TriStar Oil & Gas Ltd. - Announces Results for Second Quarter 2009; Closes Strategic Asset Acquisition in Southeast Saskatchewan; Announces Corporate Strategic Combination



    CALGARY, Aug. 10 /CNW/ - TriStar Oil & Gas Ltd. ("TriStar" or the
"Company") is pleased to announce its financial and operating results for the
three and six months ended June 30, 2009.
    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
    ($ thousands                ended        ended                     ended
     except per share and     June 30,     June 30,           %      June 30,
     Boepd amounts)              2009         2008       Change         2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Financial (CDN$)
      Production revenue
       (prior to hedging)      99,762      184,607          -46%     181,681
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Funds flow from
       operations(1)(5)        59,111       96,848          -39%     116,062
        Per share basic(5)      $0.46        $0.88          -48%       $0.96
        Per share diluted(5)    $0.46        $0.88          -48%       $0.96
      Net loss(2)(5)          (20,793)     (55,212)         NMF      (34,619)
        Per share basic(5)     ($0.16)      ($0.50)         NMF       ($0.29)
        Per share diluted(5)   ($0.16)      ($0.50)         NMF       ($0.29)
      Total net debt(3)       400,954      303,585           32%     400,954
    -------------------------------------------------------------------------
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      Common shares (000's)
        Shares outstanding,
         end of period
         (basic)              152,037      110,110           38%     152,037
        Weighted average
         shares (basic)       127,502      110,110           16%     120,952
        Weighted average
         shares (fully
         diluted)(4)          127,502      110,110           16%     120,952
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operations
      Production
        Crude oil and NGL
         (Bbls per day)        15,886       15,228            4%      16,332
        Natural gas (Mcf
         per day)              27,089       30,621          -12%      25,850
        Barrels of oil
         equivalent
         (Boepd, 6:1)          20,401       20,332            0%      20,641
      Average realized price
        Crude oil and NGL
         ($ per Bbl)            62.44       113.29          -45%       54.02
        Natural gas
         ($ per Mcf)             3.85         9.91          -61%        4.70
        Barrels of oil
         equivalent ($ per
         Boe, 6:1)              53.74        99.78          -46%       48.63
      Netback per Boe
       (6:1)($)
        Operating netback(1)    37.78        57.05          -34%       35.40
        Cash flow netback(1)    31.84        52.35          -39%       31.06
      Wells drilled
        Gross                      26           34                        57
        Net                      19.3         24.2                      43.4
        Success (%)                96           97                        95
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    "NMF"  No Meaningful Figure
    (1)    Management uses funds flow from operations (before changes in non-
           cash working capital and incurred asset retirement expenditures),
           and operating and cash flow netback to analyze operating
           performance and leverage. Funds flow as presented, and operating
           and cash flow netback do not have any standardized meaning
           prescribed by Canadian Generally Accepted Accounting Principles
           and therefore may not be comparable with the calculation of
           similar measures for other entities.
    (2)    The net income in the quarter ended June 30, 2009 includes the
           unrealized loss on the Company's financial derivative contracts of
           $24.4 million recognized in the period.
    (3)    Total net debt is calculated as long-term debt and current
           liabilities less current assets, excluding the current fair value
           of financial instruments and related current future income taxes.
    (4)    Due to the antidilutive effect of TriStar's net loss for the three
           and six months ended June 30, 2009 and 2008, the diluted number of
           shares is equivalent to the basic number of shares. Therefore,
           diluted per share amounts for net loss and funds flow from
           operations are equivalent to basic per share amounts.
    (5)    Funds flow from operations and net loss for the three and six
           months ended June 30, 2009 includes a $3.3 million provision for
           non-recoverable accounts receivable related to the SemCanada
           creditor protection filing. For the three months ended June 30,
           2008, this provision was $1.5 million. Excluding these provisions,
           funds flow from operations for the three months ended June 30,
           2009 would be $62.4 million or $0.49 per share (basic and
           diluted), $98.3 million or $0.89 per share (basic and diluted) for
           the three months ended June 30, 2008 and $119.3 million or $0.99
           per share (basic and diluted) for the six months ended June 30,
           2009. Excluding these provisions, net loss would be $17.5 million
           or $0.14 per share (basic and diluted) for the three months ended
           June 30, 2009, $53.7 million or $0.49 per share (basic and
           diluted) for the three months ended June 30, 2008 and $31.4
           million or $0.26 per share (basic and diluted) for the six months
           ended June 30, 2009.



    President's Letter to Shareholders

    The Company's accomplishments during the second quarter of 2009 include
the following:

    -   TriStar successfully closed and integrated the strategic acquisition
        of approximately 4,000 Boepd of legacy, long life, high netback light
        oil assets in its Southeast Saskatchewan core area (the "Talisman
        Acquisition"). In conjunction with the Talisman Acquisition, TriStar
        completed an equity offering of 35.9 million subscription receipts
        for gross proceeds of $287.5 million. Upon closing of the Talisman
        Acquisition on June 1, 2009, each subscription receipt holder
        received one common share;

     -  Production for the second quarter exceeded expectations averaging
        20,401 Boepd, approximately 80 percent light oil. Production in the
        quarter included only one month of production from the Talisman
        Acquisition;

    -   Funds flow totalled $59.1 million in the second quarter, which
        included a $3.3 million provision for the SemCanada Crude Company
        ("SemCanada") creditor protection filing. Excluding this provision
        funds flow would have totaled $62.4 million;

    -   Funds flow per share was $0.46 in the second quarter. Excluding the
        provision for SemCanada described above, funds flow per share would
        have been $0.49 per share;

    -   TriStar executed a $38.8 million capital program which included the
        drilling of 26 (19.3 net) wells resulting in 25 (18.3 net) oil wells
        and 1 (1.0 net) D&A well achieving an overall success rate of
        96 percent;

    -   On closing of the Talisman Acquisition, the Company's credit facility
        was increased to $525 million, providing substantial financial
        flexibility;

    -   On August 4, 2009, TriStar and Petrobank Energy & Resources Ltd.
        ("Petrobank") announced the strategic combination of TriStar and
        Petrobank's Canadian Business Unit (the "Transaction"). The
        combination will create a new publicly listed company that will be a
        premier, Bakken focused, light oil exploration and production company
        in Canada which will trade under the name of PetroBakken Energy Ltd.
        ("PetroBakken" or the "Company") on the TSX (TSX:PBN), immediately
        following the successful completion of the Transaction expected to
        occur on or about October 1, 2009. Please refer to the joint
        TriStar/Petrobank press release dated August 4, 2009 for details
        surrounding the proposed transaction.

    Operational Review

    Production in the second quarter of 2009 averaged 20,401 Boepd. The
Company participated in the drilling of 26 (19.3 net) wells resulting in 25
(18.3 net) oil wells and 1 (1.0 net) D&A well achieving an overall success
rate of 96 percent.

    Southeast Saskatchewan
    ----------------------
    
    Development and exploration activity continued in TriStar's Southeast
Saskatchewan core area with the drilling of 14 (9.8 net) Bakken horizontal
wells with 100 percent success, and 11 (5.0 net) conventional oil wells with
100 percent success.
    Of the Bakken wells drilled in the second quarter, 12 (9.6 net) were
short length horizontals (approximately 600 meters versus 1,400 meter full
length horizontals). TriStar continues to test the concept of reducing the
inter-fracture distance and increasing the effective reservoir contact per
meter of the horizontal well bore. Based on the initial production profiles of
these shorter length horizontals, TriStar believes that this development plan
will result in an increased primary recovery factor in this play than what is
currently being projected by third party engineers. Improving primary recovery
factors in the Bakken resource play through the optimization of stimulation
techniques and technology improvements remains a focus and represents
significant upside to our shareholders.
    Pro forma the Talisman Acquisition, which closed on June 1, 2009,
TriStar's current oil reserve booking represents a recovery factor of
approximately 4 percent of the estimated net total Original Oil In Place
("OOIP") of an estimated more than 750 Mmboe on the Company's land base. A
12.5 percent "primary" recovery factor would yield up to 65 million barrels of
recoverable oil net to TriStar in addition to what is currently booked in
TriStar's reserve report.
    The achievement of a higher primary recovery factor based on the
improvement of the effective frac length would be in addition to this unbooked
upside provided by a 12.5 percent "primary" recovery factor. Based on the 52
net producing short length horizontals that have been drilled and their
production histories, the implied recovery factor for these wells based on
third party booking methods is approximately 15 percent, as compared to 12.5
percent for average long length horizontals. TriStar believes that additional
production history is required on these short length horizontals before a
revised recovery factor can be accurately estimated, but results to date are
very encouraging. Further, TriStar believes that continued advancements in
increasing frac density in shorter and longer length wells will ultimately
increase the recovery factor of this play over time.
    Currently, TriStar's land holdings exceed 193 net sections with over 780
net future Bakken drilling locations identified on our land base. Of these 780
net drilling locations, 630 are considered development with only 205 net wells
currently booked in TriStar's year-end 2008 reserve report.
    In addition to our Bakken wells drilled in the second quarter of 2009,
TriStar drilled 11 (8.5 net) conventional wells in Southeast Saskatchewan at a
100% success rate. Plans for the third quarter for the southeast Saskatchewan
conventional assets include the drilling of several conventional oil wells
into a number of the Company's high quality, light oil pools at Fertile,
Hastings, Bellegarde and Wauchope. Concurrent with the Company's conventional
development drilling program, TriStar will maintain its active production
optimization program.

    
    Alberta
    -------
    
    TriStar drilled 1 well (1.0 net) in Alberta in the second quarter.
TriStar completed an internal review of all of its Alberta projects that
qualify for the Alberta royalty incentives announced in March 2009. These
drilling incentives as they relate to TriStar's large inventory of Alberta
prospects have resulted in increased returns on projects relative to what had
been projected under the original New Alberta Royalty Framework. TriStar has
identified a number of development opportunities across all three of its core
areas in Alberta, many of which will be ideally suited for drilling using
horizontal well technology and multi-stage fracs to maximize economic returns.

