Twin Butte Energy Reports Third Quarter 2007 Results



    CALGARY, Nov. 8 /CNW/ -

    Highlights

    Twin Butte Energy Ltd. ("Twin Butte" or the "Company") (TSX: TBE) is
pleased to announce its financial and operational results for the three and
nine month periods ended September 30, 2007.

    
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                            Three months ended              Nine months ended
                                  September 30                   September 30

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                                             %                              %
                      2007        2006  Change       2007        2006  Change
    -------------------------------------------------------------------------
    Financial
    ($ thousands,
    except per
    share amounts)
    -------------------------------------------------------------------------
      Petroleum
       and natural
       gas sales      8,060       4,569    76%      20,795       6,294   230%
      Cash flow (1)   3,254       1,861    75%       8,970       2,450   266%
      Per share
       basic &
       diluted         0.12        0.10    20%        0.39        0.25    56%
      Net loss (3)   (4,818)     (2,267)  113%      (5,251)     (3,201)   64%
      Per share
       basic &
       diluted        (0.18)      (0.13)   38%       (0.23)      (0.30) (23)%
      Capital
       expenditures
       (net of
       dispositions)  3,615       4,666  (23)%      43,988       5,123   759%
      Corporate
       acquisitions       -           -                  -       8,252
      Net debt (2)   22,823       7,517   204%      22,823       7,517   204%

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    Operating
    -------------------------------------------------------------------------
    Average daily
     production
      Crude oil
       (bbl per day)    382         298    28%         338         144   135%
      Natural gas
       (Mcf per day)  9,483       4,313   120%       7,197       1,930   273%
      Natural gas
       liquids (bbl
       per day)          79          30   163%          64          13   392%
      Barrels of oil
       equivalent
       (boe per
       day, 6:1)      2,042       1,047    95%       1,601         478   235%
    Average
     sales price
      Crude oil
       ($ per bbl)    77.21       73.79     5%       70.96       73.79   (4)%
      Natural gas
       ($ per Mcf)     5.54        5.95   (7)%        6.68        6.00    11%
      Natural gas
       liquids
       ($ per bbl)    70.40       67.75     4%       64.30       67.98   (5)%
      Barrels of oil
       equivalent
       ($ per
       boe, 6:1)      42.91       47.45  (10)%       47.57       48.22   (1)%
    Operating
     netback
     ($ per boe)      19.50       25.38  (23)%       23.91       26.19   (9)%

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    Common Shares
    -------------------------------------------------------------------------
    Shares
     outstanding,
     end of
     period      27,752,398  19,031,007    46%  27,752,398  19,031,007    46%
    Weighted
     average
     shares
     outstanding 26,726,855  18,041,441    48%  23,115,992  10,643,596   117%
    -------------------------------------------------------------------------
    (1) Cash flow means earnings before future taxes, depletion, depreciation
    and accretion, stock based compensation, and unrealized loss (gain) on
    financial derivative contracts. See Management's Discussion & Analysis
    Non-GAAP Measures.
    (2) Net debt at September 30, 2007 excludes financial derivative
    contracts liability in the amount of $159 thousand included in current
    liabilities. The liability relates to an unrealized loss on financial
    derivative contracts recognized at September 30, 2007.
    (3) Net loss for the three month period ended September 30, 2007 includes
    a non-cash future income tax expense of $2.0 million.

    Report to Shareholders

    The Company's achievements in the third quarter include the following:

    -  5th consecutive quarter (since commencing operations in Q2 2006) of
       increased cash flow, production and production per share;

    -  Average production of 2,042 boe/d in the third quarter representing a
       95 percent increase from the third quarter of 2006 production average
       of 1,047 boe/d, and a 41 percent increase from the second quarter of
       2007 production average of 1,445 boe/d.;

    -  Closed a bought deal private placement of Common Shares for aggregate
       proceeds of $16,650,000, positioning the Company with a strong balance
       sheet and financial flexibility supported by a solid production base;

    -  Cash flow totaled $3.3 million representing a 75 percent increase over
       third quarter 2006 cash flow of $1.9 million;

    -  Commenced technical and operational activity in new core area of
       Thunder, Alberta;

    -  Drilled and cased four (2.9 net) wells in the quarter for a 100
       percent success rate and finished associated completion and tie in
       work; and

    -  Submitted EUB downspacing application to facilitate infill drilling in
       the 37.5 MMbbl Jayar light oil pool.
    

    Operations Review

    Production for the third quarter averaged 2,042 boe/d comprised of 77
percent natural gas and 23 percent light oil and natural gas liquids
representing an increase of 95 percent from the third quarter of 2006
production average of 1,047 boe/d, and a 41 percent increase over the
1,445 boe/d production average in the second quarter of 2007. The Company
completed a Q3 net capital program of $ 3.6 million drilling three (2.4 net)
wells in the Bulwark core area and one (0.5 net) well in the new Thunder core
area. Additionally, the wells drilled in late Q2 at Bulwark and Oyen were
completed and tied in as planned. Production for the quarter reflects
additions from new wells brought on production in early September and the
acquired production from the Thunder acquisition that closed on June 28, 2007.
    This was the first full quarter with our new Thunder area assets which
were acquired on June 28, 2007. The acquisition has brought us a stable new
core area in which the Company drilled one well in the third quarter and plans
to drill an additional two wells in the fourth quarter. Since the acquisition
closed the Company has purchased new lands in the area through crown land
sales and has entered into a preliminary farm-in arrangement that will
compliment the 19,000 net undeveloped acres of land acquired with the
transaction. The Company is also in the process of purchasing trade data and
shooting new seismic data in the area to evaluate and follow up on
opportunities identified on the acquired lands.
    Net income for the Company continues to be affected by significant
variances in future tax expense. This non cash item results from the fact that
approximately $50 million of our $161 million in tax pools cannot be currently
recognized as a future tax asset for accounting purposes based on the
Company's present future cash flow estimates. This has resulted in significant
variances in both future tax expenses and recoveries from quarter to quarter
this year and management expects this may continue over the near term. This
non cash item results despite the fact that the Company has in excess of
$160 million in tax pools. The Company has no current cash tax payable and
does not forsee any cash taxes payable until beyond 2011 based on current
operations. This enviable tax pool status will allow Twin Butte to maintain a
competitive advantage in the acquisition market.
    On the management front, the Company is pleased to announce that
subsequent to the end of the quarter, Alan Steele has re-joined the team as
Vice President Finance and CFO. Alan has over 25 years of experience in
finance and accounting within the oil and gas industry and brings great depth
to the Twin Butte management team. Additionally, effective November 15th, 2007
Jeff Lawson will resign from the Twin Butte Board of Directors to focus on his
new primary business venture. At this time the management and remaining Board
of Directors would like to thank Jeff for his many valuable contributions to
the Company since inception and wish him all the best in his new venture.

