TriStar Oil & Gas Ltd. - Announces Record Production and Cashflow for the three and six months ended June 30, 2008



    CALGARY, Aug. 11 /CNW/ - TriStar Oil & Gas Ltd. ("TriStar" or the
"Company") is pleased to announce its financial and operating results for the
three and six month periods ended June 30, 2008.
    In this report, all references to barrels of oil equivalent ("Boe") are
calculated converting natural gas to oil at a ratio of six thousand cubic feet
of natural gas to one barrel of oil.

    
     Highlights                    Three       Three                     Six
                                  months      months                  months
                                   ended       ended                   ended
    ($ thousands except per      June 30,    June 30,                June 30,
     share and Boepd amounts)       2008      2007(1)   % Change        2008
    -------------------------------------------------------------------------
    Financial (CDN$)
      Production revenue
       (prior to hedging)        183,107      25,965        605%     318,274
    -------------------------------------------------------------------------
      Cash flow from
       operations(2)              96,848      13,931        595%     170,348
         Per share basic           $0.88       $0.49         80%       $1.63
         Per share diluted         $0.88       $0.48         83%       $1.63
      Net income (loss)(3)       (55,212)      2,023         NMF     (61,269)
         Per share basic          ($0.50)      $0.07         NMF      ($0.59)
         Per share diluted        ($0.50)      $0.07         NMF      ($0.59)
      Total net debt(4)          303,585      77,665        291%     303,585
    -------------------------------------------------------------------------

      Common shares (000's)
        Shares outstanding,
         end of period (basic)   110,110      28,353        288%     110,110
        Weighted average
         shares (basic)          110,110      28,351        288%     104,589
        Weighted average
         shares (fully
         diluted)(5)             110,110      28,804        282%     104,589
    -------------------------------------------------------------------------

    Operations
      Production
        Crude oil and NGL
         (Bbls per day)           15,228       3,371        352%      14,418
        Natural gas
         (Mcf per day)            30,621       9,419        225%      32,778
        Barrels of oil
         equivalent
         (Boepd, 6:1)             20,332       4,941        311%      19,882
      Average realized price
        Crude oil and NGL
         ($ per Bbl)              112.20       64.45         74%      101.37
        Natural gas
         ($ per Mcf)                9.91        7.23         37%        8.76
        Barrels of oil
         equivalent
         ($ per Boe, 6:1)          98.97       57.75         71%       87.96
      Netback per Boe (6:1) ($)
         Operating netback(2)      56.24       36.52         54%       51.06
         Operating netback
          (prior to hedging)(2)    67.73       35.69         90%       59.02
         Cash flow netback(2)      52.35       30.99         69%       47.09
         Cash flow netback
          (prior to hedging)(2)    63.83       28.97        120%       55.05
      Wells drilled
        Gross                         34          21                      86
        Net                         24.2        15.3                    59.1
        Success (%)                   97          95                      93
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    "NMF" No Meaningful Figure
    (1) Pursuant to the acquisition of Real Resources Inc. on August 16,
        2007, the number of outstanding shares of prior comparative periods
        has been adjusted by a factor of 0.4762 in order for the comparative
        outstanding share and per share amounts to be equivalent.
    (2) Management uses cash flow from operations (before changes in non-cash
        working capital), and operating and cash flow netback to analyze
        operating performance and leverage. Cash flow as presented, and
        operating and cash flow netback do not have any standardized meaning
        prescribed by Canadian GAAP and therefore may not be comparable with
        the calculation of similar measures for other entities.
    (3) The net loss in the quarter ended June 30, 2008 includes the
        unrealized loss on the Company's financial derivative contracts of
        $108.1 million recognized in the period.
    (4) Total net debt is calculated as bank loan and current liabilities
        less current assets, excluding financial derivative contracts and
        related current future income taxes.
    (5) Due to the antidilutive effect of TriStar's net loss in the current
        period, the diluted number of shares is equivalent to the basic
        number of shares. The non-GAAP diluted weighted average shares
        outstanding for the three and six months ended June 30, 2008 was
        114,018,236 and 108,218,928, respectively.

    President's Letter to Shareholders

    The Company's achievements during the second quarter of 2008 include the
following:

    -   Increased production to 20,332 Boepd in the second quarter of 2008
        from 4,941 Boepd in the second quarter of 2007, representing a year
        over year increase of 311 percent;

    -   Achieved ninth consecutive quarter of production growth;

    -   Cash flow increased to $96.8 milion in the second quarter of 2008
        from $13.9 milion in the second quarter of 2007, a year over year
        increase of 595 percent;

    -   Cash flow per share increased from $0.49 per share in the second
        quarter of 2007 to $0.88 per share in the current quarter, a year
        over year increase of 80 percent;

    -   Cash flow per share increased by 19 percent over the first quarter of
        2008;

    -   Drilled 34 (24.2 net) wells in the second quarter with a 97 percent
        success rate;

    -   Successfully completed the divestiture of certain non-core properties
        for approximately $10 million, the proceeds of which will be
        redeployed into TriStar's 2008 capital budget as described below;

    -   TriStar has successfully increased its Bakken land inventory which
        now exceeds 220 (145 net) sections, up from 200 (130 net) sections,
        through acquisitions, success at crown land sales and through farm-in
        agreements. This represents a future Bakken drilling inventory of 797
        (531 net) locations;

    -   Subsequent to quarter end, TriStar closed the acquisition of all of
        the issued and outstanding shares of two private companies through
        the issuance of 1.6 million TriStar Common Shares to the shareholders
        of the private companies. The acquired assets are located adjacent to
        TriStar's Southeast Saskatchewan core properties; and

    -   Subsequent to quarter end, increased the Company's credit facility to
        $450 million.

    Increased 2008 Capital Budget:

    -   The Company is revising upwards its 2008 capital expenditure program
        to approximately $365 million from $300 million, reflecting greater
        than anticipated cash flow resulting from the success of the
        Company's first half drilling program and from sustained higher than
        budgeted commodity prices. The increase in expenditures is expected
        to be allocated entirely to the Company's Southeast Saskatchewan
        core area, primarily to the Bakken play. The majority of the increase
        will be directed towards facilities and infrastructure construction
        along with continued Bakken undeveloped land acquisition and drilling
        activity. Facilities and infrastructure projects include the
        construction of two additional central processing facilities and
        extensive oil pipeline and gas gathering systems, all to position
        TriStar for continued growth of the Bakken resource play.

    -   The Company is reiterating 2008 production guidance with an
        anticipated 2008 exit rate of more than 23,000 Boepd. The unadjusted
        production guidance, despite the increase in capital expenditures, is
        the result of the majority of the increased capital spending being
        allocated to facility and infrastructure projects and additional
        Bakken drilling not occurring until late in 2008.
    

    Operational Review

    TriStar achieved its ninth consecutive quarter of production growth in
the second quarter of 2008 where the Company averaged 20,332 Boepd. The
Company participated in the drilling of 34 (24.2 net) wells resulting in
30 (21.6 net) oil wells, 3 (1.6 net) stratigraphic and service wells, and
1 (1.0 net) D&A wells, for an overall success rate of 97 percent.

    Southeast Saskatchewan - Bakken
    -------------------------------

    Development and exploration activity in the second quarter continued in
TriStar's Southeast Saskatchewan Bakken area. TriStar drilled 15 (8.1 net)
Bakken horizontal wells during the second quarter with 100 percent success.
TriStar has been successful in expanding the Bakken play boundaries to the
north, east and south.
    TriStar continues to focus its efforts on improving potential primary
recovery factors through the maximization of fracture stimulation efficiency.
TriStar believes that advancements in technology and improvements in the
techniques employed will ultimately lead to higher primary recovery factors
and reserves per well than are currently forecast in its booked reserves.
    During the remainder of 2008, TriStar has plans to drill an additional
84 (52.5 net) wells into the play. Total 2008 risked capital expenditures on
the Bakken play of approximately $200 million, including facilities and land
acquisitions, now represents approximately 55 percent of TriStar's revised
$365 million capital budget.
    TriStar's current oil reserve booking represents a recovery factor of
1.2 percent of the estimated net total Original Oil In Place ("OOIP") of
580 MMBoe on the Company's land base. The achievement of 12 percent "primary"
recovery factor, consisting of four wells per section at current average
reserve bookings, would yield up to 62 million barrels of additional
recoverable oil, net to TriStar, over what is currently booked in TriStar's
reserve report.
    TriStar continues to expand its Bakken land position through acquisitions
at Saskatchewan Crown land sales, freehold lease acquisitions and farm-in
agreements. TriStar's development and exploration land position in the
resource play now exceeds 220 (145 net) sections of land. TriStar has
identified over 797 (531 net) future Bakken drilling locations on its land
base. Of these 531 net locations, only 36 net locations are currently booked
in TriStar's year-end 2007 reserve report which have not yet been drilled in
2008.
    Based on $100 WTI, each average Bakken well adds approximately
$4.3 million of net present value (at 10 percent discount) to TriStar and
reaches payout in under nine months. With these attractive economics and
TriStar's sizeable Bakken development drilling inventory, the Bakken play will
continue to be a focus of TriStar for the remainder of 2008 and beyond.

    Southeast Saskatchewan - Conventional
    -------------------------------------

    Tristar drilled 5 (5.0 net)development horizontal oil wells at Fertile,
an 86 million barrel light OOIP Tilston oil reservoir. Wells at Fertile
produce high netback, light oil at initial rates between 100 and 300 Boepd.
Since the acquisition of the Tilston reservoir in the first quarter of 2008,
TriStar has drilled 12 (12.0 net) wells into the pool with 100 percent
success. For the remainder of 2008 TriStar plans to drill an additional 15
(14.3 net) wells at Fertile.
    Drilling in TriStar's Southeast Saskatchewan core area for the second
quarter also included the execution of a successful step-out program at
TriStar's Hastings Frobisher pool. TriStar successfully drilled 5 (5.0 net)
new horizontal oil wells. The Hastings step-out wells exceeded expectations
with initial rates of up to 300 Boepd setting up seven additional follow up
horizontal locations. TriStar has plans to drill up to four additional wells
into this pool during the second half of 2008.
    In aggregate, TriStar has plans to drill an additional 50 (35.2 net)
conventional oil wells into a number of the Company's high quality, light oil
pools in southeast Saskatchewan during the remainder of 2008.

    Alberta
    -------

    At TriStar's Ante Creek Montney oil pool in the Company's West Central
Alberta core area, activity was limited in the second quarter due to annual
spring break up. The two wells TriStar drilled in the first quarter, including
a vertical step-out well and a horizontal development well, are scheduled to
be completed during the second half of 2008.
    Similar to the Ante Creek Montney oil pool, TriStar's Ante Creek North
Montney gas pool, which consists of 79 BCF of original gas in place ("OGIP"),
saw limited activity as a result of annual spring break up. TriStar expects to
commence drilling its Ante Creek North Montney gas pool prior to year end
2008, where TriStar has approximately eight sections of land which are
prospective for Montney gas.
    TriStar has plans to drill up to eight horizontal 100 percent working
interest wells in its Ante Creek core area over the next year.
    Additional Alberta activity for the remainder of 2008 will see
19 (16.1 net) wells drilled in the Ferrybank, Redwater and Scandia/Countess
areas. These wells are targeting light oil and natural gas prospects. In
Alberta, TriStar plans to employ the use of horizontal wells and multi-stage
fracture techniques in a number of geologic reservoirs which management
believes will result in increased productivity and reserve recoveries.