    
    Outlook
    -------
    
    Uncertainty and volatility surrounding the global economy, capital
markets and commodity prices continued in the second quarter of 2009. Through
this period, TriStar remained consistent with its philosophy of cost effective
per share growth through an integrated strategy combining acquisitions,
exploitation and exploration activities. The Company has been disciplined by
controlling costs and protecting its balance sheet while aggressively
developing and adding to our high visible growth, high quality asset base.
    TriStar successfully closed and integrated the strategic Talisman
Acquisition in our Southeast Saskatchewan core area which further enhances our
opportunity base. Despite volatile equity markets, TriStar was successful in
raising $287.5 million to assist in adding this combination of legacy
conventional light oil assets with high netbacks and a low decline profile,
and a large undeveloped land base and drilling inventory on the Bakken
resource play.
    The Company now has more than 1,500 gross development, step-out and
exploratory drilling locations on its greater than 900,000 net acre land base.
This large internal suite of strategically focused drilling opportunities
represents a greater than four year drilling inventory.
    On August 4, 2009, TriStar was pleased to announce the strategic merger
of TriStar and Petrobank's Canadian Business Unit. TriStar has achieved
significant growth over the past three years assembling a high quality, long
life asset base with tremendous upside potential. The Transaction combines
complementary asset bases creating a pure-play investment opportunity for
exposure to southeast Saskatchewan light oil resource plays, particularly the
Bakken light oil resource play.
    The merger results in the combination of premier technical teams to focus
on increasing recovery factors of the combined large resource in place asset
base. With the increase in scale, this will provide operating synergies
particularly with respect to complementary gathering systems and oil
processing and gas plant facilities.
    Overall, the consolidation of southeast Saskatchewan Bakken and
conventional assets along with combining the strong technical teams of the
respective companies is an extremely positive next-step in the evolution of
TriStar and positions the Company and our shareholders for significant value
creation.
    As a result of our disciplined approach, TriStar is well positioned to
continue to grow its reserves, production and funds flow per share and
currently has the following key attributes:

    
    -   High Quality Assets:      Top decile netbacks, light oil and natural
                                  gas reserves and production focused in
                                  four core operating areas.

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

    -   Long Life Reserves:       Greater than 108.5 Mmboe (P+P); RLI
                                  approximately 12 years.

    -   High Netback Production:  Greater than 25,000 Boepd (2009E
                                  Exit Guidance); 80 percent light oil.

    -   Extensive Drilling        Greater than 1,500 development drilling
        Inventory:                locations.
                                  Greater than 900,000 net acres of
                                  undeveloped land.
                                  Greater than four year drilling inventory.

    -   Significant Bakken        Greater than 600 development drilling
        Upside:                   locations (greater than 420 not booked in
                                  current reserve report).
                                  193 net sections of prospective Bakken
                                  acreage.

    -   Net Debt (June 30,        Net debt of $401 million.
        2009):                    Bank line of $525 million.

    -   Shares Outstanding:       152.0 million (Basic).
                                  158.5 million (Fully Diluted).


    On behalf of the Board of Directors,

    (signed)

    Brett Herman
    President and Chief Executive Officer
    August 10, 2009
    


    Forward-Looking Statements

    This document contains forward-looking statements. More particularly,
this document contains statements concerning the anticipated closing date of
the strategic combination of TriStar and Petrobank, anticipated exploration
and development activities and anticipated recovery rates.
    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 and the timing for
obtaining necessary approvals and otherwise satisfying all conditions to the
completion of the Transaction.
    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, uncertainties resulting from
potential delays or changes in plans with respect to exploration or
development projects or capital expenditures and risks that TriStar and
Petrobank may not obtain required regulatory and security holder approvals to
the Transaction or that other conditions to the completion of the Transaction
are not satisfied within expected timeframes or at all. 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
wellhead. Boe figures may be misleading, particularly if used in isolation.


    Management's Discussion and Analysis

    Management's Discussion and Analysis ("the MD&A") is dated August 10,
2009. 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, 2009 and
audited consolidated financial statements as at and for the year ended
December 31, 2008 and 2007. 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

    The MD&A contains the terms "funds flow from operations" and "operating
netback" which are not Canadian GAAP standards and therefore may not be
comparable to performance measures presented by others. Funds flow from
operations represents cash flow from operating activities prior to changes in
non-cash working capital and incurred asset retirement expenditures. Operating
netback represents revenue less royalties, realized hedging gains and losses,
operating expenses and transportation expenses. Management believes that in
addition to net income, funds 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 both
net income and cash flow from operating activities, which are determined in
accordance with GAAP, as indicators of TriStar's performance.

    The reconciliation between funds flow from operations, as defined above,
and cash flow from operating activities, as defined by GAAP, is as follows:

    
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
    ($ thousands)                2009         2008         2009         2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Funds flow from
     operations (as defined
     above)                    59,111       96,848      116,062      170,348
    Incurred asset
     retirement expenditures     (325)           -         (597)           -
    Changes in non-cash
     working capital          (10,569)      (8,602)     (18,908)      (9,680)
    -------------------------------------------------------------------------
    Cash flow from operating
     activities (as defined
     by GAAP)                  48,217       88,246       96,557      160,668
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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 wellhead. 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 continuing volatility in
crude and natural gas pricing, the anticipated application of royalty regimes,
the anticipated means of funding capital expenditures, the effects of
implementing International Financial Reporting Standards and the anticipated
terms, conditions and timing of the proposed Transaction (as defined herein).
    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, accounting and royalty regimes,
anticipated economic conditions, anticipated operating conditions and
anticipated timing for obtaining necessary approvals for and otherwise
satisfying all conditions to the completion of the Transaction.
    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 environmental, health, and
safety risks), commodity price and exchange rate fluctuations, changes in
applicable laws and policies, uncertainties resulting from potential delays or
changes in plans with respect to exploration or development projects or
capital expenditures and risks that TriStar and Petrobank may not obtain
required regulatory and security holder approvals to the Transaction or that
other conditions to the completion of the Transaction are not satisfied within
expected timeframes or at all. Certain of these risks are set out in more
detail in this MD&A and in the Company's Annual Information Form ("AIF") 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.

    Subsequent Event

    On August 4, 2009, TriStar, together with Petrobank Energy and Resources
Ltd. ("Petrobank") announced a strategic combination of TriStar and
Petrobank's Canadian Business Unit (the "Transaction").  The combination will
create a new publicly listed company, PetroBakken Energy Ltd. ("PetroBakken").
    Petrobank will capitalize PetroBakken with its Canadian Business Unit
assets and liabilities and $400 million of cash. PetroBakken will then acquire
all the outstanding shares of TriStar. In return, Petrobank will receive 109.8
million common shares of PetroBakken which will represent approximately 64% of
PetroBakken's anticipated shares outstanding. Consideration to TriStar
shareholders will consist of a combination of PetroBakken common shares and
cash. At the election of the holder, a TriStar shareholder will receive $14.75
cash, or 0.5350 of a PetroBakken share, or a combination thereof, being
approximately $3.75 per share in cash and 0.3989 of a PetroBakken share, for
each share held. In aggregate, TriStar shareholders will receive approximately
$580 million in cash and 61,762,500 shares of PetroBakken, representing 36% of
PetroBakken's anticipated shares outstanding. In the event that the holders of
TriStar shares elect to receive more or less than the set amount of cash, or
more or less than the set amount of PetroBakken shares of which they are
entitled, the amount of cash or shares to be received by a holder will be
adjusted pro rata and the balance of the consideration will be paid in cash or
PetroBakken shares, as the case may be.
    The Transaction will be completed by way of plan of arrangement (the
"Arrangement") and is subject to TriStar shareholder approval. The information
circular for the Arrangement is expected to be mailed to TriStar shareholders
on or about August 31, 2009 and it is anticipated that the special meeting of
TriStar's shareholders will be held on or about September 30, 2009 with
closing of the Transaction to occur on or about October 1, 2009. The
successful completion of the Transaction is also subject to customary
regulatory, stock exchange, court and other approvals, and will result in
certain compensation and financing arrangements being accelerated.
    The Arrangement prohibits TriStar from soliciting or initiating any
discussion regarding any other business combination or sale of material
assets, contains provisions enabling Petrobank to match competing, unsolicited
proposals and, subject to certain conditions, provides for a reciprocal
termination fee of up to $80 million.

    Significant Transactions

    Talisman Properties Acquisition

    On June 1, 2009, TriStar, together with Crescent Point Resources Limited
Partnership ("Crescent Point"), acquired certain properties in southeast
Saskatchewan from Talisman Energy Inc. ("Talisman") for $720.0 million.
Concurrent with the close of the transaction with Talisman, TriStar and
Crescent Point sold certain of the properties to Shelter Bay Energy Inc. for
$71.0 million. The remaining properties were divided equally by TriStar and
Crescent Point on a working interest basis where each acquired fifty percent
of Talisman's interest in the properties for a net cost to TriStar of $321.8
million after estimated closing adjustments. In addition, $8.4 million was
accrued in respect of the related asset retirement obligations. Together,
these transactions are described as the "Talisman Properties Acquisition".
    Concurrent with the Talisman Properties Acquisition, TriStar entered into
an agreement to issue 31.25 million subscription receipts for gross proceeds
of approximately $250 million. There was an overallotment option of 4.7
million additional subscription receipts which the underwriters exercised
resulting in additional proceeds of $37.6 million. Total net proceeds were
$267 million after estimated related costs. Concurrent with the close of the
Talisman Properties Acquisition on June 1, 2009, each subscription receipt was
exchanged for one common share. The proceeds from this equity financing was
used to fund the majority of the Talisman Properties Acquisition, with the
remainder being from TriStar's credit facilities.

    Private Company Property Acquisition

    On March 2, 2009, TriStar completed the acquisition of properties from a
private southeast Saskatchewan company through the issuance of approximately
2.4 million shares and payment of $8.6 million of cash, including the
assumption of the private company's net debt. In addition, $0.4 million was
accrued in respect of the asset retirement obligations.

    Results of Operations

    
    Production

                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Daily Production
    Crude oil and natural
     gas liquids
     (Bbls per day)            15,886       15,228       16,332       14,418
    Natural gas
     (Mcf per day)             27,089       30,621       25,850       32,778
    -------------------------------------------------------------------------
    Total (Boepd)              20,401       20,332       20,641       19,882
    % Oil and liquids              78%          75%          79%          73%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the three months ended June 30, 2009, TriStar averaged 20,401 Boepd as
compared to 20,332 Boepd in the second quarter of 2008. Production was
comprised of 15,886 Bbls per day of crude oil and natural gas liquids ("NGL")
and 27,089 Mcf per day of natural gas. For the six months ended June 30, 2009,
TriStar averaged 20,641 Boepd as compared to 19,882 Boepd in the second
quarter of 2008, a 4 percent increase. Production was comprised of 16,332 Bbls
per day of crude oil and NGL and 25,850 Mcf per day of natural gas.
    Production from acquisitions is 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. The Talisman Properties
Acquisition closed June 1, 2009.

