Comaplex Minerals Corp. Announces Nine Month 2007 Results


    CALGARY, Nov. 14 /CNW/ - Comaplex Minerals Corp. (
(TSX:CMF) is pleased to announce its financial and oil and gas operational
results for the nine months ended September 30, 2007.

    Financial and Operational Highlights

                                Three Months Ended         Nine Months Ended
                                   September 30               September 30
                                 2007         2006         2007         2006
    Financial ($000,
     except $ per share)
      Mineral Division            288          618          784        1,226
      Oil and Gas Division        671          701        2,211        2,618
    Funds Flow from
     Operations(1)                632          549        1,746        1,781
      Per Share Basic            0.01         0.01         0.04         0.05
      Per Share Diluted          0.01         0.01         0.04         0.05
    Net Earnings                  (40)         650         (481)       1,470
      Per Share Basic           (0.00)        0.02        (0.01)        0.04
      Per Share Diluted         (0.00)        0.02        (0.01)        0.04
    Capital Expenditures
      Mineral Division          9,344        3,250       16,153        8,012
      Oil and Gas Division         71            9          194          138
    Total Assets
      Mineral Division                                   82,836       52,590
      Oil and Gas Division                               10,117        4,648
    Oil and Gas Operations
    Barrel of Oil Equivalent
     per Day(2)                   195          249          206          299

    (1) Funds flow from operations is not a recognized measure under GAAP.
        Management believes that in addition to net earnings, funds flow from
        operations is a useful supplemental measure as it demonstrates the
        Company's ability to generate the cash necessary to fund future
        growth through capital investment. Investors are cautioned, however,
        that this measure should not be construed as an indication of the
        Company's performance. The Company's method of calculating this
        measure may differ from other issuers and accordingly, it may not be
        comparable to that used by other issuers. For these purposes, the
        Company defines funds flow from operations as funds provided by
        operations before changes in non-cash operating working capital

    (2) BOE's are calculated using a conversion ratio of 6 MCF to 1 barrel of
        oil. The conversion is based on an energy equivalency conversion
        method primarily applicable at the burner tip and does not represent
        a value equivalency at the wellhead and as such may be misleading if
        used in isolation.

    Forward-looking Information

    Certain statements contained in this press release include statements
which contain words such as "anticipate", "could", "should", "expect", "seek",
"may", "intend", "likely", "will", "believe" and similar expressions, relating
to matters that are not historical facts, and such statements of our beliefs,
intentions and expectations about development, results and events which will
or may occur in the future, constitute "forward-looking information" within
the meaning of applicable Canadian securities legislation and are based on
certain assumptions and analysis made by us derived from our experience and
perceptions. Forward-looking information in this press release includes, but
is not limited to: expected cash provided by continuing operations; future
capital expenditures, including the amount and nature thereof; gold, oil and
natural gas prices and demand; expansion and other development trends of the
precious metal industry; business strategy and outlook; expansion and growth
of our business and operations; and maintenance of existing customer, supplier
and partner relationships; supply channels; accounting policies; credit risks;
and other such matters.
    All such forward-looking information is based on certain assumptions and
analyses made by us in light of our experience and perception of historical
trends, current conditions and expected future developments, as well as other
factors we believe are appropriate in the circumstances. The risks,
uncertainties, and assumptions are difficult to predict and may affect
operations, and may include, without limitation: the risks of foreign exchange
fluctuations; equipment and labour shortages and inflationary costs; general
economic conditions; industry conditions; changes in applicable environmental,
taxation and other laws and regulations as well as how such laws and
regulations are interpreted and enforced; the ability of mineral companies to
raise capital; the effect of weather conditions on operations and facilities;
the existence of operating risks; volatility of precious metals and oil and
natural gas prices; precious metal and oil and gas product supply and demand;
risks inherent in the ability to generate sufficient cash flow from operations
to meet current and future obligations; increased competition; stock market
volatility; opportunities available to or pursued by us; and other factors,
many of which are beyond our control.
    Actual results, performance or achievements could differ materially from
those expressed in, or implied by, this forward-looking information and,
accordingly, no assurance can be given that any of the events anticipated by
the forward-looking information will transpire or occur, or if any of them do,
what benefits will be derived therefrom. Except as required by law, Comaplex
disclaims any intention or obligation to update or revise any forward-looking
information, whether as a result of new information, future events or
    The forward-looking information contained herein is expressly qualified
by this cautionary statement.