    Risk Management

    As a key component to management's strategy, TriStar maintains an ongoing
risk management program to reduce the volatility of revenues in order to
maintain balance sheet strength, protect acquisition economics and fund
capital expenditures.
    Although management considers the risk management contracts that TriStar
enters into to be effective economic hedges, these contracts do not meet the
accounting definition requirement as an effective hedge. Therefore, gains and
losses on such contracts are shown as a separate category in the statement of
operations.
    As the price of crude oil increased from US$101.58 per barrel at the end
of the first quarter of 2008 to US$140.00 per barrel at the end of the second
quarter of 2008, TriStar recorded an unrealized loss of $108.1 million in its
second quarter 2008 financial statements and at June 30, 2008 had an
unrealized liability of $166.0 million based on market values.
    The period-end mark-to-market liability values represent the market price
to buy-out the hedge contracts as at June 30, 2008. The mark-to-market value
at June 30, 2008 may be different from what will eventually be realized.
    TriStar's management team continues to be disciplined in using what it
believes to be effective economic hedges when making acquisitions to protect
the economics of transactions despite the accounting impact.

    Outlook

    TriStar achieved a record production level in the second quarter of 2008,
averaging 20,332 Boepd. The Company continues to be successful in achieving
its goal of cost effective per share growth in reserves, production and cash
flow through management's integrated strategy of acquiring, exploiting and
exploring.
    TriStar remains very well positioned with an extensive, resource based
drilling inventory that has extremely attractive associated economics. This
drilling inventory, which includes TriStar's Bakken, Southeast Saskatchewan
conventional and Alberta Montney plays, represent future capital expenditures
of over $1.5 billion for long term development growth.
    TriStar also has an extensive exploration opportunity set with over
750,000 net acres of undeveloped land and 3,000 square miles of 3D seismic.
TriStar continues to evaluate this large opportunity set and assess various
potential high impact exploration concepts along with potential farm-out
opportunities to maximize value of this large land base.
    Based on continued drilling success and commodity prices sustaining well
above TriStar's initial budget parameters, the Company is revising upwards its
2008 capital expenditure budget to approximately $365 million. This capital
program will include the drilling of 250 (169.9 net) wells in 2008, which
represents approximately 62 percent of the total capital expenditures.
Southeast Saskatchewan will be allocated approximately 77 percent of TriStar's
2008 capital budget with the remaining expenditures split evenly between
TriStar's remaining three core areas. This high quality, low risk development
drilling program will be focused over 90 percent to light oil projects. In
addition, TriStar is further positioning itself for continued successful
growth of its Bakken resource play with the construction of key
infrastructure.
    Today, as a result of the successful execution of management's strategy,
TriStar is well positioned to continue to grow its reserves, production and
cash flow per share and has the following key attributes:

    
    -  High Quality Assets:              High netback (Q2 operating netback,
                                         prior to hedging =
                                         $67.73) light oil and natural gas
                                         reserves and production focused in
                                         four operating areas

    -  Operatorship / High Working
       Interest:                         More than 90 percent operated
                                         assets, and more than a 70 percent
                                         average working interest

    -  Long Life Reserves:               Greater than 67 Mmboe proven plus
                                         probable; 9 year RLI

    -  High Netback Production:          2008 Estimated Exit of greater than
                                         23,000 Boepd (75% light oil)

    -  Extensive Drilling Inventory:     More than 1,800 locations identified
                                         Greater than a four year drilling
                                         inventory
                                         Greater than 750,000 net
                                         acres of undeveloped land

    -  Strong Balance Sheet:             Debt to run rate cash flow ratio of
                                         less than one times

    -  Shares Outstanding:               111.7 mm (Basic)
                                         117.3 mm (Fully Diluted)



    On behalf of the Board of Directors,



    Brett Herman
    President and Chief Executive Officer

    August 11, 2008
    

    Forward-Looking Statements

    This document contains forward-looking statements. More particularly,
this document contains statements concerning anticipated exploration and
development activities, planned capital expenditures for 2008 and TriStar's
projected exit rates of production for 2008.
    The forward-looking statements contained in this document are based on
certain key expectations and assumptions made by TriStar, including
expectations and assumptions concerning the application of regulatory and
royalty regimes, prevailing commodity prices and exchange rates, availability
and cost of labour and services, the timing of receipt of regulatory
approvals, the performance of existing wells, the success obtained in drilling
new wells, the performance of new wells and the sufficiency of budgeted
capital expenditures in carrying out planned activities.
    Although TriStar believes that the expectations and assumptions on which
the forward-looking statements are based are reasonable, undue reliance should
not be placed on the forward-looking statements because TriStar can give no
assurance that they will prove to be correct. Since forward-looking statements
address future events and conditions, by their very nature they involve
inherent risks and uncertainties. Actual results could differ materially from
those currently anticipated due to a number of factors and risks. These
include, but are not limited to, the risks associated with the oil and gas
industry in general (e.g., operational risks in development, exploration and
production; delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of reserve
estimates; the uncertainty of estimates and projections relating to
production, costs and expenses, and health, safety and environmental risks),
commodity price and exchange rate fluctuations and uncertainties resulting
from potential delays or changes in plans with respect to exploration or
development projects or capital expenditures. Certain of these risks are set
out in more detail in TriStar's Annual Information Form which has been filed
on SEDAR and can be accessed at www.sedar.com.
    The forward-looking statements contained in this document are made as of
the date hereof and TriStar undertakes no obligation to update publicly or
revise any forward-looking statements or information, whether as a result of
new information, future events or otherwise, unless so required by applicable
securities laws.
    Where amounts are expressed on a barrel of oil equivalent ("Boe") basis,
natural gas volumes have been converted to Boe using a ratio of 6,000 cubic
feet of natural gas to one barrel of oil equivalent. This conversion ratio is
based upon an industry standard energy equivalent conversion method primarily
applicable at the burner tip and does not represent value equivalence at the
well head. Boe figures may be misleading, particularly if used in isolation.

    Management's Discussion and Analysis

    Management's Discussion and Analysis ("MD&A") is dated August 11, 2008.
The MD&A should be read in conjunction with TriStar Oil & Gas Ltd.'s
("TriStar" or the "Company") unaudited interim consolidated financial
statements as at and for the three and six months ended June 30, 2008 and
audited consolidated financial statements as at and for the years ended
December 31, 2007 and 2006. The reader should be aware that historical results
are not necessarily indicative of future performance. Additional information
relating to TriStar can be found at www.sedar.com.
    TriStar commenced commercial operations on January 6, 2006 after the
completion of a plan of arrangement pursuant to which TriStar acquired certain
oil and gas properties from StarPoint Energy Trust and Acclaim Energy Trust.
    The financial data presented below has been prepared in accordance with
Canadian Generally Accepted Accounting Principles ("GAAP"), unless otherwise
indicated.

    Non-GAAP Measurements

    Management's Discussion and Analysis contains the terms "cash flow from
operations" and "operating netback" which are not Canadian GAAP standards and
therefore may not be comparable to performance measures presented by others.
Cash flow from operations represents cash flow from operating activities prior
to changes in non-cash working capital. Operating netback represents revenue
less royalties, realized hedging gains and losses, operating expenses and
transportation expenses. Management believes that in addition to net income,
cash flow from operations and operating netback are useful supplemental
measures as they provide an indication of TriStar's operating performance,
leverage and liquidity. Investors should be cautioned, however, that these
measures should not be construed as an alternative to net income determined in
accordance with GAAP as an indication of TriStar's performance.
    The reconciliation between cash flow from operations, as defined above,
and cash flow from operating activities, is as follows:

    
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
    ($ thousands)                2008         2007         2008         2007
    -------------------------------------------------------------------------
    Cash flow from
     operations (as
     defined above)            96,848       13,931      170,348       25,342
    Changes in non-cash
     working capital           (8,602)        (395)      (9,680)      (4,845)
    -------------------------------------------------------------------------
    Cash flow from
     operating activities      88,246       13,536      160,668       20,497
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    TriStar's reporting and measurement currency is the Canadian dollar.
Amounts in this MD&A are in Canadian dollars unless otherwise stated.
    Where amounts are expressed on a barrel of oil equivalent ("Boe") basis,
natural gas volumes have been converted to Boe using a ratio of 6,000 cubic
feet of natural gas to one barrel of oil equivalent. This conversion ratio is
based upon an energy equivalent conversion method primarily applicable at the
burner tip and does not represent value equivalence at the well head. Boe
figures may be misleading, particularly if used in isolation.

    Forward-Looking Statements

    This MD&A contains forward-looking statements. More particularly, this
MD&A contains statements concerning the anticipated impact on the Company of
changes to the Alberta royalty structure and the anticipated means of
financing the Company's capital budget and acquisitions in 2008.
    The forward-looking statements are based on certain key expectations and
assumptions made by the Company, including expectations and assumptions
concerning the application of regulatory and royalty regimes and expected cash
flow and capital expenditures.
    Although the Company believes that the expectations and assumptions on
which the forward-looking statements are based are reasonable, undue reliance
should not be placed on the forward-looking statements because the Company can
give no assurance that they will prove to be correct.
    Since forward-looking statements address future events and conditions, by
their very nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated due to a
number of factors and risks. These include, but are not limited to, risks
associated with the oil and gas industry in general (e.g., operational risks
in development, exploration and production; delays or changes in plans with
respect to exploration or development projects or capital expenditures; the
uncertainty of reserve estimates; the uncertainty of estimates and projections
relating to production, costs and expenses, and health, safety and
environmental risks), commodity price and exchange rate fluctuations and
uncertainties resulting from potential delays or changes in plans with respect
to exploration or development projects or capital expenditures. Certain of
these risks are set out in more detail in this MD&A and in the Company's
Annual Information Form which has been filed on SEDAR and can be accessed at
www.sedar.com.
    The forward-looking statements contained in this MD&A are made as of the
date hereof and the Company undertakes no obligation to update publicly or
revise any forward-looking statements or information, whether as a result of
new information, future events or otherwise, unless so required by applicable
securities laws.

    Significant Transactions

    Plan of Arrangement with Bulldog Resources Inc.

    On February 7, 2008, TriStar acquired all of the issued and outstanding
common shares of Bulldog Resources Inc. ("Bulldog") pursuant to a plan of
arrangement under the Business Corporations Act (Alberta) (the "Bulldog
Transaction").
    Under the terms of the arrangement, TriStar issued 0.59 common shares of
TriStar for each Bulldog common share outstanding, for a total of 16.8 million
TriStar common shares. TriStar has accounted for the acquisition using the
purchase method of accounting.

    Plan of Arrangement with Arista Energy Limited

    On January 18, 2008, TriStar acquired all of the issued and outstanding
common shares of Arista Energy Limited ("Arista") pursuant to a plan of
arrangement under the Business Corporations Act (Alberta) (the "Arista
Transaction").
    Under the terms of the arrangement, TriStar paid consideration of
approximately $215 million, consisting of cash and net debt assumed, for all
issued and outstanding common shares of Arista. TriStar has accounted for the
acquisition using the purchase method of accounting.
    Concurrently, TriStar issued 16.9 million common shares at $12.15 per
common share for gross proceeds of approximately $205 million. A portion of
the proceeds from this equity financing were used to fund the Arista
Transaction.

    Acquisition of Kinwest Corporation

    On January 8, 2008, TriStar closed the acquisition of all of the issued
and outstanding shares of Kinwest Corporation ("Kinwest") through the issuance
of 8.0 million Common Shares to the shareholders of Kinwest. TriStar has
accounted for the acquisition using the purchase method of accounting.

