of
        royalties to Solana.

    -   Subsequent to the end of the third quarter, on November 16, 2007,
        Solana spudded the Cocodrilo-1 well. Cocodrilo-1 is the second of the
        two well program Solana is undertaking on the Catguas Block and is
        targeting the Barco and Catatumbo formations that have been
        identified on 2D seismic and that are oil bearing in the nearby Tres
        Curvas-1 new field discovery. This well is expected to take three
        weeks to drill with testing potentially to follow.

    -   Subsequent to the end of the third quarter, on November 26, 2007
        Solana closed a bought deal financing (including over-allotment
        shares) of 27.3 million shares at CDN$2.20 per share for gross
        proceeds of CDN$60.1 million. Solana plans to use the proceeds to
        fund its Colombian exploration and development activities and general
        corporate purposes.
    

    OPERATIONAL UPDATE

    LLANOS BASIN

    The Llanos basin is located northeast of Bogota, the capital of Colombia,
on the east side of the Andes Mountains. This basin covers an area of
approximately 200,000 km(2) (77,000 square miles) and holds Colombia's largest
number of oil fields and proved oil reserves.
    Solana has working interests in six blocks in the Llanos Basin, covering
an area of 2,015 km(2) (778 square miles). These blocks are: Guachiria Norte,
Guachiria, Guachiria Sur, Colonia, San Pablo and Garibay.

    GUACHIRIA NORTE BLOCK

    Solana is the Operator of the 412 km(2) (159 square miles) Guachiria
Norte Block with a working interest of 70%. The block is located approximately
250 km (155 miles) northeast of Bogota and is subject to an Agencia Nacional
de Hidrocarburos (ANH) contract.
    In this part of the Llanos Basin, drilling activity is generally
restricted to a four month weather window from December to March and as such
Solana submitted an application to the ANH to extend the Phase 2 period
(December 21, 2005 to December 21, 2006) to March 2007. The ANH approved this
extension on the condition that Phases 3 and 4 are combined into one. During
Phases 3 and 4 (March 21, 2007 to March 21, 2009) Solana is required to drill
two exploration wells.
    Solana is currently incorporating the results of the Calcedonia-1 well,
drilled and abandoned in March 2007, with the Onyx 3-D seismic survey, to
optimize the location of the next well, a Carbonera C5 channel target. The
Company plans to drill this well prior to the March 21, 2009 deadline.

    GUACHIRIA BLOCK

    Solana is the Operator of the 68 km(2) (26 square miles) Guachiria Block
with a working interest of 70%. The block adjoins the Guachiria Norte Block
immediately to the South. This block was acquired from Empresa Colombiana de
Petroleos SA (Ecopetrol, the State owned oil Company), and is subject to a
standard ANH contract plus an additional 13% royalty payable to Ecopetrol.
    For Phase 3 (June 1, 2006 to June 1, 2007), Ecopetrol agreed that Solana
may substitute its well commitment for a 100 km(2) (39 square mile) 3-D
seismic survey, covering the block, and overlapping the southern part of the
adjacent Guachiria Norte 3-D seismic survey. Data acquisition and processing
are now complete. In this part of the Llanos Basin, drilling and seismic
activity is generally restricted to a four-month weather window from December
to March.
    The Company plans to drill the Primavera-1 well in Q1, 2008 targeting a
more traditional Llanos structural play.

    GUACHIRIA SUR BLOCK

    Solana is the Operator of the 366 km(2) (141 square miles) Guachiria Sur
Block with a working interest of 70%. The block is to the west and the south
of the Guachiria Block and to the south of the Guachiria Norte Block. This
block is subject to an ANH contract.
    The commitment to drill a well during Phase 2 (October 25, 2006 to
October 25, 2007) was renegotiated with the ANH and was replaced by a
120 km(2) (74 square mile) 3-D seismic survey and a commitment to drill one
well during Phase 3 (October 25, 2007 to October 25, 2008). This survey covers
the northern part of the Block, immediately west and south of the Guachiria
Block. Data acquisition and processing are now complete. In this part of the
Llanos Basin, drilling and seismic activity is generally restricted to a
four-month weather window from December to March.
    The Company plans to drill the Palmitas-1 well in January, 2008 targeting
a structural play. The Company is currently shooting a 50 line km 2D seismic
program over this structure.

    GAVIOTAS BLOCK

    Solana and its partners relinquished the Gaviotas Block effective
August 23, 2007, subject to completion of the abandonment (operational and
environmental) of Gaviotas-1 and Bevea-1 wells. These activities are planned
for first quarter next year.

    GARIBAY BLOCK

    Solana is the Operator of the 307 km(2) (119 square miles) Garibay Block
with a working interest of 100%. The block is located approximately 170 km
(105 miles) east of Bogota. This Block is subject to an ANH contract.
    During Phase 2 (October 25, 2006 to October 25, 2007) Solana is required
to drill one well. The ANH has approved the replacement of this program with
the acquisition of 100 km(2) (39 square miles) of 3-D seismic, subject to
relinquishment of 30% of the block area. This survey started in March 2007.
Acquisition and processing are now complete and interpretation is underway.
    The Company is actively looking for a farm-in partner for this Block.

    COLONIA BLOCK

    On June 25, 2007, Solana acquired the 439 km(2) (169 square mile) Colonia
Block, situated immediately to the west of the Guachiria Norte Block. Solana's
commitments are to acquire 55 km(2) (21 square miles) of 3-D seismic data and
to reprocess the existing 2-D seismic data during the first phase (June 25,
2007 until June 25, 2008), and to drill one exploration well in each of the
subsequent five annual phases.
    The acquisition of the 3-D seismic data is scheduled to start in December
2007.
    The Company is actively seeking to farm down 30% of its interest in this
Block to bring its interest in line with the neighbouring three Guachiria
blocks.

    SAN PABLO BLOCK

    On June 25, 2007, Solana acquired the 423 km(2) (163 square mile) San
Pablo Block, situated immediately to the west of the Guachiria Sur Block.
Solana's commitments are to acquire 50 km(2) (19 square miles) of 3-D seismic
data during the first phase (June 25, 2007 until June 25, 2008) and to drill
one exploration well in each of the subsequent five annual phases.
    The acquisition of the 3-D seismic data is scheduled to start in December
2007.
    The Company is actively seeking to farm down 30% of its interest in this
Block to bring its interest in line with the neighbouring three Guachiria
blocks.

    PUTUMAYO BASIN

    The Putumayo basin is located in southwest Colombia and extends into
Ecuador and Peru, where it is called the Oriente (Ecuador)-Maranon (Peru)
Basin. It covers an area of approximately 320,000 km(2) (124,000 square miles)
and Solana holds interests in the Guayuyaco Block and the Chaza Block totaling
537 km(2) (207 square miles) in this basin.

    GUAYUYACO BLOCK

    Solana holds a 35% non-operated net working interest in the 212 km(2)
(82 square mile) Guayuyaco Block, located approximately 290 km (180 miles)
southwest of Bogota. Gran Tierra Energy Inc. is the Operator with a 35%
working interest. Ecopetrol has a 30% working interest in the Guayuyaco field
which is currently producing 89 m(3)/day (561 Bopd, 191 Bopd net to Solana).
All commitments have been fulfilled and the block is being further developed
under an Association Contract.
    During the first quarter of 2007 Solana participated in drilling the
Juanambu-1 discovery well. The well has been completed with a jet pump and the
tubing string configured to allow for production from selected zones. Pursuant
to regulatory requirements, the well has been intermittently tested since
April 26, 2007 and as of September 30, 2007 has produced a total of 7,094 m(3)
(44,621 bbls) gross.
    On November 13, 2007, a declaration of commerciality was received from
Ecopetrol, the state oil company, for the Juanambu field and Juanambu-1 was
placed on production at approximately 1,400 Bopd (450 Bopd net of royalty to
Solana). Production, currently being transported by truck to existing
infrastructure, will flow through a five kilometre, six inch flow-line that is
expected to be operational by mid January 2008.