    Outlook: 2007 Guidance

    Changes in the oil and gas industry have presented challenges to our
Company and to our peers, that we believe will continue to strongly support
our value based business strategy. The industry challenges continued in the
third quarter with sustained low natural gas pricing and the announcement by
the provincial government of Alberta of their intention to increase royalty
rates on oil and gas production.
    On October 25, 2007, the Alberta Government released its New Royalty
Framework which was the Government's confirmation of the direction it was
heading in response to the Alberta royalty review panel recommendations. While
these new royalty rules will not come into effect until January 2009, we have
reviewed our current production base to quantify the effects. Based on 2007
production and using McDaniel & Associates Consultants Ltd. July 2007 price
deck, the Company expects to realize a marginal reduction in overall royalty
costs. With our evolving production base it is difficult to quantify what
effect these changes will have on actual cash flows and capital spending for
2009 and beyond, however, the Company will need to consider these changes in
all future economic decisions. Along with most of our peers, the Company does
expect to be negatively effected by the royalty changes as the current project
inventory is focused on conventional production opportunities in Alberta. As a
result, future projects could be impacted depending on production rates and
commodity price. Management of the Company will continue to utilize sound
economic evaluation criteria to prioritize projects and maximize shareholder
value.
    We continue to believe in the long term outlook for natural gas and feel
that our value based approach, and an element of countercyclical thinking,
will result in future rewards to our shareholders. Management remains
committed to building a solid foundation from which the Company will thrive,
illustrated by the Company's attributes as follows:

    
    -  Stable production base and a 2007 exit production rate of
       approximately 2,100 boe/d;

    -  Reserves of 5.8 MMboe (P+P);

    -  A reserve life index of 7.6 years (P+P);

    -  Tax pools of approximately $161 million;

    -  Net undeveloped land totaling 61,000 acres;

    -  Solid balance sheet with net debt of approximately $23 million and
       total credit facilities of $40 million;

    -  Significant light oil exploitation upside at Jayar 37.5MMbbl OOIP
       light oil pool; and

    -  New core area at Thunder, Alberta with extensive opportunity base.
    

    Management confirms that Twin Butte is on target to meet its 2007 exit
production guidance of 2,100 boe/d. We are currently working through our 2008
budget and will be providing 2008 guidance in mid to late December.
    The Company continues to focus on its core areas, adding to our inventory
of opportunities and growing our land base through Crown land sales, joint
ventures and farm-in opportunities. The management team and Board of Directors
remains focused on cost effective per share growth in reserves, production and
cash flow which will be achieved through exploitation of the existing asset
base and the integration of accretive acquisitions following management's
"acquire, exploit and explore" business strategy.

    On behalf of the Board of Directors,

    Ron Cawston
    President and C.E.O.
    November 8, 2007

    Certain information regarding the Company contained herein may constitute
forward-looking statements within the meaning of applicable securities laws.
Forward-looking statements may include estimates, plans, anticipations,
expectations, intentions, opinions, forecasts, projections, guidance or other
similar statements that are not statements of fact. Although the Company
believes that the expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to
be correct. These statements are subject to certain risks and uncertainties
and may be based on assumptions that could cause actual results to differ
materially from those anticipated or implied in the forward-looking
statements. The Company's forward-looking statements are expressly qualified
in their entirety by this cautionary statement.

    In this news release, reserves and production data are commonly stated in
barrels of oil equivalent ("boe") using a six to one conversion ratio when
converting thousands of cubic feet of natural gas ("Mcf") to barrels of oil
("bbl") and a one to one conversion ratio for natural gas liquids ("NGLs" or
"ngls"). Such conversion may be misleading, particularly if used in isolation.
A boe conversion ratio of 6 Mcf: 1 bbl is based on energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.

    Management's Discussion and Analysis

    Dated as of November 8, 2007

    The following discussion and analysis as provided by the management of
Twin Butte Energy Ltd. ("Twin Butte" or the "Company") should be read in
conjunction with the unaudited financial statements for the period ended
September 30, 2007 and the audited financial statements and management
discussion and analysis for the year ended December 31, 2006. Other unaudited
interim financial statements, current annual information form and other
disclosure documents are filed on SEDAR at www.sedar.com. Other corporate
documentation can be obtained from our website at www.twinbutteenergy.com.

    Basis of Presentation - The reporting and measurement currency is the
    Canadian dollar.

    Non-GAAP Measures - The Management's Discussion and Analysis ("MD&A")
contains the term cash flow from operations or cash flow which 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 the Company's
performance. The Company 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. These
measures may not be comparable to other companies.

    boe Presentation - Barrels of oil equivalent ("boe") may be misleading,
particularly if used in isolation. A boe conversion rate of 6 Mcf: 1 bbl is
based on an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead. All boe
conversions in the report are derived by converting gas to oil at the ratio of
six thousand cubic feet of gas to one barrel of oil.

    Forward-Looking Information - Certain information regarding the Company
presented in this document, including management's assessment of the Company's
future plans and operations, may constitute forward-looking statements under
applicable securities law and necessarily involve risk associated with oil and
gas exploration, production, marketing, and transportation such as loss of
market, volatility of commodity prices, currency fluctuations, imprecision of
reserve estimates, environmental risk, competition from other producers and
ability to access sufficient capital from internal and external resources; as
a consequence, actual results may differ materially from those anticipated in
the forward-looking statements.