    General Discussion
    The Company is pleased to report its financial and operations results for
the first nine months of 2007 and the progress it has made with regard to its
exploration plans for 2007. At September 30, 2007 the Company had working
capital of $23,311,000 and along with the Company's funds flow is adequately
financed to complete its 2007/2008 underground capital project that is
expected to cost approximately $17,000,000 from October 1, 2007 to its
completion date of June 30, 2008.

    Meliadine West Property

    The 2007 surface exploration program at the Meliadine West property was
completed in late August. The underground exploration program commenced in
August and is estimated to be completed in June, 2008.

    -   As of the end of the third quarter, a total of 21,758 meters of
        diamond drilling in 102 holes was completed on budget (including
        17 geotech holes for site infrastructure planning purposes). All of
        the drilling was completed on the Tiriganiaq deposit. This year's
        program was predominantly an infill program to upgrade the resource
        status and to increase the understanding of some deeper parts of the
        deposit. Meterage was also allocated to shallow drill testing of both
        the western and eastern potential open pit areas of the deposit.

    -   In early August, Comaplex received final approval from the regulatory
        agencies for its proposed underground exploration and bulk sampling
        program on the Tiriganiaq deposit. Portal excavation began in early
        August and was completed on October 5. The underground mining
        contractor mobilized its underground mining equipment to site from
        Rankin by heavy lift helicopter over a one week period starting
        September 14. Construction of site infrastructure was completed and
        the underground exploration program commenced on October 7, 2007. The
        underground portion of the program is expected to continue for
        approximately nine months.

    -   Surface exploration to locate the source of the G10d garnet diamond
        indicators on the far eastern end of the Meliadine property was
        limited to prospecting and mapping. No surface exposures of
        kimberlitic rock were found. With the extensive drilling and
        underground programs focused on gold on the property, the Company did
        not have personnel available to conduct further programs in 2007.
        Comaplex continues to monitor the diamond exploration results and
        activities of unrelated third parties who hold ground around its
        claim block. More work on the diamond targets will be completed in
        the 2008 field program.

    -   A scoping study on the Tiriganiaq deposit is being compiled. The
        delay in getting assay results from the lab for the 2007 drill-holes
        has impacted Comaplex's schedule for getting a new resource estimate
        completed and in ongoing scoping level studies. A completely
        re-engineered mine plan and costing analysis, from first principles,
        is being done for the deposit and it is expected that it will be
        completed early in 2008.

    Information with regard to the 2007 exploration program will continue to
be released on a timely basis throughout the year. Comaplex has a 78 percent
interest in the property with an option to increase to 80 percent. Mr. Doug
Dumka, P.Geo., is the Chief Geologist for Comaplex and is the Senior Project
Geologist and designated Qualified Person (Q.P.) for the Meliadine West

