TriStar Oil & Gas Ltd. - Q3 For the three and nine months ended September 30, 2007



    CALGARY, Nov. 13 /CNW/ - TriStar Oil & Gas Ltd. ("TriStar" or the
"Company") is pleased to announce its financial and operating results for the
three and nine month periods ended September 30, 2007.
    As the Real Resources Inc. ("Real") transaction closed on August 16,
2007, the financial and operating results only represent a partial quarter of
combined operations.
    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
to one barrel of oil.

    
    Highlights                  Three        Three                      Nine
                               Months       Months                    Months
                                Ended        Ended                     Ended
                              Sept 30,     Sept 30,                  Sept 30,
                                 2007       2006(1)    % Change         2007
    -------------------------------------------------------------------------
    ($ thousands except per
     share and Boepd amounts)
    (unaudited)
    -------------------------------------------------------------------------
    Financial (CDN$)
      Production Revenue
       (prior to hedging)      53,578       18,174         195%      100,459
    -------------------------------------------------------------------------
      Cash flow from
       operations(2)           26,735       11,021         143%       52,078
        Per share basic          0.56         0.50          11%         1.56
        Per share diluted        0.56         0.48          16%         1.56
      Net income (loss)(3)     (5,419)       1,126         NMF        (5,496)
        Per share basic         (0.11)        0.04         NMF         (0.16)
        Per share diluted       (0.11)        0.04         NMF         (0.16)
      Total Net Debt(4)(5)    246,690       44,844         450%      246,690
    -------------------------------------------------------------------------
      Common shares (000's)
        Shares outstanding,
         end of period (basic) 68,462       22,248         208%       68,462
        Weighted average
         shares (basic)        47,972       21,889         119%       33,341
        Weighted average
         shares (fully
         diluted)              47,972       22,563         113%       33,341
    -------------------------------------------------------------------------
    Operations
      Production
        Crude oil (Bbls
         per day)               6,268        2,191         186%        4,230
        Natural gas (Mcf
         per day)              23,112        7,400         212%       13,115
        Barrels of oil
         equivalent
         (Boepd, 6:1)          10,120        3,424         196%        6,416
      Average realized price
        Crude oil
         ($ per Bbl)            71.94        70.67           2%        67.25
        Natural gas
         ($ per Mcf)             5.69         5.64           1%         6.37
        Barrels of oil
         equivalent
         ($ per Boe, 6:1)       57.55        57.41           0%        57.35
      Netback per Boe
       (6:1) ($)
        Operating netback       35.08        38.87         -10%        35.64
        Cashflow netback        28.71        34.99         -18%        29.72
      Wells Drilled
        Gross                      22           29                        53
        Net                      14.8         15.7                      38.6
        Success (%)                82           93                        91
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Pursuant to the acquisition of Real Resources Inc., the number of
        outstanding shares of prior comparative periods has been adjusted in
        order for the comparative outstanding share and per share amounts to
        be equivalent.
    (2) Management uses cash flow (before changes in non-cash working
        capital), and operating and cash flow netback to analyze operating
        performance and leverage. Cash flow as presented, and operating and
        cashflow netback do not have any standardized meaning prescribed by
        Canadian GAAP and therefore may not be comparable with the
        calculation of similar measures for other entities.
    (3) The net loss in the quarter primarily relates to the unrealized loss
        on the Company's financial derivative contracts recognized in the
        quarter as well as expenses realized in the quarter related to the
        acquisition of Real.
    (4) Calculated as bank loan and current liabilities less current assets,
        excluding Financial Derivatives Contracts.
    (5) Does not include proceeds of $39.5 million from non-core asset
        dispositions which closed subsequent to September 30, 2007.

    President's Letter to Shareholders

    The Company's achievements in its third quarter of 2007 include the
following:
    -   Increased production to 10,120 Boepd in the third quarter of 2007
        (partial quarter of Real acquisition) from 3,424 Boepd in the third
        quarter of 2006, representing a year over year increase of
        196 percent;

    -   Achieved sixth consecutive quarter of production growth;

    -   Production per share increased by 35 percent over the third quarter
        of 2006;

    -   Cash flow increased to $26.7 million in the third quarter of 2007
        (partial quarter of Real acquisition) from $11.0 million in the third
        quarter of 2006, a year over year increase of 143 percent;

    -   Cash flow per share increased from $0.48 per share in the third
        quarter of 2006 to $0.56 per share in the current quarter, a year
        over year increase of 16 percent;

    -   Drilled 22 (14.8 net) wells in the third quarter with an 82 percent
        success rate bringing the year to date success rate to 91 percent;

    -   Closed the strategic combination with Real on August 16, 2007,
        creating a new, growth focused intermediate exploration and
        development company;

    -   Announced an increase to TriStar's credit facility to $300 million;

    -   Subsequent to quarter end, disposed of non core properties comprising
        1,100 Boepd (93 percent gas) and 1.8 mmboe of proven plus probable
        reserves for $39.5 million, prior to closing adjustments;

    -   Subsequent to quarter end, management revised its 2007 exit guidance
        from 15,250 Boepd to 14,500 Boepd reflecting the above mentioned
        non core sale of 1,100 Boepd of non core assets;

    -   Subsequent to quarter end, management announced its initial 2008
        production guidance to average more than 15,350 Boepd and exit 2008
        at more than 16,000 Boepd.
    

    Operational Review

    During the third quarter of 2007, TriStar drilled a total of
22 (14.8 net) wells, resulting in 13 (7.2 net) oil wells, 5 (4.1 net) gas
wells, and 4 (3.5 net) D&A wells, for an overall success rate of 82 percent.
    TriStar's southeast Saskatchewan activity during the third quarter
focused on the Stoughton-Freestone area, where the Bakken light oil
(40 degrees API) play is emerging as an elite, large scale resource play with
an estimated greater than two billion barrels of original oil in place
("OOIP"). New data available from 2007 drilling activity has shown a
definitive positive impact from the application of new fracture stimulation
techniques. Initial results suggest a two fold increase in initial oil
production rates from 75 to 100 Boepd, to more than 150 to 200 Boepd and a
decrease in the initial water cuts from 50 to 75 percent down to less than
25 percent. These results are expected to ultimately lead to higher recovery
factors and reserves per well.
    TriStar's land base in this area now exceeds 73 (43.0 net) sections of
undeveloped land with an additional 18 (11.0 net) sections to be earned
through previously agreed to farm-in transactions. TriStar believes it has
more than 250 (100.0 net) development drilling locations identified on its
lands, all within a two mile radius of existing Bakken production, based on
four wells per section. In addition, TriStar has up to 193 (116.0 net)
drilling locations on exploratory lands located more than two miles from
existing Bakken production.
    During the third quarter, TriStar drilled 3 (1.3 net) wells into the
Bakken play, with 100 percent success. By the end of the third quarter TriStar
had participated in the drilling of 11 (6.3 net) wells. Of these wells,
5 (2.5 net) wells have been fracture stimulated with very encouraging results,
and the other 6 (3.8 net) wells are scheduled to be fracture stimulated in
late 2007 or early 2008. TriStar expects to continue to be active in the
fourth quarter in the Bakken with a three drilling rig program, drilling
19 (10.5 net) wells.
    At Star Valley in southeast Saskatchewan (40% - 100% working interest),
TriStar drilled a development horizontal Alida oil well (0.5 net) in the third
quarter. This well, the fifth development well drilled at Star Valley this
year, is producing high netback, light oil (33 degrees API) at an initial rate
of 350 Boepd. The well was a 75 metre infill location and continues to
demonstrate the ability of this high quality, light oil pool to deliver
increasing recovery factors over time. The remainder of 2007 will see the
drilling of 2 (1.1 net) oil wells into this large, 49 million barrel OOIP
reservoir.
    Additional drilling results in southeast Saskatchewan in the third
quarter included the drilling of 5 (3.0 net) new horizontal oil wells into
TriStar's Browning, Hastings, Crystal Hill and Antler pools. These pools are
all high quality, light oil accumulations with combined OOIP of more than
25 million barrels. Fourth quarter conventional drilling activity in southeast
Saskatchewan will include an additional 9 (6.7 net) development oil wells
primarily in TriStar's Wauchope, Hastings, Crystal Hill and Antler pools.
    In southern Alberta, TriStar was active in the third quarter, drilling a
4 (2.5 net) well oil program at Countess. These wells continue to develop the
original 24 new pool discoveries that TriStar acquired at its inception in
early 2006 which have no lessor's royalties associated with them. In addition,
a new Pekisko oil discovery was made on 100 percent working interest lands
directly offsetting one of these original wells.
    At Ferrybank, in central Alberta, third quarter activity included the
successful drilling of 1 (1.0 net) Glauconitic new pool wildcat gas well that
is currently producing at 2.5 Mmcfpd of natural gas. In addition, TriStar
drilled a successful development gas well that tested at rates of 2.5 Mmcfpd
and 2.0 Mmcfpd respectively from two Mannville zones. The well is expected to
be brought on production in mid-December at a restricted rate.
    In west central Alberta, at TriStar's Ante Creek Montney Pool, the
fracture stimulation of the 2 (2.0 net) horizontal wells drilled in the first
quarter has been completed. These wells were completed with a similar fracture
stimulation technique that TriStar is employing in the Company's southeast
Saskatchewan Bakken program. Early initial results are very encouraging as the
wells have met or exceeded the expectations of TriStar's economic model.
TriStar continues to monitor these wells relative to its reservoir modeling
expectations as well as working to optimize its completion technique and cost
structure as the Company moves towards an active 2008 in this area. TriStar
believes that its lands at Ante Creek contain OOIP in excess of 100 million
barrels of 39 degrees API oil with very low recovery factors to date. In
addition, TriStar believes there is over 75 Bcf of associated solution gas in
place within this reservoir. Management believes that ultimate primary
recoveries of 7.5 percent of the oil and 71 percent of the gas in place are
achievable. The remainder of 2007 will see the drilling of 1 (1.0 net)
horizontal well into this light oil resource play with the associated fracture
stimulation in the first quarter of 2008.
    TriStar continues to add to its large drilling inventory. The Company now
has more than 1,400 gross development and step-out locations on its land base
throughout western Canada. This large internal suite of strategically focused
drilling opportunities represents greater than a four year drilling inventory
on TriStar's land base. TriStar continues to evaluate opportunities to expand
its inventory of locations through potential farm out opportunities on its
large undeveloped land base of more than 675,000 net acres.