    
    Petroleum and Natural Gas Sales

    Twin Butte realized the following production volumes, commodity prices and
revenues:

                              Three months ended           Nine months ended
                                    September 30                September 30

    -------------------------------------------------------------------------
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Average Realized
     Commodity Prices
    -------------------------------------------------------------------------
    Crude oil ($ per bbl)    77.21         73.79         70.96         73.79
    Natural gas
     ($ per Mcf)              5.54          5.95          6.68          6.00
    Natural gas liquids
     ($ per bbl)             70.40         67.75         64.30         67.98
    Barrels of oil
     equivalent
     ($ per boe, 6:1)        42.91         47.45         47.57         48.22

    Revenue

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    $'s
    Crude oil            2,712,211     2,020,412     6,551,462     2,896,735
    Natural gas          4,832,945     2,360,469    13,127,565     3,161,361
    Natural gas liquids    514,455       188,139     1,116,435       236,078
    -------------------------------------------------------------------------
    Total petroleum and
     natural gas sales   8,059,611     4,569,020    20,795,462     6,294,174
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Average Daily Production
    -------------------------------------------------------------------------

    Crude oil & natural
     gas liquids (bbl/day)     461           328           402           157
    Natural gas (Mcf/day)    9,483         4,313         7,197         1,930
    -------------------------------------------------------------------------
    Total (boe/d)            2,042         1,047         1,601           478
    -------------------------------------------------------------------------
    

    Revenues for the three months ended September 30, 2007 were $8.1 million,
as compared to $4.6 million for the three months ended September 30, 2006
representing an increase of $3.5 million or 76%. This increase in revenue is
attributed primarily to third quarter production average increasing by 95% to
2,042 boe/d in 2007 from 1,047 boe/d in 2006 largely as a result of the
Thunder property acquisition. The increase in revenue is partially offset by a
10% reduction in the average realized commodity price from $47.45 per boe in
2006 to $42.91 in 2007. After incorporating the effect of the realized gain on
financial derivatives resulting from commodity hedges in the amount of
$0.6 million in the third quarter, the Company realized a natural gas price of
$6.31/mcf, and a crude oil price of $74.59/bbl for the third quarter.
    Revenues for the nine months ended September 30, 2007 were $20.8 million
as compared to $6.3 million, representing an increase of 230%. This increase
is due to a 235% increase in production volumes, offset by a 1% decrease in
average realized prices. As well the majority of operations did not commence
until June 2006.
    Production for the third quarter consists of 872,449 Mcf of gas,
35,126 bbl of oil and 7,308 bbl of natural gas liquids, for a total of 187,842
boe. The Company's sales volumes were 77% natural gas for the third quarter
compared to 69% in the prior year comparative quarter.

    Royalties

    Royalties for the three months ended September 30, 2007 were
$1.7 million, as compared to $0.8 million for the three months ended September
30, 2006. As a perecentage of revenues, the average royalty rate for the third
quarter of 2007 was 21% compared to 17% for the comparative period of 2006.
Royalties for the nine months ended September 30, 2007 were $4.2 million, as
compared to $1.1 million for the nine months ended September 30, 2006. As a
perecentage of revenues, the average royalty rate for the nine months ended
September 30, 2007 was 20% compared to 17% for the comparative period of 2006.
    The increase in the average royalty rates for both the three and nine
month periods ending September 30, 2007 compared to the same period in 2006,
results primarily from the elimination of the Alberta Royalty Tax Credit
("ARTC") in 2007 and slightly higher royalty rates associated with production
acquired in June 2007.

    Operating Expenses

    Operating expenses were $2.2 million or $11.86 per boe for the quarter
ended September 30, 2007 as compared to $1.1 million or $11.76 per boe for the
three months ended September 30, 2006. Operating expenses were $5.1 million or
$11.55 per boe for the nine months ended September 30, 2007 as compared to
$1.5 million or $11.28 per boe for the nine months ended September 30, 2006.
    Management has implemented some cost saving measures that should reduce
or hold flat operating costs in the near future.

    Transportation Expenses

    Transportation expenses for the three months ended September 30, 2007
were $0.5 million or $2.47 per boe compared to $0.2 million or $2.40 per boe
in the prior year comparative quarter. Transportation expenses for the nine
months ended September 30, 2007 were $1.1 million or $2.48 per boe compared to
$0.3 million or $2.40 per boe in the prior year comparative quarter. Increases
in total transportation expenses are the result of increases in production
volumes but transportation expenses on a per unit basis remain consistent.

    General and Administrative ("G&A") Expenses

    
                              Three months ended           Nine months ended
                                    September 30                September 30

    -------------------------------------------------------------------------
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    G&A expenses           828,020       586,656     2,413,001       789,156
    Recoveries             (57,059)      (21,770)     (243,686)      (32,855)
    Capitalized
     G&A expenses         (172,414)     (150,411)     (537,937)     (167,178)
    -------------------------------------------------------------------------
    Total net
     G&A expenses          598,547       414,475     1,631,378       589,123
    -------------------------------------------------------------------------
    

    General and administrative expenses, net of recoveries and capitalized
G&A, were $0.6 million, or $3.19 per boe for the current quarter as compared
to $0.4 million or $4.30 per boe in the prior year comparative quarter.
General and administrative expenses, net of recoveries and capitalized G&A,
were $1.6 million, or $3.73 per boe for the nine months ended September 30,
2007 as compared to $0.6 million or $4.51 per boe for the nine months ended
September 30, 2006. The increase in G&A costs is directly attributable to
increased office and staffing costs. However, with the increased production
volumes the Company has realized a reduction in general and administrative
expenses on a per boe basis.

    Stock Based Compensation Expense

    During the three month period ended September 30, 2007, the Company
expensed $0.2 million in stock based compensation as compared to $1.6 million
in the three month period ended September 30, 2006. Stock based compensation
expense amounts to $0.4 million for the nine month period ended September 30,
2007 compared to $2.2 million for the nine months ended September 30, 2006.
Stock based compensation expense in 2007 relates to the outstanding stock
options.

    Interest Expense

    For the three months ended September 30, 2007, interest expense was
$0.4 million, an increase of $0.2 million from $0.2 million for the prior year
comparative quarter. For the nine months ended September 30, 2007, interest
expense was $0.5 million compared to $0.4 million for the nine months ended
September 30, 2006. Higher interest costs in the third quarter and the first
nine months of 2007 are due to higher average debt levels. Debt levels have
increased primarily as a result of a $28.4 million property acquisition in
June 2007.