    Production for the quarter was divided between the following areas:

                                                          Three
                                                         Months
                                                          ended
                                                        June 30,
                                                           2009
    -------------------------------------------------------------------------
                            Crude Oil      Natural
                              and NGL      Gas Mcf        Total
    Area                 Bbls per day      per day        Boepd            %
    -------------------------------------------------------------------------
    Alberta                     3,601       24,136        7,624           37
    Saskatchewan/Manitoba      12,285        2,953       12,777           63
    -------------------------------------------------------------------------
    Total                      15,886       27,089       20,401          100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    During the quarter, the Company drilled 26 (19.3 net) wells, achieving a
96 percent success rate.

    Pricing

    Crude oil prices decreased in the second quarter of 2009 as compared to
2008 as WTI reached a low of US$45.88 per Bbl during the quarter. WTI averaged
US$59.62 per Bbl in the second quarter of 2009 after averaging US$123.92 per
Bbl in the second quarter of 2008, a 52 percent decrease. The Canadian dollar
averaged $0.86 per US dollar in the second quarter of 2009 relative to $0.99
per US dollar in the second quarter of 2008. Edmonton Par averaged $65.90 per
Bbl in the second quarter of 2009, as compared to $126.51 per Bbl in the
second quarter of 2008, a 48 percent decrease. The price of crude oil
continued to be volatile in the second quarter of 2009, a result of
uncertainty around future worldwide economic conditions.
    Natural gas prices averaged $3.29 per Mcf for AECO daily spot, $3.66 per
Mcf for AECO monthly, and US$3.70 per Mmbtu for NYMEX daily gas in the second
quarter of 2009. In the second quarter of 2008, natural gas prices averaged
$9.70 per Mcf for AECO daily spot, $9.72 per Mcf for AECO monthly, and
US$11.36 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 liquefied natural gas, continue to cause
significant price volatility in North American natural gas prices. Continued
uncertainty around North American industrial demand has resulted in a
continued negative price trend for North American natural gas.
    TriStar's average realized price, prior to the effects of hedging, for
its crude oil and NGL was $62.44 per Bbl in the second quarter while its
realized natural gas price was $3.85 per Mcf.

    
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Benchmark Prices
    Crude oil - WTI
     (US$ per Bbl)              59.62       123.92        51.35       110.84
    Crude oil - Edmonton
     Par Price ($ per Bbl)      65.90       126.51        57.78       112.32
    Natural gas - AECO-C
     Daily Spot ($ per Mcf)      3.29         9.70         3.99         8.59
    Natural gas - AECO-C
     Monthly ($ per Mcf)         3.66         9.72         4.65         8.61
    Exchange rate -
     (CDN$/US$)                  0.86         0.99         0.83         0.99
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    TriStar Average Realized
     Prices Prior to Hedging
    Crude oil and NGL -
     ($ per Bbl)                62.44       113.29        54.02       101.94
    Natural gas -
     ($ per Mcf)                 3.85         9.91         4.70         8.76
    Boe - ($ per Boe)           53.74        99.78        48.63        88.37
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Revenues

    For the three months ended June 30, 2009, TriStar recorded $90.3 million
in crude oil and NGL sales and $9.5 million in natural gas sales, a 42 percent
decrease and 67 percent decrease, respectively, over the second quarter of
2008 when TriStar recorded $157.0 million of crude oil and NGL sales and $27.6
million of natural gas sales. These amounts exclude the effects of hedging.
    For the six months ended June 30, 2009, TriStar recorded $159.7 million in
crude oil and NGL sales and $22.0 million in natural gas sales, a 40 percent
decrease and 58 percent decrease, respectively, over the six months ended June
30, 2008 when TriStar recorded $267.5 million of crude oil and NGL sales and
$52.3 million of natural gas sales due to significantly lower realized
commodity prices. These amounts exclude the effects of hedging.


                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
    ($ thousands)                2009         2008         2009         2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Revenues by Product
    Crude oil and NGL          90,265      156,991      159,702      267,514
    Realized hedging gains
     (losses) on crude oil
     and NGL                    5,833      (20,835)      22,531      (28,513)
    Natural gas                 9,497       27,616       21,979       52,260
    Realized hedging gains
     (losses) on natural gas       30         (414)          30         (279)
    -------------------------------------------------------------------------

    Total revenues
     (including hedging)      105,625      163,358      204,242      290,982
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Royalty Expenses

    Royalties for the three months ended June 30, 2009 were $13.4 million or
13.4 percent of revenue (before effects of hedging) as compared to $35.7
million or 19.3 percent for the corresponding three months in 2008. Royalties
for the six months ended June 30, 2009 were $26.5 million or 14.6 percent of
revenue (before effects of hedging) as compared to $62.1 million or 19.4
percent for the corresponding six months in 2008. 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 (before the effects of hedging).
    Commencing in January 2009, the Company has been subject to Alberta's New
Royalty Framework ("NRF"). In addition to the NRF, the Alberta provincial
government has implemented a number of incentive measures intended to
stimulate drilling-related spending in the near term. Overall, these
additional incentive measures generally have positive economic impacts on the
wells that they apply to. As a result of the lower commodity price environment
in the quarter ended June 30, 2009, and the fact that the royalties paid under
the NRF are sensitive to commodity prices, the overall royalty burden
associated with wells affected by the NRF was generally less in the second
quarter of 2009 than what it would have been under the royalty framework that
was in place prior to 2009. In the event of rising commodity prices, the
royalty burden associated with wells affected by the NRF will be generally
greater than it would have been under the old royalty framework.
    TriStar has significant production in the province of Saskatchewan and
production in Alberta that is not subject to crown royalties, mitigating the
effect of the NRF on TriStar's corporate royalty rates. As well, some of the
production from the Talisman Properties Acquisition is subject to lower
royalties because TriStar also acquired the freehold mineral title, which
results in a lower royalty burden.

    Operating Expenses

    Operating expenses were $20.7 million or $11.16 per Boe in the three
months ended June 30, 2009 as compared to $19.6 million or $10.62 per Boe in
the three months ending June 30, 2008. Operating expenses were $42.1 million
or $11.27 per Boe in the six months ended June 30, 2009 as compared to $38.2
million or $10.56 per Boe in the six months ending June 30, 2008.

    Transportation Expenses

    Transportation expenses were $1.4 million or $0.75 per Boe in the three
months ended June 30, 2009 as compared to $2.5 million or $1.33 per Boe in the
three months ended June 30, 2008. Transportation expenses were $3.3 million or
$0.88 per Boe in the six months ended June 30, 2009 as compared to $4.4
million or $1.22 per Boe in the six months ended June 30, 2008. The second
quarter of 2008 saw significant oil trucking costs due to constraints on the
major oil gathering system, Enbridge Pipelines (Saskatchewan). Since then, an
expansion of that system occurred and also utilization decreased due to
reduced drilling activity as a result of lower realized oil prices. This has
resulted in lower incremental trucking costs.

    Operating Netbacks

    Operating netbacks were $37.78 per Boe for the quarter ended June 30,
2009 as compared to $57.05 per Boe for the quarter ended June 30, 2008 and
$35.40 for the six months ended June 30, 2009 as compared to $51.47 for the
six months ended June 30, 2008.

    
    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)             2009         2008         2009         2008
    -------------------------------------------------------------------------

    Total production (Boepd)   20,401       20,332       20,641       19,882
    -------------------------------------------------------------------------

    Crude oil and natural gas
     liquids ($ per Bbl)        62.44       113.29        54.02       101.94
    Realized hedging
     gains/(losses)
     ($ per Bbl)                 4.18       (14.87)        7.96       (10.81)
    -------------------------------------------------------------------------

    Natural gas ($ per Mcf)      3.85         9.91         4.70         8.76
    Realized hedging
     gains ($ per Mcf)           0.01        (0.15)        0.01        (0.05)
    -------------------------------------------------------------------------

    Average Price Prior to
     Hedging                    53.74        99.78        48.63        88.37
    -------------------------------------------------------------------------

    Realized gain/(loss) on
     financial instruments
     (hedging)                   3.16       (11.49)        6.04        (7.96)
    Royalties, net              (7.21)      (19.29)       (7.12)      (17.16)
    Operating                  (11.16)      (10.62)      (11.27)      (10.56)
    Transportation              (0.75)       (1.33)       (0.88)       (1.22)
    -------------------------------------------------------------------------

    Operating Netback           37.78        57.05        35.40        51.47
    Operating Netback
     (prior to hedging)         34.62        68.54        29.36        59.43
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    General and Administrative Expenses

    During the second quarter of 2009, general and administrative ("G&A")
expenses, net of recoveries and capitalized amounts, were $3.6 million or
$1.92 per Boe as compared to the second quarter ended June 30, 2008 where G&A
expenses were $3.2 million or $1.73 per Boe. G&A, net of recoveries and
capitalized amounts, for the six months ended June 30, 2009 were $6.0 million
or $1.61 per Boe as compared to $5.9 million or $1.63 per Boe for the six
months ended June 30, 2008.

                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
    ($ thousands)                2009         2008         2009         2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    General and administrative
     expenses                   7,591        6,445       14,809       12,277
    Recoveries                 (1,340)      (1,354)      (3,663)      (2,694)
    Capitalized general and
     administrative expenses   (2,684)      (1,881)      (5,131)      (3,668)
    -------------------------------------------------------------------------

    Total net general and
     administrative expenses    3,567        3,210        6,015        5,915
    G&A per Boe - ($ per Boe)    1.92         1.73         1.61         1.63
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Provision for Non-Recoverable Accounts Receivable

    For the three months ended June 30, 2009, TriStar recorded $3.3 million
or $1.76 per Boe as a provision for non-recoverable accounts receivable
related to the SemCanada Crude Company ("SemCanada") creditor protection
filing, as further described in "Contractual Obligations - Working Capital",
compared to $1.5 million or $0.81 per Boe in the quarter ended June 30, 2008.
The amount of the expense was $3.3 million or $0.87 per Boe for the six months
ended June 30, 2009 compared to $1.5 million or $0.41 per Boe for the six
months ended June 30, 2008.