    Outlook; 2008 Guidance

    The implementation of TriStar's integration plan surrounding the
strategic combination with Real on August 16, 2007 is complete. TriStar has
organized the Company internally to manage its expanded, high quality,
operated asset base by adding key operating personnel both in head office and
field positions. TriStar has retained additional key technical personnel in
geology, geophysics, engineering and operations to implement the Company's
planned capital program and continue to identify additional opportunities on
its asset base.
    On behalf of the Board of Directors and the management at TriStar I would
like to thank all of our staff for the commitment, focus and hard work over
the past several months to ensure a smooth integration process. In addition, I
would also like to extend my gratitude to both Paul Charron and Paul Starnino,
two previous Board members of TriStar who have not continued on with us post
the Real transaction, for their valuable leadership and guidance since
TriStar's inception.
    On November 1, 2007, the Company completed the divestiture of 1,100 Boepd
and 1.8 Mmboe of proven plus probable reserves of non core assets associated
with the Real transaction for $39.5 million, prior to closing adjustments. The
sale price was above TriStar's internal estimate of the before tax present
value of the reserves discounted at 10 percent. The completion of this
disposition allows the Company to focus its efforts on assets where capital
will be allocated. As a result of the disposition, we have adjusted our 2007
exit guidance from 15,250 Boepd to 14,500 Boepd and our exit net debt guidance
from $240 million to $215 million. TriStar's bank facility was reconfirmed at
$300 million post the sale of the non core assets. TriStar's balance sheet
remains very well positioned to execute on strategic acquisitions and
exploitation opportunities going forward.
    As we move forward, TriStar is very well positioned to continue growing
the Company's reserves, production and cash flow per share through the
management team's strategy of acquiring, exploiting and exploring.
    TriStar has assembled a high quality asset base characterized by high
netback production, a development drilling inventory of over 1,400 locations
and a large undeveloped land base with numerous exciting exploration
prospects.
    Management's strategy of focusing on large oil and gas in place
reservoirs continues to produce exciting results. Over the past number of
months there have been exciting advancements in fracture completions
technologies which have recently been proven to be successful when applied to
TriStar's Bakken play in southeast Saskatchewan and the Company's Ante Creek
asset in west central Alberta. Given the results experienced on these two
plays in the third quarter of 2007, TriStar expects to increase its focus on
these plays in 2008.
    The Board of Directors of TriStar have approved a capital budget of
$160 million for 2008. Capital expenditures will be primarily focused on light
oil plays in the Company's four core areas. Southeast Saskatchewan will
comprise the largest portion of the capital expenditure budget with more than
50 percent of the capital budget expected to be focused in this area.
    Based on the approved capital budget, management anticipates production
to average over 15,350 Boepd in 2008 with an exit rate of over 16,000 Boepd.
    On October 25, 2007 the Alberta provincial government announced its
response to the Alberta Royalty Review Panel's recommendations with respect to
changes to the Alberta royalty structure which were announced on September 18,
2007. The Alberta government intends to make significant changes to the
current royalty structure beginning January 1, 2009. It is expected that these
changes will generally have a negative impact on conventional oil and gas
production in the province of Alberta. As the Company has significant
interests in the province of Saskatchewan, and assets within Alberta that do
not fall under the provincial royalty regime, the corporate impact of the
proposed changes is expected to be minimal. However, as the proposed revisions
to the current royalty regime negatively impact the economics of drilling
wells in Alberta relative to other jurisdictions, TriStar will be analyzing
its development portfolio and will shift capital in 2009 to other
jurisdictions if warranted by the economics.
    Today, as a result of the successful execution of management's strategy,
TriStar is well positioned to continue to grow its reserves, production and
cash flow per share and has the following key attributes:


    
    -  High Quality Assets:                High netback (Q3 operating netback
                                           equals $35.08) light oil and
                                           natural gas reserves and
                                           production focused in four
                                           operating areas

    -  Operatorship / High Working         More than 85 percent operated
        Interest:                          assets, and more than a 75 percent
                                           average working interest

    -  Long Life Reserves:                 greater than 47 Mmboe proven plus
                                           probable; 8.9 year RLI

    -  High Netback Production:            14,500 Boepd (2007 Estimated Exit)
                                           15,350 Boepd (2008 Estimated
                                           Average)
                                           16,000 Boepd (2008 Estimated Exit)

    -  Extensive Drilling Inventory:       More than 1,400 locations -
                                           greater than a four year drilling
                                           inventory

    -  Strong Balance Sheet:               Estimated 2007 Exit net debt:
                                           approximately $215 million
                                           ($300 million credit facility)
                                           Debt to cash flow of less than
                                           1.3 times

    -  Shares Outstanding:                 68.5mm (Basic)
                                           72.8mm (Fully Diluted)
    


    On behalf of the Board of Directors,



    Brett Herman
    President and Chief Executive Officer

    November 13, 2007


    Forward-Looking Statements

    This document contains forward-looking statements. More particularly,
this document contains statements concerning anticipated increases in
reserves, oil production and recovery rates at Stoughton-Freestone as a result
of the application of a new fracture stimulation technique, anticipated
primary recovery rates at Ante Creek, TriStar's projected exit debt and exit
rate of production for 2007, TriStar's projected average and exit rates of
production for 2008 and the anticipated allocation by TriStar of its capital
expenditures in 2008.
    The forward-looking statements contained in this document are based on
certain key expectations and assumptions made by TriStar, including the
success of drilling and development activities, the availability and cost of
labour and services, the timing of receipt of regulatory approvals, the
performance of existing wells, the performance of new wells, prevailing
commodity prices and operating costs and the sufficiency of budgeted capital
expenditures in carrying out TriStar's planned activities.
    Although TriStar believes that the expectations and assumptions on which
the forward-looking statements are based are reasonable, undue reliance should
not be placed on the forward-looking statements because TriStar can give no
assurance that they will prove to be correct. Since forward-looking statements
address future events and conditions, by their very nature they involve
inherent risks and uncertainties. Actual results could differ materially from
those currently anticipated due to a number of factors and risks.
    These include, but are not limited to, the risks associated with the oil
and gas industry in general (e.g., operational risks in development,
exploration and production; delays or changes in plans with respect to
exploration or development projects or capital expenditures; the uncertainty
of reserve estimates; the uncertainty of estimates and projections relating to
production, costs and expenses, and health, safety and environmental risks),
commodity price and exchange rate fluctuations and uncertainties resulting
from potential delays or changes in plans with respect to exploration or
development projects or capital expenditures. Certain of these risks are set
out in more detail in TriStar's Annual Information Form which has been filed
on SEDAR and can be accessed at www.sedar.com.
    The forward-looking statements contained in this document are made as of
the date hereof and TriStar undertakes no obligation to update publicly or
revise any forward-looking statements or information, whether as a result of
new information, future events or otherwise, unless so required by applicable
securities laws.

    Where amounts are expressed on a barrel of oil equivalent ("Boe") basis,
natural gas volumes have been converted to Boe using a ratio of 6,000 cubic
feet of natural gas to one barrel of oil equivalent. This conversion ratio is
based upon an 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 ("MD&A") is dated November 13, 2007.
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 nine month periods ended September 30,
2007 and audited financial statements as at and for the periods ended
December 31, 2006 and 2005. 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 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.
    The financial data presented below has been prepared in accordance with
Canadian Generally Accepted Accounting Principles ("GAAP"), unless otherwise
indicated.

    Non-GAAP Measurements

    Management's Discussion and Analysis contains the terms "cash flow from
operations" and "operating netback" which are not Canadian GAAP standards and
therefore may not be comparable to performance measures presented by others.
Cash flow from operations represents cash flow from operating activities prior
to changes in non-cash working capital. Operating netback represents revenue
less royalties, hedging gains and losses, operating expenses and
transportation expenses. Management believes that in addition to net income,
cash flow from operations and operating netback are useful supplemental
measures as they provide an indication of TriStar's operating performance,
leverage and liquidity. Investors should be cautioned, however, that this
measure should not be construed as an alternative to net income determined in
accordance with GAAP as an indication of TriStar's performance.
    The reconciliation between cash flow from operations, as defined above,
and cash flow from operations after changes in working capital for the periods
ended September 30, 2007 and 2006 is as follows:



    
                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
    ($ thousands)                2007         2006         2007         2006
    -------------------------------------------------------------------------
    Cash flow from operations
     (as defined above)        26,735       11,021       52,078       22,902
    Changes in non-cash
     working capital           (1,731)       1,350       (6,577)         926
    -------------------------------------------------------------------------
    Cash flow from operations
     after changes in working
     capital                   25,004       12,371       45,501       23,828
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Forward-Looking Statements

    This MD&A contains forward-looking statements, which may include
statements relating to management's approach to the number of wells, amount
and timing of capital projects, interest rates, worldwide and industry
production, prices of oil and natural gas, Company production, cash flow and
debt levels. These forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. See under "Business Conditions and Risks" in this
MD&A and under "Risk Factors" in the Company's Annual Information Form ("AIF")
which has been filed on SEDAR and can be accessed at www.sedar.com. The reader
is cautioned that assumptions used in the preparation of such information,
although considered reasonable by TriStar at the time of preparation, may
prove to be incorrect.