    
    Results of Operations

                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
    Production                   2008         2007         2008         2007
    -------------------------------------------------------------------------

    Daily Production
    Crude oil and natural
     gas liquids
     (Bbls per day)            15,228        3,371       14,418        3,195
    Natural gas
     (Mcf per day)             30,621        9,419       32,778        8,033
    -------------------------------------------------------------------------

    Total (Boepd)              20,332        4,941       19,882        4,534
    % Natural Gas                 25%          32%          27%          30%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    For the three months ended June 30, 2008, TriStar averaged 20,332 Boepd
as compared to 4,941 Boepd in the second quarter of 2007, a 311 percent
increase. Production was comprised of 15,228 Bbls per day of crude oil and
natural gas liquids ("NGL") and 30,621 Mcf per day of natural gas.
    For the six months ended June 30, 2008, TriStar averaged 19,882 Boepd as
compared to 4,534 Boepd in the first half of 2007, a 339 percent increase.
Production was comprised of approximately 14,418 Bbls per day of crude oil and
NGL and 32,778 Mcf per day of natural gas.
    Production from corporate acquisitions are only included from the date of
closing. Similarly, production from the divestiture of non-core assets is
included only until the date of close of these transactions.
    Production for the quarter was divided between the following areas:


    
                                                           Three
                                                          Months
                                                           ended
                                                         June 30,
                                                            2008
    -------------------------------------------------------------------------
                               Crude Oil     Natural
                                 and NGL     Gas Mcf       Total
    Area                    Bbls per day     per day       Boepd           %
    -------------------------------------------------------------------------

    Alberta                        4,849      27,705       9,467          47
    Saskatchewan                  10,379       2,916      10,865          53
    -------------------------------------------------------------------------

    Total                         15,228      30,621      20,332         100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    During the quarter, the Company drilled 34 (24.2 net) wells, achieving a
97 percent success rate.

    Pricing

    Crude oil prices continued to rise in the second quarter of 2008 as
compared to 2007 as WTI reached a high of US$140.21 per Bbl during the
quarter. Tight supply/demand fundamentals along with increasing geopolitical
concerns continue to drive the world crude markets as WTI averaged US$123.92
in the second quarter of 2008 after averaging US$64.94 per Bbl in the second
quarter of 2007, a 91 percent increase. The Canadian dollar averaged $0.99 per
US dollar in the second quarter of 2008 relative to $0.91 per US dollar in the
second quarter of 2007. Edmonton mixed sweet averaged $126.51 in the second
quarter of 2008, as compared to $73.75 per Bbl in the second quarter of 2007,
a 72 percent increase.
    Natural gas prices averaged $9.70 per Mcf for AECO daily spot, $9.72 for
AECO monthly, and US$11.36 per Mmbtu for NYMEX daily gas in the second quarter
of 2008. In the second quarter of 2007, natural gas prices averaged $7.09 per
Mcf for AECO daily spot, $7.08 for AECO monthly, and US$7.53 per Mmbtu for
NYMEX daily gas. Fluctuating North American supply/demand forecasts along with
volatile international natural gas prices, which affect the global flow of
liquified natural gas, continue to cause significant price volatility in North
American natural gas prices.
    TriStar's average realized price for its crude oil and NGL was
$112.20 per Bbl in the second quarter while its realized natural gas price was
$9.91 per Mcf.

    
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
    Average Benchmark
     Prices
    Crude oil - WTI
     (US$ per Bbl)             123.92        64.94       110.84        61.53
    Crude oil - Edmonton
     Par Price ($ per Bbl)     126.51        73.75       112.32        70.81
    Natural gas - AECO-C
     Daily Spot ($ per Mcf)      9.70         7.09         8.59         7.24
    Natural gas - AECO-C
     Monthly ($ per Mcf)         9.72         7.08         8.61         7.25
    Exchange rate -
     (US$/CDN$)                  0.99         0.91         0.99         0.88
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
    TriStar Average Realized
     Prices Prior to Hedging
    Crude oil and NGL -
     ($ per Bbl)               112.20        64.45       101.37        62.58
    Natural gas -
     ($ per Mcf)                 9.91         7.23         8.76         7.36
    Boe - ($ per Boe)           98.97        57.75        87.96        57.13
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Revenues

    For the three months ended June 30, 2008, TriStar recorded $155.5 million
in crude oil and NGL sales (net of a $1.5 million reduction of revenue related
to the SemCanada Crude Company ("SemCanada") creditor protection filing, as
further described under "Contractual Obligations - Working Capital") and
$27.6 million in natural gas sales, a 685 percent and 345 percent increase,
respectively, over the second quarter of 2007 when TriStar recorded
$19.8 million of crude oil and NGL sales and $6.2 million of natural gas
sales.
    For the six months ended June 30, 2008, TriStar recorded $266.0 million
in crude oil and NGL sales (net of a $1.5 million reduction of revenue related
to the SemCanada creditor protection filing, as further described under
"Contractual Obligations - Working Capital") and $52.3 million in natural gas
sales, a 635 percent and 388 percent increase respectively over the six months
ended June 30, 2007 when TriStar recorded $36.2 million of crude oil sales and
$10.7 million of natural gas sales.

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

    Revenues by Product
    Crude oil and NGL         155,491       19,770      266,014       36,185
    Realized hedging gains
     (losses) on crude oil
     and NGL                  (20,835)         266      (28,513)       1,474
    Natural gas                27,616        6,195       52,260       10,696
    Realized hedging gains
     (losses) on natural gas     (414)         106         (279)         182
    -------------------------------------------------------------------------

    Total revenues
     (net of hedging)         161,858       26,337      289,482       48,537
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Royalty Expenses

    Royalties for the quarter ended June 30, 2008 were $35.7 million or
19.5 percent of revenue (before effects of hedging) as compared to
$4.9 million or 18.8 percent for the corresponding quarter in 2007. Royalties
in the six months ended June 30, 2008 were $62.1 million or 19.5 percent of
revenue as compared to $9.0 million or 19.1 percent in the six months ended
June 30, 2007. Royalties are calculated and paid based on oil and natural gas
revenues before any realized hedging gains or losses. Accordingly, royalty
expense is directly correlated to changes in revenue (prior to the effect of
hedging).
    On October 25, 2007 the Alberta provincial government announced its
response to the Alberta Royalty Review Panel's recommendations which were
announced on September 18, 2007. On April 10, 2008, the Alberta provincial
government announced certain changes to its new Alberta Royalty Framework as a
result of certain "unintended consequences" with respect to Deep Oil and Deep
Gas drilling. It is expected that numerous changes will be made to the current
royalty structure effective January 1, 2009. TriStar expects that the revised
royalty program will generally have a negative impact on Alberta conventional
oil and gas production and future drilling economics. TriStar has significant
production in the province of Saskatchewan and production in Alberta that is
not subject to crown royalties, mitigating the effect on TriStar's corporate
royalties.

    Operating Expenses

    Operating expenses were $19.6 million or $10.62 per Boe in the quarter
ended June 30, 2008 as compared to $4.8 million or $10.57 per Boe in the
second quarter of 2007. Growing production volumes in southeast Saskatchewan
have strained the area's infrastructure. This has resulted in increased oil
emulsion trucking costs in the first half of 2008. Operating expenses were
$38.2 million or $10.56 per Boe in the six months June 30, 2008 as compared to
$9.1 million or $11.13 per Boe in the six months ended June 30, 2007. While
the initial expansion of the major oil gathering system, Enbridge Pipelines
(Saskatchewan) was completed in June 2008 and is expected to alleviate some
trucking costs in the near term, the continual expansion of the Bakken play is
expected to continue to put pressure on infrastructure in the region going
forward.

    Transportation Expenses

    Transportation expenses were $2.5 million or $1.33 per Boe in the quarter
ended June 30, 2008 as compared to $0.3 million or $0.65 per Boe in the second
quarter of 2007. Increased transportation costs in the quarter are reflective
of the infrastructure issues described above and the growing relative
percentage of the Company's production derived from its Southeast Saskatchewan
core area. Transportation expenses are reflective of the location of TriStar's
properties, transportation rates and the location where the product is sold.
Transportation expenses were $4.4 million or $1.22 per Boe in the six months
ended June 30, 2008 as compared to $0.7 million or $0.79 per Boe in the six
months ended June 30, 2007.

    Operating Netbacks

    Operating netbacks were $56.24 per Boe for the quarter ended June 30,
2008 as compared to $36.52 per Boe for the quarter ended June 30, 2007 and
$51.06 for the six months ended June 30, 2008 as compared to $36.30 for the
six months ended June 30, 2007.

    
    Netbacks

                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
    ($ per Boe, unless        June 30,     June 30,     June 30,     June 30,
     otherwise noted)            2008         2007         2008         2007
    -------------------------------------------------------------------------

    Total production (Boepd)   20,332        4,941       19,882        4,534
    -------------------------------------------------------------------------

    Crude oil and natural
     gas liquids ($/Bbl)       112.20        64.45       101.37        62.58
    Realized hedging
     gains/(losses) ($/Bbl)    (14.87)        0.87       (10.81)        2.55
    -------------------------------------------------------------------------

    Natural gas ($/Mcf)          9.91         7.23         8.76         7.36
    Realized hedging
     gains/(losses) ($/Mcf)     (0.15)        0.12        (0.05)        0.13
    -------------------------------------------------------------------------

    Average Price Prior to
     Hedging                    98.97        57.75        87.96        57.13
    -------------------------------------------------------------------------

    Realized gain/(loss) on
     financial instruments
     (hedging)                 (11.49)        0.83        (7.96)        2.02
    Royalties, net             (19.29)      (10.84)      (17.16)      (10.93)
    Operating                  (10.62)      (10.57)      (10.56)      (11.13)
    Transportation              (1.33)       (0.65)       (1.22)       (0.79)
    -------------------------------------------------------------------------

    Operating Netback           56.24        36.52        51.06        36.30
    Operating Netback
     (prior to hedging)         67.73        35.69        59.02        34.28
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    General and Administrative Expenses

    During the second quarter of 2008, general and administrative ("G&A")
expenses, net of recoveries and capitalized amounts, were $3.2 million
($1.73 per Boe) as compared to the quarter ended June 30, 2007 where G&A
expenses were $1.2 million or $2.67 per Boe. G&A, net of recoveries, for the
six months ended June 30, 2008 was $5.9 million ($1.63 per Boe) as compared to
$2.1 million or $2.55 per Boe for the six months ended June 30, 2007. The
absolute increase in G&A expenses relative to previous periods reflects the
growth of TriStar, primarily as a result of the acquisition of Real Resources
Inc., which closed on August 16, 2007. The reduction of G&A expenses per Boe
is a reflection of the increased efficiency achieved as a result of such
growth.


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

    General and administrative
     expenses                   6,445        2,409       12,277        4,257
    Recoveries                 (1,354)        (433)      (2,694)        (811)
    Capitalized general and
     administrative expenses   (1,881)        (777)      (3,668)      (1,353)
    -------------------------------------------------------------------------

    Total net general and
     administrative expenses    3,210        1,199        5,915        2,093
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Interest Expense

    Interest expense was $3.4 million or $1.82 per Boe in the quarter as
compared to $1.0 million or $2.31 per Boe in the quarter ended June 30, 2007.
Interest expense was $7.0 million or $1.92 per Boe in the six months ended
June 30, 2008 as compared to $1.9 million or $2.32 per Boe in the six months
ended June 30, 2007. The absolute amount of interest costs in the second
quarter of 2008 increased primarily as a result of an increased level of bank
debt held by the Company as a result of the growth of TriStar.
    The Company's effective interest rates for the three and six months ended
June 30, 2008 were 4.8 percent and 5.0 percent, respectively.

    Stock-Based Compensation Expenses

    The Company's stock-based compensation expense for the quarter ended June
30, 2008 was $1.4 million or $0.76 per Boe as compared to the quarter ended
June 30, 2007 of $0.3 million or $0.69 per Boe. The Company's stock-based
compensation expense for the six months ended June 30, 2008 was $2.7 million
or $0.75 per Boe as compared to the six months ended June 30, 2007 of
$0.7 million or $0.87 per Boe. The stock-based compensation expense was
calculated utilizing a fair value assessment methodology. These amounts are
net of amounts capitalized to property and equipment when they are related to
drilling, production and acquisitions, which amount to $1.0 million for the
quarter ended June 30, 2008 or $0.53 per Boe (2007 - $0.2 million or
$0.50 per Boe). For the six months ended June 30, 2008, the capitalized
amounts were $1.9 million or $0.52 per Boe (2007 - $0.5 million or
$1.01 per Boe).