    Interest and Bank Expenses

    Interest and bank expenses were $2.8 million or $1.50 per Boe in the
quarter ended June 30, 2009 as compared to $3.4 million or $1.82 per Boe in
the quarter ended June 30, 2008. Interest and bank expenses were $5.0 million
or $1.35 per Boe in the six months ended June 30, 2009 as compared to $7.0
million or $1.92 per Boe in the six months ended June 30, 2008. The absolute
amount of interest and bank expenses, for the current quarter, relative to the
same quarter in 2008, decreased primarily because of reduced prime and Bankers
Acceptance interest rates. However, the Company has begun paying increased
interest rate spreads since the renewal of its credit facility on June 1,
2009, in line with general price increases from lenders.
    The Company's effective interest rates for the three and six months ended
June 30, 2009 were 2.9 percent and 2.7 percent, respectively, compared to 4.8
percent and 5.0 percent, for the three and six months ended June 30, 2008,
respectively. The interest rate is based on applicable bankers acceptance
rates plus a margin that varies on the basis of various financial ratios.

    Stock-Based Compensation Expenses

    The Company's stock-based compensation expenses for the quarter ended
June 30, 2009 were $2.3 million or $1.26 per Boe as compared to the quarter
ended June 30, 2008 of $1.4 million or $0.76 per Boe. The Company's
stock-based compensation expenses for the six months ended June 30, 2009 were
$4.6 million or $1.24 per Boe as compared to the six months ended June 30,
2008 of $2.7 million or $0.75 per Boe. The stock-based compensation expenses
reflect the value ascribed to the non-cash compensation provided by TriStar,
and were calculated utilizing a fair value assessment methodology. These
amounts are net of the portion of stock-based compensation costs capitalized
to property and equipment when they are related to drilling, production and
acquisitions, which amounted to $1.6 million for the quarter ended June 30,
2009 or $0.87 per Boe (2008 - $1.0 million or $0.53 per Boe). For the six
months ended June 30, 2009, the capitalized amounts were $3.2 million or $0.86
per Boe (2008 - $1.9 million or $0.52 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 expenses in the quarter ended June
30, 2009 were $58.6 million or $31.57 per Boe as compared to the quarter ended
June 30, 2008 which were $60.4 million or $32.63 per Boe. Depletion,
depreciation and accretion expenses in the six months ended June 30, 2009 were
$119.0 million or $31.86 per Boe as compared to the six months ended June 30,
2008 which were $118.0 million or $32.62 per Boe.
    At June 30, 2009, the calculation of the depletion expense excluded
unproved property and undeveloped land cost of $410.5 million (2008: $388.7
million). Unused seismic costs of $26.2 million (2008: $31.3 million) were
also excluded. Future development costs of $440.9 million (2008: $166.7
million) were included in the depletion calculation. The excluded amounts,
which represent costs incurred for unproved properties, will be brought into
the depletion pool at varying rates over the next five years.

    Taxes

    For the quarter ended June 30, 2009, TriStar recorded capital and current
tax expenses of $1.4 million, comprised of capital tax expenses of $1.4
million and current tax expenses of $nil, and future income tax reductions of
$5.4 million as compared to the quarter ended June 30, 2008 when the Company
recorded $0.6 million of capital tax expenses and current tax reductions of
$2.1 million and future income tax reductions of $17.8 million. For the six
months ended June 30, 2009, TriStar recorded capital and current tax expenses
of $1.9 million, comprised of capital tax expenses of $1.9 million offset by
current tax expenses of $nil, and future income tax reductions of $9.6 million
as compared to the six months ended June 30, 2008 when the Company recorded
$1.5 million of capital and future income tax reductions of $18.6 million.
Capital tax expenses are comprised of the Saskatchewan Capital Tax and
Resource Surcharge.
    As at June 30, 2009, TriStar had approximately $1.0 billion of tax pools
available to offset future taxable income.

    Net Loss and Comprehensive Income

    The net loss for the quarter ended June 30, 2009 was $20.8 million
compared to a net loss of $55.2 million during the same period in 2008. The
net loss for the six months ended June 30, 2009 was $34.6 million compared to
a net loss of $61.3 million during the same period in 2008. The net loss for
the three and six months ended June 30, 2009 includes the unrealized loss of
$24.4 million and $36.6 million (before tax), respectively, on the Company's
financial derivative contracts recognized in the period.
    Basic and diluted net loss per share for the quarter ended June 30, 2009
were $0.16 per share compared to basic and diluted net loss per share of $0.50
per share for the same period in 2008. Basic and diluted net loss per share
for the six months ended June 30, 2009 were $0.29 per share compared to basic
and diluted net loss per share of $0.59 per share for the same period in 2008.

    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, 2009, the fair value of the financial derivative contracts
was a liability of $0.4 million. The fair values represent the market price to
buy out TriStar's contracts at June 30, 2009 and may be different from what
will eventually be realized.
    WTI averaged US$59.62 per Bbl in the second quarter of 2009 up from
US$43.08 per Bbl in the first quarter of 2009 and was US$69.89 as at June 30,
2009 as compared to US$49.66 as at March 31, 2009. Although this increase had
an overall positive impact on TriStar's revenue, this has resulted in hedge
contracts being less valuable during the second quarter of 2009 with a
realized gain on financial instruments of $5.9 million relative to a $16.7
million realized gain in the first quarter of 2009.
    For the quarter ended June 30, 2009, the Company had a net unrealized
loss on its financial derivative contracts of $24.4 million before taxes. This
is a result of the Company's overall contract position as measured at June 30,
2009 being less valuable during the remaining term of these contracts than it
was at the previous measurement date of March 31, 2009 since a portion of the
benefit that was accrued as at March 31, 2009 was actually realized during the
three months ended June 30, 2009 and since the forward commodity price curve
moved up substantially relative to March 31, 2009.
    The following tables summarize TriStar's commodity risk management
positions as at June 30, 2009:

    
    Oil Contracts
    -------------
                                        Volume
    Term                    Type        (Bbl/d)       Price          Index
    -------------------------------------------------------------------------
    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     65.00 - 73.25       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     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     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     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
    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
    Jul. 1, 2009 -
     Dec. 31, 2009    Costless Collar     500   C$65.00 - C$76.15   C$WTI
    Jul. 1, 2009 -
     Dec. 31, 2009    Costless Collar     500   C$65.00 - C$75.65   C$WTI
    Jan. 1, 2010 -
     Dec. 31, 2010    Costless Collar     500   C$65.00 - C$87.25   C$WTI
    Jan. 1, 2010 -
     Dec. 31, 2010    Costless Collar     500   C$65.00 - C$90.00   C$WTI
    Jan. 1, 2010 -
     Dec. 31, 2010    Costless Collar     500   C$65.00 - C$99.50   C$WTI
    Jan. 1, 2010 -
     Dec. 31, 2010    Costless Collar     500   C$75.00 - C$100.00  C$WTI
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The fair value of the oil costless collars, puts and swap contracts at
June 30, 2009 was a net liability of $0.9 million.

    Natural Gas Contracts
    ---------------------
                                       Volume
    Term                    Type       (GJ/d)         Price       Index
    -------------------------------------------------------------------------
    Jun. 1, 2009 -
     Sep. 30, 2009    Costless Collar   2,500      3.75 - 4.40  AECO monthly
    Nov. 1, 2009 -
     Nov. 30, 2010    Costless Collar   2,500      5.00 - 7.20  AECO monthly
    Nov. 1, 2009 -
     Oct. 31, 2010    Costless Collar   1,500      5.00 - 6.25  AECO monthly
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The fair value of the natural gas costless collars, puts and swap
contracts at June 30, 2009 was a net asset of $0.4 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 exchange rate risks.

                                         Amount      Strike
                           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
    Dec. 1, 2008 -
     Dec. 31, 2009         Forward     $2,500,000     $1.28       $3,200,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The fair value of the foreign exchange contracts as at June 30, 2009 was a
net asset of $0.6 million.

    Bankers' Acceptance Fixed Interest Rate Swap Contracts
    ------------------------------------------------------

    Term                                          Fixed Rate      Amount CDN
    -------------------------------------------------------------------------
    Jan. 29, 2009 - Jan. 29, 2012                   1.620%       $50,000,000
    Jan. 29, 2009 - Jan. 30, 2012                   1.653%       $50,000,000
    Feb. 17, 2009 - Feb. 10, 2012                   1.540%       $25,000,000
    Feb. 17, 2009 - Feb. 12, 2012                   1.510%       $25,000,000
    Jun. 19, 2009 - Jun. 19, 2012                   2.094%       $25,000,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The fair value of the fixed interest rate swap contracts as at June 30,
2009 was a net liability of $0.5 million.
    

    Liquidity and Capital Resources

    In order to support TriStar's growth-oriented business plan, TriStar's
strategy is to fund its capital expenditure program with cash flows from
operations and bank debt.
    As at June 30, 2009, the Company had available a $525.0 million credit
facility. The Company's credit facility is with a syndicate of eight banks and
is open for review semi-annually. On close of the Talisman Properties
Acquisition, TriStar's credit facility was increased from $450.0 million to
$525.0 million. There were no changes to existing terms under this increased
credit facility except increases to the applicable margins and stamping fees
described below which determine the interest expense paid by the Company. The
Company's next credit facility review is due to be completed by October 31,
2009. 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 forecast commodity prices and the current economic
environment.
    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.
    As at June 30, 2009, TriStar had long-term debt of $348.1 million, which
is reduced by $2.1 million of prepaid credit facility renewal fees to be
amortized over the term of the credit facility, for a total of $350.2 million
drawn on its credit facility. Net working capital deficit was $52.9 million
(excluding the fair value of financial instruments and related current future
income taxes) for a total net debt of $401.0 million. As at that date, TriStar
had met all of its requirements pertaining to this loan agreement and was not
required to make any repayments.

