Berkana Energy Corp. Announces Second Quarter Results



    TSX : BEC

    CALGARY, Aug. 10 /CNW/ - Berkana Energy Corp. ("Berkana" or the
"Company") is pleased to announce its financial and operating results for the
second quarter ended June 30, 2007.

    
    -------------------------------------------------------------------------
                                                  Three Months    Six Months
                                                         Ended         Ended
                                                       June 30       June 30
                                                          2007          2007
    -------------------------------------------------------------------------
    (unaudited, $ thousands, except where
     otherwise noted)

    Financial
    Petroleum and natural gas sales                     11,081        22,595
    Cash flow from operations(1)                         4,986        10,115
      Per share - basic and diluted                       0.07          0.15
    Net loss                                            (1,835)       (1,797)
      Per share - basic and diluted                      (0.03)        (0.03)
    Capital expenditures                                 2,178        12,193
    Working capital deficiency ("net debt")             (7,399)       (7,399)
    Shareholders' equity                                72,120        72,120
    -------------------------------------------------------------------------
    (No. thousands)

    Share Data
    Total shares outstanding                            67,497        67,497
    Total stock options outstanding                      4,459         4,459
    Weighted average shares outstanding
      Basic and diluted                                 67,497        67,497
    -------------------------------------------------------------------------
    Operating
    Production
      Natural gas (mcf/d)                               10,297        10,983
      Crude oil (bbls/d)                                   353           317
      Natural gas liquids (bbls/d)                         366           365
    -------------------------------------------------------------------------
      Total Production (boe/d)(6:1)                      2,435         2,512
    -------------------------------------------------------------------------
    Average sales prices
      Natural gas ($/mcf)                                 7.38          7.56
      Crude oil ($/bbl)                                  67.21         65.60
      Natural gas liquids ($/bbl)                        60.10         57.64
    -------------------------------------------------------------------------
      Total ($/boe)                                      50.01         49.69
    -------------------------------------------------------------------------
    Wells drilled - gross (net) (No.)
      Gas                                                   --        4 (2.9)
      Oil                                                   --        1 (1.0)
    -------------------------------------------------------------------------
      Total                                                 --        5 (3.9)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Cash flow from operations is a non-GAAP measure and is defined as
        cash provided by operations before changes in non-cash operating
        working capital.

    HIGHLIGHTS FOR THE SECOND QUARTER ENDED JUNE 30, 2007

    -  On May 29, 2007, common shares of Berkana began trading on the Toronto
       Stock Exchange ("TSX")
    -  Production averaged 2,435 boe per day, consisting of 10 mmcf/d of
       natural gas, 353 bbls/d of crude oil and 366 bbls/d of natural gas
       liquids.
    -  At Kaybob tie-in work was completed for initial production of
       500 boe/day which commenced August 1, 2007.
    -  No wells were drilled during the second quarter. Drilling plans
       established for the third and fourth quarters, include the drilling of
       up to ten wells at Rimbey. Drilling at Rimbey is planned to commence
       in August, 2007.
    -  A major farm-in was completed in the Gull Lake area of Rimbey with
       drilling planned to commence in the fourth quarter.
    -  Petroleum and natural gas revenues were $11.1 million or $50.01/boe.
    -  Cash flow from operations was $5.0 million or $0.07 per basic and
       diluted share.
    -  Capital expenditures were $2.2 million for the quarter.
    -  Berkana ended the quarter with net debt of $7.4 million and an
       annualized net debt to cash flow ratio of 0.37:1.
    -  Increased Rimbey gas plant gas throughput volumes to 20 to 25 mmcf/d
       from 14 mmcf/d by adding new third party volumes, thereby lowering
       operating costs and increasing processing revenues.

    

    OPERATIONAL REVIEW

    The second quarter of 2007 has seen the challenges for our industry
increase. While oil prices have remained firm, natural gas prices have been
increasingly volatile. The combination of new gas supplies in North America,
especially LNG and non-conventional production, changing royalties, lower than
expected demand and the high cost structure in the Western Canadian
Sedimentary Basin has placed the conventional Western Canadian energy industry
largely out of favour with capital markets.
    While these are challenging times, Berkana is in a unique position.
Berkana has a strong balance sheet and the vision to grow and therefore is
able to take advantage of the current market uncertainty. Berkana is
positioning itself for the long term. We believe that growth in this downturn
will position us to take maximum advantage of the next cycle in commodity
prices. For this reason we have increased our efforts to review strategic
acquisitions of quality assets that will complement our current portfolio.
    At the same time, we have seen a dramatic increase in deal flow in our
core operating areas of Rimbey, Kaybob and Red Earth. Competitors with limited
financial resources are finding themselves with expiring lands but are unable
to drill those lands for the first time in several years. These circumstances
provide us with the opportunity to increase organic growth and land base in
our core operating areas. We are currently evaluating the capital resources
required to increase our drilling activity for the remainder of the year and
may divert planned drilling capital from lands which are not at risk of
expiry, to earn new lands which will further enhance our growth prospects.

    Kaybob

    During the second quarter, we completed tie-in work on two of the three
wells drilled last winter. Third party processing capacity remained restricted
during the quarter with production averaging 62 boe/d. Berkana currently has
eight wells producing or capable of production (seven gas and one oil well) at
Kaybob.
    We successfully obtained a contract for firm service gas processing
capacity from a third party operator which commenced August 1, 2007. This
agreement was the result of new plant construction at Jupiter/Bigstone. With
the construction of this new plant and the reduced levels of activity by other
operators, there will be at least three processing plants in the immediate
area with surplus capacity, and therefore we have several options for
processing as we move forward. Obtaining this firm service agreement at
reasonable cost is a significant operating achievement for our Company. On
August 1, 2007, the Company began flowing approximately 500 boe/d of
additional production under the agreement which increased the Company's total
production to approximately 700 boe/d in the area. Management expects the
remaining 250 boe/d of additional production under the agreement to begin
flowing later in the third quarter.
    In the second quarter, we commenced field work on an extensive
geotechnical exploration effort. Land and farm-in opportunities have increased
significantly over the past six months in this highly competitive area, and we
believe we can expand our interests in this core area significantly for future
growth.

    Red Earth

    During the quarter, our Red Earth team continued regional geological
mapping of the area and the evaluation of strategic land and farm-in
opportunities. Application is being made for a holding for our producing
property, which will facilitate further drilling and proper spacing and
drainage of the Company's newly discovered Red Earth Granite Wash pool. The
holding application is consistent with offsetting Granite Wash pools, however
approval is not expected prior to next winter.
    During the winter of 2006/07 we drilled three wells. Two of the wells
were drilled in the fourth quarter of 2006, both of which were successful. The
third well was drilled in first quarter of 2007 and we have completed our
evaluation of this well. Based on this evaluation it was determined that the
well was not commercially successful to tie-in and will be abandoned or used
as a disposal well.
    Red Earth production averaged 237 bbls/d (net) for the quarter.
    The Red Earth Area is the focus of an extensive geological and
geophysical review by Berkana and we believe we can successfully explore for
new pools similar to our current discovery.

    Rimbey

    During the quarter, the Company continued geotechnical work to plan its
2007 summer/fall drilling program at Rimbey. The Company plans on drilling up
to 10 gross (six net) wells in the Rimbey area during the remainder of the
year, most of which will be low risk development and exploratory wells.
    In addition, the Company successfully negotiated an agreement to increase
third party gas volumes at its Rimbey gas plant; in return, Berkana sold a
minority interest in certain functional units of the plant to a third party.
Management expects this agreement to increase plant throughput and therefore
decrease per unit operating costs. Under this agreement, new volumes began
flowing to the plant on June 12, 2007.
    The geotechnical team has reviewed approximately 30 standing wellbores
for re-completion, and has reviewed numerous farm-in and land opportunities.
Much of Berkana's remaining 2007 capital budget is dedicated for drilling at
Rimbey, and we are currently reviewing our options to increase our land
position at Rimbey with acquisitions and strategic farm-ins.
    The drilling of a Rock Creek test well on the west side of the Rimbey
property is expected to commence in August 2007.

    Drake

    The Company completed the tie-in of two gross (2.0 net) successful
shallow (850 metre) gas wells in the Drake area of northeastern British
Columbia. Both wells commenced production during the quarter.
    Land is tightly held in this area and Berkana is not expecting this to
become a core property; rather, it expects this property will be rationalized
as it moves its business plan forward.

    TORONTO STOCK EXCHANGE LISTING

    On May 29, 2007, Berkana's common shares began trading on the TSX. We
believe the graduation to the TSX will provide Berkana with access to Canada's
largest and most dynamic exchange while enhancing our liquidity and visibility
within the investment community. We believe this transfer to the TSX, along
with our investor relations efforts over the upcoming year, will attract
additional institutional and retail shareholder interest in Berkana as we
continue to grow.

    INCREASED CREDIT FACILITY

    On August 1, 2007, Berkana renewed and expanded its $25 million credit
facility to $40 million. The terms and conditions of the new credit facility
are similar to the Company's previous credit facility, except for one new
financial covenant which requires the Company to maintain its net debt to
trailing cash flow at 3:1 or less while the credit facility is outstanding. We
believe the increase in the credit facility reflects the continued strength of
our Company and provides us with increased financial flexibility for potential
acquisitions and/or increasing our capital budget.