    Financial and Operations Discussion
    Revenues for the first nine months of 2007 from mineral operations
decreased $442,000 from the first nine months of 2006 mainly due to the sale
of investments during the 2006 three quarters resulting in a gain on sale of
$997,000 compared to a gain of $101,000 in 2007 offset by higher interest
income of approximately $400,000 in 2007. Revenue during Q3 2007 was $119,000
lower than Q2 2007 due to the sale of investments in Q2 which resulted in a
gain on sale of $94,000.
    Revenue for the oil and gas division decreased to $2,211,000 in the first
nine months of 2007 from $2,618,000 in the first nine months of 2006. The
decrease was primarily due to reduced production volumes (offset slightly by
higher commodity prices) as well as the elimination of the Alberta royalty tax
credit (ARTC) effective January 1, 2007. Revenue for the third quarter of 2007
was slightly less than the revenue of the second quarter of 2007 due to a
slight drop in commodity prices.
    Natural gas liquids and natural gas production during the nine months
ended September 30, 2007, averaged 206 barrels of oil equivalent (BOE) per
day. Total production consisted of 40 barrels per day of liquids and 997 MCF
per day of natural gas. Average production during the corresponding 2006 nine
month period was 44 barrels per day of liquids and 1,529 MCF per day of
natural gas. During a workover at the Company's main producing well it was
discovered by the operator, that there was a hole in the production casing.
The operator scheduled a well maintenance program to ensure all the other
natural gas wells' production casing meets safety standards. This maintenance
program has caused continuous down time during the workovers and it is
anticipated production levels will increase once the maintenance program is
    Natural gas prices increased on average in the first nine months of 2007
to $6.58 per MCF compared to an average price in the first nine months of 2006
of $4.77 per MCF ($5.94 per MCF in the third quarter of 2007 compared to
$7.33 per MCF in the second quarter of 2007).
    Natural gas and natural gas liquids production costs for the nine month
period of 2007 were $114,000 ($2.03 per BOE) compared to $243,000 ($2.97 per
BOE) for the first nine months of 2006. The decrease in 2007 over the first
nine months of 2006 was due mainly to increased third party plant processing
fee recoveries in 2007. Production costs for the third quarter of 2007 over
the second quarter of 2007 saw a slight decline due to further third party
plant processing fee recoveries in Q3 2007.
    General and administrative costs for mineral operations decreased to
$670,000 in the first nine months of 2007 compared to $735,000 in the
corresponding 2006 period. The decrease was primarily due to a smaller bonus
accrual and increased capitalized administrative costs. General and
administrative expenses were slightly lower in the third quarter of 2007 than
the second quarter of 2007 due to more administrative costs with regard to
continuous disclosure obligations in Q2.
    Foreign exchange loss increased to $240,000 for the nine months of 2007
compared to $18,000 for the same period in 2006. The difference is due to the
increased US funds the Company has (September 30, 2007 - $1,350,000 USD versus
September 30, 2006 - $93,000 USD) and the strengthening of the Canadian dollar
versus the US dollar. There was no significant difference in the foreign
exchange loss between the third and second quarter of 2007.
    The Company granted 1,986,000 stock options in 2006 and 2007 with a total
stock based compensation of $2,374,000 of which $1,299,000 has been expensed
to date. The stock based compensation is to be amortized over three years. The
remaining balance of $1,075,000 will be fully amortized over the next two
years (approximately $200,000 in Q4, 2007, $550,000 in 2008 and $325,000 in
    Depletion, depreciation and accretion expense decreased to $473,000 for
the nine month period of 2007 compared to $562,000 for the first nine months
of 2006. The decrease was due primarily to lower oil and gas production
volumes in 2007. Third quarter 2007 DD&A costs over second quarter 2007 DD&A
costs were $13,000 lower due to decreased production of one of the Company's
oil and gas properties which had the highest capitalized costs (despite
production as a whole being static this quarter).
    The Company reviews the carrying value of its mineral properties on an
ongoing basis and reduces the cost of properties if it is determined that the
property values are lower than the property cost. No amounts were written off
in 2007 or 2006.
    Comaplex has no current income tax expense. Comaplex has sufficient tax
pools to ensure that no current income taxes are payable.
    The tax pool balances at September 30, 2007 totalled $90,496,000 and
consist of the following pool balances.

                                                        Rate of
                                                              %       Amount
    Undepreciated capital costs                          10-100  $   516,000
    Foreign exploration expenses                             10      897,000
    Share issue costs                                        20    1,511,000
    Earned depletion expenses (successored)                  25    2,299,000
    Canadian development expenditures                        30   17,149,000
    Non-capital loss carryforward                           100    6,750,000
    Canadian exploration expenditures (successored)         100   33,368,000
    Canadian exploration expenditures                       100   28,006,000