    Unrealized Loss on Financial Derivative Contracts and Realized Gain on
    Financial Derivatives

    On January 1, 2007, the Company adopted new accounting standards for
financial instruments and hedging. Accordingly, realized and unrealized gains
on commodity derivative contracts are recognized in the current period. See
note 1 of the financial statements for a description of the new accounting
policies.
    In the first two quarters of 2007, the Company entered into fixed price
swap contracts for natural gas and oil. As part of our financial management
strategy, Twin Butte has adopted a disciplined commodity price risk management
program. The purpose of the program is to reduce volatility in the financial
results and to stabilize and hedge future cash flow against the unpredictable
commodity price environment.
    The Company has recognized a realized gain on financial derivatives in
the amount of $578 thousand for the three month period ended September 30,
2007 and a realized gain of $700 thousand for the nine month period ended
September 30, 2007.
    The following is a summary of all natural gas sales price derivative
contracts in effect as at September 30, 2007:

    
                                                            Fixed price
    Daily quantity        Remaining term of contract        per GJ (AECO)
    -------------------------------------------------------------------------

       1,500 GJ          October 1 to October 31, 2007          $6.80
       1,500 GJ          October 1 to October 31, 2007          $7.04
         500 GJ          October 1 to October 31, 2007          $7.40

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

    The following is a summary of all oil sales price derivative contracts in
effect as at September 30, 2007:
                                                            Fixed price
    Daily quantity        Remaining term of contract        per bbl (WTI)
    -------------------------------------------------------------------------
        100 bbl          October 1 to December 31, 2007       US $68.50
         50 bbl          October 1 to December 31, 2007       US $68.75
        100 bbl       January 1, 2008 to December 31, 2008    US $70.65
    -------------------------------------------------------------------------
    

    In accordance with the new accounting standards for financial instruments
and hedging, the Company has calculated the fair value of the above contracts
and recorded an unrealized liability on financial derivative contracts in the
amount of $158,970 as at September 30, 2007.

    Depletion, Depreciation and Accretion Expense

    For the three month period ended September 30, 2007, depletion and
depreciation of capital assets and the accretion of the asset retirement
obligations was $5.8 million or $30.51 per boe compared to $3.6 million or
$37.14 per boe for the three month period ended September 30, 2006. For the
nine month period ended September 30, 2007, depletion and depreciation of
capital assets and the accretion of the asset retirement obligations was
$13.8 million or $31.08 per boe compared to $4.8 million or $36.17 per boe for
the nine month period ended September 30, 2006.
    The increase in depletion, depreciation and accretion expense for the
three months and nine months ended September 30, 2007 as compared to the same
periods in 2006 is due to higher production volumes, but reflects a decrease
in costs on a per unit basis. Per unit costs have decreased in 2007 when
compared to 2006 due to proven reserve additions.

    Income Taxes

    Future income tax expense amounted to $2.0 million for the three month
period ended September 30, 2007 compared to a future income tax recovery in
the amount of $1.1 million for the three month period ended September 30,
2006. For the nine month period ended September 30, 2007, future income tax
recovery amounted to $0.2 million compared to a future income tax recovery of
$1.3 million for the prior year comparative period.
    Due to accounting rules governing the calculation of future taxes, the
Company is limited in its recognition of a future tax asset related to its tax
pools. However, the Company has existing tax losses and pools of approximately
$161.8 million of which $69.5 million are non-capital losses and the Company
has no current tax expense. Based on current reserve forecasts the Company
will be able to realize the benefit of the majority of the non-capital losses
and is forecasted to be non-taxable beyond 2011.

    Cash Flow from Operations and Net Loss and Comprehensive Loss

    Cash flow from operations for the three month period ended September 30,
2007 was $3.3 million, an increase of 75% from third quarter 2006 cash flow of
$1.9 million. This represents an increase of 20% in cash flow per share basic
and diluted to $0.12 per share in third quarter 2007 from $0.10 per share in
third quarter 2006.
    The Company posted a net loss and comprehensive loss of $4.8 million for
the three month period ended September 30, 2007, equating to a basic and
diluted net loss per share of $0.18, compared to a net loss and comprehensive
loss of $2.3 million for the three month period ended September 30, 2006,
equating to a basic and diluted net loss per share of $0.13. Net loss and
comprehensive loss for the nine months ended September 30, 2007 was
$5.3 million, or $0.23 per share basic and diluted, compared to a net loss and
comprehensive loss for the prior year comparative period of $3.2 million, or
$0.30 per share basic and diluted.
    The net loss and comprehensive loss of $5.3 million for the nine month
period ended September 30, 2007 includes non cash items including depletion,
depreciation and accretion expense of $13.8 million, future income tax
recovery of $0.2 million, unrealized loss on financial derivative contracts of
$0.2 million, and stock based compensation expense of $0.4 million.
    The following table summarizes netbacks for the past four quarters on a
barrel of oil equivalent basis:

    
                           Q3 2007       Q2 2007       Q1 2007       Q4 2006

    -------------------------------------------------------------------------
    ($ per boe)
    -------------------------------------------------------------------------
    Petroleum and
     natural gas sales       42.91         51.38         50.76         48.48
    Royalties                (9.08)       (10.52)        (9.55)        (7.21)
    -------------------------------------------------------------------------
                             33.83         40.86         41.21         41.27
    Operating expenses      (11.86)       (10.96)       (11.73)       (11.38)
    Transportation
     expenses                (2.47)        (2.31)        (2.69)        (2.77)
    -------------------------------------------------------------------------
    Operating netback        19.50         27.59         26.79         27.12
    General and
     administrative
     expenses                (3.19)        (4.25)        (4.03)        (5.19)
    Interest expense         (2.07)        (0.77)        (0.47)        (1.42)
    -------------------------------------------------------------------------
    Cash flow from
     operations              14.24         22.57         22.29         20.51
    -------------------------------------------------------------------------

    Quarterly Financial Summary

    The following table highlights Twin Butte's performance for the past five
quarters:

                            Sep. 30,  June 30,  March 31,  Dec. 31,  Sep. 30,
                               2007      2007       2007      2006      2006
    -------------------------------------------------------------------------
    ($ thousands, except
    per share amounts)
    -------------------------------------------------------------------------
    Average
     production (boe/d)       2,042     1,445      1,309     1,089     1,047
    Petroleum and
     natural gas sales        8,060     6,755      5,981     4,855     4,569
    Operating netback
     (per boe)                19.50     27.59      26.79     27.12     25.38

    Cash flow from
     operations               3,254     3,091      2,626     2,054     1,861
      Per share basic
       & diluted               0.12      0.14       0.13      0.11      0.10

    Net earnings (loss)      (4,818)    3,483     (3,915)     (881)   (2,267)
      Per share basic
       & diluted              (0.18)     0.16      (0.19)    (0.07)    (0.13)

    Capital expenditures
     (net of dispositions)    3,615    31,981      8,391     9,580     4,666
    Total assets            112,804   116,389     81,899    78,697    67,060
    Net debt excluding
     financial derivative
     contracts liability     22,823    38,042      9,001    14,578     7,517
    -------------------------------------------------------------------------
    

    The Company's first fully operational quarter of activity was the three
month period ended September 30, 2006.