    Depletion, Depreciation and Accretion Expenses

    Depletion of oil and natural gas properties, including the capitalized
portion of the asset retirement obligations, is provided for on a
unit-of- production basis using estimated proven reserves volumes.
    Depletion, depreciation and accretion expense in the quarter ended June
30, 2008 was $60.4 million or $32.63 per Boe as compared to the quarter ended
June 30, 2007 which was $13.3 million or $29.59 per Boe. Depletion,
depreciation and accretion expense in the six months ended June 30, 2008 was
$118.0 million or $32.62 per Boe as compared to the six months ended June
30, 2007 which was $24.3 million or $29.63 per Boe.

    Taxes

    For the quarter ended June 30, 2008, TriStar recorded a capital and
current tax expense of $0.6 million, comprised of a capital tax expense of
$2.7 million and a current tax reduction of $2.1 million, and a future income
tax reduction of $17.8 million as compared to the quarter ended June 30, 2007
when the Company recorded $0.3 million of capital and current tax expense and
a future income tax reduction of $1.0 million. For the six months ended June
30, 2008, TriStar recorded a capital tax expense of $1.5 million, and a future
income tax reduction of $18.6 million as compared to the six months ended June
30, 2007 when the Company recorded $0.4 million of capital tax expense and a
future income tax reduction of $1.3 million. The capital tax expense is
comprised of the Saskatchewan Capital Tax and Resource Surcharge. The current
tax recovery reflects the continued recovery of the current tax liability
recorded in the purchase price equation pursuant to the acquisition of
Bulldog.
    As at June 30, 2008, TriStar had approximately $610 million of tax pools
available to offset future taxable income.

    Net Income (Loss) and Comprehensive Income

    Net loss for the quarter ended June 30, 2008 was $55.2 million compared
to a net income of $2.0 million during the same period in 2007. Net loss for
the six months ended June 30, 2008 was $61.3 million compared to a net loss of
$0.08 million during the same period in 2007. The net loss in the quarter
includes the unrealized loss of $108.1 million (before tax) on the Company's
financial derivative contracts recognized in the quarter.
    Basic and diluted net loss per share for the quarter ended June 30, 2008
were $0.50 per share. This is compared to basic and diluted net income per
share of $0.07 per share for the same period in 2007. Basic and diluted net
loss per share for the six months ended June 30, 2008 were $0.59 per share.
This is compared to a net loss of $nil per share basic and diluted for the
same period in 2007.
    Other comprehensive income for the quarter ended June 30, 2008 included a
charge of $0.05 million, net of tax, (2007 - $0.5 million) relating to the
amortization of the amount recognized in accumulated other comprehensive
income on January 1, 2007 for the fair value of financial derivatives on
adoption of new accounting standards for financial instruments at that date.
This resulted in a total comprehensive loss of $55.3 million for the quarter
ended June 30, 2008, and a total comprehensive loss of $61.4 for the six
months ended June 30, 2008. This is compared to total comprehensive income of
$1.6 million for the quarter ended June 30, 2007 and a total comprehensive
loss of $1.2 million for the six months ended June 30, 2007.

    Risk Management - Financial Instruments

    TriStar enters into commodity price derivative contracts that provide
downside price protection in order to protect acquisition economics and
provide some stability of cash flows for capital spending planning purposes.
Commodity prices fluctuate due to political events, meteorological conditions,
disruptions in supply and changes in demand. The Company's risk management
activities are conducted pursuant to the Company's risk management policies
approved by the Board of Directors.
    At June 30, 2008, the fair value of the financial derivative contracts
was a liability of $166.0 million. The fair values represent the market price
to buy out TriStar's contracts at June 30, 2008 and may be different from what
will eventually be realized.
    WTI averaged US$123.92 per Bbl in the second quarter of 2008 up from
US 97.70 per Bbl in the first quarter of 2008 and was US$140.00 as at
June 30, 2008 as compared to US$101.58 as at March 31, 2008. Although this
increase had an overall positive impact on TriStar's revenue, this has
resulted in a loss recorded on TriStar's derivative contracts. For the quarter
ended June 30, 2008, the Company had a net unrealized loss on its financial
derivative contracts of $108.1 million before taxes, in addition to the
after-tax amortized gain of $0.05 million (pre-tax: $0.06 million) from the
adoption of new GAAP standards on January 1, 2007, for a net pre-tax
unrealized loss on financial instruments of $108.1 million.
    The following tables summarizes TriStar's commodity risk management
positions as at June 30, 2008:

    
    Oil Contracts
    -------------
                                        Volume
         Term               Type        (Bbl/d)       Price          Index
    -------------------------------------------------------------------------
    Jan. 1, 2007 -
     Dec. 31, 2008    Costless Collar     250     60.00 - 75.00      WTI
    Jan. 1, 2008 -
     Dec. 31, 2009    Costless Collar     500     65.00 - 76.30      WTI
    Jan. 1, 2008 -
     Dec. 31, 2009    Costless Collar     500     65.00 - 76.15      WTI
    Jan. 1, 2008 -
     Dec. 31, 2009    Costless Collar     500     67.00 - 76.70      WTI
    Jan. 1, 2008 -
     Dec. 31, 2009    Costless Collar     500     70.00 - 75.52      WTI
    Jan. 1, 2008 -
     Dec. 31, 2009    Costless Collar     500     65.00 - 73.25      WTI
    Jan. 1, 2008 -
     Dec. 31, 2008    Costless Collar     250     80.00 - 97.05      WTI
    Jan. 1, 2008 -
     Dec. 31, 2009    Costless Collar     250     75.00 - 96.05      WTI
    Jan. 1, 2008 -
     Dec. 31, 2009    Costless Collar     250     75.00 - 102.00     WTI
    Jan. 1, 2008 -
     Dec. 31, 2009    Costless Collar     250     75.00 - 100.00     WTI
    Jan. 1, 2008 -
     Dec. 31, 2009    Costless Collar     250     80.00 - 100.00     WTI
    Jan. 1, 2008 -
     Dec. 31, 2009    Costless Collar     250     75.00 - 100.00     WTI
    Jan. 1, 2008 -
     Dec. 31, 2009    Costless Collar     250     80.00 - 100.00     WTI
    Feb. 1, 2008 -
     Dec. 31, 2009        Oil Put         500         75.00          WTI
    Mar. 1, 2008 -
     Dec. 31, 2009        Oil Put         500         80.00          WTI
    Jan. 1, 2007 -
     Dec. 31, 2008        Oil Swap        250         68.35          WTI
    Apr. 1, 2007 -
     Dec. 31, 2009        Oil Swap        250        C$76.60         C$WTI
    Jan. 1, 2008 -
     Dec. 31, 2009        Oil Swap        250        C$78.20         C$WTI
    Apr. 1, 2008 -
     Dec. 31, 2008        Oil Swap        500       C$100.20         C$WTI
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The fair value of the oil costless collars, puts and swap contracts at
June 30, 2008 was a liability of $163.5 million.

    Natural Gas Contracts
    ---------------------
                                        Volume
          Term              Type        (GJ/d)        Price         Index
    -------------------------------------------------------------------------
    Apr. 1, 2008 -
     Sep. 30, 2008    Costless Collar    1,500     7.50 - 8.67  AECO Monthly
    Apr. 1, 2008 -
     Oct. 31, 2008    Costless Collar    2,000     7.50 - 8.45  AECO Monthly
    Apr. 1, 2008 -
     Sep. 30, 2008       Gas Swap        1,500        8.07      AECO Monthly
    Apr. 1, 2008 -
     Oct. 31, 2008       Gas Swap        2,000        8.00      AECO Monthly
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The fair value of the natural gas collars and swap contracts as at June
30, 2008 was a liability of $2.5 million.


    Fixed Strike, Foreign Exchange Contracts
    ----------------------------------------

    The Company is exposed to fluctuations in the exchange rate between the
Canadian dollar and the US dollar. Crude oil, and to a certain extent natural
gas prices, are based upon reference prices denominated in US dollars, while
the majority of the Company's expenses are denominated in Canadian dollars.
When appropriate, the Company enters into agreements to fix the exchange rate
of Canadian dollars to US dollars in order to manage the risk.

                                         Amount       Strike
    Term                    Type          USD         Price      Amount CDN
    -------------------------------------------------------------------------
    May 1, 2008 -
     Dec. 31, 2009           Put       $1,250,000     $1.00       $1,250,000
    May 1, 2008 -
     Dec. 31, 2009           Call      $2,500,000     $1.00       $2,500,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The fair value of the foreign exchange contracts as at June 30, 2008 was
an asset of $0.02 million.

    Capital Expenditures

    During the quarter, the Company incurred $91.6 million of capital
expenditures, net of $12.3 million of disposition proceeds, as compared to
$14.7 million spent for the three months ended June 30, 2007. The Company
incurred $694.0 million of capital expenditures during the six months ended
June 30, 2008 as compared to $101.0 million in the six months ended June 30,
2007. The following table details additions to the Company's property, plant
and equipment for these periods:

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

    Drilling, development
     and production
     equipment                 43,324       12,798      104,878       28,029
    Land and seismic           18,989        1,862       59,988        2,335
    Acquisitions(1)            38,164       (1,031)     538,065       68,668
    Dispositions              (12,279)           -      (15,191)           -
    Other - cash items(2)       2,482          815        4,344        1,541
    Other - non-cash items(3)     896          228        1,876          453
    -------------------------------------------------------------------------

    Total                      91,576       14,672      693,960      101,026
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Acquisitions include the amount allocated to property, plant and
        equipment for corporate and property acquisitions. This differs from
        the purchase price where there are allocations made to goodwill and
        other assets and liabilities, including asset retirement obligations.
    (2) Includes capitalized G&A and administrative assets.
    (3) Includes capitalized stock-based compensation expense.


    The Company's current exploration and development budgeted capital program
for 2008 (excluding acquisitions and dispositions) is approximately
$365 million, which is expected to be financed primarily through the Company's
cash flow. The Company does not set a budget for acquisitions. The Company
searches for opportunities that align with strategic parameters and evaluates
each prospect on a case by case basis. The Company's acquisitions are expected
to be financed through the Company's cash flow, bank debt and new equity
issuances.

    Goodwill

    As a result of the adjustment of certain purchase price equations or
acquisitions that occurred in prior periods, goodwill was reduced by
$7.5 million during the quarter ended June 30, 2008. Goodwill as at June 30,
2008 was $241.9 million.

    Shareholders' Equity

    Share Capital
    -------------

                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
                                 2008       2007(1)        2008       2007(1)
    -------------------------------------------------------------------------
    Outstanding Common
     shares
    Weighted average
     outstanding
     Common shares
    Basic                 110,109,657   28,351,370  104,588,862   25,903,601
    Diluted(2)            110,109,657   28,804,082  104,588,862   25,903,601
    -------------------------------------------------------------------------
    Outstanding
     Securities:
    Common shares         110,109,657   28,353,357  110,109,657   28,353,357
    Common share options    3,270,900    1,066,688    3,270,900    1,066,688
    Incentive shares        2,221,834            -    2,221,834            -
    Performance shares              -    1,060,728            -    1,060,728
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Pursuant to the acquisition of Real Resources Inc., the number of
        outstanding shares of prior comparative periods has been adjusted by
        a factor of 0.4762 in order for the comparative outstanding share and
        per share amounts to be equivalent.
    (2) Due to the antidilutive effect of TriStar's net loss in the current
        period, the diluted number of shares is equivalent to the basic
        number of shares. The non-GAAP diluted weighted average shares
        outstanding for the three and six months ended June 30, 2008 was
        114,018,236 and 108,218,928, respectively.
    

    Contractual Obligations

    Bank Facility
    -------------

    As at June 30, 2008, the Company had available a $400.0 million credit
facility. The Company's credit facility is with a syndicate of Canadian
chartered banks and is open for review semi-annually. The facility is a
borrowing base facility that is determined based on, among other things, the
Company's current reserve report, results of operations, current and
forecasted commodity prices and the current economic environment. Subsequent
to June 30, 2008, the Company increased its available credit facility to
$450.0 million.