    Capital Expenditures

    During the quarter, the Company incurred $370.3 million of capital
expenditures, net of $1.3 million of disposition proceeds, as compared to
$91.6 million of capital expenditures, net of $12.3 million of disposition
proceeds spent for the three months ended June 30, 2008. The Company incurred
$455.4 million of capital expenditures, net of $10.4 million of disposition
proceeds during the six months ended June 30, 2009, as compared to $694.0
million of capital expenditures, net of $15.2 million of disposition proceeds
in the six months ended June 30, 2008. The following table details additions
to the Company's property 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)                2009         2008         2009         2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Drilling, development
     and production
     equipment                 35,075       43,324       95,389      104,878
    Land and seismic            3,208       18,989        4,129       59,988
    Acquisitions(1)           328,908       38,164      357,985      538,065
    Dispositions               (1,302)     (12,279)     (10,446)     (15,191)
    Other - cash items(2)       2,745        2,482        5,155        4,344
    Other - non-cash items(3)   1,622          896        3,211        1,876
    -------------------------------------------------------------------------

    Total                     370,256       91,576      455,423      693,960
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Acquisitions include the amount allocated to property 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, as
        applicable. For these corporate and property acquisitions, TriStar
        paid total consideration, including assumed net working capital and
        related transaction costs, as applicable, of $328.9 million in the
        second quarter of 2009 (Q2 2008: $513.3 million).

    (2) Includes administrative assets and capitalized G&A.

    (3) Includes capitalized stock-based compensation expense.

    The Company's current exploration and development budgeted capital
programs for 2009 (excluding acquisitions and dispositions) are expected to be
financed primarily through the Company's cash flow and credit facility. 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, credit facility and new equity
issuances.

    Goodwill

    As a result of the adjustment of certain purchase price equations for
acquisitions that occurred in prior periods, goodwill was increased by $0.2
million during the quarter ended June 30, 2009. Goodwill as at June 30, 2009
was $249.8 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,
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Outstanding Common
     shares
    Weighted average
     outstanding
     Common shares
    Basic(1)              127,501,902  110,109,657  120,952,396  104,588,862
    Diluted(1)            127,501,902  110,109,657  120,952,396  104,588,862
    -------------------------------------------------------------------------
    Outstanding
     Securities:
    Common shares         152,036,962  110,109,657  152,036,962  110,109,657
    Common share options    4,237,034    3,270,900    4,237,034    3,270,900
    Incentive shares        2,205,983    2,221,834    2,205,983    2,221,834
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Due to the antidilutive effect of TriStar's net loss for the three
        and six months ended June 30, 2009 and 2008, the diluted number of
        shares is equivalent to the basic number of shares. Therefore,
        diluted per share amounts for net loss and funds flow from operations
        are equivalent to basic per share amounts.
    

    Contractual Obligations

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

    As at June 30, 2009, the Company had available a $525.0 million credit
facility. The Company's credit facility is with a syndicate of eight banks and
is open for review semi-annually. On close of the Talisman Properties
Acquisition, TriStar's credit facility was increased from $450.0 million to
$525.0 million. There were no changes to existing terms under this increased
credit facility except increases to the applicable margins and stamping fees
which determine the interest expense paid by the Company. The Company's next
credit facility review is due to be completed by October 31, 2009. 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 forecast commodity prices and the current economic environment.

    Flow-through shares
    -------------------

    On December 18, 2008, TriStar issued 1,025,000 flow-through Common Shares
at a price of $14.70 per share for gross proceeds of $15.1 million. As a
result, the Company must incur qualifying resource expenditures amounting to
$15.1 million before December 31, 2009. The related tax impact was recorded in
the first quarter of 2009. The qualifying expenditures were renounced to
shareholders as at December 31, 2008. The obligation remaining for this
flow-through share issue was $8.8 million as at June 30, 2009.

    Operating commitments
    ---------------------

    TriStar is obligated to pay various costs associated with operations
incurred in the normal course of business. These costs include royalties paid
to the Alberta and Saskatchewan governments, surface and mineral lease rentals
to various landowners, and abandonment and reclamation costs. These costs are
highly dependent on the future operating environment and are subject to
changes in commodity prices, ownership, production volumes and government
policies.

    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, NGL 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 nor for July crude volumes shipped up to July 21, 2008. TriStar had an
irrevocable standby letter of credit for $1.5 million which was fully
collected subsequent to July 21, 2008. The remaining amount owed to TriStar as
a result of this matter is $7.1 million. On July 24, 2009, SemCanada and
certain related companies filed Plans of Arrangement which would result in a
payout to unsecured creditors such as TriStar of 4% of amounts outstanding.
Accordingly, the Company has recorded a reduction of accounts receivable
totalling $6.8 million of the amount owed, accounted for as a provision for
non-recoverable accounts receivable of $3.3 million in the second quarter of
2009, $1.5 million in the second quarter of 2008 and $2.0 million in the third
quarter of 2008. The Company continues to monitor the matter and make
necessary adjustments for impairment based on its expectation of ultimate
collection. There are no other significant accounts receivable at June 30,
2009 that TriStar deemed uncollectible.
    During the fourth quarter of 2008, TriStar entered into a credit
insurance policy to provide coverage over the collectability of production
revenues from certain buyers. The Company believes that this policy, in
conjunction with continued prudent credit-granting practices, should reduce
the non-collectability of bad debts from these buyers.
    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 forecast 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 ending 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 ending
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. While at this time the impact of adopting IFRS cannot
be reasonably quantified, TriStar has developed and commenced implementing its
plan for the changeover to IFRS. The IFRS changeover plan ensures that TriStar
addresses matters such as accounting policies, information technology systems,
internal controls, disclosure controls and procedures, staffing requirements,
and business activities impacted by accounting processes and measures.
    The plan is comprised of three stages. The first stage is to obtain an
understanding of the impact that the conversion to IFRS will have on the
elements described above. This commenced in 2008 and will continue in 2009.
The second stage will be to develop and test solutions to the issues
identified in stage one. It is anticipated that this will also largely take
place in 2009. The third and final stage will see the implementation of the
solutions developed in stage two. While the third stage will commence in some
cases in 2009, it will also occur in 2010.
    The impact of converting to IFRS may be material. Significant impacts
will be on accounting for property and equipment: "full cost" accounting under
current GAAP differs in significant ways from IFRS, with IFRS generally
requiring analysis and computation at a greater level of detail than current
GAAP. Further differences are anticipated to be in disclosures, which are more
onerous under IFRS than current GAAP.

    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 favourable 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 and interest 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.
    

    Environmental Regulation and Risk

    The oil and gas industry has various environmental risks subject to
regulation by various governmental bodies. Environmental legislation includes,
but is not limited to, operational controls, site restoration and abandonment
requirements and restrictions on emissions of various substances related to
the production of oil and natural gas. Compliance with this legislation may
require additional costs and a failure to comply may result in fines and
penalties.
    TriStar is committed to minimizing the environmental impact from its
operations through its environmental program which includes stakeholder
communication, resource conservation and site restoration.

    Critical Accounting Estimates

    The preparation of the Company's financial statements requires management
to adopt accounting policies that involve the use of significant estimates and
assumptions. These estimates and assumptions are developed based on the best
available information and are believed by management to be reasonable under
the existing circumstances. New events or additional information may result in
the revision of these estimates over time. The critical estimates are
discussed below:

    Full cost accounting and ceiling test
    -------------------------------------

    The Company follows the full cost method of accounting for petroleum and
natural gas operations. All costs related to the acquisition of, exploration
for and development of petroleum and natural gas reserves are capitalized.
These capitalized costs are evaluated on an annual basis to determine that the
costs are recoverable and do not exceed the fair value of the properties (the
"ceiling test"). These costs are also depleted on a unit-of-production basis.
The ceiling test and depletion expense require estimates of reserve volumes
and discounted cash flows, which are calculated by independent reserve
engineers using assumptions including, but not limited to, future commodity
prices, government policy, royalty rates, capital spending and operating
costs.

    Goodwill
    --------

    The Company records goodwill relating to a corporate acquisition when the
purchase price exceeds the fair value for accounting purposes of the net
identifiable assets and liabilities acquired by the Company. The goodwill
balance is assessed for impairment annually at year-end or as events occur
that could result in an impairment. The Company compares the fair value of the
entity to its carrying value, including goodwill. If the carrying value
exceeds the fair value, a goodwill impairment loss is charged to income. The
fair value is largely determined using estimates of reserve volumes and
discounted cash flows, which are calculated by independent reserve engineers
using assumptions including, but not limited to, future commodity prices,
government policy, royalty rates, capital spending and operating costs.

    Hedges
    ------

    The Company uses derivative financial instruments from time to time to
hedge its exposure to commodity price, foreign exchange and interest rate
fluctuations. The mark to market valuations of these hedge contracts are
presented in the Company's Consolidated Financial Statements as at June 30,
2009. These valuations are based on forward looking estimates including, but
not limited to, volatility, interest rates and commodity prices.

    Asset retirement obligations
    ----------------------------

    The Company records a liability for the fair value of legal obligations
associated with the retirement of long-lived tangible assets in the period in
which they are incurred, normally when the asset is purchased or developed. On
recognition of the liability, there is a corresponding increase in the
carrying amount of the related assets, known as the asset retirement cost,
which is depleted on a unit-of-production basis over the life of the reserves.
The liability for these future legal obligations is discounted using estimates
of interest rates, inflation rates and the length of time to actual
settlement.
    A summary of the significant accounting policies used by TriStar can be
found in note 4 to the Consolidated Financial Statements as at and for the
year ended December 31, 2008.