    Significant Transactions

    Divestiture of Non-Core Assets

    Subsequent to September 30, 2007, TriStar closed two divestitures of
certain non-core assets for aggregate proceeds of $39.5 million, before
transaction-related adjustments.

    Plan of Arrangement with Real Resources Inc.

    On August 2, 2007, the shareholders of TriStar and Real Resources Inc.
("Real") approved a plan of arrangement to form an intermediate oil and gas
exploration and development company (hereinafter the "Arrangement"). Under the
terms of the Arrangement, each TriStar shareholder received 0.4762 shares of
the combined entities for each share of TriStar held and each Real shareholder
received one share of the combined entities for each share of Real held. At
the closing date, TriStar shareholders owned approximately 42 percent of the
combined entities and Real shareholders owned approximately 58 percent of the
combined entities. The transaction closed on August 16, 2007. The combined
entities continued under the name TriStar.
    Senior management of the combined entity are the previous officers of
TriStar, and the board of directors are comprised of seven of TriStar's
previous directors and three of Real's previous directors. Accordingly, the
transaction has been accounted for as a reverse takeover whereby TriStar is
deemed to be the acquirer of Real, using the purchase method of accounting
with an effective date of August 16, 2007.
    This has also resulted in the number of outstanding shares of prior
comparative periods being reduced by being multiplied by 0.4762, in order for
these share and per share amounts to be equivalent.

    Acquisitions of Assets and Common Share Financing

    During March 2007, TriStar completed two acquisitions of certain assets
in its core areas of Ante Creek and Countess, Alberta and in southeast
Saskatchewan for total cash consideration of approximately $55.9 million, net
of certain closing adjustments. In conjunction with the acquisitions, the
Company issued, on a private placement basis, 4.1 million common shares of
TriStar ("Common Shares") (8.6 million shares before the consolidation of
shares related to the Real acquisition) for gross aggregate proceeds of
approximately $40.4 million and 0.8 million flow-through Common Shares
(1.7 million shares before the effect of the Real acquisition) for gross
aggregate proceeds of approximately $10.2 million.

    
    Results of Operations

    Production
                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Daily Production
    Crude oil and natural gas
     liquids (Bbls per day)     6,268        2,191        4,230        1,699
    Natural gas (Mcf per day)  23,112        7,400       13,115        4,525
    -------------------------------------------------------------------------
    Total (Boepd)              10,120        3,424        6,416        2,453
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    For the three months ended September 30, 2007, TriStar averaged
10,120 Boepd as compared to 3,424 Boepd in the third quarter of 2006, a
196 percent increase. Production was comprised of approximately 6,268 Bbls per
day of crude oil and natural gas liquids ("NGL") and 23,112 Mcf per day of
natural gas.
    For the nine months ended September 30, 2007, TriStar averaged
6,416 Boepd as compared to 2,453 Boepd in the corresponding period of 2006, a
162 percent increase. Production was comprised of approximately 4,230 Bbls per
day of crude oil and NGLs and 13,115 Mcf per day of natural gas.
    As the Arrangement closed on August 16, 2007, production acquired from
Real has been included from that date forward.


    
    Production for the quarter was divided between the following areas:

                                                                       Three
                                                                      Months
                                                                       ended
                                                                     Sept 30,
                                                                        2007
    -------------------------------------------------------------------------
                                 Crude Oil and
                                          NGLs    Natural Gas          Total
    Area                          Bbls per day    Mcf per day          Boepd
    -------------------------------------------------------------------------
    Alberta                              3,605         22,737          7,394
    Saskatchewan                         2,663            375          2,726
    -------------------------------------------------------------------------
    Total                                6,268         23,112         10,120
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    During the quarter, the Company drilled 22 (14.8 net) wells, achieving an
82 percent success rate.
    In the first nine months of 2007, TriStar drilled 53 (38.6 net) wells
with and overall success rate of 91 percent.

    Pricing

    Crude oil prices continued to rise in the third quarter as compared to
the first and second quarters of 2007 as WTI reached a high of US$77.03 per
Bbl. Tight supply/demand fundamentals continue to drive the world crude
markets with WTI averaging US$70.57 in the third quarter after averaging
US$58.25 in the first quarter of 2007 and $64.94 in the second quarter of
2007. Edmonton mixed sweet averaged $80.27 in the third quarter as compared to
$73.75 per Bbl in the second quarter and $67.86 per Bbl during the first
quarter.
    Natural gas prices averaged $5.67 per Mcf for AECO daily spot and
US$6.09/Mmbtu for NYMEX daily gas in the quarter. Natural gas storage levels
continue to be consistent with last year's level at this same time, but above
the five year average. Fluctuating supply/demand forecasts continue to cause
significant price volatility and weather will be a key component of natural
gas pricing in the next few months.
    TriStar's average realized price for its crude oil and NGLs was $71.94
per Bbl in the quarter while its realized natural gas price was $5.69 per Mcf.


    
                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Average Benchmark Prices
    Crude oil - WTI
     (US$ per Bbl)              70.57        70.36        68.15        68.70
    Crude oil - Edmonton
     Par Price ($ per Bbl)      80.27        79.40        76.60        76.79
    Natural gas - AECO-C
     Daily Spot ($ per Mcf)      5.67         6.03         6.37         6.02
    Exchange rate - (US$/CDN$)   0.89         0.89         0.88         0.89
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Revenues

    For the three months ended September 30, 2007, TriStar recorded
$41.5 million in crude oil and NGL sales and $12.1 million in natural gas
sales, a 192 percent and 218 percent increase respectively over the third
quarter of 2006 when TriStar recorded $14.2 million of crude oil and NGL sales
and $3.8 million of natural gas sales.
    For the nine months ended September 30, 2007, TriStar recorded
$77.7 million in crude oil sales and $22.8 million in natural gas sales, a
151 percent and 208 percent increase respectively over the nine months ended
September 30, 2006 when TriStar recorded $30.9 million of crude oil sales and
$7.3 million of natural gas sales.
    The Company realized the following commodity prices for the three and
nine months ended September 30, 2007 and September 30, 2006.


    
                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    TriStar Average Realized
     Prices Prior to Hedging
    Crude oil and NGLs -
     ($ per Bbl)                71.94        70.67        67.25        67.95
    Natural gas - ($ per Mcf)    5.69         5.64         6.37         6.04
    Boe - ($ per Boe)           57.55        57.41        57.35        58.20
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
    ($ thousands)                2007         2006         2007         2006
    -------------------------------------------------------------------------
    Revenues by Product
    Crude oil and NGL          41,480       14,242       77,665       30,939
    Hedging gains (losses)       (313)          38        1,161           38
    Natural gas                12,098        3,842       22,794        7,322
    Hedging gains (losses)        522           52          704           94
    -------------------------------------------------------------------------
    Total revenues             53,787       18,174      102,324       38,393
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Royalty Expenses

    Royalties in the quarter ended September 30, 2007 were $10.5 million or
19.5 percent of revenue as compared to $2.8 million or 15.6 percent in the
third quarter of 2006. Royalties in the nine months ended September 30, 2007
were $19.4 million or 19.3 percent of revenue as compared to $6.1 million or
16.0 percent in the nine months ended September 30, 2006. Royalties are
calculated and paid based on oil and natural gas revenues before any realized
hedging gains or losses. Accordingly, royalty expense is directly correlated
to changes in revenue (prior to the effect of hedging).
    On October 25, 2007 the Alberta provincial government announced its
response to the Alberta Royalty Review Panel's recommendations which were
announced on September 18, 2007. The government announced that numerous
changes will be made to the current royalty structure on January 1, 2009.
Although all details were not released, TriStar expects that the revised
royalty program will generally have a negative impact on Alberta conventional
oil and gas production. TriStar does have significant production in the
province of Saskatchewan and production in Alberta that is not subject to
crown royalties mitigating the effect on TriStar's corporate royalties. Based
on preliminary calculations, the expected effect on corporate royalties in
2009 would be an increase of less than three percentage points to TriStar's
current corporate royalty rates of approximately 20 percent.

    Operating Expenses

    Operating expenses were $9.7 million or $10.41 per Boe in the quarter
ended September 30, 2007 as compared to $3.0 million or $9.67 per Boe in the
third quarter of 2006. Operating expenses were $18.8 million or $10.75 per Boe
in the nine months ended September 30, 2007 as compared to $6.3 million or
$9.57 per Boe in the nine months ended September 30, 2006. Absolute operating
expenses in the quarter were affected by the Real transaction completed on
August 16, 2007. It is expected that absolute operating expenses will rise in
the fourth quarter as the Real transaction is fully integrated.

    Transportation Expenses

    Transportation expenses were $1.0 million or $1.04 per Boe in the quarter
ended September 30, 2007 as compared to $0.06 million or $0.19 per Boe in the
third quarter of 2006. Transportation expenses were $1.6 million or $0.92 per
Boe in the nine months ended September 30, 2007 as compared to $0.20 million
or $0.27 per Boe in the nine months ended September 30, 2006. Transportation
expenses are reflective of the location of TriStar's properties,
transportation rates and the location where the product is sold. The increase
in transportation expenses relative to the three and nine months ended
September 30, 2006 is reflective of the assets acquired in the Real
transaction.