    CHAZA BLOCK

    Solana has a 50% working interest in the 325 km(2) (125 square mile)
Chaza Block, immediately west of the Guayuyaco Block. Gran Tierra, the
operator, holds the other 50% in the block. The block is held under an ANH
contract.
    During Phase 2 (June 27, 2006 to June 26, 2007) the partners drilled
Costayaco-1 discovery well. This well tested six zones over four formations
through cased hole and yielded an exceptional 939 m(3)/day (5,906 Bopd)
combined maximum flow rate from 47.2 m (155 ft) of perforations.
    The Pride-17 drilling rig, used to drill Costayaco-1, is expected to be
available for additional drilling in December. Current plans include drilling
two additional wells as soon as Pride-17 is available. To assist with future
development drilling location selection, a 70 km(2) 3-D seismic program has
been initiated and is expected to be completed by the end of December 2007.
    Pursuant to regulatory requirements, the well has been intermittently
tested since June 10, 2007 and as of September 30, 2007 has produced a total
of 10,645 m(3) (66,957 bbls) gross. The well is currently on a long term test
and production is trucked to existing facilities, located on the Guayuyaco
Block. Costayaco-1's production rate is currently limited by trucking
capacity. A ten kilometer, eight inch pipeline, tying into existing
infrastructure, is being designed to replace trucking operations.
    The Chaza block is subject to a fiscally attractive Agencia Nacional de
Hidrocarburos contract with no additional state participation.

    CATATUMBO BASIN

    The Catatumbo Basin is a 7,350 km(2) sub-basin, forming the southwest
flank of Venezuela's prolific Maracaibo Basin. Solana has one block in the
Catatumbo sub-basin, namely Catguas.

    CATGUAS BLOCK

    Solana is the operator of the 1,591 km(2) (614 square miles) Catguas
Block with 100% working interest. In the southernmost two-thirds and in the
northern third of the Block, Trayectoria Oil and Gas, Sucursal Colombia, has a
15% and 50% beneficial interest respectively.
    The block is held under an ANH contract. Fulfillment of first Phase
(November 17, 2005 to May 17, 2007) commitments is underway. The acquisition
of 200 line-km (124 miles) of seismic data and 10 line-km (six miles) of high
resolution seismic has been completed.
    Seismic interpretation and geochemical mapping identified several
drillable prospects. Two shallower Barco structures, Tres Curvas and
Cocodrilo, were selected. Tres Curvas-1 has been drilled and completed as a
new oilfield discovery and Cocodrilo-1 will follow immediately afterwards. An
extension to the phase deadline was requested and granted.
    In September 2007, Solana successfully drilled, logged and cased a
potential new field discovery, the Tres Curvas-1 wildcat exploration well.
Tres Curvas-1 reached a total measured depth of 3,550 feet (total vertical
depth of 3,518 feet). Initial log interpretations, sidewall cores, and
hydrocarbon shows encountered during drilling indicated reservoir quality
sandstones with potential oil pay within the Los Cuervos, Barco and Catatumbo
formations. Five zones were tested with cased hole drill stem tests in October
2007. The drill stem tests confirmed that the targeted zones were
significantly under-pressured and have high porosities and permeabilities.
    The preliminary test results for Tres Curvas-1, completed in October
2007, yielded a combined 180 Bopd from 61 feet of perforations in two
Catatumbo formation zones.
    As a result of a regulatory requirement to reach total depth at
Cocodrilo-1 before November 27, 2007, Solana decided to cease testing at Tres
Curvas-1 with the DWS drilling rig and move the rig to Cocodrilo-1
immediately. Spud date for Cocodrilo-1 was November 15, 2007.
    Given the initial positive Tres Curvas-1 results, further testing to
determine optimal flow rates and initial reserves is required. A service rig
is being sourced to undertake this evaluation.
    The Catguas Block is subject to a fiscally attractive ANH Contract with
no additional state participation.

    LOWER MAGDALENA BASIN

    The Lower Magdalena basin is located in northwest Colombia. It covers an
area of approximately 87,000 km(2) (33,500 square miles) and contains Solana's
Magangué Block.

    MAGANGUE BLOCK

    The Magangué Block is held pursuant to the Magangué Association Contract.
Solana is the operator of the block with a 37.8% working interest and has
partners, Ecopetrol with 58%, and Technopetrol, a Colombian company, with
4.2%.
    Solana operates the Guepajé gas field on the 84 km(2) (32 square mile)
Magangué Block, which is currently producing 97,000 m(3)/day (3.4 mmcfd,
1.0 mmcfd net to Solana) and sold into the local market at a current price of
$2.55/mmbtu. Solana is currently re-evaluating the available seismic and
geological information to identify possible workover opportunities and other
possible targets.

    OUTLOOK

    Over the next three months, Solana looks to drill the last well in its
2007 six exploration well drilling program that has yielded three discoveries
to date. Two wells drilled in the Putamayo basin, Juanambu-1 on the Guayuyaco
Block and Costayaco-1 on the Chaza Block, and Tres Curvas-1 drilled on the
Catguas Block in the Catatumbo basin, are all new field discoveries.
Conversely, the two wells drilled in the Llanos basin, Calcedonia-1 on the
Guachiria Norte Block and Bevea-1 on the Gaviotas Block, were abandoned.
    By year end, Solana will have drilled the Cocodrilo-1 well on the Catguas
Block and one Costayaco step out well. A second Costayaco step out well will
immediately follow the first step out. Additionally, the acquisition of the
Costayaco 3-D seismic program should be completed by year end, with processing
to follow in early 2008.
    On November 13, 2007, a declaration of commerciality was received from
Ecopetrol, the state oil company, for the Juanambu field and Juanambu-1 was
placed on production at approximately 1,400 Bopd (450 Bopd net of royalty to
Solana). A six kilometer, six inch flowline tying Juanambu-1 into the Toroyaco
facilities should be complete by mid January 2008 and will eliminate
Juanambu-1 trucking. Costayaco-1 is expected to produce throughout the fourth
quarter with production constrained by trucking limitations.
    Based on the 320 km(2) of 3D seismic acquired during the first quarter of
2007 in the Guachiria and Guachiria Sur Blocks and other seismic, drilling
locations for the next Llanos dry season drilling campaign have been selected.
Rigs are being sourced.
    In addition to development activity on Costayaco, Juanambu, Tres Curvas
and possibly Cocodrilo (in the event of a discovery), Solana looks forward to
drilling five to six exploration wells in 2008. Significantly more management
time and capital will be applied to the highly prospective Catguas Block.
    Glenn Van Doorne, Chief Operating Officer of Solana, a Petroleum
Geologist, with 30 years of experience and a member of the AAPG and the SPE,
is the qualified person that has reviewed the technical reserve, resource, and
drilling update information contained in these results.