    The ability to claim the above successored amounts is restricted to
income from 56 percent of the Meliadine property. In addition to the above
federal and provincial income tax pools, the Company has approximately
$1,021,000 of attributable crown royalty deduction available to apply against
Alberta taxable income.
    Due to the uncertainty inherent in mineral exploration, the Company is
precluded from recording the full value of its tax pools. Should a positive
feasibility report be obtained on the Meliadine property it is expected that
the full benefit of the tax pools will be recorded.
    Net loss for the first nine months of 2007 was $481,000 compared to
$1,470,000 of net income in the corresponding 2006 period. The decrease over
the 2006 first three quarters is predominantly due to decreased gain on sale
of investments and decreased natural gas production volumes. Also, a
significant increase in stock based compensation due to the issuance of stock
options and to a foreign exchange loss as the Canadian dollar strengthened
against the US dollar. The third quarter 2007 net loss of $40,000 compared to
the second quarter net earnings of $270,000 was due primarily to a gain on
sale of investments in Q2, reduced oil and gas revenue as prices for natural
gas commodities decreased in Q3 and a significantly higher future income tax
provision in the third quarter.
    Prior to future income taxes expense, the Company had a net profit of
$341,000 for the 2007 nine month period and $119,000 for Q3, 2007. It is
extremely frustrating that with tax pools of $90 million the GAAP requirements
still require that the Company has to set up future income taxes of $822,000
for the nine month period and $159,000 for Q3, 2007. These highly unlikely
expenditures result in Comaplex showing a loss position.
    On January 1, 2007 the Company adopted the new accounting standards
regarding the accounting for financial instruments. As a result of the
adoption the Company's investment figure increased by $3,105,000 for the fair
value of these investments. This adjustment resulted in a further increase in
the future income tax liability and accumulated other comprehensive income of
$510,000 and $2,595,000 respectively. Other comprehensive income for the first
nine months of 2007 included an increase in the unrealized gain on investment
of $787,000 net of $133,000 in income tax and a transfer of a realized gain on
investment to net income of $80,000 net of $14,000 in income tax.
    Funds flow from operations decreased marginally in the first nine months
of 2007 to $1,746,000 from $1,781,000 for the 2006 comparable period. Quarter
over quarter saw a decrease of $55,000 primarily due to lower oil and gas
revenue, which was partially offset by lower general and administrative
expenditures in the minerals division.
    The following reconciliation compares funds flow to the Company's net
earnings as calculated according to Canadian generally accepted accounting

    Nine Months Ended September 30                         2007         2006
    Cash flow form operating activities             $ 1,941,000  $ 2,592,000
    Items not affecting funds flow
      Accounts receivable                               380,000     (289,000)
      Prepaid expenses                                   20,000       31,000
      Accounts payable and accrued liabilities         (608,000)    (553,000)
      Asset retirement obligations settled               13,000            -
    Funds flow for the period                       $ 1,746,000  $ 1,781,000

    At September 30, 2007, the Company had a working capital position of
$23,311,000 (December 31, 2006 - $10,308,000). The Company completed a private
placement on March 23, 2007 resulting in the issuance of 6,000,000 common
shares at a price of $4.45 per common share for gross proceeds of $26,700,000.
The Company paid a commission of 5.75 percent of the gross proceeds
($1,535,000) plus legal, accounting and commission costs of approximately
    The Company currently has a projected capital expenditure budget of
$17,000,000 for the underground mining costs of the Meliadine West and East
projects for the remainder of 2007 and the first half of 2008. A further
$120,000 is planned to be spent on miscellaneous other mineral exploration
plays in 2007. In addition, Comaplex has been informed by the operator of the
Garrington Elkton property that the Company's 4.6 percent share of a proposed
capital program will be approximately $800,000. This program was delayed in
2006 and is scheduled to be completed in 2008. All planned expenditures will
be funded from existing working capital, anticipated cash flow from oil and
gas operations, investment income, and the issuance of equity.
    The success of the Meliadine West and East projects' operations and
recoverability of the capitalized costs related thereto are dependent upon the
development of successful producing properties. The Company is currently in
the planning phase for its 2008 drill program and further underground
projects. This will require additional financing in amounts sufficient to
continue the on-going development of the Meliadine operations and to meet the
related obligations as they become due.