    Operating Netbacks

    Operating netbacks were $35.08 per Boe for the quarter ended
September 30, 2007 as compared to $38.87 per Boe for the quarter ended
September 30, 2006 and $35.64 for the nine months ended September 30, 2007 as
compared to $39.25 for the nine months ended September 30, 2006.


    
    Netbacks

                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
    ($ per Boe, unless        Sept 30,     Sept 30,     Sept 30,     Sept 30,
     otherwise noted)            2007         2006         2007         2006
    -------------------------------------------------------------------------
    Total production (Boepd)   10,120        3,424        6,416        2,453
    -------------------------------------------------------------------------
    Crude oil and natural
     gas liquids ($/Bbl)        71.94        70.67        67.25        67.95
    Hedging gains/(losses)
     ($/Bbl)                    (0.54)        0.18         1.01         0.09
    -------------------------------------------------------------------------
    Natural gas ($/Mcf)          5.69         5.64         6.37         6.04
    Hedging gains/(losses)
     ($/Mcf)                     0.25         0.08         0.20         0.08
    -------------------------------------------------------------------------
    Average Price Prior to
     Hedging                    57.55        57.41        57.35        58.20
     ------------------------------------------------------------------------
    Realized gain/(loss) on
     financial instruments       0.22         0.29         1.06         0.20
    Royalties, net             (11.24)       (8.97)      (11.10)       (9.31)
    Operating                  (10.41)       (9.67)      (10.75)       (9.57)
    Transportation              (1.04)       (0.19)       (0.92)       (0.27)
    -------------------------------------------------------------------------
    Operating Netback           35.08        38.87        35.64        39.25
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    General and Administrative Expenses

    During the third quarter of 2007, general and administrative expenses
("G&A"), net of recoveries, was $2.1 million ($2.27 per Boe) as compared to
the quarter ended September 30, 2006 where G&A was $0.7 million or $2.12 per
Boe. G&A, net of recoveries, for the nine months ended September 30, 2007 was
$4.2 million ($2.40 per Boe) as compared to $1.6 million or $2.47 per Boe for
the nine months ended September 30, 2006. The absolute increase in G&A
relative to previous periods reflects the greater size of TriStar as a result
of the acquisition of Real. It is expected that absolute expenses will rise in
the fourth quarter as Real is integrated for the full quarter.


                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
    ($ thousands)                2007         2006         2007         2006
    -------------------------------------------------------------------------
    General and administrative
     expenses                   4,143        1,745        8,399        3,835
    Recoveries                   (629)        (508)      (1,440)        (925)
    Capitalized general and
     administrative expenses   (1,397)        (570)      (2,750)      (1,290)
    -------------------------------------------------------------------------
    Total net general and
     administrative expenses    2,117          667        4,209        1,620
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Interest Expense

    Interest expense was $2.5 million or $2.69 per Boe in the quarter as
compared to $0.6 million or $1.88 per Boe in the quarter ended September 30,
2006. Interest expense was $4.4 million or $2.52 per Boe in the nine months
ended September 30, 2007 as compared to $1.0 million or $1.58 per Boe in the
nine months ended September 30, 2006. Interest costs increased primarily as a
result of an increased level of bank debt held by the Company in the quarter
related to the acquisition of Real. It is expected that this will continue in
the fourth quarter as the Real transaction is integrated for the full quarter.

    Stock-Based Compensation

    The Company's stock-based compensation expense for the quarter ended
September 30, 2007 was $0.8 million or $0.84 per Boe as compared to the
quarter ended September 30, 2006 of $0.3 million or $0.89 per Boe. The
Company's stock-based compensation expense for the nine months ended
September 30, 2007 was $1.5 million or $0.85 per Boe as compared to the nine
months ended September 30, 2006 of $0.6 million or $0.85 per Boe. The
stock-based compensation expense was calculated utilizing a fair value
assessment methodology. These amounts are net of amounts capitalized to
property and equipment because they are related to drilling, production and
acquisitions, which amount to $1.3 million for the quarter ended September 30,
2007 or $1.42 per Boe (2006 - $0.2 million or $0.62 per Boe) and to $1.8
million for the nine months ended September 30, 2007 or $1.91 per Boe (2006 -
$0.4 million or $0.60 per Boe).

    Acquisition Related Expenses

    During the third quarter of 2007, as a result of the acquisition of Real,
TriStar incurred $1.9 million ($2.07 per Boe) of merger-specific expenses. Of
these, $0.8 million ($0.86 per Boe) related to cash employment and financing
expenditures. In addition, the transaction resulted in the termination of
TriStar's previous stock-based compensation arrangements, which resulted in
the immediate recognition of a $1.1 million ($1.21 per Boe) non-cash expense
under stock-based compensation accounting rules. It is expected that certain
additional cash employment costs related to the merger will be incurred and
expensed in the fourth quarter.

    Depletion, Depreciation and Accretion

    Depletion of oil and natural gas properties, including the capitalized
portion of the asset retirement obligations, is provided for on a
unit-of-production basis using estimated proven reserves volumes.
    Depletion, depreciation and accretion expense in the quarter ended
September 30, 2007 was $27.2 million or $29.27 per Boe as compared to the
quarter ended September 30, 2006 which was $9.0 million or $28.68 per Boe.
Depletion, depreciation and accretion expense in the nine months ended
September 30, 2007 was $51.6 million or $29.44 per Boe as compared to the nine
months ended September 30, 2006 which was $18.8 million or $28.63 per Boe.

    Taxes

    For the quarter ended September 30, 2007, TriStar recorded a capital tax
expense of $0.5 million, and a future income tax reduction of $1.2 million as
compared to the quarter ended September 30, 2006 when the Company recorded
$0.04 million of capital tax recovery and a future income tax expense of
$0.6 million. For the nine months ended September 30, 2007, TriStar recorded a
capital tax expense of $0.9 million, and a future income tax reduction of
$2.5 million as compared to the nine months ended September 30, 2006 when the
Company recorded $0.2 million of capital tax expense and a future income tax
reduction of $0.9 million. The capital tax expense is comprised of the
Saskatchewan Capital Tax and Resource Surcharge.
    As at September 30, 2007, TriStar had approximately $489.9 million of tax
pools available to offset future taxable income.

    Net Income (Loss) and Comprehensive Income

    Net loss for the quarter ended September 30, 2007 was $5.4 million
compared to net income of $1.1 million during the same period in 2006. The net
loss in the quarter primarily relates to the unrealized loss on the Company's
financial derivative contracts recognized in the quarter as well as expenses
realized in the quarter related to the acquisition of Real. Net loss for the
nine months ended September 30, 2007 was $5.5 million compared to net income
of $4.4 million during the same period in 2006. Basic and diluted net loss per
share for the quarter ended September 30, 2007 was $0.11 per share. This is
compared to net income of $0.04 per share basic and diluted for the same
period in 2006.
    Basic and diluted net loss per share for the nine months ended September
30, 2007 was $0.16. This is compared to net income of $0.12 and $0.11 per
share basic and diluted, respectively, for the same period in 2006.
    Other comprehensive income for the quarter ended September 30, 2007
included a charge of $0.4 million, net of tax, (2006 - nil) relating to the
amortization of the amount recognized in accumulated other comprehensive
income on January 1, 2007 for the fair value of financial derivatives on
adoption of the new accounting standards for financial instruments. This
resulted in total comprehensive loss of $5.9 million for the quarter ended
September 30, 2007 (2006 - nil), and a total comprehensive loss of
$7.0 million for the nine months ended September 30, 2007 (2006 - nil).

    Risk Management - Financial Instruments

    TriStar enters into commodity price derivative contracts that provide
downside price protection, in order to 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 Policy approved by the Board of Directors.
    At September 30, 2007, the fair value of the financial derivative
contracts was a liability of $5.1 million.
    For the quarter ended September 30, 2007, the Company had a net
unrealized loss on its financial derivative contracts of pre-tax $4.8 million,
in addition to the after-tax $0.4 million (pre-tax: $0.6 million) amortized
gain from the adoption of the standards on January 1, 2007, for a net pre-tax
unrealized loss on financial instruments of $4.2 million.
    The following tables summarize TriStar's commodity risk management
positions as at September 30, 2007:

    
    Oil Costless Collar Contracts
    -----------------------------
                                       Volume        Price
                                       (Bbl/d)     ($US/Bbl)        Index
    -------------------------------------------------------------------------
    Apr. 1, 2006 - Dec. 31, 2007          250    60.00 - 76.10       WTI
    Jan. 1, 2007 - Dec. 31, 2007          500    70.00 - 78.10       WTI
    Jan. 1, 2007 - Dec. 31, 2008          250    60.00 - 75.00       WTI
    Jul. 1, 2007 - Dec. 31, 2007          250    70.00 - 78.00       WTI
    Jan. 1, 2008 - Dec. 31, 2009          500    65.00 - 76.30       WTI
    Jan. 1, 2008 - Dec. 31, 2009          500    65.00 - 76.15       WTI
    Jan. 1, 2008 - Dec. 31, 2009          500    67.00 - 76.70       WTI
    Jan. 1, 2008 - Dec. 31, 2009          500    70.00 - 75.52       WTI
    Jan. 1, 2008 - Dec. 31, 2009          500    65.00 - 73.25       WTI
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Oil Swap Contracts
    ------------------
                                       Volume        Price
                                       (Bbl/d)     ($US/Bbl)        Index
    -------------------------------------------------------------------------
    Jan. 1, 2007 - Dec. 31, 2008          250         68.35           WTI
    Apr. 1, 2007 - Dec. 31, 2009          250       C$76.60         C$WTI
    Jan. 1, 2008 - Dec. 31, 2009          250       C$78.20         C$WTI
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The fair value of the oil costless collars and the swap contracts at
    September 30, 2007 was a liability of US$6.0 million.