    Capital Expenditures

    During the third quarter of 2007, the Company incurred $3.6 million of
net capital expenditures and $44.0 million in net capital expenditures for the
nine month period ended September 30, 2007.

    
                                                  Three months   Nine months
                                                         ended         ended
                                                  September 30, September 30,
                                                          2007          2007

    -------------------------------------------------------------------------
    Land acquisition                                   675,903     1,632,869
    Geological and geophysical                         169,355       566,557
    Drilling and completions                         1,578,074     8,346,291
    Equipping and facilities                         1,016,411     4,952,528
    Property acquisitions                                    -    28,403,761
    Property dispositions                                    -      (465,721)
    Other                                              175,403       551,426
    -------------------------------------------------------------------------
    Total net capital expenditures                   3,615,146    43,987,711
    -------------------------------------------------------------------------
    

    During the second quarter the Company closed a property acquisition on
June 28, 2007 for approximately $28.4 million. The acquisition consists of
producing assets, undeveloped land, and infrastructure in the Leaman/Thunder
area of West Central Alberta. This represents a new core growth area to the
Company.
    During the third quarter the Company drilled and cased three (2.4 net)
wells in the Bulwark core area and one (0.5 net) well in the Thunder core
area. The Company also continued to be active at crown land sales.

    Liquidity and Capital Resources

    At September 30, 2007, the Company had net debt of $22.8 million,
excluding financial derivative contracts liability in the amount of
$0.2 million included in current liabilities relating to an unrealized loss on
financial derivative contracts recognized at September 30, 2007.
    In relation to the previously announced property acquisition that was
completed June 28, 2007, the Company increased its total credit facility with
a Canadian chartered bank to a total of $40.0 million. The renewed credit
facility is composed of a $32.5 million demand revolving operating credit
facility and a $7.5 million acquisition and development credit facility.

    Share Capital

    On May 31, 2007, the Company consolidated its share capital on a 1:5
basis. All share and per share amounts have been restated to reflect this
share consolidation.
    On July 17, 2007, the Company closed a bought deal private placement of
5,550,000 Common Shares at a price of $3.00 per share, for aggregate proceeds
of $16,650,000. The proceeds were used to repay debt incurred in relation to
the property acquisition that was completed June 28, 2007.
    As of November 8, 2007 the Company currently has 27,752,398 Common Shares
and 1,855,000 stock options outstanding.

    Contractual Obligations

    The issuance of flow through shares in February 2007 for proceeds of
$12.0 million will require the Company to spend $12.0 million of flow-through
share eligible Canadian Exploration Expenditures, as defined in the Canadian
Income Tax Act, by December 31, 2008. As at September 30, 2007 the Company has
incurred approximately $1.7 million of this commitment.
    The Company has other commitments and guarantees in the normal course of
business, consisting of an office space lease and equipment rentals which are
not considered material.

    Related Party Transactions

    During the quarter the Company expensed and capitalized legal fees
totaling $158,623 for services rendered by a professional firm related to a
director of the Company. The fees were incurred in the normal course of
business and recorded at the exchange amount.

    Disclosure Controls and Procedures and Internal Control Over Financial
    Reporting

    Twin Butte has implemented a system of internal controls that it believes
adequately protects the assets of the Company and is appropriate for the
nature of its business and the size of its operations. These internal controls
include disclosure controls and procedures designed to ensure that information
required to be disclosed by the Company is accumulated and communicated to
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, that Twin Butte's
disclosure controls and procedures are effective to provide reasonable
assurance that material information related to the Company is made known to
them and have been operating effectively. It should be noted that while the
Company's CEO and CFO believe that Twin Butte's disclosure controls and
procedures provide a reasonable level of assurance that the system of internal
controls are effective, they do not guarantee that the disclosure controls and
procedures will prevent all errors and fraud. A control system, no matter how
well conceived or operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.
    In addition, in accordance with Multilateral Instrument 52-109, the
Company has, under the supervision of its CEO and CFO, designed a process of
internal control over financial reporting, which has been affected by the
Company's board of directors and management. The process was designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in
accordance with Canadian generally accepted accounting principles ("GAAP").
    Based on the CEO and the CFO's review of the design of internal controls
over financial reporting, the CEO and CFO have concluded that the design of
internal controls is adequate for the nature of the Corporation's business and
size of its operations. As a small organization, and similar to other small
organizations, the Company's management is composed of a small number of key
individuals, resulting in a situation where limitations on the segregation of
duties as well as expertise in such areas as complex calculations and
estimations do not exist, as such these risks are compensated by more
effective supervision and monitoring by the CEO and CFO as well as reliance on
third party expertise where appropriate. It is important to note that in order
to eliminate the potential risk associated with these issues the Company would
be required to hire additional staff in order to provide greater segregation
of duties and expertise in certain areas. Since the increased costs of such
hiring would be financially constrictive to Twin Butte, the Corporation has
chosen to disclose the potential risk in its annual filings and proceed with
increased staffing as the Company's growth supports such overhead expansion.