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

    Additional information relating to the Company may be found on
WWW.SEDAR.COM and by visiting its website at

    As at September 30, 2007 (unaudited) and December 31, 2006

                                                           2007         2006
      Cash                                          $22,156,000  $ 4,759,000
      Accounts receivable                               742,000      362,000
      Prepaid expenses                                  171,000      151,000
      Investments (for December 31, 2006
       recorded at cost;
        Market value - $5,637,000) (Note 2)           6,415,000    2,532,000
                                                     29,484,000    7,804,000
    Future Income Tax Asset                           3,313,000    4,261,000
    Property and Equipment
      Mineral properties                             58,727,000   43,668,000
      Petroleum and natural gas properties
       and related equipment                          8,670,000    8,485,000
      Other                                             230,000      221,000
      Accumulated depletion, depreciation
       and amortization                              (7,471,000)  (7,021,000)
                                                     60,156,000   45,353,000
                                                    $92,953,000  $57,418,000
      Accounts payable and accrued liabilities      $ 6,173,000  $   601,000
    Asset Retirement Obligations                        596,000      588,000
                                                      6,769,000    1,189,000
      Share capital (Note 3)                         71,368,000   44,922,000
      Contributed surplus                             2,372,000    1,684,000
                                                     73,740,000   46,606,000

      Retained earnings                               9,142,000    9,623,000
      Accumulated other comprehensive income
       (Note 4)                                       3,302,000            -
                                                     12,444,000    9,623,000
                                                     86,184,000   56,229,000
                                                    $92,953,000  $57,418,000

    For the periods ended September 30 (unaudited)

                                    Three Months              Nine Months
                                 2007         2006         2007         2006
    Minerals Division
      Interest            $   262,000  $    68,000  $   614,000  $   203,000
      Gain on sale of
       property and
       investments                  -      537,000      101,000      977,000
      Mineral production
       royalty                 26,000       13,000       69,000       46,000
                              288,000      618,000      784,000    1,226,000
    Oil and Gas Division
      Oil and gas sales       724,000      694,000    2,421,000    2,790,000
      Royalties              (188,000)    (167,000)    (570,000)    (679,000)
      Alberta royalty
       tax credits                  -       28,000            -      126,000
      Trust distributions
       (Note 2)               135,000      146,000      360,000      381,000
                              671,000      701,000    2,211,000    2,618,000
                              959,000    1,319,000    2,995,000    3,844,000
      Oil and gas
       production costs        (2,000)           -      114,000      243,000
      General and
        Minerals division     187,000      201,000      670,000      735,000
        Oil and gas
         division              42,000       30,000      124,000       90,000
      Foreign exchange
       loss                   100,000        2,000      240,000       18,000
      Stock based
       compensation           361,000       12,000    1,033,000       73,000
       depreciation and
       accretion              152,000      171,000      473,000      562,000
                              840,000      416,000    2,654,000    1,721,000
    Earnings Before Taxes     119,000      903,000      341,000    2,123,000
    Income Taxes
      Current                       -            -            -            -
      Future                  159,000      253,000      822,000      653,000
                              159,000      253,000      822,000      653,000
    Net Earnings (Loss)
     for the Period           (40,000)     650,000     (481,000)   1,470,000
    Retained earnings,
     beginning of period    9,182,000    8,359,000    9,623,000    7,539,000
    Retained Earnings,
     End of Period        $ 9,142,000  $ 9,009,000  $ 9,142,000  $ 9,009,000
    Net Earnings (Loss)
     Per Share - Basic         ($0.00) $      0.02       ($0.01) $      0.04
    Net Earnings (Loss)
     Per Share - Diluted       ($0.00) $      0.02       ($0.01) $      0.04

    For the Three and Nine Months Ended September 30 (unaudited)

                                                   Three Months  Nine Months
                                                           2007         2007

    Net loss for the period                           ($508,000)   ($949,000)

      Unrealized gains on investments (net of tax;
       Three Months ended - $11,000, Nine Months
       ended - $133,000)                                 69,000      787,000
      Realized gains on investments transferred to
       net income (net of tax; Three Months
       ended - $-, Nine Months ended - $14,000)               -      (80,000)
    Changes in unrealized gains and losses on
     available-for-sale financial assets                 69,000      707,000
    Other comprehensive income                           69,000      707,000
    Comprehensive income                              ($439,000)   ($242,000)

    For the periods ended September 30 (unaudited)