    OUTLOOK

    We continue to be on track to achieve average production for 2007 of
between 2,600 to 2,900 boe/d and to exit the year between 2,800 to 3,000
boe/d. We have budgeted $24.4 million for capital expenditures in calendar
2007 with approximately $12.2 million to be spent over the remainder of the
year and approximately $10 million dedicated to drilling up to 10 gross (six
net) wells in the Rimbey area.
    We are very excited about the increased potential to earn additional
lands in each of our core areas this year. Historically, all three areas have
tended to be highly competitive and opportunities to acquire additional
interests have been limited. We will continue targeting acquisitions that have
the potential to add new franchise areas or strengthen our operating position
in our core areas of Rimbey, Kaybob and Red Earth.
    Although we have seen a softening in natural gas prices during the
quarter, Berkana's cash flow and balance sheet remain strong and we continue
to be in a unique and opportunistic position for future growth.
    I would like to take this opportunity to thank Mike Heule for his
invaluable contribution to Berkana. Mike is stepping down as a senior officer
of Berkana to allow him to spend more time with his family. Mike will continue
to contribute to Berkana on a part time basis, and we will continue to benefit
from Mike's wealth of knowledge and experience.

    On behalf of the Board of Directors,
    (signed) "Glenn D. Gradeen"

    Glenn D. Gradeen
    President & Chief Executive Officer
    August 10, 2007



    MANAGEMENT'S DISCUSSION AND ANALYSIS

    This Management's Discussion and Analysis ("MD&A") has been prepared by
management as of August 8, 2007 and reviewed and approved by the Board of
Directors of Berkana Energy Corp. ("Berkana" or the "Company"). This MD&A is a
review of the operational and financial results of the Company based on
Canadian Generally Accepted Accounting Principles ("GAAP"). The reporting
currency is the Canadian dollar. This MD&A should be read in conjunction with
the unaudited interim consolidated financial statements and related notes for
the three and six months ended June 30, 2007 and Berkana's audited
consolidated financial statements, related notes and MD&A for the one-month
period ended December 31, 2006.
    Basis of Presentation - On December 1, 2006, Berkana commenced operations
as an independent Canadian junior oil and gas exploration and production
company pursuant to an Acquisition Agreement (the "Acquisition") entered into
between Murphy Oil Canada ("Murphy"), Mach Resources Ltd. ("Mach") and Rosetta
Exploration Inc. ("Rosetta"). Murphy established and organized Mach pursuant
to an Asset Conveyance Agreement to transfer the Rimbey assets immediately
before the closing of the Acquisition. The transaction resulted in the
transfer of all the issued and outstanding common shares of Mach to Rosetta in
exchange for Rosetta issuing to Murphy 269,988,560 common shares. The
Acquisition was affected pursuant to the takeover bid provisions of applicable
securities legislation and has been accounted for as a reverse takeover. The
transaction is described in more detail in note 5 of the unaudited interim
consolidated financial statements for the three and six months ended June 30,
2007, the Information Circular dated October 26, 2006 and the Acquisitions
section of this MD&A. Historical financial information is not available or
required for comparative purposes for Berkana in these circumstances under
existing securities law, however, selected historical information with respect
to the Rimbey property is presented in the December 31, 2006 MD&A of Berkana.
    Non-GAAP Measures - This MD&A contains the term cash flow from operations
and operating netback, which are non-GAAP financial measures that do not have
any standardized meaning prescribed by GAAP and are, therefore, unlikely to be
comparable to similar measures presented by other issuers. Management believes
cash flow from operations and operating netback are relevant indicators of the
Company's financial performance, ability to fund future capital expenditures
and repay debt. Cash flow from operations and operating netback should not be
considered an alternative to or more meaningful than cash flow from operating
activities, as determined in accordance with GAAP, as an indicator of the
Company's performance. In the Operating Netback and Cash Flow from Operations
section of this MD&A, a reconciliation has been prepared of cash flow from
operations and operating netback to cash from operating activities, the most
comparable measure calculated in accordance with GAAP.
    Boe Presentation - Production information is commonly reported in units
of barrel of oil equivalent ("boe"). For purposes of computing such units,
natural gas is converted to equivalent barrels of oil using a conversion
factor of six thousand cubic feet to one barrel of oil. This conversion ratio
of 6:1 is based on an energy equivalent wellhead value for the individual
products. Such disclosure of boes may be misleading, particularly if used in
isolation. Readers should be aware that historical results are not necessarily
indicative of future performance.
    Forward-Looking Statements - 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 capital from internal and external resources, and as a
consequence, actual results may differ materially from those anticipated in
the forward-looking statements.

    Business of Berkana

    Berkana commenced operations on December 1, 2006 pursuant to the
Acquisition with over 2,400 boe/d of production (79% natural gas),
approximately 150,000 net undeveloped acres of land, marginal net debt and a
planned capital program of over $30 million to the end of 2007. Berkana's
capital program is balanced primarily between lower risk exploration and
development opportunities and acquisitions, with up to 20% of the capital
budget devoted to higher impact exploration. Lower risk growth will come
through a combination of the development of Berkana's three core properties:
Rimbey, Kaybob and Red Earth. Berkana will continue with Rosetta's leverage
approach to high impact exploration by bringing in joint venture drilling
partners and using geological studies conducted by Rosetta over the past five
years.

    Acquisitions

    Prior to the closing of the Acquisition and pursuant to the Asset
Conveyance Agreement, Murphy transferred the Rimbey assets to Mach in exchange
for 100 Mach common shares. As the acquisition of the Rimbey assets by Mach
from Murphy is between entities under common control, the net assets were
recorded at their carrying values as follows:

    
    -------------------------------------------------------------------------
    ($ thousands)
    -------------------------------------------------------------------------
    Consideration
      100 common shares of Mach                                       41,219
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net assets received:
      Petroleum and natural gas properties                            54,151
      Cash                                                             1,263
      Asset retirement obligations                                    (6,043)
      Future income taxes                                             (8,152)
    -------------------------------------------------------------------------
                                                                      41,219
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    As part of the Asset Conveyance Agreement, Mach assumed Murphy's
commitments for natural gas transmission and processing of production from the
Rimbey assets.
    At June 30, 2007, the Company had received a preliminary statement of
adjustments from Murphy in the amount of $2.0 million. The Company recorded
the adjustment as a reduction to property, plant and equipment ($2.9 million)
and future income tax liability ($0.9 million). As of August 8, 2007, the
purchase price allocation is subject to change until such time as the Company
receives the final statement of adjustments from Murphy.
    Under the Acquisition, Rosetta acquired all of the issued and outstanding
shares of Mach from Murphy in exchange for 269,988,560 Rosetta common shares.
As such, Murphy owns approximately 80% of Rosetta's issued and outstanding
shares. The acquisition was accounted for under the purchase method as a
reverse takeover whereby Mach acquired Rosetta. Rosetta subsequently changed
its name to Berkana and consolidated all of its issued and outstanding common
shares on a five-for-one basis.
    The following table summarizes the consideration, purchase price
allocation and fair value of the Rosetta net assets acquired by Mach:

    
    -------------------------------------------------------------------------
    ($ thousands)
    -------------------------------------------------------------------------
    Consideration
      53,997,712(1) common shares of Rosetta                          29,024
      Transaction costs                                                1,898
    -------------------------------------------------------------------------
      Total consideration                                             30,922
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Purchase Price and Fair Value
    Net assets received:
      Petroleum and natural gas properties                            36,885
      Cash                                                                 9
      Working capital deficiency                                      (1,727)
      Revolving credit facility                                       (2,224)
      Asset retirement obligations                                    (1,034)
      Future income taxes                                               (987)
    -------------------------------------------------------------------------
                                                                      30,922
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Shares issued reflect the five-for-one share consolidation.
    


    Berkana Operational Results for the Three Months Ended June 30, 2007

    For the three months ended June 30, 2007 (the "second quarter"),
Berkana's operational focus was directed towards resolving facility
constraints at Kaybob, the tie-in of two wells in the Drake area and continued
planning for the summer/fall drilling program.

    Rimbey

    During the second quarter, the Company continued geotechnical work to
plan its 2007 summer/fall drilling program at Rimbey. The Company plans on
drilling up to 10 gross (six net) wells in the Rimbey area during the
remainder of the year, most of which will be low risk development and
exploratory wells.
    In addition, the Company successfully negotiated an agreement to increase
third party gas volumes at its Rimbey gas plant; in return, Berkana sold a
minority interest in certain functional units of the plant to a third party.
Management expects this agreement to increase plant throughput and therefore
decrease per unit operating costs. Under this agreement, new volumes began
flowing to the plant on June 12, 2007.
    For the second quarter, Rimbey area production averaged 2,044 boe/d
consisting of 9 mmcf/d of natural gas, 116 bbls/d of crude oil and 363 bbls/d
of natural gas liquids. The Company exited the quarter with 79 wells producing
in the Rimbey area.