    
    TWIN BUTTE ENERGY LTD

    Balance Sheets (unaudited)

    -------------------------------------------------------------------------
                                                  September 30   December 31
                                                          2007          2006
    -------------------------------------------------------------------------

    Assets

    Current Assets
      Accounts receivable                         $  3,808,852  $  4,554,362
      Deposits and prepaid expenses                    660,034       606,175
      -----------------------------------------------------------------------
                                                     4,468,886     5,160,537

    Future income taxes                              2,780,652     2,029,400

    Property and equipment (note 2)                105,554,096    71,506,633
    -------------------------------------------------------------------------
                                                  $112,803,634  $ 78,696,570
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current Liabilities
      Accounts payable and accrued liabilities    $  6,496,575  $ 13,399,101
      Bank indebtedness (note 3)                    20,795,758     6,318,985
      Financial derivative contracts (note 8)          158,970             -
      -----------------------------------------------------------------------
                                                    27,451,303    19,718,086

    Asset retirement obligation (note 4)             6,923,848     3,073,325

    -------------------------------------------------------------------------
                                                    34,375,151    22,791,411

    Shareholders' Equity
      Share capital (note 5)                        93,724,461    66,397,721
      Contributed surplus (note 5)                     863,187       415,713
      Deficit                                      (16,159,165)  (10,908,275)
      -----------------------------------------------------------------------
                                                    78,428,483    55,905,159
    -------------------------------------------------------------------------
                                                  $112,803,634  $ 78,696,570
    -------------------------------------------------------------------------

    Commitments (note 7)

    See accompanying notes to financial statements


    TWIN BUTTE ENERGY LTD

    Statements of Loss, Comprehensive Loss and Deficit (unaudited)

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

    Revenue:
      Petroleum and
       natural gas
       sales          $  8,059,611  $  4,569,020  $ 20,795,462  $  6,294,174
      Royalties         (1,704,854)     (761,126)   (4,213,287)   (1,090,357)
      Realized gain on
       financial
       derivatives         577,607             -       700,063             -
      Unrealized loss
       on financial
       derivative
       contracts
       (note 8)            (37,997)            -      (158,970)            -
      -----------------------------------------------------------------------
                         6,894,367     3,807,894    17,123,268     5,203,817

    Expenses:
      Operating          2,226,958     1,132,680     5,050,720     1,472,588
      Transportation       463,310       231,385     1,083,468       312,854
      General and
       administrative      598,547       414,475     1,631,378       589,123
      Stock based
       compensation        183,163     1,630,989       447,474     2,175,496
      Interest             389,460       168,422       546,317       378,809
      Depletion,
       depreciation
       and accretion     5,842,229     3,602,345    13,790,773     4,756,559
      -----------------------------------------------------------------------
                         9,703,667     7,180,296    22,550,130     9,685,429

    -------------------------------------------------------------------------
    Loss before income
     taxes              (2,809,300)   (3,372,402)   (5,426,862)   (4,481,612)
    Income taxes
      Future tax expense
       (recovery)        2,009,097    (1,105,458)     (175,972)   (1,280,458)
      -----------------------------------------------------------------------
                         2,009,097    (1,105,458)     (175,972)   (1,280,458)

    -------------------------------------------------------------------------
    Net loss and
     comprehensive
     loss               (4,818,397)   (2,266,944)   (5,250,890)   (3,201,154)

    Deficit, beginning
     of period         (11,340,768)   (7,760,614)  (10,908,275)   (6,826,404)

    -------------------------------------------------------------------------
    Deficit, end of
     period           $(16,159,165) $(10,027,558) $(16,159,165) $(10,027,558)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Basic & diluted
     loss per share   $      (0.18) $      (0.13) $      (0.23) $      (0.30)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average
     common shares
     outstanding
      Basic             26,726,855    18,041,441    23,115,992    10,643,596
      Diluted           26,726,855    18,463,095    23,115,992    10,701,934

    See accompanying notes to financial statements


    TWIN BUTTE ENERGY LTD

    Statements of Cash Flows (unaudited)

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

    Cash provided by
     (used in):

    Operations:
      Net loss        $ (4,818,397) $ (2,266,944) $ (5,250,890) $ (3,201,154)
      Items not
       involving cash:
        Depletion,
         depreciation
         and accretion   5,842,229     3,602,345    13,790,773     4,756,559
        Future income
         taxes           2,009,097    (1,105,458)     (175,972)   (1,280,458)
        Unrealized loss
         on financial
         derivative
         contracts          37,997             -       158,970             -
        Stock based
         compensation      183,163     1,630,989       447,474     2,175,496
        ---------------------------------------------------------------------
                         3,254,089     1,860,932     8,970,355     2,450,443
      Changes in non-cash
       working capital    (432,267)   (2,346,566)    1,436,716    (1,384,537)
      -----------------------------------------------------------------------
                         2,821,822      (485,635)   10,407,071     1,065,906

    Financing:
      Change in bank
       debt            (15,704,872)       20,377    14,476,773    (5,898,464)
      Issuance of
       share capital,
       net of share
       issue costs      15,580,067     3,645,612    26,751,459    12,535,867
      Changes in non-
       cash working
       capital                   -       (37,074)            -       (37,354)
      -----------------------------------------------------------------------
                          (124,805)    3,628,915    41,228,232     6,600,049

    Investing:
      Expenditures on
       property and
       equipment        (3,615,146)   (4,665,524)  (44,453,432)   (5,122,515)
      Acquisition
       expenditures              -             -             -    (8,252,364)
      Proceeds on
       disposition of
       property and
       equipment                 -             -       465,721             -
      Changes in non-
       cash working
       capital             918,129     1,522,244    (7,647,592)    2,083,338
      -----------------------------------------------------------------------
                        (2,697,017)   (3,143,280)  (51,635,303)  (11,291,541)

    -------------------------------------------------------------------------
    Decrease in cash
     and cash
     equivalents                 -             -             -    (3,625,587)
    Cash and cash
     equivalents,
     beginning of
     period                      -             -             -     3,625,587
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     end of period    $          -  $          -  $          -  $          -
    -------------------------------------------------------------------------

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

    Cash interest
     paid             $    411,544  $    114,204  $    544,562  $    261,381


    See accompanying notes to financial statements


    Notes to Financial Statements (Unaudited) - September 30, 2007

    The interim financial statements of Twin Butte Energy Ltd. ("Twin Butte"
    or the "Company") have been prepared by management in accordance with
    accounting principles generally accepted in Canada. The interim financial
    statements have been prepared following the same accounting policies and
    methods of computation as the audited financial statements for the year
    ended December 31, 2006 except as noted below. The disclosures provided
    below are incremental to those included in the audited annual financial
    statements. These interim financial statements should be read in
    conjunction with the financial statements and notes thereto in the
    Company's audited annual financial statements. Certain of the comparative
    amounts have been reclassified to conform to the presentation adopted in
    the current period.

    Twin Butte is engaged in the acquisition of, exploration for, and
    development of petroleum and natural gas properties in Western Canada.