    Working Capital
    ---------------

    The capital intensive nature of the Company's activities may create a
negative working capital position in periods with high levels of capital
investment. The Company will limit the total negative working capital plus the
outstanding bank debt to the amount of the Company's credit line.
    The industry has a pre-arranged monthly clearing day for payment of
revenues from all buyers of crude oil and natural gas. This occurs on the 25th
day following the month of sale. As a result, the Company's production
revenues are collected in an orderly fashion. To the extent that the Company
has joint venture partners in its activities it will collect on a monthly
basis the partners' share of capital and operating expenses. These are subject
to normal collection risk.
    On July 22, 2008, SemCanada, a petroleum marketer for the Company, filed
for creditor protection. As a result, it did not make payment on the July 25,
2008 settlement date for the June crude oil volumes marketed on behalf of its
clients, amounting to approximately $4.5 million for TriStar. Further,
SemCanada suspended payment to its clients for July crude volumes shipped up
to July 21, 2008, which TriStar estimates to be $3.5 million. TriStar had an
irrevocable standby letter of credit for $1.5 million which was fully
collected subsequent to July 21, 2008. Although not determinable at this time,
as at June 30, 2008, the Company has recorded a reduction of revenue of
$1.5 million of the June 30, 2008 receivable amount, representing 50% of the
amount outstanding after collecting funds from the letter of credit. The
Company continues to monitor the matter and once it has further information,
it will make necessary adjustments for impairment. There are no other material
accounts receivable at June 30, 2008 that TriStar deemed uncollectible.
    Accounts payable consist of amounts payable to suppliers relating to head
office expenses, field operating activities and capital spending activities.
These invoices are processed within the Company's normal payment period.
    The Company continuously manages the pace of its capital spending program
by monitoring forecasted production and commodity prices and resulting cash
flows. Should circumstances affect cash flow in a detrimental way, the Company
is capable of reducing its capital spending levels.

    Forthcoming and Newly Adopted Accounting Policies

    International Financial Reporting Standards

    On February 13, 2008, the Canadian Accounting Standards Board ("AcSB")
confirmed the mandatory changeover date to International Financial Reporting
Standards ("IFRS") for Canadian profit-oriented publicly accountable entities
("PAEs") such as TriStar.
    The AcSB requires that IFRS compliant financial statements be prepared
for annual and interim financial statements commencing on or after
January 1, 2011. For PAEs with a December 31 year-end, the first unaudited
interim financial statements under IFRS will be for the quarter ending March
31, 2011, with comparative financial information for the quarter ended March
31, 2010. The first audited annual financial statements will be for the year
ending December 31, 2011, with comparative financial information for the year
ended December 31, 2010. This also means that all opening balance sheet
adjustments relating to the adoption of IFRS must be reflected in the
January 1, 2010 opening balance sheet which will be issued as part of the
comparative financial information in the March 31, 2011 unaudited interim
financial statements.
    TriStar intends to adopt these requirements as set out by the AcSB and
other regulatory bodies. At this time, the impact of adopting IFRS cannot be
reasonably quantified. During 2008, TriStar will continue to review the impact
of IFRS on the Company and develop and put in place a plan on the changeover
to IFRS. The actual conversion work will occur in 2009 and 2010, in
anticipation of the preparation of the opening January 1, 2010 balance sheet
that will be required for comparative figures for all periods ending in 2011.

    Other Newly Adopted Accounting Policies

    Effective January 1, 2008, the Company adopted Section 3862 Financial
Instruments - Disclosures and Section 3863 Financial Instruments - Disclosure
and Presentation. These disclosure standards were adopted prospectively and
require entities to provide information enabling users of the financial
statements to evaluate the significance of the Company's financial instruments
and the nature and extent of risks arising from financial instruments to which
the Company is exposed during the period and at the balance sheet date, and
how the company manages those risks.
    Effective January 1, 2008, the Company adopted Section 1535 Capital
Disclosures, which requires companies to disclose their objectives, policies
and processes for managing capital as well as compliance with any externally
imposed capital requirements.

    Business Conditions and Risks

    The Company is engaged in the exploration, development, production and
acquisition of crude oil and natural gas. TriStar's business is inherently
risky and there is no assurance that hydrocarbon reserves will be discovered
and economically produced. Financial risks associated with the petroleum
industry include fluctuations in commodity prices, interest rates, and
currency exchange rates. Operational risks include competition, environmental
factors, reservoir performance uncertainties, a complex regulatory environment
and safety concerns.
    The Company minimizes its business risks by operating a large number of
its properties. This enables TriStar to control the timing, direction and
costs related to exploration and development opportunities. TriStar's
geological focus is on areas in which the prospects are well understood by
management. Technological tools are regularly used to reduce risk and increase
the probability of success. The Company closely follows all government
regulations and has an up-to-date emergency response plan that has been
communicated to field operations by management. The Company also carries
insurance coverage to protect itself against potential losses. Maintaining a
highly motivated and talented staff of petroleum and natural gas professionals
further minimizes the business risk.
    TriStar relies on various sources of funding to support its growing
capital expenditure program:

    
    -   Internally-generated cash flow provides a minimum level of funding on
        which the Company's annual capital expenditure program is based;

    -   Debt may be utilized to expand capital programs when appropriate; and

    -   New equity, if available on favorable terms, may be utilized to
        expand capital programs.
    

    The Company is exposed to commodity price and market risk for its
principal products of petroleum and natural gas. Commodity prices are
influenced by a wide variety of factors, most of which are beyond TriStar's
control. To manage this risk, the Company has entered into a number of
financial derivative contracts for hedging purposes. These derivative
contracts included contracts related to oil and gas prices, as well as foreign
exchange rates. The Company may also from time to time, enter into fixed
physical contracts. The Company continues to monitor the cost and associated
benefit of these instruments and contracts as well as debt levels and
utilization rates on bank lines and will utilize these derivatives and
contracts when warranted.
    Inflation risks subject the Company to potential erosion of product
netbacks. For example, increasing domestic prices for oil and natural gas
production equipment and services can inflate the costs of operations.
    The supply of service and production equipment at competitive prices is
critical to the ability to add reserves at a competitive cost and produce them
in an economic and timely fashion. In periods of increased activity, these
services and supplies can become difficult to obtain. The Company attempts to
mitigate this risk by developing strong long-term relationships with suppliers
and contractors and maintaining an appropriate inventory of production
equipment.
    Demand for crude oil and natural gas produced by the Company exists
within Canada and the United States; however, crude oil prices are affected by
worldwide supply and demand fundamentals while natural gas prices are
primarily affected by North American supply and demand fundamentals. Demand
for natural gas liquids is influenced mainly by the demand for petrochemicals
in North American and off-shore markets. TriStar mitigates these risks as
follows:

    
    -   Crude oil production is of a high quality mitigating its exposure to
        adverse quality differentials;
    -   Natural gas production is generally connected to a mature pipeline
        infrastructure that operates with minimal interruptions;
    -   Exploration efforts target high-quality oil and liquids-rich natural
        gas reserves;
    -   Sale arrangements vary in term and pricing structure creating a
        diverse portfolio that minimizes risk of exposure to any one market;
        and
    -   Financial instruments may be used where appropriate to manage
        commodity price volatility.
    

    Disclosure Control

    Disclosure controls and procedures have been designed to ensure that
information required to be disclosed by the Company is accumulated and
communicated to its management as appropriate to allow timely decisions
regarding required disclosure. The Company's Chief Executive Officer ("CEO")
and Chief Financial Officer ("CFO") have concluded, based on their evaluation
of the design of TriStar's disclosure controls and procedures as of the date
of this MD&A, that the Company's disclosure controls and procedures provide
reasonable assurance that material information is made known to them by others
within the Company.

    Internal Controls Over Financial Reporting

    The Company's CEO and CFO have designed or caused to be designed under
their supervision internal controls over financial reporting to provide
reasonable assurance regarding the reliability of the Company's financial
reporting and the preparation of financial statements for external purposes in
accordance with Canadian GAAP.
    The Company's CEO and CFO are required to cause the Company to disclose
any change in the Company's internal controls over financial reporting that
has occurred during the period that has materially affected, or is reasonably
likely to materially affect, the Company's internal controls over financial
reporting. No changes in the Company's internal controls over financial
reporting were identified during the three months ended June 30, 2008, that
have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

    Additional Information

    Additional information relating to TriStar, including TriStar's AIF and
financial statements, can be found on SEDAR at www.sedar.com.

    
    Summary of Quarterly Results

                                Three        Three        Three        Three
                               months       months       months       months
    ($ thousands except         ended        ended        ended        ended
     per share and            June 30,      Mar 31,      Dec 31,      Sep 30,
     Boepd amounts)              2008         2008         2007         2007
    -------------------------------------------------------------------------

    Production revenue
     (net of hedging)         183,107      135,167       85,419       53,578
    Net income (loss)         (55,212)      (6,058)     (11,414)      (5,418)
      Per share -
       basic(1)                 (0.50)       (0.06)       (0.17)       (0.11)
      Per share -
       diluted(1)               (0.50)       (0.06)       (0.17)       (0.11)
    Production (Boepd)         20,332       19,431       14,769       10,120
    Cash flow from
     operations(2)             96,848       73,500       43,503       26,735
      Per share -
       basic(1)                  0.88         0.74         0.64         0.56
      Per share -
       diluted(1)                0.88         0.74         0.64         0.56
    Cash flow from
     operating
     activities(3)             88,246       72,422       40,007       25,005
      Per share -
       basic(1)                  0.80         0.73         0.58         0.52
      Per share -
       diluted(1)                0.80         0.73         0.58         0.52
    Total assets            1,938,167    1,892,336    1,169,530    1,160,068
    Total net debt(4)         303,585      317,315      223,398      246,690
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                Three        Three        Three        Three
                               months       months       months       months
    ($ thousands except         ended        ended        ended        ended
     per share and            June 30,      Mar 31,      Dec 31,      Sep 30,
     Boepd amounts)              2007         2007         2006         2006
    -------------------------------------------------------------------------

    Production revenue
     (prior to hedging)        25,965       20,916       18,846       18,084
    Net income (loss)           2,023       (2,101)       1,786        1,126
      Per share -
       basic(1)                  0.07        (0.09)        0.08         0.04
      Per share -
       diluted(1)                0.07        (0.09)        0.08         0.04
    Production (Boepd)          4,941        4,121        3,919        3,424
    Cash flow from
     operations(2)             13,931       11,411       10,725       11,021
      Per share -
       basic(1)                  0.49         0.49         0.48         0.50
      Per share -
       diluted(1)                0.48         0.49         0.46         0.48
    Cash flow from
     operating
     activities(3)             13,536        6,961       12,626       12,371
      Per share -
       basic(1)                  0.49         0.30         0.57         0.57
      Per share -
       diluted(1)                0.48         0.30         0.55         0.55
    Total assets              453,337      441,661      351,974      330,821
    Total net debt(4)          77,665       77,058       63,247       44,844
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Pursuant to the acquisition of Real Resources Inc., the shares
        outstanding for each quarter prior to the one ending September 30,
        2007 have been converted on a 0.4762 to 1 basis to reflect the
        exchange of each share of TriStar Oil & Gas Ltd.
    (2) "Cash flow from operations" should not be considered an alternative
        to, or more meaningful than, cash flow from operating activities as
        determined in accordance with Canadian Generally Accepted Accounting
        Principles ("GAAP") as an indicator of TriStar's performance. "Cash
        flow from operations" represents cash flow from operating activities
        prior to changes in non-cash working capital. TriStar's determination
        of cash flow from operations may not be comparable to that found in
        the consolidated statement of cash flows in the unaudited interim
        financial statements. TriStar also presents cash flow from operations
        per share whereby per share amounts are calculated using weighted
        average shares outstanding consistent with the calculation of
        earnings per share.
    (3) "Cash flow from operating" activities is determined in accordance
        with GAAP and includes changes in non-cash working capital.
    (4) "Total net debt" is calculated as bank loan and current liabilities
        less current assets, excluding financial derivative contracts and
        related current future income taxes.