    OPERATING RESULTS

    Selected Quarterly Information

    The following table summarizes selected financial data for Solana for
each of the two most recently completed financial three month and nine month
periods ended September 30, 2007 and 2006.

    
                                September 2007            September 2006
    -------------------------------------------------------------------------
                              Three        Nine         Three        Nine
                              Months       Months       Months       Months
                              Ended        Ended        Ended        Ended
    -------------------------------------------------------------------------
                                $            $            $            $
    -------------------------------------------------------------------------
    Revenue
      Production Revenue,
       net of
        Royalties           3,152,267    5,953,735    3,308,657    7,887,763
        Operating costs       969,405    2,443,658      567,023    1,563,566
    -------------------------------------------------------------------------
                            2,182,862    3,510,077    2,741,634    6,324,197
    -------------------------------------------------------------------------

    Expenses
    General and
     administrative         1,165,775    3,545,106      423,640    2,560,787
    Depletion,
     depreciation           2,018,435    4,224,763      886,985    2,899,552
    Foreign exchange
     loss (gain)              237,775      463,999   (3,424,332)  (2,305,790)
    Stock-based
     compensation           1,302,779    4,134,068      209,875      729,705
    -------------------------------------------------------------------------
                            4,724,764   12,367,936   (1,903,832)   3,884,254
    -------------------------------------------------------------------------


                                September 2007            September 2006
    -------------------------------------------------------------------------
                              Three        Nine         Three        Nine
                              Months       Months       Months       Months
                              Ended        Ended        Ended        Ended
    -------------------------------------------------------------------------
                                $            $            $            $
    -------------------------------------------------------------------------
    Other income/(expenses)
      Interest and other      193,397      663,796      343,951    1,074,426
      Income taxes                  -      (89,258)        (260)     (46,271)
    -------------------------------------------------------------------------
                              193,397      574,538      343,691    1,028,155
    -------------------------------------------------------------------------

    Net income (loss)      (2,348,505)  (8,283,321)   4,989,157    3,468,098

    Net income (loss)
     per share                  (0.02)       (0.08)        0.05         0.04


                                                   September 30, December 31,
                                                        2007         2006
    -------------------------------------------------------------------------
                                                          $            $

    Share capital                                   126,347,717  122,962,256

    Working capital                                  12,045,307   37,106,929

    Petroleum and natural gas properties             75,135,164   54,313,189

    Total assets                                     96,771,186   98,615,541

    Total current liabilities                         5,629,716    3,404,607

    Shareholders' equity                             89,494,518   93,654,111

    Cash dividends per share                                NIL          NIL
    


    Results of operations for the three and nine month periods ending
    September 30, 2007

    This consolidated financial information includes the revenue and expenses
of the Company for the nine month periods ended September 30, 2007 and 2006.
During the nine month period ended September 30, 2007, revenue from operations
amounted to $5,953,735. In this same period, operating costs were $2,443,658
resulting in an operating profit of $3,510,077. During the nine month period
ended September 30, 2006, the Company generated revenue of $7,887,763. In this
same period operating costs were $1,563,566 resulting in an operating profit
of $6,324,197. This lower operating profit is mainly due to lower production
volumes from the Guayuyaco field (46,139 bbls as of September 30, 2007 versus
105,323 bbls as of September 30, 2006). Higher crude prices somewhat mitigated
the effect these lower production volumes had on revenue. Operating costs as a
percentage of the net revenue are significantly higher in the nine month
period ending September 30, 2007 in comparison with the period ending
September 30, 2006 (41% versus 19%) and in the three month period ending
September 30, 2007 in comparison with the three month period ending
September 30, 2006 (30% versus 17%) due to the impact of additional costs
incurred during testing of new discoveries.
    The Company produced on average 588 Boepd for the nine months ended
September 30, 2007 and 663 Boepd for the nine months ended September 30, 2006.
Production from Costayaco-1 testing offset the lower Guayuyaco production
volumes. Additionally, the average is affected by the income from Juanambu
test volumes (15,000 bbls equivalent to about $858,000) accounted as cost
recovery rather than crude sales revenue.
    The Company's revenue (net of royalties), operating costs and net backs
for the three month periods ended September 30, 2007 and 2006 are:

    
                                September 30, 2007        September 30, 2006
    -------------------------------------------------------------------------
                               Three        Nine         Three        Nine
                               Months       Months       Months       Months
                               Ended        Ended        Ended        Ended

    Oil
    Bopd - Average                659          421          585          483
    Revenue, net of
     royalties per
     barrel                     62.42        53.77        57.31        54.35
    Net operating costs
     per barrel                 14.59        15.46         9.44         8.96

    Gas
    Mcf per day - Average         952        1,006        1,031        1,082
    Revenue, net of
     royalties per Mcf           2.42         2.29         2.28         2.26
    Net operating costs
     per Mcf                     0.91         0.90         0.85         0.67
    

    General and administrative expenses for the three and nine month periods
ended September 30, 2007 amounted to $1,165,775 and $3,545,106 respectively,
in comparison to the three and nine month period ended September 30, 2006,
which were to $423,640 and $2,560,787 respectively.
    The substantial components of general and administrative expenses are as
follows:

    
                              September 30, 2007        September 30, 2006
    -------------------------------------------------------------------------
                              Three        Nine         Three        Nine
                              Months       Months       Months       Months
                              Ended        Ended        Ended        Ended
                                $            $            $            $

    General office            252,076      790,271     (149,784)     938,987
    Salaries & Benefits       877,168    2,086,667      351,370      735,895
    Professional fees          45,348      240,639       52,570      372,092
    Public company costs      137,155      323,092      152,222      404,520
    Consulting fees          (145,972)     104,437       17,262      109,293
                          ---------------------------------------------------
                            1,165,775    3,545,106      423,640    2,560,787
                          ---------------------------------------------------
                          ---------------------------------------------------
    

    General and administrative expenses increased in the 2007 three month and
nine month periods in comparison with same periods of the previous year mainly
due to costs related with labor contract terminations, higher salaries and
benefits, and a 20% increase in staff. The General offices credit in the three
month period ended September 30, 2006 resulted from a cumulative adjustment of
overhead billed to partners. The credit in consulting fees during the three
month period ended September 30, 2007 is due to reclassification of consulting
fees initially expensed and subsequently allocated to investments in oil and
gas properties.
    Depletion, depreciation and accretion amounted to $2,018,435 and
$4,224,763 for the three and nine month periods ended September 30, 2007,
compared to the same periods in 2006, which were $886,985 and $2,899,552
respectively. The variance is due mainly to a substantial increase in the
depletable base partially compensated by the impact of the booking additional
reserves.
    The foreign exchange loss amounted to $237,775 and $463,999 for the three
and nine month periods ended September 30, 2007, reflecting variations of the
Canadian dollar and the Colombian peso against the U.S. dollar during these
periods. A gain of $3,424,333 and $2,305,791 was recognized for the same
periods ended September 30, 2006. This variance is also affected by the
adoption of the US dollar as the reporting currency effective October 1, 2006.
    Stock-based compensation amounted to $1,302,779 and $4,134,068 for the
three and nine month period ended September 30, 2007, respectively, as
compared to $209,875 and $729,705 for same periods ended September 30, 2006.
This significant increase is due to the amortization of stock based
compensation associated with the Breakaway acquisition that was concluded in
October 2006.
    Other income and expenses relate to interest income amounting to $193,397
and $663,796 for the three and nine month periods ended September 30, 2007,
respectively, compared to $343,951 and $1,074,426 for the same periods ended
September 30, 2006. This decrease in interest income is due to the lower cash
balances held throughout the current period.
    The net losses are $2,348,505 and $8,283,321 for the three and nine month
periods ended September 30, 2007, respectively, compared with net income of
$4,989,157 and $3,468,098 for the same periods ended September 30, 2006. These
differences are representative of the higher oil and gas revenues and
significant foreign exchange gains booked during the three month period ended
September 30, 2006.