    Kaybob

    During the second quarter, the Company continued to experience
operational challenges in the Kaybob area. Two of the Company's wells were
shut-in for the majority of the quarter due to the Jupiter/Bigstone plant
being at full capacity. In addition, the start-up of two additional wells was
postponed due to the delayed construction of a compressor station at the
plant. The Company has entered into a firm service agreement which is expected
to resolve the facility constraints and increase total production in the area.
On August 1, 2007, the Company began flowing approximately 500 boe/d of
additional production under the agreement which increased the Company's total
production to approximately 700 boe/d in the area. Management expects the
remaining 250 boe/d of additional production under the agreement to begin
flowing later in the third quarter.
    For the second quarter, Kaybob area production averaged 62 boe/d
consisting of 368 mcf/d of natural gas and 1 bbls/d of natural gas liquids.
The Company exited the quarter with eight wells producing or capable of
production in the Kaybob area.

    Red Earth

    During the second quarter, the Company continued regional geological
mapping of the Red Earth area and the evaluation of strategic land and farm-in
opportunities. Berkana has up to two follow-up drilling locations planned for
the 2007/2008 winter drilling season. Application is being made for a holding
on Berkana's producing property, which will facilitate further drilling and
proper spacing and drainage of the Company's Red Earth Granite Wash pool. The
holding application is consistent with offsetting Granite Wash pools however
approval is not expected prior to next winter.
    The Company has now completed its evaluation of the 100% working interest
oil well that was drilled in the first quarter of 2007. Based on the
evaluation it was determined that the well was not commercially successful to
tie-in and will be abandoned or used as a disposal well.
    For the second quarter, Red Earth area production averaged 237 bbls/d of
crude oil. The Company exited the quarter with four wells producing or capable
of production in the Red Earth area.

    Drake

    The Company completed the tie-in of two gross (2.0 net) successful
shallow (850 metre) gas wells in the Drake area of northeastern British
Columbia. Both wells commenced production during the second quarter.
    Management continues to expect this property to be rationalized as land
is tightly held in this area and Berkana is not expecting this to become a
core property.


    
    Selected Financial Information

    -------------------------------------------------------------------------
                                                  Three Months    Six Months
                                                         Ended         Ended
                                                       June 30       June 30
    ($ thousands, except where otherwise noted)           2007          2007
    -------------------------------------------------------------------------
    Production
      Natural gas (mcf/d)                               10,297        10,983
      Crude oil (bbls/d)                                   353           317
      Natural gas liquids (bbls/d)                         366           365
    -------------------------------------------------------------------------
      Total production (boe/d) (6:1)                     2,435         2,512
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average sales price
      Natural gas ($/mcf)                                 7.38          7.56
      Crude oil ($/bbl)                                  67.21         65.60
      Natural gas liquids ($/bbl)                        60.10         57.64
    -------------------------------------------------------------------------
      Total ($/boe)                                      50.01         49.69
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Petroleum and natural gas sales                     11,081        22,595
    Net loss                                            (1,835)       (1,797)
      Per share - basic and diluted                     ($0.03)       ($0.03)
    Capital expenditures                                 2,178        12,193
    Total assets                                       109,157       109,157
    Working capital surplus excluding revolving
     credit facility                                     7,101         7,101
    Revolving credit facility                          (14,500)      (14,500)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating Netbacks
    -------------------------------------------------------------------------
                                                  Three Months    Six Months
                                                         Ended         Ended
                                                       June 30       June 30
    ($/boe)                                               2007          2007
    -------------------------------------------------------------------------
    Total
      Sales price                                        50.01         49.69
      Royalties                                          11.34         11.38
      Operating expenses                                  6.72          7.15
      Transportation                                      0.80          0.80
    -------------------------------------------------------------------------
      Operating netback                                  31.15         30.36
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Production
    -------------------------------------------------------------------------
                                                  Three Months    Six Months
                                                         Ended         Ended
                                                       June 30       June 30
                                                          2007          2007
    -------------------------------------------------------------------------
    Rimbey
      Natural gas (mcf/d)                                9,391         9,940
      Crude oil (bbls/d)                                   116           123
      Natural gas liquids (bbls/d)                         363           352
    -------------------------------------------------------------------------
      Production (boe/d) (6:1)                           2,044         2,132
    -------------------------------------------------------------------------
    Kaybob
      Natural gas (mcf/d)                                  368           595
      Crude oil (bbls/d)                                     -             4
      Natural gas liquids (bbls/d)                           1            10
    -------------------------------------------------------------------------
      Production (boe/d) (6:1)                              62           113
    -------------------------------------------------------------------------
    Red Earth
      Crude oil (bbls/d)                                   237           190
    -------------------------------------------------------------------------
      Production (boe/d) (6:1)                             237           190
    -------------------------------------------------------------------------
    Other
      Natural gas (mcf/d)                                  538           448
      Natural gas liquids (bbls/d)                           2             3
    -------------------------------------------------------------------------
      Production (boe/d) (6:1)                              92            77
    -------------------------------------------------------------------------
    Total Berkana
      Natural gas (mcf/d)                               10,297        10,983
      Crude oil (bbls/d)                                   353           317
      Natural gas liquids (bbls/d)                         366           365
    -------------------------------------------------------------------------
      Total Production (boe/d) (6:1)                     2,435         2,512
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Berkana's production for the second quarter averaged 2,435 boe/d
consisting of 10 mmcf/d of natural gas, 353 bbls/d of crude oil and 366 bbls/d
of natural gas liquids. Average production for the six months ended June 30,
2007 was 2,512 boe/d. The Company continued to experience operational
challenges in the Kaybob area due to third party facility constraints. The
Company has entered into a firm service agreement which is expected to resolve
the facility constraints and increase total production in the area. On August
1, 2007, the Company began flowing approximately 500 boe/d of additional
production under the agreement which increased the Company's total production
to approximately 700 boe/d in the area. Management expects the remaining 250
boe/d of additional production under the agreement to begin flowing later in
the third quarter.


    
    Petroleum and Natural Gas Sales

    -------------------------------------------------------------------------
                                                  Three Months    Six Months
                                                         Ended         Ended
                                                       June 30       June 30
    ($ thousands, except where otherwise noted)           2007          2007
    -------------------------------------------------------------------------
    Petroleum and Natural Gas Sales
      Natural gas                                        6,919        15,023
      Crude oil                                          2,163         3,764
      Natural gas liquids                                1,999         3,808
    -------------------------------------------------------------------------
      Total                                             11,081        22,595
    -------------------------------------------------------------------------
    Average Sales Price
      Crude oil ($/bbl)                                  67.21         65.60
      Natural gas liquids ($/bbl)                        60.10         57.64
    -------------------------------------------------------------------------
      Average liquids price ($/bbl)                      63.60         61.34
      Natural gas ($/mcf)                                 7.38          7.56
    -------------------------------------------------------------------------
      Total ($/boe)                                      50.01         49.69
    -------------------------------------------------------------------------
    Benchmark Pricing
      Edmonton par price ($/bbl)                         72.66         70.20
      AECO-C spot ($/mmbtu)                               7.46          7.42
    -------------------------------------------------------------------------
    

    Petroleum and natural gas sales for the second quarter were $11.1
million, consisting of $6.9 million of natural gas sales, $2.2 million of
crude oil sales and $2.0 million of natural gas liquid sales. For the six
months ended June 30, 2007, petroleum and natural gas sales were $22.6
million.
    Berkana realized natural gas prices of $7.38/mcf for the second quarter
and $7.56/mcf for the six months ended June 30, 2007. Due to the higher energy
content of Berkana's natural gas production, the Company realized higher
natural gas prices than AECO during the six months ended June 30, 2007.
    Berkana's realized price for its crude oil production was $67.21/bbl for
the second quarter and $65.60/bbl for the six months ended June 30, 2007,
compared to the Edmonton par daily index average of $72.66/bbl and $70.20/bbl,
respectively.
    All the Company's production is currently sold on the spot market.
Management is currently evaluating different hedging strategies to decrease
the volatility of sales price and fluctuations in cash flow from operations.


    
    Royalties

    -------------------------------------------------------------------------
                                                  Three Months    Six Months
                                                         Ended         Ended
                                                       June 30       June 30
    ($ thousands, except where otherwise noted)           2007          2007
    -------------------------------------------------------------------------
    Royalties
      Crown                                              1,675         3,399
      Freehold and overriding                              837         1,778
    -------------------------------------------------------------------------
      Total                                              2,512         5,177
    -------------------------------------------------------------------------
    Royalties per boe
      Natural gas ($/boe)                                11.32         11.45
      Crude oil ($/bbl)                                  10.56          8.93
      Natural gas liquids ($/bbl)                        12.16         13.15
    -------------------------------------------------------------------------
      Total ($/boe)                                      11.34         11.38
    -------------------------------------------------------------------------
    Average royalty rate (%)                              22.7          23.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Berkana pays royalties to the provincial governments, freehold landowners
and overriding royalty owners. Royalties are calculated and paid based on
petroleum and natural gas sales net of transportation. Natural gas and liquids
royalties for the second quarter were $2.5 million or 22.7% of total petroleum
and natural gas sales. For the six months ended June 30, 2007, natural gas and
liquids royalties were $5.2 million or 23.0% of total petroleum and natural
gas sales.