    TriStar Oil & Gas Ltd.
    Consolidated Balance Sheets
    (unaudited)

    -------------------------------------------------------------------------
                                                        June 30, December 31,
    ($ thousands)                                          2008         2007
    -------------------------------------------------------------------------

    Assets

    Current assets
      Accounts receivable                               110,273       59,749
      Taxes receivable                                    3,200            -
      Other current assets                                5,705        6,481
      Fair value of financial instruments
       (note 11)                                          1,852        2,916
      Future income taxes                                31,259        6,000
    -------------------------------------------------------------------------
                                                        152,289       75,146

    Property and equipment (notes 4, 5)               1,543,057      965,485
    Goodwill (note 4)                                   241,899      126,293
    Fair value of financial instruments (note 11)           922        2,606
    -------------------------------------------------------------------------

    Total assets                                      1,938,167    1,169,530
    -------------------------------------------------------------------------

    Liabilities

    Current liabilities
      Accounts payable and accrued liabilities          150,243       91,025
      Fair value of financial instruments (note 11)     118,137       24,250
    -------------------------------------------------------------------------
                                                        268,380      115,275

    Asset retirement obligations (note 7)                28,226       22,650
    Long-term debt (note 6)                             272,520      198,603
    Fair value of financial instruments (note 11)        50,613       20,218
    Future income taxes                                 226,095      121,947
    -------------------------------------------------------------------------

    Total liabilities                                   845,834      478,693
    -------------------------------------------------------------------------

    Shareholders' Equity

    Share capital (notes 4, 8)                        1,153,211      694,934
    Contributed surplus (note 8)                         10,992        6,414
    Accumulated other comprehensive income (note 8)          92          182
    Retained earnings                                   (71,962)     (10,693)
    -------------------------------------------------------------------------

    Total shareholders' equity                        1,092,333      690,837
    -------------------------------------------------------------------------

    Total liabilities and shareholders' equity        1,938,167    1,169,530
    -------------------------------------------------------------------------

    Commitments (note 12)
    Contingencies (note 13)

    See accompanying notes to consolidated financial statements.



    TriStar Oil & Gas Ltd.
    Consolidated Statements of Operations, Comprehensive Income (Loss) and
     Retained Earnings (Deficit)
    For the three and six months ended June 30, 2008 and 2007
    (unaudited)

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

    Revenues
      Petroleum and
       natural gas sales      183,107       25,965      318,274       46,881
      Royalties               (35,687)      (4,875)     (62,109)      (8,968)
    -------------------------------------------------------------------------
                              147,420       21,090      256,165       37,913

    Realized gain (loss)
     on financial
     instruments
     (note 11)                (21,249)         372      (28,792)       1,656
    Unrealized loss on
     financial instruments
     (note 11)               (108,078)         733     (129,472)      (1,695)
    -------------------------------------------------------------------------
                               18,093       22,195       97,901       37,874

    Expenses
      Operating                19,640        4,752       38,223        9,135
      Transportation            2,465          292        4,415          652
      General and
       administration           3,210        1,200        5,915        2,093
      Depletion,
       depreciation and
       accretion               60,377       13,304      118,039       24,316
      Stock-based
       compensation             1,411          311        2,699          711
      Interest                  3,372        1,037        6,954        1,904
    -------------------------------------------------------------------------
                               90,475       20,896      176,245       38,811

    Earnings (loss) before
     taxes                    (72,382)       1,299      (78,344)        (937)
    -------------------------------------------------------------------------

    Taxes
      Capital and current
       taxes                      636          250        1,518          443
      Future income tax
       expense (reduction)    (17,806)        (974)     (18,593)      (1,302)
    -------------------------------------------------------------------------
                              (17,170)        (724)     (17,075)        (859)

    -------------------------------------------------------------------------
    Net income (loss)         (55,212)       2,023      (61,269)         (78)

    Other comprehensive
     income (loss)
      Amortization of fair
       value of financial
       instruments                (45)        (451)         (91)      (1,092)
    -------------------------------------------------------------------------

    Comprehensive income
     (loss)                   (55,257)       1,572      (61,360)      (1,170)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings
      Retained earnings
       (deficit), beginning
       of period              (16,750)       4,117      (10,693)       6,218
    -------------------------------------------------------------------------

    Retained earnings
     (deficit), end of
     period                   (71,962)       6,140      (71,962)       6,140
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (loss) per
     share (note 8)
      Basic                     (0.50)        0.07        (0.59)        0.00
      Diluted                   (0.50)        0.07        (0.59)        0.00
    -------------------------------------------------------------------------

    Weighted average
     number of shares
     (note 8)
      Basic               110,109,657   28,351,370  104,588,862   25,903,601
      Diluted             110,109,657   28,804,082  104,588,862   25,903,601
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    TriStar Oil & Gas Ltd.
    Consolidated Statements of Cash Flows
    For the three and six months ended June 30, 2008 and 2007
    (unaudited)

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

    Operating activities
      Net income (loss)       (55,212)       2,023      (61,269)         (78)
      Unrealized loss
       (gain) on financial
       instruments            108,078         (733)     129,472        1,695
      Depletion,
       depreciation and
       accretion               60,377       13,304      118,039       24,316
      Stock-based
       compensation             1,411          311        2,699          711
      Future income taxes     (17,806)        (974)     (18,593)      (1,302)
    -------------------------------------------------------------------------
                               96,848       13,931      170,348       25,342

      Change in non-cash
       working capital         (8,602)        (395)      (9,680)      (4,845)
    -------------------------------------------------------------------------

                               88,246       13,536      160,668       20,497
    -------------------------------------------------------------------------

    Financing activities
      Issuance of share
       capital                      -            -      205,031       50,620
      Share issue costs             -         (101)     (10,297)      (2,781)
      Increase (decrease)
       in bank loan               104       (1,515)      53,439       14,627
    -------------------------------------------------------------------------

                                  104       (1,616)     248,173       62,466
    -------------------------------------------------------------------------

    Investing activities
      Capital expenditures    (64,711)     (15,468)    (169,210)     (31,842)
      Acquisitions, net of
       cash acquired          (37,704)           -     (214,345)     (56,197)
      Proceeds from
       dispositions            12,279        1,031       15,191        1,031
      Change in non-cash
       working capital          1,786        2,517      (40,477)       4,045
    -------------------------------------------------------------------------

                              (88,350)     (11,920)    (408,841)     (82,963)
    -------------------------------------------------------------------------

    Change in cash and
     cash equivalents               -            -            -            -
    Cash and cash
     equivalents, beginning
     of period                      -            -            -            -
    -------------------------------------------------------------------------

    Cash and cash
     equivalents, end of
     period                         -            -            -            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow information (note 9)

    See accompanying notes to consolidated financial statements.



    TriStar Oil & Gas Ltd.
    Notes to the Consolidated Financial Statements
    As at and for the three and six months ended June 30, 2008


    1.  Business and basis of presentation

        TriStar Oil & Gas Ltd. ("TriStar" or the "Company") was incorporated
        pursuant to the Business Corporations Act (Alberta) on September 30,
        2005. These financial statements and the notes thereto should be read
        in conjunction with TriStar's audited consolidated financial
        statements as at and for the year ended December 31, 2007.

    2.  Principles of consolidation

        As at June 30, 2008, the consolidated financial statements include
        the accounts of TriStar, TOG Partnership, Vortex Energy Corporation,
        TriStar BR Incorporated, TriStar BR Partnership, TriStar KW
        Corporation, 1369645 Alberta Limited and 1284827 Alberta Limited.

    3.  Changes in accounting policy

        Effective January 1, 2008, the Company adopted Section 3862 Financial
        Instruments - Disclosures and Section 3863 Financial Instruments -
        Disclosure and Presentation. These disclosure standards were adopted
        prospectively and require entities to provide information enabling
        users of the financial statements to evaluate the significance of the
        Company's financial instruments and the nature and extent of risks
        arising from financial instruments to which the Company is exposed
        during the period and at the balance sheet date, and how the company
        manages those risks.

        Effective January 1, 2008, the Company adopted Section 1535 Capital
        Disclosures, which requires companies to disclose their objectives,
        policies and processes for managing capital as well as compliance
        with any externally imposed capital requirements.

        On February 13, 2008, the Canadian Accounting Standards Board
        ("AcSB") confirmed the mandatory changeover date to International
        Financial Reporting Standards ("IFRS") for Canadian profit-oriented
        publicly accountable entities ("PAEs") such as TriStar.

        The AcSB requires that IFRS compliant financial statements be
        prepared for annual and interim financial statements commencing on or
        after January 1, 2011. For PAEs with a December 31 year-end, the
        first unaudited interim financial statements under IFRS will be for
        the quarter ending March 31, 2011, with comparative financial
        information for the quarter ended March 31, 2010. The first audited
        annual financial statements will be for the year ending December 31,
        2011, with comparative financial information for the year ended
        December 31, 2010. This also means that all opening balance sheet
        adjustments relating to the adoption of IFRS must be reflected in the
        January 1, 2010 opening balance sheet which will be issued as part of
        the comparative financial information in the March 31, 2011 unaudited
        interim financial statements.

        TriStar intends to adopt these requirements as set out by the AcSB
        and other regulatory bodies. At this time, the impact of adopting
        IFRS cannot be reasonably quantified. During 2008, TriStar will
        continue to review the impact of IFRS on the Company and develop and
        put in place a plan on the changeover to IFRS. The actual conversion
        work will occur in 2009 and 2010, in anticipation of the preparation
        of the opening January 1, 2010 balance sheet that will be required
        for comparative figures for all periods ending in 2011.

    4.  Business combinations

        Acquisition of Bulldog Resources Inc.
        -------------------------------------

        On February 7, 2008, TriStar acquired all of the issued and
        outstanding common shares of Bulldog Resources Inc. ("Bulldog").
        Under the terms of the arrangement, TriStar issued 0.59 common shares
        of TriStar for each Bulldog common share outstanding, for a total of
        16.8 million TriStar common shares.

        This acquisition has been accounted for using the purchase method of
        accounting, as follows:


        ($ thousands)
        ---------------------------------------------------------------------
        Consideration
        ---------------------------------------------------------------------
          Common shares issued                                       188,962
          Transaction costs                                            1,400
        ---------------------------------------------------------------------

                                                                     190,362
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Net assets received, at estimated fair value
        ---------------------------------------------------------------------
          Property and equipment                                     218,635
          Working capital                                            (21,000)
          Goodwill                                                    36,175
          Fair value of financial instruments                            997
          Asset retirement obligations                                (1,553)
          Future income taxes                                        (42,892)
        ---------------------------------------------------------------------

                                                                     190,362
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The results of operations include net revenue from this transaction
        effective February 8, 2008.

        The above amounts are estimates, which were made by management at the
        time of the preparation of these financial statements based on
        information then available. Amendments may be made to these amounts
        as values subject to estimate are finalized.

        Acquisition of Arista Energy Limited
        ------------------------------------

        On January 18, 2008, TriStar acquired all of the issued and
        outstanding common shares of Arista Energy Limited ("Arista").
        Under the terms of the Arrangement, TriStar paid consideration of
        $215 million (net of transaction costs), consisting of cash and net
        debt assumed, for all issued and outstanding common shares of Arista.