    Selected Quarterly Financial Information

    The following table sets out selected Solana unaudited quarterly
financial information derived from unaudited quarterly financial statements
prepared by management.

    
    -------------------------------------------------------------------------
                              Sept 30,     June 30,      Mar 31,      Dec 31,
                                 2007         2007         2007         2006

    Additions to Petroleum
     and Natural Gas
     properties             7,191,743   10,486,480    7,274,457    7,902,112

    Total revenues          3,345,664    1,726,827    1,545,040    2,049,754

    General and
     administrative
     expenses               1,165,775    1,319,363    1,061,304    2,042,166

    Depletion,
     depreciation and
     accretion              2,018,435      945,635    1,266,908    2,441,325

    Impairment                      -            -            -   29,822,544

    Foreign exchange
     (gain) loss              237,775      199,233       25,655      160,105

    Stock-based
     compensation           1,302,779    1,207,881    1,617,193    2,300,703

    Loss after income tax  (2,348,505)  (2,802,217)  (3,132,598) (31,076,705)

    Loss per share
     (basic and diluted)        (0.02)       (0.05)       (0.04)       (0.34)


                               Sep 30,      Jun 30,      Mar 31,      Dec 31,
                                 2006         2006         2006         2005

    Additions to Petroleum
     and Natural Gas
     properties             4,402,811    8,876,927    6,538,659   10,275,878

    Total revenues          3,652,608    2,797,670    2,511,910    3,145,166

    General and
     administrative
     expenses                 423,640    1,197,315      939,831      960,537

    Depletion,
     depreciation and
     accretion                886,985      957,026    1,055,540    3,976,602

    Foreign exchange
     (gain) loss           (3,424,333)     870,581      247,961     (282,610)

    Stock-based
     compensation             209,875      228,640      291,191      653,304

    Income (Loss) after
     income tax             4,989,157   (1,236,674)    (284,386)  (1,951,707)

    Income (Loss) per share
     (basic and diluted)         0.05        (0.01)       (0.01)       (0.05)
    -------------------------------------------------------------------------
    

    LIQUIDITY

    Solana's working capital decreased from $18,039,839 at June 30, 2007, to
$12,045,307 at September 30, 2007, largely due to the Company's petroleum and
natural gas property expenditures.
    The Company has $11,762,900 cash balance at September 30, 2007.
Management is actively seeking additional equity and is concurrently
structuring a debt facility to fund its ongoing exploration, appraisal and
development programs.
    The Company currently does not have any long term debt.

    SUMMARY OF CASH INFLOWS AND OUTFLOWS

    The company generated cash inflows from operations of $1,072,621 and
outflows of $843,947 for the three and nine month periods ended September 30,
2007, compared to the same periods in 2006 which generated a cash inflow of
$1,071,136 and an outflow of $2,278,717. This difference is substantially due
to a reduction in non-cash working capital resulting from the payment of
outstanding pending cash calls.
    Solana's net cash inflow from financing activities amounted to $23,711
for the nine month period ended September 30, 2007, compared to $34,440,170
for the nine month period ended September 30, 2006, due to the private
placement completed in April 2006.
    The Company incurred cash outflows from its investing activities of
$8,499,697 and $20,620,631 for the three and nine month periods ended
September 30, 2007 as compared to $3,673,192 and $19,142,885 for the three and
nine month periods ended September 30, 2006. The most significant cash outflow
component for the nine month period ended September 30, 2007 was the
investment of $24,941,360 in petroleum and natural gas properties.

    RELATED PARTY TRANSACTIONS

    The Company paid $41,598 in management fees in the current nine month
period ended September 30, 2007 to a company controlled by a director of the
Company. These fees are included in general and administrative expense.

    CAPITALIZATION

    Authorized share capital consists of an unlimited number of common
shares.

    
    Continuity of common shares                        Shares      Amount
                                                         No.          $
    -------------------------------------------------------------------------
    Balance, December 31, 2006                       95,876,792  122,962,256

    Shares in escrow earned in the period                          3,385,461
    -------------------------------------------------------------------------
    Balance, September 30, 2007                      95,876,792  126,347,717
    -------------------------------------------------------------------------


    Continuity of stock options                                      Number
    -------------------------------------------------------------------------
    Balance, December 31, 2006                                     4,350,000
    Issued                                                           225,000
    Exercised                                                              -
    Expired                                                        1,421,668
    -------------------------------------------------------------------------
    Balance, September 30, 2007                                    3,153,332
    -------------------------------------------------------------------------


    Continuity of warrants                                           Number
    -------------------------------------------------------------------------
    Balance, December 31, 2006                                    10,000,000
    Issued                                                                 -
    Exercised                                                              -
    Expired                                                                -
    -------------------------------------------------------------------------
    Balance, September 30, 2007                                   10,000,000
    -------------------------------------------------------------------------
    

    SUBSEQUENT EVENTS

    Subsequent to the end of the third quarter, on November 13, 2007, a
declaration of commerciality for the Juanambu field was obtained (Solana net
35% working interest). Juanambu-1 was immediately placed on production and is
currently producing in the range of 450 Bopd net of royalties to Solana.
    Subsequent to the end of the third quarter, on November 16, 2007, Solana
spudded the Cocodrilo-1 well. Cocodrilo-1 is the second of the two well
program Solana is undertaking on the Catguas Block and is targeting the Barco
and Catatumbo formations that have been identified on 2D seismic and that are
oil bearing in the nearby Tres Curvas-1 new field discovery. This well is
expected to take three weeks to drill with testing potentially to follow.
    Subsequent to the end of the third quarter, on November 26, 2007, Solana
closed a bought deal financing (including over-allotment shares) of
27.3 million shares at CDN$2.20 per share for gross proceeds of
CDN$60.06 million. Solana plans to use the proceeds to fund its Colombian
exploration and development activities and general corporate purposes.

    MANAGEMENT'S ASSESSMENT OF INTERNAL CONTROLS AND
    DISCLOSURE CONTROLS AND PROCEDURES

    Management has evaluated the effectiveness of the Company's disclosure
controls and procedures as of September 30, 2007. Based on this evaluation,
management has concluded that the Company's disclosure controls and
procedures, as defined in Multilateral Instrument 52-109, are sufficient to
ensure that the information required to be disclosed in reports that are filed
or submitted under Canadian securities legislation are recorded, processed,
summarized and reported within the time periods specified in those rules.