    Operating and Transportation Expenses

    For the six months ended June 30, 2007, operating expenses net of
processing were $3.2 million or $7.15/boe of which $1.5 million or $6.72/boe
was incurred in the second quarter. The majority of the Company's operating
expenses were for compression and gathering of natural gas production, repairs
and maintenance, and contract operating costs.
    Transportation expenses were $0.2 million or $0.80/boe for the second
quarter. For the six months ended June 30, 2007, transportation expenses
averaged $0.80/boe or $0.4 million. The Company incurs transportation charges
primarily for natural gas transmission of Rimbey production and oil hauling at
Red Earth.
    Management anticipates 2007 operating expenses including transportation
expenses and net of processing revenues to be in the $6.50/boe to $8.50/boe
range.

    
    General and Administrative Expenses

    -------------------------------------------------------------------------
                                                  Three Months    Six Months
                                                         Ended         Ended
                                                       June 30       June 30
    ($ thousands, except where otherwise noted)           2007          2007
    -------------------------------------------------------------------------
    Gross general and administrative expense             2,193         3,838
    Overhead recoveries                                   (100)         (307)
    -------------------------------------------------------------------------
    Net general and administrative expense               2,093         3,531
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    General and administrative ($/boe)                    9.45          7.76
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    General and administrative expenses ("G&A") for the second quarter were
$2.1 million or $9.45/boe. For the six months ended June 30, 2007, G&A was
$3.5 million or $7.76/boe. The majority of the Company's gross G&A expenses
are incurred for salaries and benefits and rent for office premises. Berkana
incurred increased G&A during the first half of 2007 due to additional hiring
of personnel attributed to increased operations and drilling activities. In
addition, the Company incurred non-recurring costs from third parties with
respect to the review of corporate growth initiatives, the Company's
graduation to the Toronto Stock Exchange and for corporate governance purposes
with respect to internal controls. The Company recovers a portion of its gross
G&A costs from its partners based on its capital spending during the period
and does not capitalize G&A. Management continues to forecast G&A expenses per
boe to decrease in the second half of the year based on the Company achieving
its production targets.

    Exploration and Dry Hole Costs

    Exploration expenses for the six months ended June 30, 2007 were $0.5
million of which $0.2 million was incurred during the second quarter.
Exploration expenses were incurred primarily for geological and geophysical
costs in the Company's core areas.
    The Company completed its evaluation of the 100% working interest Red
Earth oil well that was drilled in the first quarter of 2007. Based on the
evaluation it was determined that the well was not commercially successful to
tie-in and will be abandoned or used as a disposal well. A total of $1.4
million was recorded to dry hole costs for this well in the second quarter.
    Berkana expenses all exploration dry hole and geological and geophysical
costs in accordance with successful efforts accounting.

    Stock Based Compensation

    During the six months ended June 30, 2007, Berkana incurred stock based
compensation expenses of $1.3 million related to the amortization of the fair
value attributed to the issuance of 4,519,750 stock options.

    Depletion, Depreciation and Accretion

    Depletion, depreciation and accretion ("DD&A") was $9.3 million or
$20.53/boe for the six months ended June 30, 2007 of which $5.2 million or
$23.36/boe was incurred in the second quarter. In determining the Company's
depletion and depreciation, salvage values of $8.8 million, undeveloped land
costs of $8.3 million and $7.3 million of costs on unevaluated wells were
excluded from the costs subject to depletion.

    Income Taxes

    Berkana's current and future income taxes are dependent on factors such
as production, commodity prices and tax classification of drilled exploration
and development wells. The Company had a future income tax recovery for the
second quarter of $0.5 million and $0.2 million for the six months ended June
30, 2007.
    At June 30, 2007, the Company had $60.9 million in tax pools and $7.6
million in non-capital losses that are available for future deduction against
taxable income.

    
    -------------------------------------------------------------------------
                                                                     June 30
    ($ thousands)                                                       2007
    -------------------------------------------------------------------------
    Canadian exploration expense                                      17,236
    Canadian oil and gas property expense                              3,426
    Canadian development expense                                      13,463
    Undepreciated capital costs                                       24,323
    Share issue costs                                                  2,369
    Other                                                                 95
    -------------------------------------------------------------------------
    Total                                                             60,912
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Non-capital losses expire as follows:

    -------------------------------------------------------------------------
    ($ thousands)
    -------------------------------------------------------------------------
    2007                                                                 594
    2008                                                               1,392
    2009                                                               1,234
    2010 and thereafter                                                4,390
    -------------------------------------------------------------------------
                                                                       7,610
    -------------------------------------------------------------------------



    Operating Netback and Cash Flow From Operations
    -------------------------------------------------------------------------
                                                  Three Months    Six Months
                                                         Ended         Ended
                                                       June 30       June 30
    ($ thousands)                                         2007          2007
    -------------------------------------------------------------------------
    Revenue
      Petroleum and natural gas sales                   11,081        22,595
      Royalties                                          2,512         5,177
      Interest and other income                            445           455
    -------------------------------------------------------------------------
                                                         9,014        17,873
      Operating expenses                                 1,488         3,249
      Transportation expenses                              178           366
    -------------------------------------------------------------------------
    Operating netback(1)                                 7,348        14,258
      General and administrative                         2,093         3,531
      Asset retirement expenditures                         94           370
      Interest                                             175           242
    -------------------------------------------------------------------------
    Cash flow from operations(1)                         4,986        10,115
      Changes in non-cash working capital                  828          (778)
    -------------------------------------------------------------------------
    Cash provided by operating activities                5,814         9,337
    -------------------------------------------------------------------------
    (1) Non-GAAP measure

    Cash flow from operations was $10.1 million ($0.15 per share basic and
diluted) for the six months ended June 30, 2007 of which $5.0 million ($0.07
per share basic and diluted) was generated in the second quarter.

    Capital Expenditures

    -------------------------------------------------------------------------
                                                  Three Months    Six Months
                                                         Ended         Ended
                                                       June 30       June 30
    ($ thousands)                                         2007          2007
    -------------------------------------------------------------------------
    Land                                                   158         1,100
    Drilling and completions                               265         6,358
    Tangible equipment                                   1,671         3,192
    Acquisitions                                             -         1,316
    Other                                                   84           227
    -------------------------------------------------------------------------
    Net capital expenditures                             2,178         2,193
    -------------------------------------------------------------------------

    The Company invested $2.2 million for capital expenditures during the
second quarter of which the majority was spent to tie-in two natural gas wells
in the Drake area. During the six months ended June 30, 2007, the Company
expended $12.2 million to drill five gross (3.9 net) wells, complete eight
gross (6.1 net) wells and tie-in eight gross (7.1 net) wells.

    Well Count

    -------------------------------------------------------------------------
                                                              Net
    -                                    ------------------------------------
    As at June 30, 2007                   Gross  Before Payout   After Payout
    -------------------------------------------------------------------------
    (No. of wells)
    Gas                                      86           50.1          51.2
    Oil                                      14           12.1          11.8
    Drilling                                  -              -             -
    Standing(1)                              15           10.5          10.8
    Total                                   115           72.7          73.8
    NCGORR(2)                                 6              -             -
    -------------------------------------------------------------------------
    (1)  Standing indicates wells that have been cased and awaiting
         evaluation.
    (2)  Non-convertible gross overriding royalty wells.



    Land Holdings

    -------------------------------------------------------------------------
    As at June 30, 2007                      Net           Net
                                     Undeveloped     Developed         Total
    -------------------------------------------------------------------------
    (acres)
    Rimbey                                 8,127        19,092        27,219
    Kaybob                                27,632         3,446        31,078
    Red Earth                             57,924           366        58,290
    Other exploration areas               47,998         2,192        50,190
    -------------------------------------------------------------------------
    Total                                141,681        25,096       166,777
    -------------------------------------------------------------------------


    Liquidity and Capital Resources

    -------------------------------------------------------------------------
                                                         As at         As at
                                                       June 30   December 31
    ($ thousands)                                         2007          2006
    -------------------------------------------------------------------------
    Working capital (surplus) deficiency
     excluding revolving credit facility                (7,101)        3,734
    Revolving credit facility                           14,500         3,100
    -------------------------------------------------------------------------
    Working capital deficiency ("net debt")              7,399         6,834
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    As at June 30, 2007, Berkana had a working capital surplus excluding the
revolving credit facility (the "credit facility") of $7.1 million and $14.5
million drawn against the $25 million credit facility at a variable interest
rate of 6.1%. The increase in the Company's net debt position is mainly due to
increased drilling activity during the six months ended June 30, 2007. On
August 1, 2007, Berkana renewed and expanded its $25 million credit facility
to $40 million. The terms and conditions of the new credit facility are
similar to the Company's previous credit facility. The credit facility is
secured by a fixed and floating charge on the assets of the Company. The
credit facility has covenants that requires the Company to maintain its
working capital ratio at 1:1 or greater and net debt to trailing cash flow at
3:1 or less while the credit facility is outstanding. The working capital
ratio is defined as current assets plus the unutilized portion of the credit
facility divided by current liabilities less the balance drawn against the
credit facility. The net debt to trailing cash flow ratio is defined as net
debt divided by annualized cash flow for the most recently completed quarter.
The borrowing base of the credit facility is subject to an annual review by
the lender. As at June 30, 2007, the Company was in compliance with all
covenants required in the agreement.
    The Company generally relies on cash flow from operations and credit
facility availability to fund its capital requirements and to provide
liquidity. Cash is primarily used, and will continue to be used, to fund
acquisitions, exploration and development of petroleum natural gas properties,
expenses for continued operations, G&A costs and/or repayment of principal and
interest outstanding on the credit facility.
    The Company's cash flow from operations is directly related to underlying
commodity prices and production volumes. A significant decrease in commodity
prices could materially impact the Company's future cash flow from operations
and liquidity. In addition, a substantial decrease in commodity prices could
impact the Company's borrowing base under the credit facility, therefore
reducing the credit facility available, and in some instances, require a
portion of the credit facility to be repaid. Berkana has not entered into any
risk management contracts to mitigate its commodity price risk, however
management is currently considering various options. The Company's future
liquidity is also dependent on its ability to increase reserves and production
through successful drilling activity and acquisitions.
    Management feels that the Company currently has sufficient liquidity and
capital resources available to fund continued operations and future capital
expenditures. In the long-term, the Company may consider issuing new equity or
debt, on favourable terms, to fund the continued growth of the Company through
acquisitions, exploration and development of petroleum and natural gas
properties. The Company's future liquidity is dependent on cash flow from
operations, the credit facility and its ability to access capital markets.