    Natural Gas Costless Collar Contracts
    -------------------------------------

                                       Volume        Price
                                       (GJ/d)        ($/GJ)        Index
    -------------------------------------------------------------------------
    Apr. 1, 2007 - Oct. 31, 2007        1,000     6.50 - 9.00   AECO Monthly
    Apr. 1, 2007 - Oct. 31, 2007        1,000     7.50 - 8.75   AECO Monthly
    Nov. 1, 2007 - Mar. 31, 2008        2,000    7.50 - 10.32   AECO Monthly
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Natural Gas Swap Contract
    -------------------------

                                       Volume        Price
                                       (GJ/d)        ($/GJ)        Index
    -------------------------------------------------------------------------
    Apr. 1, 2007 - Oct. 31, 2007        1,000         7.64      AECO Monthly
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The fair value of the natural gas costless collars and swap contract as
    at September 30, 2007 was an asset of $0.9 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.
    The Company has a $300.0 million credit facility. 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 September 30, 2007, TriStar had $219.4 million drawn on its credit
facility and a net working capital deficit of $27.3 million (excluding the
fair value of financial instruments) for a total net debt of $246.7 million.
As at that date, TriStar had met all of its covenants pertaining to this loan
agreement and is not required to make any repayments.

    Capital Expenditures

    During the quarter, the Company incurred $638.7 million of capital
expenditures, of which $601.8 million related to the acquisition of Real, as
compared to $21.9 million spent for the three months ended September 30, 2006.
The Company incurred $739.7 million of capital expenditures during the nine
months ended September 30, 2007 as compared to $292.0 million in the nine
months ended September 30, 2006. The following table details capital
expenditures for the three and nine months ended September 30, 2007 and
September 30, 2006.

    
                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
    ($ thousands)                2007         2006         2007         2006
    -------------------------------------------------------------------------
    Drilling, development and
     production equipment      23,274       20,188       51,303       38,310
    Land and seismic            4,092          532        6,428        1,687
    Acquisitions(1)           608,613          256      677,281      248,830
    Other(2)                    2,691          932        4,685        3,126
    -------------------------------------------------------------------------

    Total                     638,670       21,908      739,697      291,953
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes total consideration (cash, stock and transaction costs) paid
        for acquisitions, and working capital and debt assumed.
    (2) Includes capitalized G&A and administrative assets.


    Goodwill

    During the quarter, TriStar recorded $72.0 of goodwill with respect to the
acquisition of Real which closed on August 16, 2007. Goodwill as at September
30, 2007 was $127.5 million.

    Shareholders' Equity

    Share Capital
    -------------
                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
                                 2007       2006(1)        2007       2006(1)
    -------------------------------------------------------------------------
    Outstanding Common Shares
    Weighted average
     outstanding
     common shares
    Basic                  47,971,955   21,889,400   33,340,780   17,740,936
    Diluted                47,971,955   22,563,054   33,340,780   18,499,545
    -------------------------------------------------------------------------
    Outstanding Securities:
    Common shares          68,462,492   22,247,965   68,462,492   22,247,965
    Common share options    2,610,780      992,877    2,610,780      472,808
    Incentive stock options 1,709,450            -    1,709,450            -
    Performance shares              -    1,082,157            -    1,082,157
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Pursuant to the acquisition of Real, the number of outstanding shares
        of prior comparative periods has been adjusted in order for the
        comparative outstanding share and per share amounts to be equivalent.
    

    Contractual Obligations

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

    As at September 30, 2007 the Company had available a $300.0 million
credit facility. The Company's credit facility is with a syndicate of Canadian
chartered banks and is open for review semi-annually. The facility is a
borrowing base facility that is determined based on, among other things, the
Company's current reserve report, results of operations, current and
forecasted commodity prices and the current economic environment.

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

    The capital intensive nature of the Company's activities may create a
negative working capital position in quarters with high levels of capital
investment. The Company will limit the total negative working capital plus the
outstanding bank debt to the amount of the Company's credit line.
    The industry has a pre-arranged monthly clearing day for payment of
revenues from all buyers of crude oil and natural gas. This occurs on the 25th
day following the month of sale. As a result, the Company's production
revenues are collected in an orderly fashion. To the extent that the Company
has joint venture partners in its activities it will collect on a monthly
basis the partners' share of capital and operating expenses. These are subject
to normal collection risk. At September 30, 2007 the Company had no material
accounts receivable it deemed uncollectible.
    Accounts payable consist of amounts payable to suppliers relating to head
office expenses, field operating activities and capital spending activities.
These invoices are processed within the Company's normal payment period.
    The Company continuously manages the pace of its capital spending program
by monitoring forecasted production and commodity prices and resulting cash
flows. Should circumstances affect cash flow in a detrimental way, the Company
is capable of reducing its capital spending levels.

    
    Summary of Quarterly Results

                                Three        Three        Three        Three
                               Months       Months       Months       Months
                                ended        ended        ended        ended
    ($ thousands except per    Sep 30,      Jun 30,      Mar 31,      Dec 31,
     share and Boepd amounts)    2007         2007         2007         2006
    -------------------------------------------------------------------------
    Production revenue
     (prior to hedging)        53,578       25,965       20,916       18,846
    Net income (loss)          (5,419)       2,024       (2,101)       1,786
    Per share - basic(4)        (0.11)        0.07        (0.09)        0.08
    Per share - diluted(4)      (0.11)        0.07        (0.09)        0.08
    Production (Boepd)         10,120        4,941        4,121        3,919
    Cash flow from
     operations(2)             26,735       13,931       11,410       10,725
    Per share - basic(4)         0.56         0.48         0.49         0.48
    Per share - diluted(4)       0.56         0.47         0.49         0.46
    Cash flow from
     operating activities(3)   25,004       13,537        6,960       12,626
    Per share - basic(4)         0.52         0.49         0.30         0.57
    Per share - diluted(4)       0.52         0.48         0.30         0.55
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                Three        Three        Three
                               Months       Months       Months
                                ended        ended        ended
    ($ thousands except per    Sep 30,      Jun 30,      Mar 31,
     share and Boepd amounts)    2006         2006         2006
    -------------------------------------------------------------------------
    Production revenue
     (prior to hedging)        18,084       12,673        7,504
    Net income (loss)           1,126        2,996          311
    Per share - basic(4)         0.04         0.17         0.02
    Per share - diluted(4)       0.04         0.17         0.02
    Production (Boepd)          3,424        2,290        1,489
    Cash flow from
     operations(2)             11,021        7,426        4,455
    Per share - basic(4)         0.50         0.40         0.36
    Per share - diluted(4)       0.48         0.40         0.34
    Cash flow from
     operating activities(3)   12,371        8,313        3,144
    Per share - basic(4)         0.57         0.46         0.25
    Per share - diluted(4)       0.55         0.44         0.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) TriStar began active operations on January 6, 2006.
    (2) "Cash flow from operations" should not be considered an alternative
        to, or more meaningful than, cash flow from operating activities as
        determined in accordance with Canadian Generally Accepted Accounting
        Principles ("GAAP") as an indicator of TriStar's performance. "Cash
        flow from operations" represents cash flow from operating activities
        prior to changes in non-cash working capital. TriStar's determination
        of cash flow from operations may not be comparable to that found in
        the consolidated statement of cash flows in the unaudited interim
        financial statements. TriStar also presents cash flow from operations
        per share whereby per share amounts are calculated using weighted
        average shares outstanding consistent with the calculation of
        earnings per share.
    (3) "Cash flow from operating activities" is determined in accordance
        with GAAP and includes changes in non-cash working capital.
    (4) Pursuant to the acquisition of Real Resources Inc., the number of
        outstanding shares of prior comparative periods has been adjusted in
        order for the comparative outstanding share and per share amounts to
        be equivalent.
    


    Newly Adopted Accounting Policies

    Financial Instruments

    The following standards regarding financial instruments are effective for
January 1, 2007; 3855 "Financial Instruments - Recognition and Measurement",
3861 "Financial Instruments - Disclosure and Presentation", 1530
"Comprehensive Income", and 3865 "Hedges". The standards require all financial
instruments other than held-to-maturity investments, loans and receivables to
be included on a company's balance sheet at their fair value. Held-to-maturity
investments, loans and receivables are to be measured at their amortized cost.
The standards create a new statement for comprehensive income that includes
changes in the fair value of certain financial instruments.
    The effect of adopting these new accounting standards is presented in the
section "Risk Management - Financial Instruments" elsewhere in this MD&A.

    Business Conditions and Risks

    The business of exploration, development and acquisition of oil and
natural gas reserves involves a number of uncertainties and as a result,
TriStar is exposed to a number of risks inherent in the oil and natural gas
industry. Operationally, TriStar faces risks that are associated with finding,
developing and producing oil and natural gas reserves. These include risks
associated with drilling, economic risk, environmental and safety concerns and
access to processing facilities. The financial risks that are not within
TriStar's control include the fluctuations in national and international
commodity prices, exchange rates and interest rates. TriStar mitigates risk
through the competence of its management team, adequate insurance coverage and
safety and environmental programs that meet or exceed regulations.