    BUSINESS RISK AND UNCERTAINTIES

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

    CRITICAL ACCOUNTING POLICIES AND ESTIMATES

    Petroleum and Natural Gas Operation

    The Company follows the full cost method of accounting for petroleum and
natural gas operations, whereby all costs of exploring for and developing
petroleum and natural gas reserves are capitalized in country-by-country cost
centres. Such costs include land acquisition costs, geological and geophysical
costs, carrying charges on non-producing properties, costs of drilling both
productive and non-productive wells, interest costs on major development
projects and overhead charges directly related to acquisition, exploration and
development activities.
    The costs (including exploratory dry holes) in cost centres from which
there has been no commercial production are not subject to depletion until
commercial production commences. The capitalized costs are assessed to
determine whether it is likely such costs will be recovered in the future. To
the extent there are costs which are not likely to be recovered in the future,
they are written-off.
    The costs in cost centres from which there is production, together with
the cost of production facilities, are depleted and depreciated on the
unit-of-production method, based on the estimated proved reserves after
royalties. Petroleum and natural gas reserves and production are converted
into equivalent units, based upon estimated relative energy content. Costs of
acquiring and evaluating significant unproved properties are excluded from the
depletion calculations. These unproved properties are assessed to determine
whether impairment has occurred. When proved reserves are assigned or the
carrying value of the property is considered to be impaired, the cost of the
property or the amount of the impairment is added to costs subject to
depletion.
    Petroleum and natural gas properties are subject to a ceiling test in
each reporting period to determine that the costs are not impaired and do not
exceed the fair value of the properties. The costs are assessed to be not
impaired if the sum of the undiscounted cash flows expected from the
production of proved reserves and the cost of unproved properties, net of
impaired allowances of unproved properties exceed the carrying value of the
petroleum and natural gas properties. If the carrying value of the petroleum
and natural gas properties is determined to be impaired, an impairment loss is
recognized to the extent that the carrying value exceeds an estimated fair
value. The fair value estimate is normally based on the sum of the discounted
cash flows expected from the production of proved and probable reserves plus
the cost of unproved properties, net of impairment allowances. The cash flows
are estimated using forecast products prices and costs and are discounted
using a risk-free interest rate.
    Proceeds from the sale of petroleum and natural gas properties are
applied against capitalized costs, with no gain or loss recognized, unless
such a sale would alter the depletion rate by more than 20%.

    ADVISORY REGARDING FORWARD-LOOKING STATEMENTS

    This discussion and analysis contains forward-looking statements.
Forward-looking statements are subject to numerous known and unknown risks and
uncertainties, some of which are beyond Solana's control, including the impact
of general economic conditions, industry conditions, volatility of commodity
prices, currency exchange rate fluctuations, reserve estimates, environmental
risks, and competition from other explorers, stock market volatility and
ability to access sufficient capital. Solana's actual costs could differ
materially from those anticipated in the forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements.


    
                          SOLANA RE

SOURCES LIMITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS For the Three and Nine Month Periods Ended September 30, 2007 and 2006 (Unaudited) Notice to Reader: The accompanying unaudited interim consolidated financial statements of Solana Resources Limited (the "Company") for the three and nine month periods ended September 30, 2007 and 2006 have been prepared by management and approved by the Audit Committee and the Board of Directors of the Company. These statements have not been reviewed by the Company's external auditors. DATED the 28th day of November, 2007 (signed) "Scott Price" J. Scott Price, President and Chief Executive Officer SOLANA RE

SOURCES LIMITED INTERIM CONSOLIDATED BALANCE SHEET (Unaudited) Expressed in US Dollars September 30, December 31, 2007 2006 $ $ ------------- ------------- ASSETS Current: Cash and cash equivalents 11,762,900 29,909,168 Cash in trust - 3,274,262 Accounts receivable - trade 4,378,713 1,472,209 - cash calls 1,296,634 4,825,589 Prepaid expenses 236,776 1,030,308 ------------- ------------- 17,675,023 40,511,536 Deposits (Note 3) 2,796,750 3,041,509 Petroleum and natural gas properties 75,135,164 54,313,189 Other capital assets 840,065 543,080 Investment (Note 4) 324,184 206,227 ------------- ------------- 79,096,163 58,104,005 ------------- ------------- 96,771,186 98,615,541 ------------- ------------- ------------- ------------- LIABILITIES Current: Accounts payable and accrued liabilities - trade 5,130,028 3,404,607 - cash calls 499,688 - ------------- ------------- 5,629,716 3,404,607 Asset retirement obligations (Note 5) 1,646,952 1,556,823 ------------- ------------- 7,276,668 4,961,430 SHAREHOLDERS EQUITY Share capital (Note 6) 126,347,717 122,962,256 Contributed surplus (Note 6) 5,773,342 5,035,075 Accumulated other comprehensive income (Note 2) 5,791,923 5,791,923 Deficit (48,418,464) (40,135,143) ------------- ------------- 89,494,518 93,654,111 ------------- ------------- 96,771,186 98,615,541 ------------- ------------- ------------- ------------- SOLANA RE

SOURCES LIMITED INTERIM CONSOLIDATED STATEMENT OF LOSS AND DEFICIT (Unaudited) Expressed in US Dollars September 30, 2007 September 30, 2006 Three Nine Three Nine months months months months ended ended ended ended $ $ $ $ ------------ ------------ ------------ ------------ Revenue Oil and gas revenues, net of royalties 3,152,267 5,953,735 3,308,657 7,887,763 Interest 193,397 663,796 343,951 1,074,426 ------------ ------------ ------------ ------------ 3,345,664 6,617,531 3,652,608 8,962,189 ------------ ------------ ------------ ------------ Expenses Operating 969,405 2,443,658 567,023 1,563,566 General and administrative 1,165,775 3,545,106 423,640 2,560,787 Depletion, depreciation and accretion 2,018,435 4,224,763 886,985 2,899,552 Foreign exchange loss (gain) 237,775 463,999 (3,424,332) (2,305,790) Stock-based compensation (Note 6) 1,302,779 4,134,068 209,875 729,705 ------------ ------------ ------------ ------------ 5,694,169 14,811,594 (1,336,809) 5,447,820 ------------ ------------ ------------ ------------ Income (loss) before income taxes (2,348,505) (8,194,063) 4,989,417 3,514,369 Income Taxes - 89,258 260 46,271 ------------ ------------ ------------ ------------ Net Income (loss) (2,348,505) (8,283,321) 4,989,157 3,468,098 Deficit, beginning of period (46,069,959) (40,135,143) (14,047,596) (12,526,537) ------------ ------------ ------------ ------------ Deficit, end of period (48,418,464) (48,418,464) (9,058,439) (9,058,439) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) per share (Note 7) (0.02) (0.08) 0.05 0.04 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ SOLANA RE

SOURCES LIMITED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Expressed in US Dollars September 30, 2007 September 30, 2006 Three Nine Three Nine months months months months ended ended ended ended $ $ $ $ ------------ ------------ ------------ ------------ Summary of activities Operating activities Net Income (loss) (2,348,505) (8,283,321) 4,989,157 3,468,098 Items not involving cash: Unrealized foreign exchange loss (gain) 151,983 (186,829) - 594,847 Depletion, depreciation and accretion 2,018,435 4,224,763 886,985 2,899,554 Stock-based compensation 1,302,779 4,134,068 209,875 729,705 ------------ ------------ ------------ ------------ 1,124,692 (111,319) 6,086,017 7,692,204 Changes in non-cash working capital (52,071) (732,628) (5,014,882) (9,970,922) ------------ ------------ ------------ ------------ 1,072,621 (843,947) 1,071,135 (2,278,718) ------------ ------------ ------------ ------------ Financing activities Proceeds from the exercise of options - - - 12,127 Proceeds from the issuance of shares - - - 36,725,684 Cost of issuance - - - (2,297,641) Sale of capital assets - 23,711 - - ------------ ------------ ------------ ------------ - 23,711 - 34,440,170 Investing activities Additions to petroleum & NG properties (7,191,743) (24,941,360) (4,402,811) (19,818,397) Additions to Investments (26,163) (117,957) - (316,593) Changes in non-cash working capital (1,375,709) 4,373,720 (3,578) 1,189,564 Additions to capital assets (156,082) (179,793) (10,624) (105,641) Deposits 250,000 244,759 743,821 (91,818) ------------ ------------ ------------ ------------ (8,499,697) (20,620,631) (3,673,192) (19,142,885) ------------ ------------ ------------ ------------ Foreign exchange 4,765 20,337 (58,384) 5,578,843 ------------ ------------ ------------ ------------ Net increase (decrease) in cash (7,422,311) (21,420,530) (2,660,441) 18,597,410 Cash and cash equivalents, beginning of period (Note 9) 19,185,211 33,183,430 37,534,634 16,276,783 ------------ ------------ ------------ ------------ Cash and cash equivalents, end of period (Note 9) 11,762,900 11,762,900 34,874,193 34,874,193 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ SOLANA RE