    Off-Balance Sheet Arrangements
    The Company has no off-balance sheet arrangements.

    Share Capital

    As at August 8, 2007, the Company had 67,497,140 (2006 - 67,497,140)
Class A common shares and 4,458,750 (2006 - nil) stock options issued and
outstanding.

    Outlook

    Management continues to expect average production for 2007 of between
2,600 to 2,900 boe/d and to exit the year between 2,800 to 3,000 boe/d. The
Company has budgeted $24.4 million for capital expenditures in 2007 with
approximately $12.2 million to be spent over the remainder of the year.
Approximately $10 million of the remaining budget will be dedicated to the
Rimbey area to drill approximately up to ten gross (six net) wells during the
remainder of 2007, the majority of which will be low risk development and
exploratory wells.

    Financial Instruments

    Fair Value of Financial Assets and Liabilities

    Financial instruments of the Company consist primarily of bank overdraft,
accounts receivable, note receivable, accounts payable and the credit
facility. As at June 30, 2007 and December 31, 2006, there were no significant
differences between the carrying amounts reported on the balance sheet and
their estimated fair values.

    Credit Risk

    The Company's accounts receivable are with customers and joint venture
partners in the petroleum and natural gas business under normal industry sale
and payment terms and are subject to normal credit risks. Management believes
the risk is mitigated by the size and reputation of the companies to which
they extend credit.

    Interest Rate Risk

    The Company is exposed to interest rate risk as the credit facility bears
interest at floating market interest rates. The Company has no interest rate
swaps or hedges at June 30, 2007.

    Adoption of New Accounting Policies

    On January 1, 2007, Berkana adopted the following new accounting
standards issued by the Canadian Institute of Chartered Accountants ("CICA"):
Comprehensive Income (Section 1530), Financial Instruments - Recognition and
Measurement (Section 3855) and Hedges (Section 3865). In accordance with the
new standards, changes are adopted retroactively without restatement of prior
period information. The Company's adoption of these new standards had no
impact on reported net loss or cash flows. The other effects of the
implementation of these new standards are discussed below.

    Comprehensive Income

    Section 1530 provides for a new Statement of Comprehensive Income and
establishes Accumulated Other Comprehensive Income ("AOCI") as a separate
component of shareholders' equity. The Statement of Comprehensive Income is
defined as a change in net assets arising from transactions and other events
from non-owner sources. The statement would present net income and each
component recognized in other comprehensive income ("OCI") when such amounts
exist. For the six months ended June 30, 2007, the Company did not recognize
any OCI. Any future OCI recognized by the Company will be recognized in AOCI.

    Financial Instruments - Recognition and Measurement

    Section 3855 requires all financial assets and liabilities, including
derivatives, to be carried at fair value on the Company's balance sheet with
the exception of loans and receivables, investments that are intended to be
held to maturity and non-trading financial liabilities which are carried at
cost or amortized cost.
    Realized and unrealized gains and losses on financial assets and
liabilities that are carried at fair value are recognized in net earnings or
loss unless they are designated as hedges and meet the requirements for hedge
accounting, in which case the realized and unrealized gains and losses are
recorded to OCI. Transaction costs incurred by the Company related to these
financial assets and liabilities will be expensed when incurred. Unrealized
gains or losses on financial assets and liabilities carried at cost or
amortized costs are recognized when the assets and liabilities settle.

    Derivatives and Hedge Accounting

    Derivatives may be embedded in other financial instruments (the "host
instruments"). Prior to the adoption of the new standards, such embedded
derivatives were not accounted for separately from the host instrument. Under
the new standard, embedded derivatives are treated as separate derivatives
when their economic characteristics and risks are not clearly and closely
related to those of the host instrument, the terms of the embedded derivative
are the same as those of the stand-alone derivative, and the combined contract
is not held for trading or designated at fair value. A review of the Company's
financial contracts determined that there were no embedded derivatives. In the
event that the Company enters into a contract that contains an embedded
derivative, the embedded derivative will be measured at fair value with
subsequent changes recognized in earnings or loss.
    At January 1, 2007 no transitional adjustments were required to the
opening balance of retained earnings or to the opening balance of AOCI arising
from the adoption of sections 1530, 3855, and 3865.

    New Accounting Pronouncements

    The Company has assessed new and revised accounting pronouncements that
have been issued that are not yet effective and determined that the following
may have a significant impact on the Company:
    As of January 1, 2008, the Company will be required to adopt the
following two new CICA standards: Financial Instruments - Disclosures (Section
3862) and Financial Instruments - Presentation (Section 3863), which will
replace Financial Instruments - Disclosure and Presentation (Section 3861).
The new disclosure standard increases the emphasis on the risks associated
with both recognized and unrecognized financial instruments and how those
risks are managed. The new presentation standard carries forward former
presentation requirements.
    As of January 1, 2008, the Company will be required to adopt CICA
standards, Capital Disclosures (Section 1535), which will require companies to
disclose their objectives, policies and processes for managing capital. In
addition, disclosures are to include whether companies have complied with
externally imposed capital requirements.
    Both new standards were issued in December 2006 and the Company is
assessing the impact on its financial statements.

    Sensitivities

    The following sensitivity analysis is provided to demonstrate the impact
of changes in commodity prices on 2007 petroleum and natural gas sales and is
based on the balances disclosed in this MD&A and the unaudited interim
consolidated financial statements for the six months ended June 30, 2007:

    
    -------------------------------------------------------------------------
                                                               Petroleum and
                                                                 Natural Gas
    ($ thousands)                                                    Sales(1)
    -------------------------------------------------------------------------
    Change in average sales price for natural gas by $1.00/mcf         1,988
    Change in the average sales price for crude oil by $1.00/bbl          57
    Change in natural gas production by 1 mmcf/d (2)                   1,368
    Change in crude oil production by 100 bbls/d (2)                   1,187
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1)  Reflects the change in petroleum and natural gas sales for the six
         months ended June 30, 2007. Balances have not been annualized.
    (2)  Reflects the change in production multiplied by the Company's
         average sales prices for the six month period ended June 30, 2007.

    Quarterly Financial Summary

    -------------------------------------------------------------------------
    For the three months ended                  March 31, 2007  June 30, 2007
    -------------------------------------------------------------------------
    ($ thousands, except where otherwise noted)

    Petroleum and natural gas sales                     11,514        11,081
    Net earnings (loss)                                     38        (1,835)
      Per share - basic and diluted                          -        ($0.03)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Disclosure Controls and Procedures

    Disclosure controls and procedures are designed to provide reasonable
assurance that material information is gathered and reported to senior
management, including the Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO"), as appropriate to permit timely decisions regarding public
disclosure.
    Management, including the CEO and CFO, has evaluated the effectiveness of
the design and operation of the Company's disclosure controls and procedures.
Based on this evaluation as of the end of the period covered by the interim
filings, the CEO and CFO have concluded that the Company's disclosure controls
and procedures, as defined in MI 52-109 Certification of Disclosures in
Issuers' Annual and Interim Filings, are effective to ensure that the
information required to be disclosed in reports that are filed or submitted
under Canadian securities legislation are recorded, processed, summarized and
reported within the time period specified in those rules.
    During the second quarter, Berkana implemented a new accounting system to
improve the efficiency and effectiveness of the Company's financial reporting.
Consequently, the Company's system of internal controls over financial
reporting ("ICOFR") has changed to incorporate the new accounting system.
    During the process of management's review and evaluation of the design of
the Company's internal control over financial reporting, it was determined
that a certain weakness existed in ICOFR. As indicative of many small
companies, the lack of segregation of duties was identified as an area where
weakness exists. Some of the risks associated with lack of segregation of
duties are misappropriation of assets, misstated financial statements and
errors and/or irregularities in financial information. The existence of this
weakness is compensated for by senior management monitoring the areas in which
it exists and through the performance of audits and quarterly reviews of
financial statements by the Company's external auditors. The Company is taking
steps to augment and improve the design of procedures and controls impacting
this area of weakness over ICOFR. It should be noted that a control system, no
matter how well conceived or operated, can only provide reasonable assurance,
not absolute assurance, that the objectives of the control system are met.