        Concurrently, TriStar issued 16.9 million Common Shares at $12.15 per
        common share for gross proceeds of approximately $205 million. A
        portion of the proceeds from this equity financing were used to fund
        the acquisition of Arista. This acquisition has been accounted for
        using the purchase method of accounting, as follows:

        ($ thousands)
        ---------------------------------------------------------------------
        Consideration
        ---------------------------------------------------------------------
          Cash                                                       167,485
          Transaction costs                                            2,600
        ---------------------------------------------------------------------

                                                                     170,085
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Net assets received, at estimated fair value
        ---------------------------------------------------------------------
          Property and equipment                                     196,270
          Working capital                                            (36,450)
          Goodwill                                                    62,549
          Bank loan                                                  (11,522)
          Fair value of financial instruments                          1,518
          Asset retirement obligations                                (1,313)
          Future income taxes                                        (40,967)
        ---------------------------------------------------------------------

                                                                     170,085
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The results of operations include net revenue from this transaction
        effective January 19, 2008.

        The above amounts are estimates, which were made by management at the
        time of the preparation of these financial statements based on
        information then available. Amendments may be made to these amounts
        as values subject to estimate are finalized.

        Acquisition of Kinwest Corporation
        ----------------------------------

        On January 8, 2008, TriStar acquired all of the issued and
        outstanding common shares of Kinwest Corporation ("Kinwest") for
        consideration of 8.0 million TriStar Common Shares and the assumption
        of Kinwest's net debt. This acquisition has been accounted for using
        the purchase method of accounting, as follows:

        ($ thousands)
        ---------------------------------------------------------------------
        Consideration
        ---------------------------------------------------------------------
          Common shares issued                                        78,251
          Transaction costs                                              400
        ---------------------------------------------------------------------

                                                                      78,651
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Net assets received, at estimated fair value
        ---------------------------------------------------------------------
          Property and equipment                                      82,486
          Working capital                                              1,713
          Goodwill                                                    17,482
          Bank loan                                                   (8,957)
          Asset retirement obligations                                (1,741)
          Future income taxes                                        (12,332)
        ---------------------------------------------------------------------

                                                                      78,651
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The results of operations include net revenue from this transaction
        effective January 9, 2008.

        The above amounts are estimates, which were made by management at the
        time of the preparation of these financial statements based on
        information then available. Amendments may be made to these amounts
        as values subject to estimate are finalized.

    5.  Property and equipment

        ($ thousands)
        ---------------------------------------------------------------------
                                                        June 30, December 31,
                                                           2008         2007
        ---------------------------------------------------------------------
        Petroleum and natural gas assets              1,776,658    1,082,855
        Administrative assets                             1,678        1,040
        ---------------------------------------------------------------------
                                                      1,778,336    1,083,895

        Less accumulated depletion and
         depreciation                                  (235,279)    (118,410)
        ---------------------------------------------------------------------

                                                      1,543,057      965,485
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        At June 30, 2008, the calculation of the depletion expense excluded
        unproved property and undeveloped land cost of $388.7 million (2007:
        $54.5 million). Unused seismic costs of $31.3 million (2007: $nil)
        were also excluded. Future development costs of $166.7 million (2007:
        $24.0 million) were included in the depletion calculation.

        During the three months ended June 30, 2008, the Company capitalized
        $1.9 million (2007: $0.8 million) of general and administrative costs
        and $1.4 million (2007: $0.2 million) of stock-based compensation
        expense, including a tax effect of $0.4 million (2007: $0.1 million),
        relating to exploration, development and acquisition activities.
        During the six months ended June 30, 2008, the Company capitalized
        $3.7 million (2007: $1.4 million) of general and administrative costs
        and $2.6 million (2007: $0.5 million) of stock-based compensation
        expense, including a tax effect of $0.7 million (2007: $0.3 million),
        relating to exploration and development activities.

    6.  Bank loan

        At June 30, 2008, the Company had available a $400.0 million credit
        facility, which was subsequently increased to $450.0 million. The
        credit facility provides that advances may be made by way of direct
        advances, bankers acceptances, or standby letters of
        credit/guarantees. Direct advances bear interest at the bank's prime
        lending rate plus an applicable margin for Canadian dollar advances
        and at the bank's U.S. base rate plus an applicable margin for U.S.
        dollar advances. The applicable margin charged by the bank is
        dependent on the Company's debt to trailing cash flow ratio. The
        banker's acceptances bear interest at the applicable banker's
        acceptance rate plus a stamping fee, based on the Company's debt to
        trailing cash flow ratio. The credit facility is secured by a fixed
        and floating charge debenture on the assets of the Company. The
        borrowing base is subject to semi-annual review by the bank.

        The Company's effective interest rate for the three and six months
        ended June 30, 2008 was 4.8 percent and 5.0 percent, respectively.

    7.  Asset retirement obligations

        The total future asset retirement obligations ("ARO") were estimated
        based on the Company's net ownership interest in all of its wells and
        facilities, estimated costs to reclaim and abandon the wells and
        facilities, and the estimated timing of the costs to be incurred in
        future periods. The Company has estimated an undiscounted total
        future liability of $84.9 million as at June 30, 2008. The Company's
        credit adjusted risk-free rate of 8.5 percent and an inflation rate
        of 2.0 percent per annum were used to calculate the net present value
        of the asset retirement obligations.

        The following table reconciles the Company's total asset retirement
        obligations:

        ($ thousands)
        ---------------------------------------------------------------------
                                                        June 30, December 31,
                                                           2008         2007
        ---------------------------------------------------------------------
        ARO, beginning of period                         22,650        6,089
        Liabilities acquired (net of dispositions)        3,511       14,340
        Liabilities incurred                                896        1,249
        Accretion expense                                 1,169          972
        ---------------------------------------------------------------------

        ARO, end of period                               28,226       22,650
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    8.  Shareholders' equity

        The corporate acquisition of Real Resources Inc. (the "Real
        acquisition") has been accounted for as a reverse takeover. As a
        result the number of outstanding shares of prior comparative periods
        has been reduced by being multiplied by 0.4762, in order for the
        comparative share and per share amounts to be equivalent.

        a) Share capital - authorized

              i)   An unlimited number of voting common shares of TriStar
                   ("Common Shares").

              ii)  The Company is authorized to issue four classes of
                   preferred shares designated as First Preferred Shares,
                   Second Preferred Shares, Third Preferred Shares and Fourth
                   Preferred Shares, each class issuable in series
                   (collectively, the "Preferred Shares"). There were no
                   Preferred Shares outstanding during the period.

        b) Share capital - issued and outstanding

           The following table reconciles the Company's share capital
           movements:

                                                        Six months ended
                                                          June 30, 2008
                                                    -------------------------
                                                      Number of
           ($ thousands, except share amounts)           shares       Amount
           ------------------------------------------------------------------
           Common Shares
             Balance, beginning of period            68,462,492      694,934
           ------------------------------------------------------------------

             Issued for cash                         16,875,000      205,031
             Issued on acquisitions (note 4)         24,772,165      267,213
             Tax effect on flow-through expenses
              renounced                                       -       (2,720)
             Share issue costs (net of tax effect)            -      (11,247)
           ------------------------------------------------------------------

             Total share capital, end of period     110,109,657    1,153,211
           ------------------------------------------------------------------
           ------------------------------------------------------------------

        c) Per share amounts

           Due to the antidilutive effect of TriStar's net loss in the
           current period, the diluted number of shares is equivalent to the
           basic number of shares.

        d) Stock-based compensation

           The Company has an employee stock option plan under which
           employees and directors are eligible to receive option grants
           ("Stock Options") and Common Share incentives ("Incentive
           Shares"). The total aggregate amount of Stock Options and
           Incentive Shares that can be issued cannot exceed ten percent of
           the outstanding Common Shares. The Company accounts for its stock-
           based compensation using the fair value method. The fair value of
           the Stock Options and Incentive Shares is charged to earnings over
           three years on a straight-line basis.

           Stock Options granted under the plan have a term of five years to
           expiry and vest over three years. The fair value of each Stock
           Option granted was estimated on the date of the grant using the
           Black-Scholes option pricing model with weighted average
           assumptions. The average expected life for the Stock Options is
           three years. The risk-free interest rate used to fair value the
           Stock Options is 4.25 percent and the expected volatility is 35
           percent.

           The weighted average exercise price for outstanding options as at
           June 30, 2008 was $8.68.

           The following table reconciles Stock Option activity:

           ------------------------------------------------------------------
                                      Three      Three        Six        Six
                                     Months     Months     Months     Months
                                      ended      ended      ended      ended
                                    June 30,   June 30,   June 30,   June 30,
                                       2008       2007       2008       2007
           ------------------------------------------------------------------
           Balance, beginning
            of period             3,155,050  1,028,592  2,695,800    995,258
             Granted                146,850     38,096    607,100     71,430
             Cancelled              (31,000)         -    (32,000)         -
           ------------------------------------------------------------------

           Balance, end of
            period                3,270,900  1,066,688  3,270,900  1,066,688
           ------------------------------------------------------------------
           ------------------------------------------------------------------

           Weighted average
            exercise price ($)         8.68      14.37       8.68      14.37
           ------------------------------------------------------------------
           ------------------------------------------------------------------

           Exercisable, end of
            period                        -          -          -          -
           ------------------------------------------------------------------
           ------------------------------------------------------------------

           Incentive Shares are earned annually in equal amounts over three
           years from the date of grant. Upon being earned, the Incentive
           Shares are converted into Common Shares and issued from treasury
           at no cost to the Incentive Shareholder. The fair value of
           Incentive Shares is deemed to equal the stock price on the date of
           grant. During the three months ended June 30, 2008, 119,750
           Incentive Shares were granted and 28,666 Incentive Shares were
           cancelled. As at June 30, 2008, there were 2,221,834 Incentive
           Shares outstanding and none were convertible to Common Shares.

        e) Contributed surplus

           The following table reconciles the Company's contributed surplus
           balance:

           ($ thousands)
           ------------------------------------------------------------------
                                                        June 30, December 31,
                                                           2008         2007
           ------------------------------------------------------------------
           Balance, beginning of period                   6,414        1,611
           Stock-based compensation expense arising
            from:
             Stock Options                                1,313        3,185
             Incentive Shares                             3,265        2,328
             Performance Shares                               -          527
           Reclass to share capital upon conversion:
             Performance Shares                               -       (1,383)
             Escrowed shares                                  -          146
           ------------------------------------------------------------------

           Balance, end of period                        10,992        6,414
           ------------------------------------------------------------------
           ------------------------------------------------------------------

        f) Accumulated other comprehensive income

           The adoption of new accounting policies regarding financial
           instruments on January 1, 2007 resulted in an amount being
           recognized in accumulated other comprehensive income for the fair
           value of the Company's commodity derivative contracts at
           January 1, 2007. The amount recognized in accumulated other
           comprehensive income is as follows:

           ($ thousands)
           ------------------------------------------------------------------
                                      Three      Three        Six        Six
                                     Months     Months     Months     Months
                                      ended      ended      ended      ended
                                    June 30,   June 30,   June 30,   June 30,
                                       2008       2007       2008       2007
           ------------------------------------------------------------------
           Balance, beginning of
            period                      137      1,445        182          -
           Change in accounting
            policy                        -          -                 2,086
           Amortization of fair
            value of financial
            instruments, net of tax     (45)      (450)       (90)    (1,091)
           ------------------------------------------------------------------

           Balance, end of period        92        995         92        995
           ------------------------------------------------------------------
           ------------------------------------------------------------------

        g) Flow-through shares

           On March 16, 2007, TriStar issued 1,700,000 (809,540 after the
           effect of the Real acquisition) flow-through Common Shares at a
           price of $6.00 ($12.60 after the effect of the Real acquisition)
           per share for gross proceeds of $10.2 million. As a result, the
           Company must incur certain qualifying resource expenditures before
           December 31, 2008. The related tax impact was recorded when the
           qualifying expenditures were renounced to shareholders in the
           first quarter of 2008. As at June 30, 2008, $8.1 million of
           expenditures related to this $10.2 million flow-through share
           obligation had been incurred.