    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              Jun 30,      Mar 31,      Dec 31,      Sep 30,
    Boepd amounts)             2009(4)      2009(4)        2008       2008(5)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Production revenue
     (prior to hedging)        99,762       81,919      111,493      185,444
    Net income (loss)         (20,793)     (13,826)      60,655      105,261
      Per share -
       basic                    (0.16)       (0.12)        0.54         0.94
      Per share -
       diluted                  (0.16)       (0.12)        0.52         0.91
    Production (Boepd)         20,401       20,883       22,072       20,553
    Funds flow from
     operations(1)             59,111       56,951       69,597       97,042
      Per share -
       basic                     0.46         0.50         0.62         0.87
      Per share -
       diluted                   0.46         0.50         0.60         0.84
    Cash flow from
     operating
     activities(2)             48,217       48,340       77,453      113,929
      Per share -
       basic                     0.38         0.42         0.69         1.02
      Per share -
       diluted                   0.38         0.42         0.67         0.99
    Total assets            2,369,937    2,107,074    2,056,841    2,014,043
    Total net debt(3)         400,954      356,773      347,724      335,038
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                Three        Three        Three        Three
                               months       months       months       months
    ($ thousands except         ended        ended        ended        ended
    per share and              Jun 30,      Mar 31,      Dec 31,      Sep 30,
    Boepd amounts)          2008(4)(5)      2008(4)      2007(4)      2007(4)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Production revenue
     (prior to hedging)       184,607      135,167       85,419       53,578
    Net income (loss)         (55,212)      (6,058)     (11,414)      (5,419)
      Per share - basic         (0.50)       (0.06)       (0.17)       (0.11)
      Per share - diluted       (0.50)       (0.06)       (0.17)       (0.11)
    Production (Boepd)         20,332       19,431       14,769       10,120
    Funds flow from
     operations(1)             96,848       73,500       43,503       26,735
      Per share - basic          0.88         0.74         0.64         0.56
      Per share - diluted        0.88         0.74         0.64         0.56
    Cash flow from
     operating
     activities(2)             88,246       72,423       40,007       25,004
      Per share - basic          0.80         0.73         0.58         0.52
      Per share - diluted        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(3)         303,585      317,315      223,398      246,690
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) "Funds 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. "Funds
        flow from operations" represents cash flow from operating activities
        prior to changes in non-cash working capital and asset retirement
        expenditures. TriStar's determination of funds flow from operations
        may not be comparable to that found in the consolidated statement of
        cash flows in the audited financial statements. TriStar also presents
        funds flow from operations per share whereby per share amounts are
        calculated using weighted average shares outstanding consistent with
        the calculation of earnings per share.

    (2) "Funds flow from operating activities" is determined in accordance
        with GAAP and includes changes in non-cash working capital and asset
        retirement expenditures.

    (3) "Total net debt" is calculated as long-term debt and current
        liabilities less current assets, excluding the current fair value of
        financial instruments and related current future income taxes.

    (4) Due to the antidilutive effect of TriStar's net loss for these
        periods, the diluted number of shares is equivalent to the basic
        number of shares. Therefore, diluted per share amounts for net loss,
        funds flow from operations and cash flow from operating activities
        are equivalent to basic per share amounts.

    (5) For the three months ended June 30, 2008 and September 30, 2008,
        revenues were originally stated as $183.1 million and $183.4 million,
        respectively, which reflected a reduction of revenue for a provision
        for loss on amounts receivable from SemCanada of $1.5 million and
        $2.0 million, respectively. Commencing in the three months ended
        June 30, 2009, these amounts previously provided for have been
        reclassified from revenue to a new account in the Consolidated
        Statements of Operations, Comprehensive Loss and Retained Earnings
        (Deficit), the "provision for non-recoverable accounts receivable".


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

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                        June 30, December 31,
    ($ thousands)                                          2009         2008
    -------------------------------------------------------------------------

    Assets

    Current assets
      Accounts receivable                                62,518       75,493
      Taxes receivable                                    3,320        5,673
      Other current assets                                4,319        4,435
      Fair value of financial instruments
       (note 11)                                         11,411       45,941
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                         81,568      131,542

    Property and equipment (note 5)                   2,036,869    1,679,611
    Goodwill                                            249,799      245,688
    Fair value of financial instruments (note 11)         1,701            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total assets                                      2,369,937    2,056,841
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities

    Current liabilities
      Accounts payable and accrued liabilities          123,062      152,423
      Fair value of financial instruments
       (note 11)                                          9,930        9,714
      Future income taxes                                   402        9,832
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                        133,394      171,969

    Long-term debt (note 6)                             348,049      280,902
    Asset retirement obligations (note 7)                41,818       30,765
    Fair value of financial instruments (note 11)         3,590            -
    Future income taxes                                 269,524      263,403
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total liabilities                                   796,375      747,039
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Shareholders' Equity

    Share capital (note 8)                            1,494,771    1,201,831
    Contributed surplus (note 8)                         19,456       14,017
    Retained earnings                                    59,335       93,954
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total shareholders' equity                        1,573,562    1,309,802
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total liabilities and shareholders' equity        2,369,937    2,056,841
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Commitments (note 12)
    Contingencies (note 13)
    Subsequent event (note 14)

    See accompanying notes to consolidated financial statements.


    Approved on behalf of the Board

    (signed)                                            (signed)

    Paul Colborne                                       Brett Herman
    Director                                            Director


    TriStar Oil & Gas Ltd.
    Consolidated Statements of Operations, Comprehensive Loss and Retained
     Earnings (Deficit)
    For the three and six months ended June 30, 2009 and 2008
    (unaudited)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
    ($ thousands, except      June 30,     June 30,     June 30,     June 30,
     per share amounts)          2009         2008         2009         2008
    -------------------------------------------------------------------------
    Revenues
      Petroleum and
       natural gas sales       99,762      184,607      181,681      319,774
      Royalties               (13,376)     (35,687)     (26,547)     (62,109)
    -------------------------------------------------------------------------
                               86,386      148,920      155,134      257,665

    Realized gain (loss)
     on financial
     instruments                5,863      (21,249)      22,561      (28,792)
    Unrealized loss on
     financial instruments    (24,395)    (108,078)     (36,635)    (129,472)
    -------------------------------------------------------------------------
                               67,854       19,593      141,060       99,401
    Expenses
      Operating                20,715       19,640       42,120       38,223
      Transportation            1,401        2,465        3,298        4,415
      General and
       administration           3,567        3,210        6,015        5,915
      Provision for
       non-recoverable
       accounts receivable
       (note 10)                3,266        1,500        3,266        1,500
      Depletion,
       depreciation
       and accretion           58,600       60,377      119,012      118,039
      Stock-based
       compensation             2,343        1,411        4,631        2,699
      Interest and bank         2,776        3,372        5,027        6,954
    -------------------------------------------------------------------------
                               92,668       91,975      183,369      177,745

    Loss before taxes         (24,814)     (72,382)     (42,309)     (78,344)
    -------------------------------------------------------------------------

    Taxes
      Capital tax expense       1,414          636        1,909        1,518
      Future income tax
       reduction               (5,435)     (17,806)      (9,599)     (18,593)
    -------------------------------------------------------------------------
                               (4,021)     (17,170)      (7,690)     (17,075)

    -------------------------------------------------------------------------
    Net loss                  (20,793)     (55,212)     (34,619)     (61,269)

    Other comprehensive
     loss
      Amortization of
       fair value of
       financial
       instruments                  -          (45)           -          (91)
    -------------------------------------------------------------------------

    Comprehensive loss        (20,793)     (55,257)     (34,619)     (61,360)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings
     (deficit)
      Retained earnings
       (deficit),
       beginning of
       period                  80,128      (16,750)      93,954      (10,693)
    -------------------------------------------------------------------------

    Retained earnings
     (deficit), end of
     period                    59,335      (71,962)      59,335      (71,962)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per share
      Basic                     (0.16)       (0.50)       (0.29)       (0.59)
      Diluted                   (0.16)       (0.50)       (0.29)       (0.59)
    -------------------------------------------------------------------------

    Weighted average
     number of shares
      Basic               127,501,902  110,109,657  120,952,396  104,588,862
      Diluted             127,501,902  110,109,657  120,952,396  104,588,862
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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, 2009 and 2008
    (unaudited)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
    ($ thousands)                2009         2008         2009         2008
    -------------------------------------------------------------------------

    Operating activities
      Net loss                (20,793)     (55,212)     (34,619)     (61,269)
      Unrealized loss on
       financial
       instruments             24,396      108,078       36,637      129,472
      Depletion,
       depreciation and
       accretion               58,600       60,377      119,012      118,039
      Stock-based
       compensation             2,343        1,411        4,631        2,699
      Future income taxes      (5,435)     (17,806)      (9,599)     (18,593)
      Incurred asset
       retirement
       expenditures
       (note 7)                  (325)           -         (597)           -
      Change in non-cash
       working capital        (10,569)      (8,602)     (18,908)      (9,680)
    -------------------------------------------------------------------------

                               48,217       88,246       96,557      160,668
    -------------------------------------------------------------------------

    Financing activities
      Issuance of share
       capital                287,814            -      287,927      205,031
      Share issue costs        (9,020)           -      (16,496)     (10,297)
      Increase in
       long-term debt             437          104       67,147       53,439
      Change in non-cash
       working capital          7,514            -        7,514            -
    -------------------------------------------------------------------------

                              286,745          104      346,092      248,173
    -------------------------------------------------------------------------

    Investing activities
      Capital expenditures    (41,028)     (64,711)    (104,673)    (169,210)
      Acquisitions, net
       of cash acquired      (300,008)     (37,704)    (336,279)    (214,345)
      Proceeds from
       dispositions              (140)      12,279        9,004       15,191
      Change in non-cash
       working capital          6,214        1,786      (10,701)     (40,477)
    -------------------------------------------------------------------------

                             (334,962)     (88,350)    (442,649)    (408,841)
    -------------------------------------------------------------------------

    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, 2009

    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 consolidated financial statements are stated in Canadian
        dollars and have been prepared in accordance with Canadian Generally
        Accepted Accounting Principles ("GAAP"). The preparation of
        financial statements in conformity with GAAP requires the Company's
        management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and disclosure of contingent assets
        and liabilities at the date of the financial statements and reported
        amounts of revenues and expenses during the period. Actual results
        could differ from those estimates and assumptions. In the opinion of
        management, these financial statements have been prepared within
        reasonable limits of materiality and within the framework of the
        significant accounting policies summarized below.

        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, 2008.

        Certain comparative figures have been reclassified to conform to the
        current quarter's financial statement presentation.

    2.  Principles of consolidation

        As at June 30, 2009, the consolidated financial statements include
        the accounts of TriStar, TOG Partnership, Vortex Energy Corporation,
        TriStar AP Partnership, Southside Petroleum Ltd. and Southside Oil
        and Gas Ltd.

    3.  Changes in accounting policy

        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. While at this time the impact of
        adopting IFRS cannot be reasonably quantified, TriStar has developed
        and commenced implementing its plan for the changeover to IFRS. The
        IFRS changeover plan ensures that TriStar addresses matters such as
        accounting policies, information technology systems, internal
        controls, disclosure controls and procedures, staffing requirements,
        and business activities impacted by accounting processes and
        measures.