    1.  SIGNIFICANT ACCOUNTING POLICIES

    Management is required to make estimates and assumptions that affect the
    reported amounts of assets and liabilities and the disclosure of
    contingent assets and liabilities as at the date of the financial
    statements and the reported amounts of revenue and expenses. The amounts
    recorded for depletion and amortization of petroleum and natural gas
    properties and equipment and the provision for future asset retirement
    obligation costs are based on estimates. The ceiling test is based on
    estimates of proved reserves, production rates, future oil and gas
    prices, future costs and other relevant assumptions. The amounts recorded
    for future taxes are based on estimates of future taxable income and
    anticipated income tax rates. The fair value of stock options is based on
    estimates using the Black-Scholes option pricing model and is recorded as
    stock-based compensation expense in the financial statements. By their
    nature, these estimates are subject to measurement uncertainty and the
    effect on the financial statements of changes in such estimates in future
    periods could be significant.

    Newly Adopted Accounting Policies

    On January 1, 2007, the Company adopted the new CICA Handbook sections
    3855 - Financial Instruments - Recognition and Measurement, 3861 -
    Financial Instruments - Disclosure and Presentation, 3865 - Hedges, and
    1530 - Comprehensive Income. The financial instruments standard
    establishes the recognition and measurement criteria of financial assets,
    financial liabilities and derivatives. All financial instruments are
    required to be measured at fair value on initial recognition of the
    instrument, except for certain related party transactions. Measurement in
    subsequent periods depends on whether the financial instrument has been
    classified as held-for-trading, available-for-sale, held-to-maturity,
    loans and receivables, or other financial liabilities as defined by the
    standard.

    Financial assets and financial liabilities held-for-trading are measured
    at fair value with changes in those fair values recognized in net
    earnings (loss). Financial assets available-for-sale are measured at fair
    value, with changes in those fair values recognized in other
    comprehensive income (loss). Financial assets held-to-maturity, loans and
    receivables and other financial liabilities are measured at amortized
    cost using the effective interest method of amortization.

    The Company has no financial instruments or activities that give rise to
    other comprehensive income (loss). The Company's cash and cash
    equivalents are designated as held-for-trading and are measured at
    carrying value, which approximates fair value due to the short-term
    nature of these instruments. Accounts receivable are designated as loans
    and receivables. Accounts payable and accrued liabilities and bank
    indebtedness are designated as other liabilities. The adoption of these
    new standards had no effect on the Company's financial statements.

    2.  PROPERTY AND EQUIPMENT

                      -------------------------------------------------------
                                                  September 30,  December 31,
                                                          2007          2006
                                     Accumulated           Net           Net
                                     Depletion &          Book          Book
                              Cost  Depreciation         Value         Value
                      -------------------------------------------------------
    Petroleum and
     natural gas
     properties       $126,914,566  $ 21,399,310  $105,515,256  $ 71,468,938
    Office and
     computer
     equipment              58,290        19,450        38,840        37,695
                      -------------------------------------------------------
    Total             $126,972,856  $ 21,418,760  $105,554,096  $ 71,506,633
                      -------------------------------------------------------
                      -------------------------------------------------------

    The Company has capitalized $537,937 of general and administrative
    expenses directly related to exploration and development activities for
    the nine months ended September 30, 2007 ($379,609 - year ended
    December 31, 2006).

    The cost of undeveloped property excluded from the depletion base as at
    September 30, 2007 was $8,837,771 (December 31, 2006 - $5,630,449).
    Future development costs on proved reserves of $1,398,300 as at
    September 30, 2007 are included in the calculation of depletion and
    depreciation (December 31, 2006 - $5,785,700).

    3.  BANK INDEBTEDNESS

    As at September 30, 2007, the Company had a $40.0 million credit facility
    with a Canadian chartered bank. The credit facility is composed of a
    $32.5 million demand revolving operating credit facility and a
    $7.5 million acquisition and development credit facility. Interest rates
    on the demand revolving operating credit facility fluctuate based on a
    pricing grid and range from bank prime to bank prime plus 2.0%, depending
    upon the Company's then current debt to cash flow ratio of between less
    than one times to greater than three times. A debt to cash flow ratio of
    less than one times has interest payable at the bank's prime lending
    rate. A debt to cash flow ratio greater than three times has interest
    payable at the bank's prime lending rate plus 2.0%. Advances on the
    acquisition and development credit facility bear interest at the bank's
    prime lending rate plus 0.25%. The credit facility is secured by a demand
    debenture and a general security agreement covering all assets of the
    Company.

    In addition, the Company had secured a $5.5 million bridge loan in
    June 2007. Interest on the loan is payable at the bank's prime lending
    rate plus 1.00%. In July 2007 the bridge loan was repaid and cancelled.

    4.  ASSET RETIREMENT OBLIGATIONS

    Asset retirement obligations are based on the Company's net ownership in
    wells and facilities, and management's estimate of future costs to
    abandon and reclaim those wells and facilities as well as an estimate of
    the future timing of the costs to be incurred.

    The Company has estimated the present value of its total asset retirement
    obligation to be $6,923,848 at September 30, 2007, based on a total
    future liability of $10,394,095. Payments to settle asset retirement
    obligations occur over the operating lives of the underlying assets,
    estimated to be from 1 year to 19 years with the majority of the costs to
    be incurred between 2008 and 2016. A credit-adjusted risk free rate of
    eight percent and an inflation rate of two percent were used to calculate
    the present value of the asset retirement obligation.

    Changes to the asset retirement obligation are as follows:

                                                   Nine Months    Year Ended
                                            Ended September 30,  December 31,
                                                          2007          2006
    -------------------------------------------------------------------------
    Asset retirement obligation,
     beginning of year                            $  3,073,325  $          -

    Liabilities incurred                               198,271        76,481
    Acquisitions                                     3,521,095     2,062,312
    Liabilities related to property dispositions       (35,940)            -
    Revisions in estimated cash outflows               (25,656)      876,988
    Accretion of asset retirement obligation           192,753        57,544
    -------------------------------------------------------------------------

    Asset retirement obligation, end of period    $  6,923,848  $  3,073,325
    -------------------------------------------------------------------------

    5.  SHARE CAPITAL

    Authorized

    An unlimited number of voting Common Shares and an unlimited number of
    Preferred Shares.