    Disclosure Control Risks

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

    Internal Controls over Financial Reporting

    The Company's CEO and CFO have designed or caused to be designed under
their supervision internal controls over financial reporting to provide
reasonable assurance regarding the reliability of the Company's financial
reporting and the preparation of financial statements for external purposes in
accordance with Canadian GAAP.
    The Company's CEO and CFO are required to cause the Company to disclose
any change in the Company's internal controls over financial reporting that
has occurred during the period that has materially affected, or is reasonably
likely to materially affect, the Company's internal controls over financial
reporting.
    No changes in the Company's internal controls over financial reporting
were identified during the three months ended September 30, 2007, that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

    Additional Information

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

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

    ($ thousands)
    -------------------------------------------------------------------------
                                                   September 30, December 31,
                                                           2007         2006
    -------------------------------------------------------------------------

    Assets

    Current assets
      Accounts receivable                                36,852       15,907
      Inventory                                               -        1,788
      Fair value of financial instruments (notes 3, 10)   3,621            -
      Other current assets                                3,870        2,445
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                         44,343       20,140

    Property and equipment (notes 4, 5)                 983,855      293,187
    Goodwill (note 4)                                   127,500       38,647
    Fair value of financial instruments (notes 3, 10)     4,370            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total assets                                      1,160,068      351,974
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities

    Current liabilities
      Accounts payable and accrued liabilities           68,017       28,975
      Bank loan (note 6)                                      -       54,411
      Fair value of financial instruments (notes 3, 10)   5,977            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                         73,994       83,386

    Asset retirement obligations (note 7)                23,049        6,089
    Long-term debt (note 6)                             219,395            -
    Future income taxes                                 135,606       35,018
    Fair value of financial instruments (notes 3, 10)     7,115            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total liabilities                                   459,159      124,493
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Shareholders' Equity

    Share capital (notes 4, 8)                          694,934      219,652
    Contributed surplus (note 8)                          4,691        1,611
    Accumulated other comprehensive income (notes 3, 8)     562            -
    Retained earnings                                       722        6,218
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Total shareholders' equity                          700,909      227,481
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total liabilities and
     shareholders' equity                             1,160,068      351,974
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Contingencies (note 12)
    Subsequent event (note 13)

    See accompanying notes to consolidated financial statements.




    TriStar Oil & Gas Ltd.
    Consolidated Statements of Operations,
     Comprehensive Income and Retained Earnings
    (unaudited)
    -------------------------------------------------------------------------
                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
    ($ thousands)                2007         2006         2007         2006
    -------------------------------------------------------------------------
                                                                     (note 1)
    Revenues
      Petroleum and
       natural gas sales       53,578       18,174      100,459       38,393
      Royalties               (10,468)      (2,825)     (19,437)      (6,122)
    -------------------------------------------------------------------------
                               43,110       15,349       81,022       32,271

    Realized gain on
     financial instruments
     (notes 3, 10)                209            -        1,865            -
    Unrealized loss on
     financial instruments
     (notes 3, 10)             (4,204)           -       (5,898)           -
    -------------------------------------------------------------------------
                               39,115       15,349       76,989       32,271

    Expenses
      Operating                 9,690        3,047       18,824        6,293
      Transportation              966           62        1,618          180
      General and
       administration           2,117          667        4,209        1,620
      Acquisition related
       (note 11)                1,930            -        1,930            -
      Depletion, depreciation
       and accretion           27,247        9,033       51,563       18,824
      Stock-based
       compensation               783          281        1,494          562
      Interest                  2,501          593        4,406        1,040
    -------------------------------------------------------------------------
                               45,234       13,683       84,044       28,519

    Income (loss) before taxes (6,119)       1,666       (7,055)       3,752
    -------------------------------------------------------------------------

    Taxes
      Capital taxes               505          (41)         948          236
      Future income taxes      (1,205)         581       (2,507)        (917)
    -------------------------------------------------------------------------
                                 (700)         540       (1,559)        (681)

    -------------------------------------------------------------------------
    Net income (loss)          (5,419)       1,126       (5,496)       4,433

    Other comprehensive income
      Amortization of fair
       value of financial
       instruments               (432)           -       (1,525)           -
    -------------------------------------------------------------------------
    Comprehensive
     income (loss)             (5,851)       1,126       (7,021)       4,433

    Retained earnings
      Retained earnings,
       beginning of period      6,141        3,307        6,218            -
    -------------------------------------------------------------------------
    Retained earnings,
     end of period                722        4,433          722        4,433
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
     (note 8)
      Basic                     (0.11)        0.04        (0.16)        0.25
      Diluted                   (0.11)        0.04        (0.16)        0.23
    -------------------------------------------------------------------------

    Weighted average number
     of shares (note 8)
      Basic                47,971,955   21,889,400   33,340,780   17,740,936
      Diluted              47,971,955   22,563,054   33,340,780   18,499,545
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements.



    TriStar Oil & Gas Ltd.
    Consolidated Statements of Cash Flows
    (unaudited)
    -------------------------------------------------------------------------
                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
    ($ thousands)                2007         2006         2007         2006
    -------------------------------------------------------------------------
                                                                     (note 1)
    Operating activities
      Net income (loss)        (5,419)       1,126       (5,496)       4,433
      Unrealized loss on
       financial instruments    4,204            -        5,898            -
      Non-cash acquisition
       related expenses
       (note 11)                1,125            -        1,125            -
      Depletion, depreciation
       and accretion           27,247        9,033       51,563       18,824
      Stock-based compensation    783          281        1,494          562
      Future income taxes      (1,205)         581       (2,507)        (917)
    -------------------------------------------------------------------------
                               26,735       11,021       52,077       22,902

      Change in non-cash
       working capital         (1,731)       1,350       (6,576)         926
    -------------------------------------------------------------------------

                               25,004       12,371       45,501       23,828
    -------------------------------------------------------------------------

    Financing activities
      Issuance of share capital     -       15,041       50,620       77,237
      Share issue costs             -         (877)      (2,781)      (3,457)
      Increase (decrease)
       in bank loan            15,079       (8,295)      29,706       12,233
    -------------------------------------------------------------------------

                               15,079        5,869       77,545       86,013
    -------------------------------------------------------------------------

    Investing activities
      Capital expenditures    (29,782)     (20,882)     (60,593)     (42,141)
      Acquisitions, net
       of cash acquired       (14,800)        (530)     (70,997)     (73,011)
      Proceeds from
       dispositions             1,031            -        1,031            -
      Change in non-cash
       working capital          3,468        3,172        7,513        5,311
    -------------------------------------------------------------------------

                              (40,083)     (18,240)    (123,046)    (109,841)
    -------------------------------------------------------------------------

    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 nine months ended September 30, 2007
    (unaudited)

    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. The Company commenced active operations on January 6, 2006,
        following the completion of a plan of arrangement involving StarPoint
        Energy Trust, StarPoint Energy Ltd., Acclaim Energy Trust and Acclaim
        Energy Ltd. to form Canetic Resources Trust and TriStar (the "Canetic
        Transaction"). Accordingly, the six month period ended June 30, 2006
        includes only results from operations for 176 days, from January 6,
        2006 to June 30, 2006.

        The corporate acquisition of Real Resources Inc. ("Real") described
        in note 4 has been accounted for as a reverse takeover. As a result
        the number of outstanding shares of prior comparative periods has
        been reduced by being multiplied by 0.4762, in order for the
        comparative share and per share amounts to be equivalent.

    2.  Principles of consolidation

        The interim consolidated financial statements include the accounts of
        TriStar, TOG Partnership, Vortex Energy Corporation, 3249271 Canada
        Limited, TriStar Resources Ltd. and Real Oil & Gas Corp. The interim
        consolidated financial statements of the Company have been prepared
        following the same accounting policies and methods of computation
        utilized in the financial statements of the Company for the year
        ended December 31, 2006, except for the changes described in note 3.
        The disclosures provided below are incremental to those included in
        the Company's annual audited financial statements and certain
        disclosures, which are normally required to be included in the notes
        to the annual consolidated financial statements, have been condensed
        or omitted. These interim consolidated financial statements should be
        read in conjunction with the consolidated financial statements and
        notes thereto in the Company's annual report for the year ended
        December 31, 2006.

        The interim 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 Canadian 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.

    3.  Change in accounting policy

        On January 1, 2007, the Company adopted the new accounting standards
        regarding the recognition, measurement, disclosure and presentation
        of financial instruments. In conjunction with the adoption of these
        new standards, the Company elected not to use hedge accounting for
        its crude oil and natural gas derivative contracts under its risk
        management program. As a result, the fair value of the commodity
        contracts is recognized at each reporting period with the change in
        the fair value being classified as an unrealized gain or loss on the
        statement of operations. Also, in accordance with the transitional
        provisions of the standards, the accounting for hedging relationships
        for prior periods is not retroactively adjusted; therefore, there has
        been no restatement of the prior period.

        On adoption, the Company recognized an asset of $3.0 million for the
        fair value of its financial derivative contracts and an increase to
        the future income tax liability and accumulated other comprehensive
        income of $0.9 million and $2.1 million, respectively. The
        $2.1 million in accumulated other comprehensive income is amortized
        through other comprehensive income and unrealized gain or loss on
        financial derivatives in the statement of operations and other
        comprehensive income over the term of the contracts. As a result,
        $1.5 million, net of tax, was charged to other comprehensive income
        with a corresponding unrealized gain on financial derivatives of
        $2.2 million and a charge to future income tax expense of
        $0.6 million for the nine months ended September 30, 2007. The impact
        of the change in fair value from January 1, 2007 to September 30,
        2007 is disclosed in note 10. Certain comparative amounts have been
        reclassified to conform to the presentation adopted in 2007.

        a)  Financial instruments - Recognition and measurement

            The standards require that all financial assets and liabilities,
            within its scope, be carried at fair value in the consolidated
            balance sheets, except for: loans and receivables, securities
            designated as held-to-maturity and non-trading financial
            liabilities which are carried at amortized cost unless designated
            as held-for-trading upon initial recognition. Fair values are
            based on quoted market prices where available from active
            markets, otherwise fair values are estimated using other
            valuation techniques and models.