        The plan is comprised of three stages. The first stage is to obtain
        an understanding of the impact that the conversion to IFRS will have
        on the elements described above. This commenced in 2008 and will
        continue in 2009. The second stage will be to develop and test
        solutions to the issues identified in stage one. It is anticipated
        that this will also largely take place in 2009. The third and final
        stage will see the implementation of the solutions developed in stage
        two. While the third stage will commence in some cases in 2009, it
        will also occur in 2010.

        The impact of converting to IFRS may be material. Significant impacts
        will be on accounting for property and equipment: current "full
        cost" accounting under current GAAP differs in significant ways from
        IFRS, with IFRS generally requiring analysis and computation at a
        greater level of detail than current GAAP. Further differences are
        anticipated to be in disclosures, which are more onerous under IFRS
        than current GAAP.

    4.  Business combinations

        Talisman Properties Acquisition

        On June 1, 2009, TriStar, together with Crescent Point Resources
        Limited Partnership ("Crescent Point"), acquired certain properties
        in southeast Saskatchewan from Talisman Energy Inc. ("Talisman") for
        $720.0 million. Concurrent with the close of the transaction with
        Talisman, TriStar and Crescent Point sold certain of the properties
        to Shelter Bay Energy Inc. for $71.0 million. The remaining
        properties were divided equally by TriStar and Crescent Point on a
        working interest basis where each acquired fifty percent of
        Talisman's interest in the properties for a net cost to TriStar of
        $321.8 million after estimated closing adjustments. In addition,
        $8.4 million was accrued in respect of the related asset retirement
        obligations. Together, these transactions are described as the
        "Talisman Properties Acquisition".

        Concurrent with the Talisman Properties Acquisition, TriStar entered
        into an agreement to issue 31.25 million subscription receipts for
        gross proceeds of approximately $250 million. There was an
        overallotment option of 4.7 million additional subscription receipts
        which the underwriters exercised resulting in additional proceeds of
        $37.6 million. Total net proceeds were $267 million after estimated
        related costs. Concurrent with the close of the Talisman Properties
        Acquisition on June 1, 2009, each subscription receipt was exchanged
        for one common share. The proceeds from this equity financing was
        used to fund the majority of the Talisman Properties Acquisition,
        with the remainder being from TriStar's credit facilities.

        Private Company Property Acquisition

        On March 2, 2009, TriStar completed the acquisition of properties
        from a private southeast Saskatchewan company through the issuance of
        approximately 2.4 million shares and payment of $8.6 million of cash,
        including the assumption of the private company's net debt. In
        addition, $0.4 million was accrued in respect of the related asset
        retirement obligations.

    5.  Property and equipment

        ($ thousands)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
                                                        June 30, December 31,
                                                           2009         2008
        ---------------------------------------------------------------------
        Petroleum and natural gas assets              2,514,586    2,039,953
        Administrative assets                             1,906        1,887
        ---------------------------------------------------------------------
                                                      2,516,492    2,041,840

        Less accumulated depletion and
         depreciation                                  (479,623)    (362,229)
        ---------------------------------------------------------------------

                                                      2,036,869    1,679,611
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        At June 30, 2009, the calculation of the depletion expense excluded
        unproved property and undeveloped land cost of $410.5 million (Q2
        2008: $388.7 million). Unused seismic costs of $26.2 million (Q2
        2008: $31.3 million) were also excluded. Future development costs of
        $440.9 million (Q2 2008: $166.7 million) were included in the
        depletion calculation.

        During the three months ended June 30, 2009, the Company capitalized
        $2.7 million (2008: $1.9 million) of general and administrative
        expenses and $1.6 million (2008: $1.4 million) of stock-based
        compensation expenses, including a tax effect of $0.6 million (2008:
        $0.4 million), relating to exploration, development and acquisition
        activities. During the six months ended June 30, 2009, the Company
        capitalized $5.1 million (2008: $3.7 million) of general and
        administrative expenses and $3.2 million (2008: $2.6 million) of
        stock-based compensation expenses, including a tax effect of $1.2
        million (2008: $0.7 million), relating to exploration, development
        and acquisition activities.

    6.  Long-term debt

        As at June 30, 2009, the Company had available a $525.0 million
        credit facility. The Company's credit facility is with a syndicate of
        eight banks and is open for review semi-annually. On close of the
        Talisman Properties Acquisition, TriStar's current credit facility
        was increased from $450.0 million to $525.0 million. There were no
        changes to existing terms under this increased credit facility except
        increases to the applicable margins and stamping fees which determine
        the interest expense paid by the Company. The Company's next credit
        facility review is due to be completed by October 31, 2009. 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 forecast commodity prices and the current
        economic environment. The credit facility is secured by a fixed and
        floating charge debenture on the assets of the Company.

        The following table reconciles the amount drawn on the credit
        facility to the total long-term debt balance at June 30, 2009:

        ($ thousands)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
                                                        June 30, December 31,
                                                           2009         2008
        ---------------------------------------------------------------------
        Credit line drawn at June 30, 2009              350,168      280,902
        Prepaid credit facility renewal fees             (2,119)           -
        ---------------------------------------------------------------------

        Total long-term debt                            348,049      280,902
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The Company's effective interest rate for the three months June 30,
        2009 and 2008 was 2.9 percent and 4.8 percent, respectively.
        The Company's effective interest rate for the six months June 30,
        2009 and 2008 was 2.7 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 $132.5 million as at June 30, 2009. 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,
                                                           2009         2008
        ---------------------------------------------------------------------
        Balance, beginning of period                     30,765       22,650
        Liabilities acquired
         (net of dispositions)                            8,423        4,147
        Liabilities incurred                              1,607        3,035
        Incurred asset retirement
         expenditures                                      (597)      (1,547)
        Accretion expense                                 1,620        2,480
        ---------------------------------------------------------------------

        Balance, end of period                           41,818       30,765
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    8.  Shareholders' equity

        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
            -----------------------------------------------------------------
            -----------------------------------------------------------------
              Balance, beginning of period           68,462,492      694,934
            -----------------------------------------------------------------

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

              Balance, end of period                110,109,657    1,153,211
            -----------------------------------------------------------------
            -----------------------------------------------------------------


                                                         Six months ended
                                                           June 30, 2009
                                                      -----------------------
                                                      Number of
            ($ thousands, except share amounts)          shares       Amount
            -----------------------------------------------------------------
            -----------------------------------------------------------------
              Balance, beginning of period          113,475,423    1,201,831
            -----------------------------------------------------------------

              Issued for cash                        35,937,500      287,500
              Issued on acquisitions                  2,407,992       21,636
              Tax effect on flow-through
               expenses renounced                             -       (4,089)
              Issued on option exercise                  58,533          427
              Issued on vesting of incentive
               shares                                   157,514            -
              Transfer from contributed
               surplus on exercise                            -        2,403
                of stock options and vesting
                 of incentive shares
              Share issue costs (net of tax effect)           -      (14,937)
            -----------------------------------------------------------------

              Balance, end of period                152,036,962    1,494,771
            -----------------------------------------------------------------
            -----------------------------------------------------------------

        c)  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 between 3.30 and 4.25 percent (2008: 4.25
            percent) and the expected volatility used is between 35.0 and
            37.5 percent (2008: 35.0 percent).

            The following table reconciles Stock Option activity:

            -----------------------------------------------------------------
                                Three                       Six
                               months     Weighted       months     Weighted
                                ended      average        ended      average
                              June 30,    exercise      June 30,    exercise
                                 2009        price         2009        price
            -----------------------------------------------------------------
            -----------------------------------------------------------------
                                          Weighted                  Weighted
                                           average                   average
                            Number of     exercise    Number of     exercise
                              Options        price      Options        price
            -----------------------------------------------------------------
            Balance,
             beginning
             of period      4,231,200        11.32    4,240,593        11.30
              Granted         143,600        11.37      158,900        11.18
              Cancelled       (94,733)       17.07     (103,926)       16.33
              Exercised       (43,033)        7.29      (58,533)        7.29
            -----------------------------------------------------------------

            Balance, end
             of period      4,237,034        11.23    4,237,034        11.23
            -----------------------------------------------------------------
            -----------------------------------------------------------------
            Exercisable,
             end of period    870,598         8.92      870,598         8.92
            -----------------------------------------------------------------
            -----------------------------------------------------------------


            -----------------------------------------------------------------
                                Three                       Six
                               months     Weighted       months     Weighted
                                ended      average        ended      average
                              June 30,    exercise      June 30,    exercise
                                 2008        price         2008        price
            -----------------------------------------------------------------
            -----------------------------------------------------------------
                                          Weighted                  Weighted
                                           average                   average
                            Number of     exercise    Number of     exercise
                              Options        price      Options        price
            -----------------------------------------------------------------
            Balance,
             beginning
             of period      3,155,050         8.31    2,695,800         7.40
              Granted         146,850        16.47      607,100        14.30
              Cancelled       (31,000)        7.29      (32,000)        7.29
              Exercised             -            -            -            -
            -----------------------------------------------------------------

            Balance, end
             of period      3,270,900         8.68    3,270,900         8.68
            -----------------------------------------------------------------
            -----------------------------------------------------------------
            Exercisable,
             end of period          -            -            -            -
            -----------------------------------------------------------------
            -----------------------------------------------------------------


            The following table reconciles Incentive Share activity:

            -----------------------------------------------------------------
                                Three        Three          Six          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
                                 2009         2008         2009         2008
            -----------------------------------------------------------------
            -----------------------------------------------------------------
            Balance,
             beginning
             of period      2,141,022    2,130,750    2,282,354    1,819,650
               Granted        144,110      119,750      144,110      447,750
               Cancelled      (30,967)     (28,666)     (62,967)     (45,566)
               Common shares
                issued
                upon vesting  (48,182)           -     (157,514)           -
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Balance, end
             of period      2,205,983    2,221,834    2,205,983    2,221,834
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Incentive Shares are earned 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. As at June
            30, 2009, there were 2,205,983 Incentive Shares outstanding and
            none were convertible to Common Shares.

        d)  Contributed surplus

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

            ($ thousands)
            -----------------------------------------------------------------
            -----------------------------------------------------------------
                                                        June 30, December 31,
                                                           2009         2008
            -----------------------------------------------------------------
            Balance, beginning of period                 14,017        6,414
            Stock-based compensation
             expense arising from:
              Stock Options                               2,346        3,651
              Incentive Shares                            5,496        8,688
            Reclass to share capital
             upon conversion:
              Exercised stock options                      (123)        (270)
              Incentive Shares                           (2,280)      (4,466)
            -----------------------------------------------------------------

            Balance, end of period                       19,456       14,017
            -----------------------------------------------------------------
            -----------------------------------------------------------------

        e)  Flow-through shares

            On December 18, 2008, TriStar issued 1,025,000 flow-through
            Common Shares at a price of $14.70 per share for gross proceeds
            of $15.1 million. As a result, the Company must incur qualifying
            resource expenditures amounting to $15.1 million before December
            31, 2009. The related tax impact was recorded in first quarter of
            2009. The qualifying expenditures were renounced to shareholders
            as at December 31, 2008. The obligation remaining for this flow-
            through share issue was $8.8 million as at June 30, 2009.