SOURCES LIMITED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited) Expressed in US Dollars September 30, 2007 September 30, 2006 Three Nine Three Nine months months months months ended ended ended ended $ $ $ $ ------------ ------------ ------------ ------------ Net Income (loss) (2,348,505) (8,283,321) 4,989,158 3,468,099 Other Comprehensive Income (loss) - - - - ------------ ------------ ------------ ------------ Comprehensive Income (loss) (2,348,505) (8,283,321) 4,989,158 3,468,099 ------------ ------------ ------------ ------------ SOLANA RE

SOURCES LIMITED Notes to the Interim Consolidated Financial Statements For the Three Month Periods Ended September 30, 2007 and 2006 (Unaudited) Note 1. Basis of Presentation The interim consolidated financial statements of Solana Resources Limited ("Solana" or the "Company") for the three and nine-month periods ended September 30, 2007 and 2006 have been prepared by management in accordance with accounting principles generally accepted in Canada on the same basis as the audited consolidated financial statements as at and for the year ended December 31, 2006 except for new standards adopted as described in Note 2. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto in Solana's annual report for the year ended December 31, 2006, as the interim consolidated financial statements do not conform in all respects to the note disclosure requirements of Generally Accepted Accounting Principles for annual financial statements. Note 2. Changes in Accounting Policies Effective January 1, 2007, the Company adopted the new Canadian Institute of Chartered Accountants ("CICA") standards related to Section 1530, "Comprehensive Income," Section 3855, "Financial Instruments - Recognition and Measurement," Section 3861, "Financial Instruments - Disclosure and Presentation" and Section 3865, "Hedges." As required by the standards the Company has adopted these standards prospectively. Therefore, the comparative interim consolidated financial statements have not been restated, except for the amount relating to the cumulative translation adjustment as described below. The Section 1530 of the CICA Handbook describes how to report and disclose comprehensive income and its components. Comprehensive income is the change in a company's net assets during a period from transactions and other events and circumstances from non-owner sources. It includes items that would not normally be included in net earnings. Upon adoption of Section 1530, amounts previously recognized on the balance sheet as cumulative translation adjustment have been reclassified as accumulated other comprehensive income. Upon adoption of Section 3855, all financial instruments are classified into one of the following five categories: held-for- trading, loans and receivables, held-to-maturity investments, available-for-sale financial assets or other based on their initial classification. Held-for-trading financial assets are measured at fair value recorded in other comprehensive income until the instrument is derecognized or impaired. All derivative instruments are recorded in the balance sheet at fair value unless they qualify for the normal sale and normal purchase exemption. All changes in their fair value are recorded in net income. The other categories of financial instruments are recognized at amortized cost using the effective interest method. Upon adoption of these standards, the Company classified its cash and cash equivalents as held-for-trading, which are measured at fair value which equals the carrying value. Accounts receivable and deposits are classified as loan and receivables, which are measured at amortized costs. Investments have been classified as held-to- maturity investments. Accounts payable are classified as other financial liabilities, which are measured at amortized cost. For financial assets and financial liabilities that are not classified as held-for-trading, the transaction costs that are directly attributable to the acquisition or issue of a financial asset or financial liability are adjusted to the fair value initially recognized for that instrument. These costs are expensed using the effective interest rate method and are recorded within interest expense. The Section 3855 of the CICA Handbook describes the standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. Upon adoption of Section 3855 all financial instruments should be classified into one of the following categories: held-for-trading (assets and liabilities), assets available-for-sale, loans and receivables, assets held-to-maturity and other financial liabilities. All financial instruments are measured at fair value on initial recognition. Transaction costs are included in the initial carrying amount of financial instruments except for held-for-trading items in which case they are expensed as incurred. Measurement in subsequent periods depends on the classification of the financial instruments. Management does not believe that the adoption of this section will have a material impact on the financial statements. The Section 3865 of the CICA Handbook describes when and how hedge accounting can be used. Hedging is an activity that may be used by a company to change an exposure to one or more risks by creating an offset between changes in the cash flows attributable to a hedge item or changes resulting from a risks exposure relating to a hedge item and a hedging item. Hedge accounting allows gains, losses, revenues and expenses from the derivative and the item it hedges to be recorded in the statement of loss in the same period. The Company currently does not utilize hedges or other derivative financial instruments in its operations; as a result the adoption of Section 3865 currently has no material impact on the consolidated financial statements of the Company. Comparative Financial Information. On October 1, 2006, the Company changed its reporting currency from Canadian dollars (CDN$) to United States dollars ($). Financial statements for prior periods presented have been translated from Canadian dollars into United States dollars using the current rate method. Using this method, all consolidated assets and liabilities have been translated using the exchange rate at the balance sheet dates, while shareholders' equity has been translated using the historical rates of exchange in effect on the dates of the corresponding transactions. Consolidated Statements of Loss and Deficit have been translated using the prevailing average exchange rate for the period, except for equity transactions which have been translated using the historical rates of exchange in effect at the dates of the corresponding transactions. All comparative financial information being presented has been restated to reflect the Company's financial statements as if they had been historically reported in United States dollars and this resulted in an accumulated other comprehensive income of $5,791,923. The adoption of these new standards had no impact on the Company's retained earnings as at January 1, 2007. The Company also adopted Section 3251, "Equity" and Section 1506, "Accounting Changes," Section 3251 replaces Section 3250, "surplus," and describes standards for the presentation of equity and changes on equity for reporting period as a result of the application of Section 1530, "Comprehensive Income." The only impact of Section 1506, "Accounting Changes," is to provide disclosure of when an entity has not applied a new source of GAAP that has been issued but is not yet effective. This is the case with Section 3863, "Financial Instruments Presentations" which are required to be adopted for fiscal years beginning on or after October 1, 2007. The Company will adopt these standards on January 1, 2008 and it is expected the only effect on the Company will be additional disclosures regarding the significance of financial instruments for the entity's financial position and performance; and the nature, extent and management of risk arising from financial instruments to which the entity is exposed. Section 1535, "Capital Disclosures" is effective for annual periods beginning on or after October 1, 2007 and establishes standards for disclosing information about the Company's capital and how it is managed. It requires disclosures of the Company's objectives, policies and processes for managing capital, the quantitative data