            Held-for-trading financial assets are purchased for resale,
            generally within a short period of time. They are measured at
            fair value at the balance sheet date. Gains and losses realized
            on disposal and unrealized gains and losses from market
            fluctuations are reported in earnings.

            Designated fair value financial assets and financial liabilities
            are those that were designated on initial recognition as
            instruments that will be measured at fair value through the
            consolidated statements of earnings and deficit. These are
            accounted for in the same manner as held-for-trading financial
            assets.

            Held-to-maturity financial assets are non-derivative financial
            assets with fixed or determinable payments and a fixed maturity,
            other than loans and receivables that an entity has the positive
            intention and ability to hold to maturity. These are accounted
            for at amortized cost. The Company has not designated any
            financial assets as held-to-maturity.


            Available for sale financial assets are non-derivative financial
            assets that are designated as available for sale and include debt
            and equity securities, including investments with no significant
            influence that have quoted market values in an active market.
            These are carried at fair value and any unrealized gains and
            losses are included in accumulated other comprehensive income
            until sale or permanent impairment. Equities that do not have a
            quoted market value in an active market are carried at cost. The
            Company has not designated any financial assets as available for
            sale.

            Loans and receivables continue to be accounted for at amortized
            cost.

            Financial liabilities are recorded at amortized cost and include
            all liabilities, other than derivatives or liabilities to which
            the fair value option has been applied or those held for trading.

            Derivatives are carried at fair value and are reported as assets
            when they have a positive fair value and as liabilities when they
            have a negative fair value. Derivatives may be embedded in other
            financial instruments, in which case they may be required to be
            separated and fair valued as separate derivatives. The Company
            has not identified any material embedded derivatives in any of
            its financial instruments.

            As required, these standards have been applied as an adjustment
            to either the opening deficit or opening accumulated other
            comprehensive income and prior periods have not been restated.

        b)  Derivatives

            The Company has elected to account for its commodity sales
            contracts and other non-financial contracts, which were entered
            into and continue to be held for the purpose of receipt or
            delivery of non-financial items in accordance with its expected
            purchase, sale or usage requirements, on an accrual basis rather
            than as non-financial derivatives. Prior to adoption of the new
            standards, physical receipt and delivery contracts did not fall
            within the scope of the definition of a financial instrument and
            were also accounted for on an accrual basis.

        c)  Other Comprehensive Income

            The new standards require a new statement of comprehensive
            income, which is comprised of net earnings and other
            comprehensive income which, for the Company, relates to changes
            in gains or losses on derivatives that previously qualified for
            hedge accounting.

    4.  Business Combinations

        Acquisition of Real
        -------------------

        On August 2, 2007, the shareholders of TriStar and Real approved a
        plan of arrangement to form an intermediate oil and gas exploration
        and development company (hereinafter the "Arrangement"). Under the
        terms of the Arrangement, each TriStar shareholder received 0.4762
        shares of the combined entities for each share of TriStar held and
        each Real shareholder received one share of the combined entities. At
        the close of the transaction, TriStar shareholders owned
        approximately 42 percent of the combined entities and Real
        shareholders owned approximately 58 percent of the combined entities.
        The transaction closed on August 16, 2007. The combined entities
        continued under the name TriStar.

        Senior management of the combined entity are the officers of TriStar,
        and the board of directors is comprised of seven of TriStar's
        previous directors and three of Real's previous directors.
        Accordingly, the transaction has been accounted for as a reverse
        takeover, whereby TriStar is deemed to be the acquirer of Real, using
        the purchase method of accounting, as follows:

        ($ thousands)
        ---------------------------------------------------------------------
        Consideration
          Common shares issued                                       417,965
          Transaction costs                                            8,000
        ---------------------------------------------------------------------

                                                                     425,965
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Net assets received, at estimated fair value
        ---------------------------------------------------------------------
          Property and equipment                                     601,813
          Working capital                                            (18,884)
          Goodwill                                                    72,048
          Bank loan                                                 (133,104)
          Asset retirement obligations                               (14,060)
          Future income taxes                                        (81,848)
        ---------------------------------------------------------------------

                                                                     425,965
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The results of operations include net revenue from this transaction
        effective August 16, 2007.

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

        Corporate Acquisition
        ---------------------

        On March 31, 2007, TriStar acquired a company with assets in core
        areas in Alberta and southeast Saskatchewan for total cash
        consideration of $47.7 million, after certain closing adjustments.
        The results of operations include net revenue from this transaction
        effective April 1, 2007.

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

        ($ thousands)
        ---------------------------------------------------------------------
        Consideration
        ---------------------------------------------------------------------
          Cash                                                        47,394
          Transaction costs                                              350
        ---------------------------------------------------------------------

                                                                      47,744
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Net assets received, at estimated fair value
        ---------------------------------------------------------------------
          Property and equipment                                      48,587
          Goodwill                                                    11,134
          Asset retirement obligations                                  (843)
          Future income taxes                                        (11,134)
        ---------------------------------------------------------------------

                                                                      47,744
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

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

        Saskatchewan Private Company Acquisition
        ----------------------------------------

        On January 11, 2007, TriStar acquired, through a series of
        transactions with another public company, all of the issued and
        outstanding common shares of a privately owned Saskatchewan oil and
        gas company (the "Saskatchewan Private Company"). The results of
        operations include net revenue from this transaction effective
        January 12, 2007.

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

        ($ thousands)
        ---------------------------------------------------------------------
        Consideration
        ---------------------------------------------------------------------
          Common Shares issued                                        11,700
          Transaction costs                                              200
        ---------------------------------------------------------------------

                                                                      11,900
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Net assets received, at estimated fair value
        ---------------------------------------------------------------------
          Property and equipment                                      12,741
          Working capital                                              1,582
          Goodwill                                                     5,670
          Bank loan                                                   (2,174)
          Asset retirement obligations                                  (249)
          Future income taxes                                         (5,670)
        ---------------------------------------------------------------------

                                                                      11,900
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

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


    5.  Property and equipment

        ($ thousands)
        ---------------------------------------------------------------------
                                                   September 30, December 31,
                                                           2007         2006
        ---------------------------------------------------------------------
        Petroleum and natural gas assets:             1,063,198      321,500
        Administrative assets                               861          826
        ---------------------------------------------------------------------
                                                      1,064,059      322,326

        Less accumulated depletion and depreciation     (80,204)     (29,139)
        ---------------------------------------------------------------------

                                                        983,855      293,187
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        At September 30, 2007 the calculation of the depletion and
        depreciation expense excludes unproved property and undeveloped land
        cost of $174.4 million (2006: $26.3 million). Unused seismic costs of
        $35.1 million (2006: nil) was also excluded. Future development costs
        of $81.6 million were included in the depletion calculation for the
        three months ended September 30, 2007.

        During the three months ended September 30, 2007, the Company
        capitalized $1.4 million (2006: $0.6 million) of general and
        administrative costs and $1.3 million (2006: $0.2 million) of
        stock-based compensation expense, including a tax effect of
        $0.5 million (2006: nil), relating to exploration, development and
        acquisition activities. During the nine months ended September 30,
        2007, the Company capitalized $2.7 million (2006: $1.3 million) of
        general and administrative costs and $1.8 million (2006:
        $0.4 million) of stock-based compensation expense, including a tax
        effect of $0.8 million (2006: nil), relating to exploration,
        development and acquisition activities.

    6.  Bank loan

        The Company has a $300.0 million credit facility. The credit facility
        provides that advances may be made by way of direct advances, bankers
        acceptances, or standby letters of credit/guarantees. Direct advances
        bear interest at the bank's prime lending rate plus an applicable
        margin for Canadian dollar advances and at the bank's U.S. base rate
        plus an applicable margin for U.S. dollar advances. The applicable
        margin charged by the bank is dependent on the Company's debt to
        trailing cash flow ratio. The banker's acceptances bear interest at
        the applicable banker's acceptance rate plus a stamping fee, based on
        the Company's debt to trailing cash flow ratio. The credit facility
        is secured by a fixed and floating charge debenture on the assets of
        the Company. The borrowing base is subject to semi-annual review by
        the bank.

        The Company's effective interest rate for the three and nine months
        ended September 30, 2007 was 5.3 percent and 5.4 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 $75.4 million as at September 30, 2007. 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)
        ---------------------------------------------------------------------
                                                   September 30, December 31,
                                                           2007         2006
        ---------------------------------------------------------------------
        ARO beginning of period                           6,089            -
        Liabilities acquired                             15,553        5,090
        Liabilities incurred                                929          731
        Accretion expense                                   478          268
        ---------------------------------------------------------------------

        Net for the period                               23,049        6,089
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    8.  Shareholders' equity

        As described in note 4, the corporate acquisition of Real has been
        accounted for as a reverse takeover. As a result the number of
        outstanding shares of prior comparative periods has been reduced by
        being multiplied by 0.4762, in order for the comparative share and
        per share amounts to be equivalent.

        a)  Share capital - authorized
              An unlimited number of voting common shares of TriStar ("Common
              Shares").

        b)  Share capital - issued and outstanding

            The following table reconciles the Company's share capital
            movements between January 1, 2007 and September 30, 2007:

            ($ thousands, except share amounts)
            -----------------------------------------------------------------
                                                      Number of
                                                         shares       Amount
            -----------------------------------------------------------------
            Common Shares
              Balance, beginning of period           22,248,051      219,629
            -----------------------------------------------------------------
              Issued on acquisitions                 40,922,047      429,665
              Issued for cash: flow-through shares      809,540       10,200
              Issued for cash                         4,095,320       40,420
              Tax effect on flow-through
               expenses renounced                             -       (4,425)
              Conversion of performance shares          387,534        1,406
              Share issue costs (net of tax effect)           -       (1,961)
            -----------------------------------------------------------------

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

            Performance Shares
              Balance, beginning of period            1,082,157           23
              Exercised for Common Shares(1)         (1,082,157)         (23)
            -----------------------------------------------------------------

              Balance, end of period                          -            -
            -----------------------------------------------------------------

            Total share capital, end of period       68,462,492      694,934
            -----------------------------------------------------------------
            -----------------------------------------------------------------
            (1) The Performance Shares were exercised or cancelled pursuant
                to the Real transaction.

        c)  Per share amounts

            The reconciling items between the basic and diluted average
            Common Shares outstanding are stock-based compensation items.

        d)  Stock-based compensation

            The Company has an employee stock option plan under which
            employees and directors are eligible to receive option grants
            ("Stock Options") and Common Share incentives ("Incentive
            Shares"). The total aggregate amount of Stock Options and
            Incentive Shares that can be issued cannot exceed ten percent of
            the outstanding Common Shares. Stock Options granted under the
            plan have a term of five years to expiry and vest over three
            years.