    9.  Supplemental cash flow information

           ($ thousands)
           ------------------------------------------------------------------
                                      Three      Three        Six        Six
                                     Months     Months     Months     Months
                                      ended      ended      ended      ended
                                    June 30,   June 30,   June 30,   June 30,
                                       2008       2007       2008       2007
           ------------------------------------------------------------------
           Income and other taxes
            paid                         14        175        709        175
           Interest paid, net of
            interest income           3,047        973      7,459      1,840
           ------------------------------------------------------------------
           ------------------------------------------------------------------

    10. Financial risk management

        a) Credit risk

           Credit risk is the risk of financial loss to a Company if a
           counterparty to a financial instrument fails to meet its
           contractual obligations, and arises principally from the Company's
           receivables from joint venture partners and petroleum and natural
           gas marketers. At June 30, 2008 the Company's receivables
           consisted of 56% of revenue from petroleum and natural gas
           marketers, 44% of trade and other receivables.

           Receivables from petroleum and natural gas marketers are collected
           on the 25th day of each month following production. The Company's
           policy to mitigate credit risk associated with these balances is
           to establish marketing relationships with large purchasers.

           Joint venture receivables are normally collected within one to
           three months of the joint venture bill being issued to the
           partner. The Company attempts to mitigate the risk from joint
           venture receivables by obtaining partner approval of significant
           capital expenditures prior to expenditure. However, the
           receivables are from participants in the petroleum and natural gas
           sector and collection of the outstanding balances is dependent on
           industry factors such as commodity price fluctuations, escalating
           costs and the risk of unsuccessful drilling. Further risks exist
           with joint venture partners as disagreements occasionally arise,
           increasing the risk of non-collection. The Company does not
           typically obtain collateral from petroleum and natural gas
           marketers or joint venture partners. However, the Company does
           have the ability to withhold production from joint venture
           partners in the event of non-payment.

           On July 22, 2008, SemCanada, a petroleum marketer for the Company,
           filed for creditor protection. As a result, it did not make
           payment on the July 25, 2008 settlement date for the June crude
           oil volumes marketed on behalf of its clients, amounting to
           approximately $4.5 million for TriStar. Further, SemCanada
           suspended payment to its clients for July crude volumes shipped up
           to July 21, 2008, which TriStar estimates to be $3.5 million.
           TriStar had an irrevocable standby letter of credit for $1.5
           million which was fully collected subsequent to July 21, 2008.
           Although not determinable at this time, as at June 30, 2008, the
           Company has recorded a reduction of revenue of $1.5 million of the
           June 30, 2008 receivable amount, representing 50% of the amount
           outstanding after collecting funds from the letter of credit. The
           Company continues to monitor the matter and once it has further
           information, it will make necessary adjustments for impairment.
           There are no other material accounts receivable at June 30, 2008
           that TriStar deemed uncollectible.

        b) Liquidity risk

           Liquidity risk relates to the risk that the Company will encounter
           difficulty in meeting its obligations associated with financial
           liabilities. The financial liabilities on the balance sheet
           consist mainly of accounts payable and bank debt. The Company
           anticipates it will continue to have adequate liquidity to fund
           its financial liabilities through its future cash flows and
           available credit facility (see note 6). The Company has had no
           defaults or breaches on its bank debt or any of its financial
           liabilities.

        c) Market risk

           Market risk is the risk that changes in market prices, such as
           currency risk, commodity price risk and interest rate risk will
           affect the Company's net earnings, future cash flows, the value of
           financial instruments, or the fair value of its assets and
           liabilities.

           Although the Company generally does not sell or transact in
           foreign currency, the United States dollar influences the price of
           petroleum and natural gas sold in Canada. Furthermore, exchange
           rate fluctuations can affect the fair value of future cash flow
           from derivative petroleum and natural gas contracts. In the first
           quarter of 2008, the Company entered into a foreign exchange rate
           hedge to mitigate a portion of this risk as described in note 11.

           Commodity prices for crude oil, natural gas liquids ("NGL") and
           natural gas are impacted by not only the relationship between the
           Canadian and US currencies, as described above, but also due to
           political events, meteorological conditions, disruptions in supply
           and changes in demand. TriStar enters into commodity derivative
           contracts that provide downside price protection in order to
           provide some stability of cash flows for capital spending planning
           purposes, as described in note 11. The Company's risk management
           activities are conducted pursuant to the Company's risk management
           policies approved by the Board of Directors. The Company's other
           assets and liabilities are generally not affected by changes in
           currency rates.

           The Company is exposed to interest rate risk on its outstanding
           bank debt which has a floating interest rate, potentially
           affecting future cash flows. At June 30, 2008 the Company did not
           have any interest rate swaps or hedges in place.

           The Company uses a non-GAAP measure, cash flow from operations, as
           a measure of current operating efficiency. Cash flow from
           operations represents cash flow from operating activities prior to
           changes in non-cash working capital. For the three months ended
           June 30, 2008, the sensitivity of cash flow from operations to
           changes in TriStar's realized crude oil and NGL prices, natural
           gas prices, and bank interest rate would have been as follows. An
           increase by $1.00 per bbl in the realized price for crude oil and
           NGL would have resulted in approximately $0.6 million additional
           cash flow from operations. An increase by $0.10 per thousand cubic
           feet in the realized price for natural gas would have resulted in
           approximately $0.2 million additional cash flow from operations.
           An increase by 0.1% to the bank interest rate would have resulted
           in approximately $0.1 million less cash flow from operations.
           However, the above sensitivity results for crude oil and NGL and
           for natural gas should not be extrapolated further without
           considering TriStar's hedge portfolio, royalty parameters and
           potential price-related effects on the results of the period.

        d) Capital management

           The Company's policy is to maintain a strong capital base for the
           objectives of maintaining financial flexibility and to sustain the
           future development of the business. The Company manages its
           capital structure and makes adjustments relative to changes in
           economic conditions and the Company's risk profile. In order to
           maintain the capital structure, the Company may from time to time
           issue shares and adjust its capital spending to manage current and
           projected debt levels. The Company monitors its net debt levels
           and working capital in order to assess capital and operating
           efficiency.

           The Company considers its capital structure to include
           shareholders' equity, working capital and long-term debt. The
           Company's share capital is not subject to external restrictions,
           however its credit facility is based on its petroleum and natural
           gas reserves.

    11. Financial instruments

        The Company's financial instruments recognized on the balance sheet
        consist of accounts receivable, accounts payable and accrued
        liabilities, bank loan and derivative commodity contracts. The fair
        value of these instruments, excluding derivative commodity contracts,
        approximate their carrying value due to their short terms to maturity
        or the indexed rate of interest on the bank debt. The fair value of
        the derivative commodity contracts ("financial derivatives") is
        recognized on the balance sheet as described below.

        Financial derivatives
        ---------------------

        At June 30, 2008, the following table presents a reconciliation of
        the change in the unrealized amounts from January 1, 2008 to June 30,
        2008:

        ($ thousands)
        ---------------------------------------------------------------------
                                                                       Total
                                                                  unrealized
                                                     Fair value   gain/(loss)
        ---------------------------------------------------------------------
        Balance, beginning of period                    (38,946)           -
        Unrealized loss on financial instruments       (129,600)    (129,600)
        Additions                                         2,570            -
        Amortization of fair value of financial
         instruments                                          -          128
        ---------------------------------------------------------------------

        Balance, end of period                         (165,976)    (129,472)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        Commodity contracts
        -------------------

        Commodity contracts outstanding as at June 30, 2008 are as follows:

        Oil contracts
        ---------------------------------------------------------------------
                                           Volume       Price
        Term                  Type         (Bbl/d)    ($US/Bbl)       Index
        ---------------------------------------------------------------------
        Jan. 1, 2007 -
         Dec. 31, 2008   Costless Collar     250     60.00 - 75.00     WTI
        Jan. 1, 2008 -
         Dec. 31, 2009   Costless Collar     500     65.00 - 76.30     WTI
        Jan. 1, 2008 -
         Dec. 31, 2009   Costless Collar     500     65.00 - 76.15     WTI
        Jan. 1, 2008 -
         Dec. 31, 2009   Costless Collar     500     67.00 - 76.70     WTI
        Jan. 1, 2008 -
         Dec. 31, 2009   Costless Collar     500     70.00 - 75.52     WTI
        Jan. 1, 2008 -
         Dec. 31, 2009   Costless Collar     500     65.00 - 73.25     WTI
        Jan. 1, 2008 -
         Dec. 31, 2008   Costless Collar     250     80.00 - 97.05     WTI
        Jan. 1, 2008 -
         Dec. 31, 2009   Costless Collar     250     75.00 - 96.05     WTI
        Jan. 1, 2008 -
         Dec. 31, 2009   Costless Collar     250     75.00 - 102.00    WTI
        Jan. 1, 2008 -
         Dec. 31, 2009   Costless Collar     250     75.00 - 100.00    WTI
        Jan. 1, 2008 -
         Dec. 31, 2009   Costless Collar     250     80.00 - 100.00    WTI
        Jan. 1, 2008 -
         Dec. 31, 2009   Costless Collar     250     75.00 - 100.00    WTI
        Jan. 1, 2008 -
         Dec. 31, 2009   Costless Collar     250     80.00 - 100.00    WTI
        Feb. 1, 2008 -
         Dec. 31, 2009        Oil Put        500         75.00         WTI
        Mar. 1, 2008 -
         Dec. 31, 2009        Oil Put        500         80.00         WTI
        Jan. 1, 2007 -
         Dec. 31, 2008       Oil Swap        250         68.35         WTI
        Apr. 1, 2007 -
         Dec. 31, 2009       Oil Swap        250        C$76.60       C$WTI
        Jan. 1, 2008 -
         Dec. 31, 2009       Oil Swap        250        C$78.20       C$WTI
        Apr. 1, 2008 -
         Dec. 31, 2008       Oil Swap        500       C$100.20       C$WTI
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The fair value of the oil costless collar, put and swap contracts at
        June 30, 2008 was a liability of $163.5 million.

        Natural gas contracts
        ---------------------------------------------------------------------
                                           Volume      Price
        Term                  Type         (GJ/d)     ($/GJ)         Index
        ---------------------------------------------------------------------
        Apr. 1, 2008 -
         Sep. 30, 2008   Costless Collar    1,500   7.50 - 8.67  AECO Monthly
        Apr. 1, 2008 -
         Oct. 31, 2008   Costless Collar    2,000   7.50 - 8.45  AECO Monthly
        Apr. 1, 2008 -
         Sep. 30, 2008      Gas Swap        1,500       8.07     AECO Monthly
        Apr. 1, 2008 -
         Oct. 31, 2008      Gas Swap        2,000       8.00     AECO Monthly
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The fair value of the natural gas collars and swap contracts as at
        June 30, 2008 was a liability of $2.5 million.

        Fixed strike, foreign exchange contracts
        ---------------------------------------------------------------------
                                           Amount      Strike       Amount
        Term                  Type          USD         Price        CDN
        ---------------------------------------------------------------------
        May 1, 2008 -
         Dec. 31, 2009         Put       $1,250,000     $1.00     $1,250,000
        May 1, 2008 -
         Dec. 31, 2009         Call      $2,500,000     $1.00     $2,500,000
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        The fair value of the foreign exchange contracts as at June 30, 2008
        was an asset of $0.02 million.

    12. Commitments

        At June 30, 2008, the Company had the following lease commitment for
        office space:

        ($ thousands)
        ---------------------------------------------------------------------
        2008                                                           1,772
        2009                                                           3,544
        2010                                                           3,544
        2011                                                           3,544
        2012                                                           3,590
        Thereafter                                                    11,449
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    13. Contingencies

        The Company is involved in litigation and claims arising in the
        normal course of operations and believes that such claims will not
        materially affect the Company's financial position or reported
        results of operations.
    

    %SEDAR: 00025796E




For further information:

For further information: Brett Herman, President & Chief Executive
Officer, TriStar Oil & Gas Ltd., (403) 268-7800; or Jason Zabinsky, Vice
President, Finance & Chief Financial Officer, TriStar Oil & Gas Ltd., (403)
268-7800

Organization Profile

TriStar Oil & Gas Ltd.

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