about what the Company regards as capital, whether the Company has complied with any capital requirements and if it has not complied, the consequences of such non-compliance. The Company is currently evaluating the impact of the adoption of this section on the consolidated financial statements. Note 3. Deposits At the end of September 30, 2007, the Company had $2,796,750 on deposit with the Colombian Agency of National Hydrocarbons ("ANH") reflecting a percentage of the cost of work commitments on certain ANH exploration blocks. These funds will be returned to the Company by ANH on completion of the work commitments on the Guachiria Norte, Catguas, Guachiria Sur, Garibay, Colonia and San Pablo Blocks. Note 4. Investment The Company has invested $324,184 in the Colombian Hydrocarbon Investment Fund ("Fund"), and expects to invest a maximum of $500,000. The Fund is managed by a U.S. based fund manager, who specializes in South American natural resources sector investments. The Fund is expected to have an investment period of four years. After this period, the Fund will be wound up, and any capital and earned profits will be returned and distributed to the investors over a maximum period of seven years. Note 5. Asset Retirement Obligations The following table represents the reconciliation of the beginning and ending obligations associated with the retirement of oil and gas properties: --------------------------------------------------------------------- Asset retirement obligations December 31, 2006 $1,556,823 Liabilities incurred during period - Liabilities settled during period - Accretion 90,129 --------------------------------------------------------------------- Asset retirement obligations, September 30, 2007 $1,646,952 --------------------------------------------------------------------- At September 30, 2007, the estimated total undiscounted amount required to settle the asset retirement obligations was $1,840,000 (2006 - $2,100,000). These obligations will be settled at the end of the useful lives of the underlying assets, which currently extend up to seven years into the future. This amount has been discounted using a credit-adjusted risk-free discount rate of 10% and an inflation rate of 2.5%. Note 6. Share Capital Authorized share capital consists of an unlimited number of common shares. Continuity of common shares Shares Amount No. $ --------------------------------------------------------------------- Balance, December 31, 2006 95,876,792 122,962,256 Shares in escrow earned in period 3,385,461 --------------------------------------------------------------------- Balance, September 30, 2007 126,347,717 --------------------------------------------------------------------- Continuity of contributed surplus Amount $ --------------------------------------------------------------------- Balance, December 31, 2006 5,035,075 Stock based compensation expense 738,267 --------------------------------------------------------------------- Balance, September 30, 2007 5,773,342 --------------------------------------------------------------------- Continuity of stock options Number --------------------------------------------------------------------- Balance, December 31, 2006 4,350,000 Issued 225,000 Exercised - Expired 1,421,668 --------------------------------------------------------------------- Balance, September 30, 2007 3,153,332 --------------------------------------------------------------------- Continuity of warrants Number --------------------------------------------------------------------- Balance, December 31, 2006 10,000,000 Issued - Exercised - Expired - --------------------------------------------------------------------- Balance, September 30, 2007 10,000,000 --------------------------------------------------------------------- Warrant terms --------------------------------------------------------------------- Strike price CDN$2.00/share Activation price Share price must exceed CDN$2.75 for 45 days Expiry April 4, 2010 Stock-based compensation For the nine months of 2007, stock based compensation expense of $738,267 has been recorded in the Consolidated Statement of Loss and Deficit (2006 - $729,705). The fair values of all common share options granted are estimated on the date of grant using the Black- Scholes option-pricing model. The weighted average fair market value of options granted and the assumptions used in their determination are as noted below: Nine months ended September 30, 2007 --------------------- Risk-free interest rate (percent) 4.28 Expected life (years) 3.5 Volatility (percent) 70 Expected annual dividend per share - Note 7. Per-Share amounts The weighted average number of common shares, basic and diluted, outstanding during the nine months ended September 30, 2007 was 96,252,392 (September 30, 2006 - 85,876,792). Note 8. Segmented information Three month period ended September 30, 2007 Canada Colombia Total $ $ $ -------------------------------------- Revenue - 3,152,267 3,152,267 Operating costs - 969,405 969,405 -------------------------------------- - 2,182,862 2,182,862 -------------------------------------- General and administrative expenses 750,505 415,270 1,165,775 Depletion, depreciation, and accretion 10,118 2,008,317 2,018,435 Foreign exchange loss 19,830 217,945 237,775 Stock-based compensation 1,302,779 0 1,302,779 Interest income (160,891) (32,506) (193,397) -------------------------------------- 1,922,341 2,609,026 4,531,367 -------------------------------------- Income (loss) before taxes (1,922,341) (426,164) (2,348,505) Income taxes - - - -------------------------------------- Net income (loss) (1,922,341) (426,164) (2,348,505) -------------------------------------- -------------------------------------- Identifiable assets 31,157,773 65,613,413 96,771,186 -------------------------------------- -------------------------------------- Expenditures on petroleum and natural gas properties - 7,191,743 7,191,743 -------------------------------------- -------------------------------------- Nine month period ended September 30, 2007 Canada Colombia Total $ $ $ -------------------------------------- Revenue - 5,953,735 5,953,735 Operating costs - 2,443,658 2,443,658 -------------------------------------- - 3,510,077 3,510,077 -------------------------------------- General and administrative expenses 1,798,506 1,746,600 3,545,106 Depletion, depreciation, and accretion 14,404 4,210,359 4,224,763 Foreign exchange (gain) loss 31,256 432,743 463,999 Stock-based compensation 4,134,068 - 4,134,068 Interest income (587,231) (76,565) (663,796) -------------------------------------- 5,391,003 6,313,137 11,704,140 -------------------------------------- Income (Loss) before taxes (5,391,003) (2,803,060) (8,194,063) Income taxes - 89,258 89,258 -------------------------------------- Net Income (loss) (5,391,003) (2,892,318) (8,283,321) -------------------------------------- -------------------------------------- Identifiable assets 31,157,773 65,613,413 96,771,186 -------------------------------------- -------------------------------------- Expenditures on petroleum and natural gas properties - 24,941,360 24,941,360 -------------------------------------- -------------------------------------- Three month period ended September 30, 2006 Canada Colombia Total $ $ $ -------------------------------------- Revenue - 3,308,657 3,308,657 Operating costs - 567,023 567,023 -------------------------------------- - 2,741,634 2,741,634 -------------------------------------- General and administrative expenses 294,869 128,771 423,640 Depletion, depreciation, and accretion 1,914 885,071 886,985 Foreign exchange (gain) loss 1,260,717 (4,685,050) (3,424,333) Stock-based compensation 209,875 - 209,875 Interest income (316,488) (27,463) (343,951) -------------------------------------- 1,450,887 (3,698,671) (2,247,784) -------------------------------------- Income (loss) before taxes (1,450,887) 6,440,305 4,989,418 Capital taxes - 260 260 -------------------------------------- Net Income (loss) (1,450,887) 6,440,045 4,989,158 -------------------------------------- -------------------------------------- Identifiable assets 56,809,735 82,414,507 139,224,242 -------------------------------------- -------------------------------------- Expenditures on petroleum and natural gas properties - 4,402,811 4,402,811 -------------------------------------- -------------------------------------- Nine month period ended September 30, 2006 Canada Colombia Total $ $ $ -------------------------------------- Revenue - 7,887,763 7,887,763 Operating costs - 1,563,566 1,563,566 -------------------------------------- - 6,324,197 6,324,197 -------------------------------------- General and administrative expenses 1,118,526 1,442,261 2,560,787 Depletion, depreciation, and accretion 5,809 2,893,743 2,899,552 Foreign exchange (gain) loss (77,071) (2,228,720) (2,305,791) Stock-based compensation 729,705 - 729,705 Interest income (1,041,839) (32,587) (1,074,426) -------------------------------------- 735,130 2,074,697 2,809,827 -------------------------------------- Income (loss) before taxes (735,130) 4,249,500 3,514,370 Capital taxes - 46,271 46,271 -------------------------------------- Net (loss) income (735,130) 4,203,229 3,468,099 -------------------------------------- -------------------------------------- Identifiable assets 56,809,735 82,414,507 139,224,242 -------------------------------------- -------------------------------------- Expenditures on petroleum and natural gas properties - 19,818,397 19,818,397 -------------------------------------- -------------------------------------- Note 9. Supplemental cash flow information September 30, September 30, 2007 2006 $ $ ------------- ------------- Cash represented by: Cash and cash equivalents 11,762,900 34,874,194 - - Restricted cash - 4,776,605 ------------- ------------- 11,762,900 39,650,799 ------------- ------------- ------------- ------------- Cash interest paid - - ------------- ------------- Cash taxes paid - - ------------- ------------- Note 10. Related party transactions Management fees in the amount of $41,598 (2006 - $ 40,261) were paid to a company controlled by a director of the Company and are included in general and administrative expenses. These fees are for services rendered in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Note 11. Income Taxes Subject to confirmation from taxation authorities, the Company has approximately CDN$9.9 million ($10 million) of Canadian non-capital loss carry forwards which expire between 2007 and 2026. Additionally, the Company has Colombian tax losses totaling Col 65 billion ($30 million) which are available to be carried forward and used to offset future Colombian taxable income up to a maximum of 25% per year. The consolidated financial statements do not reflect the potential tax benefit of these losses, as currently they do not meet the more likely than not criteria, to be recognized. Provision for current income taxes are based on presumptive income calculated as a percentage of Colombian equity levels and can be recovered against future income taxes for up to five years. Note 12. Commitments The Company has remaining commitments to be met during 2007 of $10.3 million. These commitments are 68% related to exploration activities, 28% to development costs and 4% to comply with environmental regulatory obligations. Note 13. Financial instruments The nature of crude oil and natural gas operations in Colombia expose the Company to fluctuations in commodity prices and foreign currency exchange rates. The Company does not manage these risks through the use of financial instruments. Credit risk A substantial portion of the Company's accounts receivable are with customers in the oil industry and are subject to normal industry credit risks. The carrying amount of accounts receivable reflects management's assessment of the credit risk associated with these customers. Solana's crude oil is sold to the Colombian state oil company, Ecopetrol, based on world prices adjusted for quality and transportation. Revenues are denominated in United States dollars. Typically, the Company's maximum credit exposure to customers is revenue from two months' sales. Foreign currency exchange risk The Company is exposed to foreign currency fluctuations as certain expenditures and expenses are denominated in Colombian pesos and Canadian dollars. Fair value of financial instruments The Company's financial instruments are classified as cash and cash equivalents, cash in trust, accounts receivable and deposits and accounts payable on the balance sheet. The carrying values and fair values of these financial instruments at September 30, 2007 are not significantly different due to the short maturity term of these financial instruments. Note 14. Subsequent Events Subsequent to the end of the third quarter, on November 13, 2007, a declaration of commerciality for the Juanambu field was obtained (Solana net 35% working interest). Juanambu-1 was immediately placed on production and is currently producing in the range of 450 Bopd net of royalties to Solana. Subsequent to the end of the third quarter, on November 16, 2007, Solana spudded the Cocodrilo-1 well. Cocodrilo-1 is the second of the two well program Solana is undertaking on the Catguas Block and is targeting the Barco and Catatumbo formations that have been identified on 2D seismic and that are oil bearing in the nearby Tres Curvas-1 new field discovery. This well is expected to take three weeks to drill with testing potentially to follow. Subsequent to the end of the third quarter, on November 26, 2007, Solana closed a bought deal financing (including over-allotment shares) of 27.3 million shares at CDN$2.20 per share for gross proceeds of CDN$60.06 million. Solana plans to use the proceeds to fund its Colombian exploration and development activities and general corporate purposes. Corporate Information Directors Nominated Adviser Raymond P. Antony, Chair(1)(3)(4) Nabarro Wells & Co. Limited Stan Grad, Director(2)(4) Grant Howard, Director(1)(4) UK Broker Roy H. Hudson, Director(3)(4) Tristone Capital Limited Keith J. Jackson, Director(1)(4) Joaquin Moreno Uribe, Director(2)(3)(4) J. Scott Price, Director, President & CEO(2)(4) (1) Audit Committee (2) Reserves Committee (3) Corporate Governance and Compensation Committee (4) Health, Environment and Safety Committee Management J. Scott Price, President & CEO Glenn Van Doorne, COO Ricardo Montes, CFO Trading Symbols TSX-V: SOR LSE (AIM): SORL Transfer Agents Valiant Trust Company Auditor Deloitte & Touche LLP Legal Counsel Davis LLP Banker Royal Bank of Canada Offices Head Office: Subsidiary: Suite 640, 340 - 12th Avenue S.W. Solana Petroleum Exploration Calgary, Alberta, T2R 1L5 (Colombia) Limited Canada Regatta Office Park, West Bay Road, Tel.: 403-770-1822 P.O. Box 31106 SMB Fax.: 403-770-1826 Gran Cayman, KYl-1205, Cayman Islands Tel.: 345-949-3977 Fax.: 345-945-7566 Branch: Solana Petroleum Exploration Colombia Limited Calle 113 No. 7-21, Of 706 Torre A, Edificio Teleport Bogota, D.C. Colombia Tel: +571 629 1636 Fax: +571 629 1704 www.solanaresources.com Abbreviations CDN Canadian U.S. United States Col. Colombian Pesos WTI West Texas Intermediate Bbl barrel Bopd barrels of oil per day MBbls thousand barrels MMBbls million barrels Mcf thousand cubic feet Mcfpd thousand cubic feet per day MMcf million cubic feet MMcfpd million cubic feet per day Boe (*)barrel of oil equivalent Boepd (*)barrel of oil equivalent per day MBoe (*)thousand barrels of oil equivalent NGL natural gas liquids $MM million dollars TSX-V TSX Venture Exchange LSE London Stock Exchange AIM Alternative Investment Market of the London Stock Exchange MD&A Management's Discussion and Analysis GAAP Generally Accepted Accounting Principles G&A General and Administrative Expenses (*) A Boe conversion ratio of 6 Mcf = 1 Bbl has been used. Boe's may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 Mcf to 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

For further information:

For further information: Enquires: Solana Resources Limited, Scott
Price, jsp@solanaresources.com, (403) 770-1822; Ricardo Montes,
rmontes@solanacolombia.com, (403) 668-6604; Nabarro Wells & Co. Limited
(Nominated Adviser), Robert Lo, RobertLo@nabarro-wells.co.uk, +44 20 7710
7400; Marc Cramsie, MarcCramsie@nabarro-wells.co.uk; Tristone Capital Limited
(UK Broker), Nick Morgan, nmorgan@tristonecapital.com, +44 207 355 5800;
Pelham Public Relations, Charles Vivian, charles.vivian@pelhampr.com, +44 207
743 6672; Philip Dennis, philip.dennis@pelhampr.com, +44 207 743 6363

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SOLANA RESOURCES LIMITED

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