    Issued

    -------------------------------------------------------------------------
                                                     Number of
                                                        shares        Amount
    -------------------------------------------------------------------------

    Common Shares

    Balance, December  31, 2006                     19,275,398  $ 66,397,721

    Issued pursuant to private placement of
    of flow-through shares                           2,927,000    12,000,700

    Issued pursuant to private placement of
    of common shares                                 5,550,000    16,650,000

    Share issue and financing costs net of tax               -    (1,323,960)
    -------------------------------------------------------------------------

    Balance, September 30, 2007                     27,752,398  $ 93,724,461
    -------------------------------------------------------------------------

    Common Share Consolidation

    On May 31, 2007, the Company consolidated its share capital on a 1:5
    basis. All Common Share, stock options, and per share amounts have been
    restated to reflect this share consolidation.

    Issue of Common Shares

    On February 27, 2007 the Company closed a bought deal private placement
    of 2,927,000 flow-through Common Shares at a price of $4.10 per share,
    for aggregate proceeds of $12,000,700.

    On July 17, 2007 the Company closed a bought deal private placement of
    5,550,000 Common Shares at a price of $3.00 per share, for aggregate
    proceeds of $16,650,000.

    Stock Options

    The following table sets forth a reconciliation of stock option plan
    activity through to September 30, 2007:

                                                                    Weighted
                                                                     Average
                                                     Number of      Exercise
                                                       Options         Price
    -------------------------------------------------------------------------


    Outstanding at December 31, 2006                 1,465,000         $4.00
    Granted                                            585,000          3.14
    Forfeited                                         (450,000)         4.00

    -------------------------------------------------------------------------
    Outstanding at September 30, 2007                1,600,000         $3.68
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    There were 273,333 options exercisable as at September 30, 2007 at an
    average exercise price of $4.00 per share.

    Stock Based Compensation

    The Company accounts for its stock based compensation plan using the fair
    value method. Under this method, a compensation cost is charged over the
    vesting period for options or warrants granted to employees, consultants,
    officers, and directors with a corresponding increase to contributed
    surplus.

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

                                             Nine Months Ended    Year Ended
                                                  September 30,  December 31,
                                                          2007          2006
    -------------------------------------------------------------------------

    Contributed surplus balance
     at beginning of year                         $    415,713  $          -

    Stock based compensation
     charged for stock options                         447,474       415,713
    Stock based compensation charged
     for management warrants                                 -     3,403,950
    Transfer to share capital on exercise
     of management warrants                                  -    (3,403,950)
    -------------------------------------------------------------------------

    Contributed surplus balance at end of period  $    863,187  $    415,713
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The fair value of each option granted is estimated on the date of grant
    using the Black-Scholes option pricing model with assumptions and
    resulting values for grants for the nine month period ended September 30,
    2007 as follows:

    -------------------------------------------------------------------------
    Expected volatility                                                  50%
    Risk free rate of return                                            4.5%
    Expected stock option life                                       3 years
    Dividend yield rate                                                 0.0%
    -------------------------------------------------------------------------

    The weighted average fair value of stock options granted during 2007 was
    $1.20 per option.

    Earnings Per Share

    The following table sets forth the details of the denominator used for
    the computation of basic and diluted earnings per share:

                              Three months ended           Nine months ended
                                    September 30                September 30
    -------------------------------------------------------------------------
                              2007          2006          2007          2006
    -------------------------------------------------------------------------

    Weighted average
     number of
     basic shares       26,726,855    18,041,441    23,115,992    10,643,595
    Effect of dilutive
     securities:
      Employee stock
       options                   -       274,000             -             -
      Management
       warrants                  -       141,000             -        52,939
      Flow-through
       warrants                  -         6,654             -         5,400
    -------------------------------------------------------------------------
    Weighted average
     number of
     diluted shares     26,726,855    18,463,095    23,115,992    10,701,934
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    All of the issued stock options in 2007 were excluded from the
    calculation of diluted weighted average shares outstanding as to include
    them would be anti-dilutive.

    6.  RELATED PARTY TRANSACTIONS

    During the nine month period ended September 30, 2007 the Company
    expensed and capitalized legal fees totaling $158,623 (2006 - $433,102)
    for services rendered by a professional firm related to a director of the
    Company. As at September 30, 2007, $5,000 is included in accounts payable
    and accrued liabilities related to these transactions. These fees were
    incurred in the normal course of business and recorded at the exchange
    amount.

    7.  COMMITMENTS

    The Company is committed to incur $12.0 million of flow-through share
    eligible Canadian Exploration Expenditures, as defined in the Canadian
    Income Tax Act, by December 31, 2008. As at September 30, 2007 the
    Company has incurred approximately $1.7 million of this commitment.

    8.  FINANCIAL INSTRUMENTS

    Fixed Price Swap Natural Gas Contracts

    The following is a summary of natural gas sales price derivative
    contracts in effect as at September 30, 2007, that have fixed future
    sales prices:

               Daily                Remaining term              Fixed price
             quantity                 of contract              per GJ (AECO)
          -----------------------------------------------------------------
             1,500 GJ         October 1 to October 31, 2007         $6.80
             1,500 GJ         October 1 to October 31, 2007         $7.04
               500 GJ         October 1 to October 31, 2007         $7.40
          -----------------------------------------------------------------

    The fair value of the above natural gas contracts, mark-to-market at
    September 30, 2007, is an unrealized gain of $209,325.

    Fixed Price Swap Oil Contracts

    The following is a summary of oil sales price derivative contracts in
    effect as at September 30, 2007, that have fixed future sales prices:

               Daily                Remaining term             Fixed price
             quantity                 of contract             per bbl (WTI)
          -----------------------------------------------------------------
              100 bbl         October 1 to December 31, 2007     US $68.50
               50 bbl         October 1 to December 31, 2007     US $68.75
              100 bbl         January 1 to December 31, 2008     US $70.65
          -----------------------------------------------------------------

    The fair value of the above oil contracts, mark-to-market at
    September 30, 2007, is an unrealized loss of $368,295.
    

    The TSX does not accept responsibility for the adequacy or accuracy of
    this news release.

    %SEDAR: 00001562E




For further information:

For further information: Ron Cawston, President and Chief Executive
Officer, Twin Butte Energy Ltd., Telephone: (403) 215-2040, Fax: (403)
215-2055

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Twin Butte Energy Ltd.

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