    
    BERKANA ENERGY CORP.
    CONSOLIDATED BALANCE SHEETS
    (Unaudited)

    -------------------------------------------------------------------------
                                                         As at         As at
                                                       June 30   December 31
    ($ thousands)                                         2007          2006
    -------------------------------------------------------------------------

    Assets (note 7)
    Current
      Cash                                               1,136             -
      Accounts receivable                               10,882         4,573
      Note receivable (note 4)                               -           534
      Prepaid expenses and deposits                      1,625           177
    -------------------------------------------------------------------------
                                                        13,643         5,284
    Property, plant and equipment (note 6)              95,514        96,467
    -------------------------------------------------------------------------
                                                       109,157       101,751
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Current
      Bank overdraft                                         -           164
      Accounts payable and accrued liabilities           6,542         8,854
      Revolving credit facility (note 7)                14,500         3,100
    -------------------------------------------------------------------------
                                                        21,042        12,118

    Asset retirement obligations (note 8)                7,649         7,585
    Future income taxes (note 10)                        8,346         9,435
    -------------------------------------------------------------------------
                                                        37,037        29,138
    -------------------------------------------------------------------------
    Subsequent event (note 13)

    Shareholders' Equity
    Share capital (note 9)                              72,141        72,141
    Contributed surplus (note 9)                         1,304             -
    (Deficit) retained earnings                         (1,325)          472
    -------------------------------------------------------------------------
                                                        72,120        72,613
    -------------------------------------------------------------------------
                                                       109,157       101,751
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited interim consolidated financial
    statements.



    BERKANA ENERGY CORP.
    CONSOLIDATED STATEMENT OF LOSS, COMPREHENSIVE LOSS AND DEFICIT
    For the Three and Six Months Ended June 30, 2007
    (Unaudited)

    -------------------------------------------------------------------------
                                                  Three months    Six months
                                                 ended June 30 ended June 30
    ($ thousands, except per share amounts)               2007          2007
    -------------------------------------------------------------------------

    Revenue
      Petroleum and natural gas sales                   11,081        22,595
      Royalties                                          2,512         5,177
    -------------------------------------------------------------------------
                                                         8,569        17,418
      Interest and other income                            445           455
    -------------------------------------------------------------------------
                                                         9,014        17,873
    -------------------------------------------------------------------------

    Expenses
      Operating                                          1,488         3,249
      Transportation                                       178           366
      General and administrative                         2,093         3,531
      Stock based compensation (note 9)                    681         1,304
      Exploration                                          184           487
      Dry hole costs                                     1,388         1,388
      Depletion, depreciation and accretion              5,176         9,335
      Interest                                             175           242
    -------------------------------------------------------------------------
                                                        11,363        19,902
    -------------------------------------------------------------------------
    Loss before income taxes                            (2,349)       (2,029)
    Future income tax recovery (note 10)                  (514)         (232)
    -------------------------------------------------------------------------
    Net loss and comprehensive loss                     (1,835)       (1,797)
    Retained earnings, beginning of period                 510           472
    -------------------------------------------------------------------------
    Deficit, end of period                              (1,325)       (1,325)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted loss per share (note 9)           ($0.03)       ($0.03)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited interim consolidated financial
    statements.



    BERKANA ENERGY CORP.
    CONSOLIDATED STATEMENT OF CASH FLOWS
    For the Three and Six Months Ended June 30, 2007
    (Unaudited)

    -------------------------------------------------------------------------
                                                  Three months    Six months
                                                 ended June 30 ended June 30
    ($ thousands)                                         2007          2007
    -------------------------------------------------------------------------

    Cash provided by (used in):

    Operating
      Net loss                                          (1,835)       (1,797)
      Items not involving cash:
        Future income recovery                            (514)         (232)
        Stock based compensation                           681         1,304
        Dry hole costs                                   1,388         1,388
        Depletion, depreciation and accretion            5,176         9,335
      Exploration                                          184           487
      Asset retirement expenditures (note 8)               (94)         (370)
    -------------------------------------------------------------------------
                                                         4,986        10,115
      Changes in non-cash working capital (note 12)        828          (778)
    -------------------------------------------------------------------------
                                                         5,814         9,337
    -------------------------------------------------------------------------

    Financing
      Collection of note receivable (note 4)                 -           534
      Revolving credit facility advances                10,325        11,400
    -------------------------------------------------------------------------
                                                        10,325        11,934
    -------------------------------------------------------------------------

    Investing
      Capital expenditures                              (2,178)      (12,193)
      Purchase price adjustment (note 5(a))              2,000         2,000
      Exploration                                         (184)         (487)
      Change in non-cash working capital (note 12)     (10,080)       (9,291)
    -------------------------------------------------------------------------
                                                       (10,442)      (19,971)
    -------------------------------------------------------------------------
    Increase in cash                                     5,697         1,300
    Bank overdraft, beginning of period                 (4,561)         (164)
    Cash, end of period                                  1,136         1,136
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the unaudited interim consolidated financial
    statements.


    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    June 30, 2007
    (Unaudited)
    (all tabular amounts in $ thousands, except where otherwise noted)

    1.  Nature of Operations and Basis of Presentation

        Berkana Energy Corp. ("Berkana" or the "Company") was incorporated
        under the laws of the Province of Alberta and commenced commercial
        operations on December 1, 2006 pursuant to an Acquisition Agreement
        between Murphy Oil Canada ("Murphy"), Mach Resources Ltd. ("Mach")
        and Rosetta Exploration Inc. ("Rosetta"). Under the Acquisition
        Agreement, Mach acquired certain petroleum and natural gas assets
        (the "Rimbey Assets") owned by Murphy in exchange for 100 Mach common
        shares, and Rosetta acquired all of the issued and outstanding shares
        of Mach from Murphy in exchange for 269,988,560 Rosetta common
        shares. As such, Murphy owns approximately 80% of Rosetta's issued
        and outstanding shares. For accounting purposes, the acquisition was
        recorded as a reverse takeover whereby Mach is deemed to have
        acquired Rosetta. As the acquisition of the Rimbey Assets by Mach
        from Murphy is between entities under common control, the net assets
        were recorded at their carrying values as reported by Murphy. Rosetta
        subsequently changed its name to Berkana and consolidated all of its
        issued and outstanding common shares on a five-for-one basis.

        Berkana is engaged in the exploration for, and acquisition,
        development and production of petroleum and natural gas predominantly
        in Western Canada.

    2.  Summary of Accounting Policies

        These unaudited interim consolidated financial statements are stated
        in Canadian dollars and have been prepared in accordance with
        Canadian Generally Accepted Accounting Principles, following the same
        accounting policies and methods of computation as the audited
        consolidated financial statements of Berkana for the one-month period
        ended December 31, 2006, except as disclosed in note 3. In these
        financial statements, certain disclosures that are required to be
        included in the notes to the December 31, 2006 audited consolidated
        financial statements, have been condensed or omitted. These interim
        consolidated financial statements should be read in conjunction with
        the audited consolidated financial statements and notes thereto in
        Berkana's annual report as at and for the one-month period ending
        December 31, 2006.

        Certain comparative amounts have been reclassified to conform to
        current period presentation.

    3.  Adoption of New Accounting Policies

        On January 1, 2007, Berkana adopted the following new accounting
        standards issued by the Canadian Institute of Chartered Accountants
        ("CICA"): Comprehensive Income (Section 1530), Financial Instruments
        - Recognition and Measurement (Section 3855), Financial Instruments -
        Disclosure and Presentation (Section 3861) and Hedges (Section 3865).
        In accordance with the new standards, changes are adopted
        retroactively without restatement of prior period information. The
        Company's adoption of these new standards had no impact on reported
        net loss or cash flows. The other effects of the implementation of
        these new standards are discussed below.

        a)    Comprehensive Income

              Section 1530 provides for a new Statement of Comprehensive
              Income and establishes Accumulated Other Comprehensive Income
              ("AOCI") as a separate component of shareholders' equity. The
              Statement of Comprehensive Income is defined as a change in net
              assets arising from transactions and other events from non-
              owner sources. The statement would present net income and each
              component recognized in other comprehensive income ("OCI") when
              such amounts exist. For the six months ended June 30, 2007, the
              Company did not recognize any OCI. Any future OCI recognized by
              the Company will be recognized in AOCI.

        b)    Financial Instruments - Recognition and Measurement

              Section 3855 requires all financial assets and liabilities,
              including derivatives, to be carried at fair value on the
              Company's balance sheet with the exception of loans and
              receivables, investments that are intended to be held to
              maturity and non-trading financial liabilities which are
              carried at cost or amortized cost.