            Incentive Shares are granted to employees and directors and are
            earned annually in equal amounts over three years from the date
            of grant. Upon vesting, the Incentive Shares are converted into
            common shares. At the end of each vesting period Incentive
            Shares will be issued from treasury. In the three and nine
            months ended September 30, 2007, 1,709,450 Incentive Shares were
            granted.

            The Company accounts for its stock-based compensation using the
            fair value method. The fair value of each Stock Option and
            Incentive Share 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 two years. The risk-free interest rate is 4.25
            percent and the expected volatility is 35 percent.

            Pursuant to the Real transaction, a change of control caused the
            cancellation of all stock options issued prior to August 16,
            2007, followed by the reissuance of new stock options.

            The following table reconciles Stock Option activity:

            -----------------------------------------------------------------
                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
                                 2007         2006         2007         2006
            -----------------------------------------------------------------
            Balance,
             beginning
             of period      1,066,688      380,246      995,258            -
            Cancelled      (1,066,688)           -     (995,258)           -
            Granted         2,610,780      612,631    2,610,780      992,877
            -----------------------------------------------------------------

            Balance, end
             of period      2,610,780      992,877    2,610,780      992,877
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Weighted average
             exercise price      7.29         7.11         7.29         6.96
            -----------------------------------------------------------------
            -----------------------------------------------------------------

        e)  Contributed surplus

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

            ($ thousands)
            -----------------------------------------------------------------
                                                   September 30, December 31,
                                                           2007         2006
            -----------------------------------------------------------------
            Balance, beginning of period                  1,611            -
            Stock-based compensation
             expense arising from:
              Stock Options                               3,577          755
              Incentive Shares                              729            -
              Performance Shares                         (1,355)         856
              Escrowed shares                               157            -
              Conversion of Performance Shares              (28)           -
            -----------------------------------------------------------------

            Balance, end of period                        4,691        1,611
            -----------------------------------------------------------------
            -----------------------------------------------------------------

        f)  Accumulated other comprehensive income

            As described in note 3, the adoption of the new accounting
            policies regarding financial instruments resulted in an amount
            being recognized in accumulated other comprehensive income for
            the fair value of the Company's commodity derivative contracts at
            January 1, 2007. The amount recognized in accumulated other
            comprehensive income is as follows:


            ($ thousands)
            -----------------------------------------------------------------
                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
                                 2007         2006         2007         2006
            -----------------------------------------------------------------
            Balance, beginning
             of period            994            -            -            -
            Change in
             accounting
             policy, net
             of tax of $874         -            -        2,087            -
            Amortization of
             fair value of
             financial
             instruments, net
             of tax of $181
             and $638 for the
             three and nine
             months ended
             September 30,
             2007, respectively  (432)           -       (1,525)           -
            -----------------------------------------------------------------

            Balance, end
             of period            562            -          562            -
            -----------------------------------------------------------------
            -----------------------------------------------------------------

        g)  Flow-through shares

            Upon the acquisition of Real, described in note 4, TriStar
            acquired the obligation to satisfy Real's flow-through share
            obligations. All qualifying expenditures related to Real's flow-
            through share obligations had been renounced at the acquisition
            date of August 16, 2007. The amount of qualifying resource
            expenditures remaining to be incurred for Real's flow-through
            share issues by December 31, 2007 was $3.5 million at
            September 30, 2007.

            On March 16, 2007, TriStar issued 1,700,000 (809,540 after effect
            of Real acquisition) flow-through Common Shares at a price of
            $6.00 ($12.60 after effect of Real acquisition) per share for
            gross proceeds of $10.2 million. As a result, the Company must
            incur certain qualifying resource expenditures before December
            31, 2008. The related tax impact will be recorded when the
            qualifying expenditures are renounced to shareholders in 2008. No
            qualifying expenditures related to this flow-through share
            obligation were renounced as at June 30, 2007. The obligation
            remaining for this flow-through share issue was $10.2 million at
            September 30, 2007.

            On August 10, 2006, TriStar issued 1,690,000 (804,778 after
            effect of Real acquisition) flow-through Common Shares at a price
            of $8.90 ($18.69 after effect of Real acquisition) per share for
            gross proceeds of $15.0 million. As a result, the Company must
            incur certain qualifying resource expenditures before December
            31, 2007. The related tax impact was recorded when the qualifying
            expenditures were renounced to shareholders in January 2007. The
            obligation remaining for this flow-through share issue was
            approximately $1.7 million at September 30, 2007.

    9.  Supplemental cash flow information

        ($ thousands)
        ---------------------------------------------------------------------
                                Three        Three         Nine         Nine
                               Months       Months       Months       Months
                                ended        ended        ended        ended
                              Sept 30,     Sept 30,     Sept 30,     Sept 30,
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------
        Income and other
         taxes paid               187            -          362           93
        Interest paid, net
         of interest income     4,120          610        5,960        1,044
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    10. Financial instruments

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

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

        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. 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 September 30, 2007, the following table presents a reconciliation
        of the change in the unrealized amounts from January 1, 2007 to
        September 30, 2007:

        ($ thousands)
        ---------------------------------------------------------------------
                                                                       Total
                                                           Fair   unrealized
                                                          value   gain/(loss)
        ---------------------------------------------------------------------
        Balance, beginning of period                      2,960            -
        Unrealized loss on financial instruments         (8,061)      (8,061)
        Amortization of fair value
         of financial instruments                             -        2,163
        ---------------------------------------------------------------------

        Balance, end of period                           (5,101)      (5,898)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

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

        Commodity contracts outstanding are as follows:

        Oil Costless Collars Contracts
        ---------------------------------------------------------------------
                                         Volume        Price
                                         (Bbl/d)     ($US/Bbl)        Index
        ---------------------------------------------------------------------

        Apr. 1, 2006 - Dec. 31, 2007       250     60.00 - 76.10        WTI
        Jan. 1, 2007 - Dec. 31, 2007       500     70.00 - 78.10        WTI
        Jan. 1, 2007 - Dec. 31, 2008       250     60.00 - 75.00        WTI
        Jul. 1, 2007 - Dec. 31, 2007       250     70.00 - 78.00        WTI
        Jan. 1, 2008 - Dec. 31, 2009       500     65.00 - 76.30        WTI
        Jan. 1, 2008 - Dec. 31, 2009       500     65.00 - 76.15        WTI
        Jan. 1, 2008 - Dec. 31, 2009       500     67.00 - 76.70        WTI
        Jan. 1, 2008 - Dec. 31, 2009       500     70.00 - 75.52        WTI
        Jan. 1, 2008 - Dec. 31, 2009       500     65.00 - 73.25        WTI

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

        Oil Swap Contracts
        ---------------------------------------------------------------------
                                         Volume        Price
                                         (Bbl/d)     (per Bbl)        Index
        ---------------------------------------------------------------------

        Jan. 1, 2007 - Dec. 31, 2008       250        US$68.35          WTI
        Apr. 1, 2007 - Dec. 31, 2009       250         C$76.60        C$WTI
        Jan. 1, 2008 - Dec. 31, 2009       250         C$78.20        C$WTI

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

        Natural Gas Costless Collars Contracts
        ---------------------------------------------------------------------
                                         Volume         Price
                                         (GJ/d)        ($/GJ)         Index
        ---------------------------------------------------------------------
        Apr. 1, 2007 - Oct. 31, 2007     1,000      6.50 - 9.00  AECO Monthly
        Apr. 1, 2007 - Oct. 31, 2007     1,000      7.50 - 8.75  AECO Monthly
        Nov. 1, 2007 - Mar. 31, 2008     2,000     7.50 - 10.32  AECO Monthly
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Natural Gas Swap Contract
        ---------------------------------------------------------------------
                                         Volume         Price
                                         (GJ/d)        ($/GJ)         Index
        ---------------------------------------------------------------------
        Apr. 1, 2007 - Oct. 31, 2007     1,000          7.64     AECO Monthly
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    11. Acquisition related expenses

        During the third quarter of 2007, as a result of the acquisition of
        Real, TriStar incurred $1.9 million of merger-specific expenses. Of
        these, $0.8 million related to cash employment and financing
        expenditures. In addition, the transaction resulted in the
        termination of TriStar's previous stock-based compensation
        arrangements, which resulted in the immediate recognition of a
        $1.1 million non-cash expense under stock-based compensation
        accounting rules.

    12. 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.

    13. Subsequent event

        Subsequent to the third quarter, the Company completed the
        divestiture of certain non core assets for proceeds of $39.5 million,
        subject to closing adjustments.
    

    %SEDAR: 00023171E




For further information:

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

Organization Profile

TriStar Oil & Gas Ltd.

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