    9.  Supplemental cash flow information

        ($ thousands)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
                                Three          Six        Three          Six
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              June 30,     June 30,     June 30,     June 30,
                                 2009         2009         2008         2008
        ---------------------------------------------------------------------
        Income taxes,
         instalments and
         other taxes paid         752        1,000           14          709
        Interest paid           2,953        5,347        3,047        7,459
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    10. Financial risk management

        a)  Credit risk

            Credit risk is the risk of financial loss to the 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 from
            petroleum and natural gas marketers. At June 30, 2009 the
            Company's receivables consisted of 70% of revenue from petroleum
            and natural gas marketers and 30% from joint venture 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 relationships with credit-worthy
            marketers, as well as to carefully assess the extent of credit
            granted to these parties.

            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, as well
            as requiring prepayment (cash calls) for significant
            expenditures.

            On July 22, 2008, SemCanada Crude Company ("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 nor for July crude volumes shipped up to
            July 21, 2008. TriStar had an irrevocable standby letter of
            credit for $1.5 million which was fully collected subsequent to
            July 21, 2008. The remaining amount owed to TriStar as a result
            of this matter is $7.1 million. On July 24, 2009, SemCanada and
            certain related companies filed Plans of Arrangement which would
            result in a payout to unsecured creditors such as TriStar of 4%
            of amounts outstanding. Accordingly, the Company has recorded a
            reduction of accounts receivable totalling $6.8 million of the
            amount owed, accounted for as a provision for non-recoverable
            accounts receivable of $3.3 million in the second quarter of
            2009, $1.5 million in the second quarter of 2008 and $2.0 million
            in the third quarter of 2008. The Company continues to monitor
            the matter and make necessary adjustments for impairment based on
            its expectation of ultimate collection. There are no other
            significant accounts receivable at June 30, 2009 that TriStar
            deemed uncollectible.

            During the fourth quarter of 2008, TriStar entered into a credit
            insurance policy to provide coverage over the collectability of
            production revenues from certain buyers. The Company believes
            that this policy, in conjunction with continued prudent credit-
            granting practices, is expected to reduce the non-collectability
            of bad debts from these buyers.

        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 on 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
            2008, the Company entered into certain foreign exchange rate
            hedges 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 also impacted by 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 and fixed interest rate,
            potentially affecting future cash flows. At June 30, 2009 the
            Company had five interest rate swaps as disclosed in note 11.

            The Company uses a non-GAAP measure, funds flow from operations,
            as a measure of current operating efficiency. Funds flow from
            operations represents cash flow from operating activities prior
            to changes in non-cash working capital and incurred asset
            retirement expenditures.

            For the quarter ended June 30, 2009, the sensitivity of funds
            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 barrel in the
            realized price for crude oil and NGL would have resulted in
            approximately $0.8 million additional funds 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 funds flow from operations. An increase
            by 0.1% to the bank interest rate would have resulted in
            approximately $0.1 million less funds flow from operations. These
            sensitivity results for crude oil and NGL, for natural gas, and
            for bank interest 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 in
            order to maintain 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 bank debt level
            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, long-term debt 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, 2009, the following table presents a reconciliation of
        the change in the unrealized amounts from January 1, 2009 to June 30,
        2009:

        ($ thousands)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
                                                                  Fair Value
        ---------------------------------------------------------------------
        Balance, December 31, 2008                                    36,227
        Unrealized loss on financial instruments                     (36,635)
        ---------------------------------------------------------------------
        Balance, June 30, 2009                                          (408)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        During the six months ended June 30, 2009, the Company actually
        realized a portion of the amount accrued as at December 31, 2008 with
        a cash gain on financial instruments of $22.6 million.

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

        Commodity contracts outstanding as at June 30, 2009 are as follows:

        Oil contracts
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
                                                         Price
        Term                  Type         Volume      (US$/Bbl)       Index
        ---------------------------------------------------------------------
        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     65.00 - 73.25      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     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     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     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
        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
        Jul. 1, 2009 -
         Dec. 31, 2009   Costless Collar     500   C$65.00 - C$76.15   C$WTI
        Jul. 1, 2009 -
         Dec. 31, 2009   Costless Collar     500   C$65.00 - C$75.65   C$WTI
        Jan. 1, 2010 -
         Dec. 31, 2010   Costless Collar     500   C$65.00 - C$87.25   C$WTI
        Jan. 1, 2010 -
         Dec. 31, 2010   Costless Collar     500   C$65.00 - C$90.00   C$WTI
        Jan. 1, 2010 -
         Dec. 31, 2010   Costless Collar     500   C$65.00 - C$99.50   C$WTI
        Jan. 1, 2010 -
         Dec. 31, 2010   Costless Collar     500   C$75.00 - C$100.00  C$WTI
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The fair value of the oil costless collar, put and swap contracts at
        June 30, 2009 was a liability of $0.9 million.

        Natural Gas Contracts
        ---------------------

        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Term                   Type       Volume      Price       Index
        ---------------------------------------------------------------------
        Jun. 1, 2009 -
         Sep. 30, 2009   Costless Collar   2,500   3.75 - 4.40  AECO monthly
        Nov. 1, 2009 -
         Oct. 31, 2010   Costless Collar   2,500   5.00 - 6.25  AECO monthly
        Nov. 1, 2009 -
         Nov. 30, 2010   Costless Collar   2,500   5.00 - 7.20  AECO monthly
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The fair value of the natural gas costless collars at June 30, 2009
        was an asset of $0.4 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
        Dec. 1, 2008 -
         Dec. 31, 2009        Forward    $ 2,500,000     $1.28    $3,200,000
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The fair value of the foreign exchange contracts as at June 30, 2009
        was an asset of $0.6 million.

        Bankers' Acceptance Fixed Interest Rate Swap Contracts
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Term                                          Fixed Rate  Amount CDN
        ---------------------------------------------------------------------
        Jan. 29, 2009 - Jan. 29, 2012                   1.620%   $50,000,000
        Jan. 29, 2009 - Jan. 30, 2012                   1.653%   $50,000,000
        Feb. 17, 2009 - Feb. 10, 2012                   1.540%   $25,000,000
        Feb. 17, 2009 - Feb. 12, 2012                   1.510%   $25,000,000
        Jun. 29, 2009 - Jun. 19, 2012                   2.094%   $25,000,000
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The fair value of the fixed interest rate swap contracts as at
        June 30, 2009 was a net liability of $0.5 million.

    12. Commitments

        At June 30, 2009, the Company had the following base lease
        commitments for office space:

        ($ thousands)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        2009                                                           1,297
        2010                                                           2,494
        2011                                                           2,417
        2012                                                           2,389
        2013                                                           2,584
        Thereafter                                                     4,728
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        In addition, TriStar is obligated to pay various costs associated
        with operations incurred in the normal course of business. These
        costs include royalties paid to the Alberta and Saskatchewan
        governments, surface lease rentals and mineral rights to various
        landowners and abandonment and reclamation costs. These costs are
        highly dependent on the future operating environment and are subject
        to changes in commodity prices, ownership, production volumes and
        government policies.

    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.

    14. Subsequent event

        On August 4, 2009, TriStar, together with Petrobank Energy and
        Resources Ltd. ("Petrobank") announced a strategic combination of
        TriStar and Petrobank's Canadian Business Unit (the "Transaction").
        The combination will create a new publicly listed company,
        PetroBakken Energy Ltd. ("PetroBakken").

        Petrobank will capitalize PetroBakken with its Canadian Business Unit
        assets and liabilities and $400 million of cash. PetroBakken will
        then acquire all the outstanding shares of TriStar. In return,
        Petrobank will receive 109.8 million common shares of PetroBakken
        which will represent approximately 64% of PetroBakken's anticipated
        shares outstanding. Consideration to TriStar shareholders will
        consist of a combination of PetroBakken common shares and cash. At
        the election of the holder, a TriStar shareholder will receive $14.75
        cash, or 0.5350 of a PetroBakken share, or a combination thereof,
        being approximately $3.75 per share in cash and 0.3989 of a
        PetroBakken share, for each share held. In aggregate, TriStar
        shareholders will receive approximately $580 million in cash and
        61,762,500 shares of PetroBakken, representing 36% of PetroBakken's
        anticipated shares outstanding. In the event that the holders of
        TriStar shares elect to receive more or less than the set amount of
        cash, or more or less than the set amount of PetroBakken shares of
        which they are entitled, the amount of cash or shares to be received
        by a holder will be adjusted pro rata and the balance of the
        consideration will be paid in cash or PetroBakken shares, as the case
        may be.

        The Transaction will be completed by way of plan of arrangement (the
        "Arrangement") and is subject to TriStar shareholder approval. The
        information circular for the Arrangement is expected to be mailed to
        TriStar shareholders on or about August 31, 2009 and it is
        anticipated that the special meeting of TriStar's shareholders will
        be held on or about September 30, 2009 with closing of the
        Transaction to occur on or about October 1, 2009. The successful
        completion of the Transaction is also subject to customary
        regulatory, stock exchange, court and other approvals, and will
        result in certain compensation and financing arrangements being
        accelerated.

        The Arrangement prohibits TriStar from soliciting or initiating any
        discussion regarding any other business combination or sale of
        material assets, contains provisions enabling Petrobank to match
        competing, unsolicited proposals and, subject to certain conditions,
        provides for a reciprocal termination fee of up to $80 million.
    

    %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

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TriStar Oil & Gas Ltd.

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