              Realized and unrealized gains and losses on financial assets
              and liabilities that are carried at fair value are recognized
              in net earnings or loss unless they are designated as hedges
              and meet the requirements for hedge accounting, in which case
              the realized and unrealized gains and losses are recorded to
              OCI. Transaction costs incurred by the Company related to these
              financial assets and liabilities will be expensed when
              incurred. Unrealized gains or losses on financial assets and
              liabilities carried at cost or amortized costs are recognized
              when the assets and liabilities settle.

        c)    Derivatives and Hedge Accounting

              Derivatives may be embedded in other financial instruments (the
              "host instruments"). Prior to the adoption of the new
              standards, such embedded derivatives were not accounted for
              separately from the host instrument. Under the new standard,
              embedded derivatives are treated as separate derivatives when
              their economic characteristics and risks are not clearly and
              closely related to those of the host instrument, the terms of
              the embedded derivative are the same as those of the stand-
              alone derivative, and the combined contract is not held for
              trading or designated at fair value. A review of the Company's
              financial contracts determined that there were no embedded
              derivatives. In the event that the Company enters into a
              contract that contains an embedded derivative, the embedded
              derivative will be measured at fair value with subsequent
              changes recognized in earnings or loss.

              At January 1, 2007 no transitional adjustments were required to
              the opening balance of retained earnings or to the opening
              balance of AOCI arising from the adoption of sections 1530,
              3855, and 3865.

        In addition, the Company has assessed new and revised accounting
        pronouncements that have been issued that are not yet effective and
        determined that the following may have a significant impact on the
        Company:

        As of January 1, 2008, the Company will be required to adopt the
        following two new CICA standards: Financial Instruments -
        Disclosures (Section 3862) and Financial Instruments - Presentation
        (Section 3863), which will replace Financial Instruments - Disclosure
        and Presentation (Section 3861). The new disclosure standard
        increases the emphasis on the risks associated with both recognized
        and unrecognized financial instruments and how those risks are
        managed. The new presentation standard carries forward former
        presentation requirements.

        As of January 1, 2008, the Company will be required to adopt CICA
        standards, Capital Disclosures (Section 1535), which will require
        companies to disclose their objectives, policies and processes for
        managing capital. In addition, disclosures are to include whether
        companies have complied with externally imposed capital requirements.

        Both new standards were issued in December 2006 and the Company is
        assessing the impact on its financial statements.

    4.  Note Receivable

        As at December 31, 2006, the Company had a $0.5 million note
        receivable that beared interest at a rate of 10% and was due on
        demand. On January 10, 2007, the note receivable was collected in
        full.

    5.  Acquisitions

        (a)   Prior to the closing of the Acquisition Agreement and pursuant
              to an Asset Conveyance Agreement, Murphy transferred the Rimbey
              Assets to Mach in exchange for 100 Mach common shares. As the
              acquisition of the Rimbey Assets by Mach from Murphy is between
              entities under common control, the net assets were recorded at
              their carrying values as follows:

              ---------------------------------------------------------------
              Consideration
                100 common shares of Mach (note 9)                    41,219
              ---------------------------------------------------------------
              ---------------------------------------------------------------
              Net assets received:
                Petroleum and natural gas properties                  54,151
                Cash                                                   1,263
                Asset retirement obligations                          (6,043)
                Future income taxes                                   (8,152)
              ---------------------------------------------------------------
                                                                      41,219
              ---------------------------------------------------------------
              ---------------------------------------------------------------

              As part of the Asset Conveyance Agreement, Mach assumed
              Murphy's commitments for natural gas transmission and
              processing of production from the Rimbey assets.

              At June 30, 2007, the Company had received a preliminary
              statement of adjustments from Murphy in the amount of $2.0
              million. The Company recorded the adjustment as a reduction to
              property, plant and equipment ($2.9 million) and future income
              tax liability ($0.9 million). As of August 8, 2007, the
              purchase price allocation is subject to change until such time
              as the Company receives the final statement of adjustments from
              Murphy.

        (b)   Under the Acquisition Agreement, Rosetta acquired all of the
              issued and outstanding shares of Mach from Murphy in exchange
              for 269,988,560 Rosetta common shares. As such, Murphy owns
              approximately 80% of Rosetta's issued and outstanding shares.
              The acquisition was accounted for under the purchase method as
              a reverse takeover whereby Mach acquired Rosetta. Rosetta
              subsequently changed its name to Berkana and consolidated all
              of its issued and outstanding common shares on a five-for-one
              basis.

              The following table summarizes the consideration, purchase
              price allocation and fair value of the Rosetta net assets
              acquired by Mach:
              ---------------------------------------------------------------
              Consideration
                53,997,712(1) common shares of Rosetta (note 9)       29,024
                Transaction costs                                      1,898
              ---------------------------------------------------------------
                Total consideration                                   30,922
              ---------------------------------------------------------------
              ---------------------------------------------------------------
              Purchase Price and Fair Value
              Net assets received:
                Petroleum and natural gas properties                  36,885
                Cash                                                       9
                Working capital deficiency                            (1,727)
                Revolving credit facility                             (2,224)
                Asset retirement obligations                          (1,034)
                Future income taxes                                     (987)
              ---------------------------------------------------------------
                                                                      30,922
              ---------------------------------------------------------------
              ---------------------------------------------------------------
              (1) Shares issued reflect the five-for-one share consolidation.

    6.  Property, Plant and Equipment

        ---------------------------------------------------------------------
                                                       June 30   December 31
                                                          2007          2006
        ---------------------------------------------------------------------
        Petroleum and natural gas properties           105,603        97,677
        Corporate assets                                   543           316
        Accumulated depletion and depreciation         (10,632)       (1,526)
        ---------------------------------------------------------------------
        Net book value                                  95,514        96,467
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        As at June 30, 2007, salvage values of $8.8 million (2006 -
        $8.9 million), undeveloped land costs of $8.3 million (2006 -
        $7.5 million) and $7.3 million (2006 - $6.5 million) of costs on
        unevaluated wells have been excluded from the costs subject to
        depletion.

        The Company applied an impairment test to its petroleum and natural
        gas properties at June 30, 2007 and determined that there was no
        impairment.

    7.  Revolving Credit Facility

        The Company has a $25 million demand revolving operating credit
        facility (the "credit facility"). The credit facility is secured by a
        fixed and floating charge on the assets of the Company. The credit
        facility has a covenant that requires the Company to maintain its
        working capital ratio at 1:1 or greater while the credit facility is
        outstanding. The working capital ratio is defined as current assets
        plus the unutilized portion of the credit facility divided by current
        liabilities less the balance drawn against the credit facility. The
        borrowing base of the credit facility is subject to an annual review
        by the lender. As at June 30, 2007, the Company had drawn $14.5
        million against the credit facility at a variable interest rate of
        6.1% (2006 - $3.1 million) (see note 13).

    8.  Asset Retirement Obligations

        The following table presents the reconciliation of the carrying
        amount of the obligations associated with the retirement of the
        property, plant and equipment:

        ---------------------------------------------------------------------
                                                    Six Months     One Month
                                                         Ended         Ended
                                                       June 30   December 31
                                                          2007          2006
        ---------------------------------------------------------------------
        Balance, beginning of period                     7,585         6,043
        Liabilities settled                               (370)            -
        Asset retirement obligations
         acquired (note 5(b))                                -         1,034
        Liabilities incurred                               206           470
        Accretion expense                                  228            38
        ---------------------------------------------------------------------
        Balance, end of period                           7,649         7,585
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The following significant assumptions were used to estimate the asset
        retirement obligation:

        ---------------------------------------------------------------------
                                                    Six Months     One Month
                                                         Ended         Ended
                                                       June 30   December 31
                                                          2007          2006
        ---------------------------------------------------------------------
        Undiscounted cash flows                         11,372        11,119
        Credit adjusted discount rate (%)                  6.0           6.0
        Inflation rate (%)                                 3.0           3.0
        Weighted average expected timing of
         cash flows (years)                               10.4          10.6
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    9.  Share Capital

        (a)   Authorized

              Unlimited number of Class A and B common shares, no par value.

              Unlimited number of Class A preferred shares, issuable in
              series, no par value.

              On December 1, 2006, the Company's shareholders approved a
              consolidation of its common shares on a five-for-one basis.
              All common shares and per share amounts are presented to
              reflect the share consolidation.

        (b)   Issued

              ---------------------------------------------------------------
              ($ thousands - except share amounts)      Number        Amount
              ---------------------------------------------------------------
              Class A Common Shares
              Balance, December 1, 2006             13,499,428        41,219
              Issued upon acquisition (note 5(b))   53,997,712        30,922
              ---------------------------------------------------------------
              Balance, December 31, 2006 and
               June 30, 2007                        67,497,140        72,141
              ---------------------------------------------------------------
              ---------------------------------------------------------------

              On December 1, 2006, Rosetta shareholders held a total of
              13,499,428 common shares, which were subsequently exchanged
              pursuant to the acquisition agreement for an equivalent number
              of Berkana common shares.

        (c)   Stock options

              The Company has a stock option plan (the "Plan"), administered
              by the Board of Directors, in which up to 10% of the issued and
              outstanding common shares are reserved for issuance. Under the
              Plan, the options that have been granted vest at varying times
              ranging from vesting on the date of grant to vesting over a
              period of three years. All options expire on the earlier of
              five years from grant date or 30 days from the date from which
              the optionee ceases to be a director, officer, employee or
              consultant of the Company.

              The following table sets forth a reconciliation of the stock
              option plan activity for the six months ended June 30, 2007:

              ---------------------------------------------------------------
                                                Number of  Weighted average
                                                  options  exercise price ($)
              ---------------------------------------------------------------
              Balance, beginning of
               period                                    -                 -
              Granted                            4,519,750              1.61
              Cancelled                            (61,000)             1.47
              ---------------------------------------------------------------
              Balance, end of period             4,458,750              1.61
              ---------------------------------------------------------------
              ---------------------------------------------------------------

              The following table summarizes stock options outstanding under
              the plan at June 30, 2007:

              ------------------------------------------------------
              Exercise price   Number outstanding  Average remaining
                    ($)          at period end     contractual life
              ------------------------------------------------------
                   1.60            4,083,750                   4.5
                   1.80              330,000                   4.5
                   1.51               30,000                   4.8
                   1.10               15,000                   4.7
              ------------------------------------------------------
                   1.61            4,458,750                   4.5
              ------------------------------------------------------
              ------------------------------------------------------

        (d)   Stock based compensation

              The Company uses the fair value method to account for its stock
              based compensation plan. Under this method, compensation costs
              are charged over the vesting period for stock options granted
              to directors, officers, employees and consultants, with a
              corresponding increase to contributed surplus.

              The following table reconciles the Company's contributed
              surplus:

              ---------------------------------------------------------------
                                                  Three Months     Six Month
                                                         Ended         Ended
                                                       June 30       June 30
                                                          2007          2007
              ---------------------------------------------------------------
              Balance, beginning of period                 623             -
              Stock based compensation expense             681         1,304
              ---------------------------------------------------------------
              Balance, end of period                     1,304         1,304
              ---------------------------------------------------------------
              ---------------------------------------------------------------

              The fair value of options granted during the period was
              estimated based on the date of grant using the Black-Scholes
              option pricing model with weighted average assumptions and
              resulting values for grants as follows:

              ---------------------------------------------------------------
                                                  Three Months     Six Month
                                                         Ended         Ended
                                                       June 30       June 30
                                                          2007          2007
              ---------------------------------------------------------------
              Risk free interest rate (%)                  4.1           4.1
              Expected life (years)                        3.0           3.0
              Expected dividend yield (%)                    -             -
              Expected volatility (%)                       51            51
              Weighted average fair value of
               options granted ($)                        0.58          0.62
              ---------------------------------------------------------------

        (e)   Employee stock purchase plan

              The Company has an employee stock purchase plan ("ESPP") in
              which employees are provided the opportunity to receive up to
              10% of their salary in common shares, which is then matched on
              a share for share basis by the Company. The Company purchased
              93,637 shares under the ESPP during the six months ended June
              30, 2007 (2006 - nil).

        (f)   Basic and diluted loss per share

              The Company used the treasury stock method to calculate net
              loss per common share.

              ---------------------------------------------------------------
                                                  Three Months     Six Month
                                                         Ended         Ended
                                                       June 30       June 30
                                                          2007          2007
              ---------------------------------------------------------------

              Weighted average common shares -
               Basic and Diluted                    67,497,140    67,497,140

              Basic and diluted loss per share          ($0.03)       ($0.03)
              ---------------------------------------------------------------

              For the calculation of diluted net loss per share the Company
              excluded 4,458,750 stock options that are anti-dilutive.

    10. Future Income Taxes

        The Company's computation of future income tax expenses is as
        follows:

        ---------------------------------------------------------------------
                                                  Three Months     Six Month
                                                         Ended         Ended
                                                       June 30       June 30
                                                          2007          2007
        ---------------------------------------------------------------------
        Expected income tax at 32.12%                     (754)         (651)
        Non-deductible items - stock based
         compensation                                      218           419
        Rate adjustment - reversal of temporary
         differences                                        22             -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
                                                          (514)         (232)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The net future tax liability is comprised of:

        ---------------------------------------------------------------------
                                                               June 30, 2007
        ---------------------------------------------------------------------
        Non-capital loss carryforwards                                 2,281
        Asset retirement obligations                                   2,218
        Share issue costs                                                711
        Net book value of assets in excess of tax basis              (11,091)
        Deferred partnership income                                   (2,465)
        ---------------------------------------------------------------------
                                                                      (8,346)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        As at June 30, 2007, the Company had approximately $60.9 million in
        tax pools and $7.6 million in non-capital losses available for
        deduction against future taxable income.

        Non-capital losses expire as follows:

        ---------------------------------------------------------------------
        2007                                                             594
        2008                                                           1,392
        2009                                                           1,234
        2010 and thereafter                                            4,390
        ---------------------------------------------------------------------
                                                                       7,610
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    11. Financial Instruments

        (a) Fair value of financial assets and liabilities

            Financial instruments of the Company consist primarily of bank
            overdraft, accounts receivable, note receivable, accounts payable
            and the credit facility.  As at June 30, 2007 and December 31,
            2006, there were no significant differences between the carrying
            amounts reported on the balance sheet and their estimated fair
            values.

        (b) Credit risk

            The Company's accounts receivable are with customers and joint
            venture partners in the petroleum and natural gas business under
            normal industry sale and payment terms and are subject to normal
            credit risks. Management believes the risk is mitigated by the
            size and reputation of the companies to which they extend credit.

        (c) Interest rate risk

            The Company is exposed to interest rate risk as the credit
            facility bears interest at floating market interest rates. The
            Company has no interest rate swaps or hedges at June 30, 2007.

    12. Supplemental Cash Flows Information

        (a) Changes in non-cash working capital

            -----------------------------------------------------------------
                                                   Three Months   Six Months
                                                          Ended        Ended
                                                        June 30      June 30
                                                           2007         2007
            -----------------------------------------------------------------
            Accounts receivable                          (2,047)      (6,309)
            Prepaid expenses and deposits                (1,486)      (1,448)
            Accounts payable and accrued liabilities     (5,719)      (2,312)
            -----------------------------------------------------------------
                                                         (9,252)     (10,069)
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            The change in non-cash working capital has been allocated to the
            following activities:


            -----------------------------------------------------------------
                                                   Three Months   Six Months
                                                          Ended        Ended
                                                        June 30      June 30
                                                           2007         2007
            -----------------------------------------------------------------
            Operating                                       828         (778)
            Investing                                   (10,080)      (9,291)
            -----------------------------------------------------------------
                                                         (9,252)     (10,069)
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (b) Interest

                                                   Three Months   Six Months
                                                          Ended        Ended
                                                        June 30      June 30
                                                           2007         2007
            -----------------------------------------------------------------

            Interest paid                                   164          224
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    13. Subsequent event

        On August 1, 2007, Berkana renewed and expanded its $25 million
        credit facility to $40 million. The terms and conditions of the new
        credit facility are similar to the Company's previous credit
        facility, except for one new financial covenant which requires the
        Company to maintain its net debt to trailing cash flow at 3:1 or less
        while the credit facility is outstanding. The net debt to trailing
        cash flow ratio is defined as net debt divided by annualized cash
        flow for the most recently completed quarter.

        Additional Information

        Berkana Energy Corp. is a Calgary based public resource company
        actively pursuing crude oil and natural gas through exploration,
        development, production and strategic acquisitions in key focus areas
        located in Western Canada. Berkana is a vibrant, growing Canadian
        energy company with a mission to grow shareholder wealth by adding
        reserves and production through a balanced mix of low risk drilling
        opportunities, high impact exploration and strategic acquisitions.
        The Company's common shares trade on the TSX under the symbol BEC.

        Additional information relating to Berkana is filed on SEDAR and can
        be viewed at www.sedar.com. Information can also be obtained by
        contacting the Company at Berkana Energy Corp., Suite 2100, 801 Sixth
        Avenue S.W., Calgary, Alberta, Canada T2P 3W2 or by e-mail at info
        @berkanaenergy.com. Information is also accessible on the
        Company's website at www.berkanaenergy.com.

        Statements in this press release may contain forward-looking
        statements including management's assessment of Berkana's future
        plans and operations. Information concerning reserves may also be
        deemed to be forward-looking statements as such estimates involve the
        implied assessment that the resources described can be profitably
        produced in future. These statements are based on current
        expectations that involve a number of risks and uncertainties, which
        could cause actual results to differ from those anticipated. These
        risks include, but are not limited to: the background risks of the
        oil and gas industry (e.g., operational risks in development,
        exploration and production; potential 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), and
        uncertainties resulting from potential delays or changes in plans
        with respect to exploration, development projects, capital
        expenditures or partners.

        Per barrel of oil equivalent ("boe") amounts may be misleading,
        particularly if used in isolation.  A boe conversion ratio has been
        calculated using a conversion rate of six thousand cubic feet of
        natural gas to one barrel of oil (6 mcf:1 bbl) and is based on an
        energy equivalency conversion method applicable at the burner tip and
        does not represent a value equivalency at the wellhead.

      THE TORONTO STOCK EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE
                    ADEQUACY OR ACCURACY OF THIS RELEASE.

    

    %SEDAR: 00002141E




For further information:

For further information: Glenn Gradeen, CEO, ggradeen@berkanaenergy.com;
Robb Thompson, CFO, rthompson@berkanaenergy.com

Organization Profile

BERKANA ENERGY CORP.

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