                                    Three Months              Nine Months
                                 2007         2006         2007         2006
      Net earnings (loss)
       for the period        ($40,000) $   650,000    ($481,000) $ 1,470,000
      Items not affecting
        Gain on sale of
         property and
         investments                -     (537,000)    (101,000)    (977,000)
        Stock based
         compensation         361,000       12,000    1,033,000       73,000
         and accretion        152,000      171,000      473,000      562,000
        Future income
         taxes                159,000      253,000      822,000      653,000
                              632,000      549,000    1,746,000    1,781,000
    Change in non-cash
     operating working
      Accounts receivable      41,000       86,000     (380,000)     289,000
      Prepaid expenses          1,000     (229,000)     (20,000)     (31,000)
      Accounts payable and
       accrued liabilities   (127,000)     420,000      608,000      553,000
    Asset retirement
     obligations settled       (2,000)           -      (13,000)           -
                              (87,000)     277,000      195,000      811,000
    Cash Provided By
     Operating Activities     545,000      826,000    1,941,000    2,592,000
      Issue of shares
       pursuant to private
       placement                    -            -   26,700,000            -
      Issue of shares
       under employee stock
       option plan                  -      926,000      638,000      966,000
      Share issue costs             -            -   (1,743,000)           -
    Cash Provided By
     Financing Activities           -      926,000   25,595,000      966,000
      Mineral exploration,
       property and
       expenditures        (9,344,000)  (3,250,000) (16,513,000)  (8,012,000)
      Mineral exploration
       property and
       equipment disposals          -            -    1,463,000            -
      Oil and gas property
       and equipment
       expenditures           (71,000)      (9,000)    (194,000)    (138,000)
      Investments purchased         -            -            -            -
      Investments sold              -      552,000      143,000    1,008,000
      Changes in non-cash
       working capital
        Accounts payable
         and accrued
         liabilities        4,962,000            -    4,962,000            -
    Cash Used In Investing
     Activities            (4,453,000)  (2,707,000) (10,139,000)  (7,142,000)
    Net Cash Inflow
     (Outflow)             (3,908,000)    (955,000)  17,397,000   (3,584,000)
    Cash, Beginning Of
     Period                26,064,000    6,801,000    4,759,000    9,430,000
    Cash, End Of Period   $22,156,000  $ 5,846,000  $22,156,000  $ 5,846,000

    Cash Interest Paid    $         -  $         -  $         -  $         -
    Cash Taxes Paid       $         -  $         -  $         -  $         -

    Periods ended September 30, 2007 and 2006 (unaudited)


        The accounting policies and methods of application followed in the
        preparation of the interim financial statements other than described
        below are the same as those followed in the preparation of the
        Company's 2006 annual financial statements. These interim financial
        statements do not include all disclosures required for annual
        financial statements. The interim financial statements as presented
        should be read in conjunction with the 2006 annual financial

        Financial instruments - recognition and measurement

        On January 1, 2007, the Company adopted Section 3855 of the Canadian
        Institute of Chartered Accounts' ("CICA") Handbook, "Financial
        Instruments - Recognition and Measurement" and Section 3861 Financial
        Instruments - Presentation and Disclosure. It sets out the standards
        for recognizing and measuring financial instruments in the balance
        sheet and the standards for reporting gains and losses in the
        financial statements. Financial assets available for sale, assets and
        liabilities held for trading and derivative financial instruments,
        part of a hedging relationship or not, have to be measured as fair

        The Company has made the following classifications:

        -   Investments are classified as available-for-sale and will thus be
            marked-to-market through comprehensive income at each period end.

        -   Accounts receivable are classified as loans and receivables and
            are recorded at amortized cost using the effective interest
            method. Gains and losses are recognized in net earnings when the
            asset is no longer recognized.

        -   Accounts payable and accrued liabilities are classified as other
            financial liabilities and are recorded at amortized cost using
            the effective interest method. Gains and losses are recognized in
            net earnings when the liability is no longer recognized.

        The adoption of this Section is done retroactively without
        restatement of the consolidated financial statements of prior
        periods. As of January 1, 2007, the impact on the consolidated
        balance sheet of measuring the investments at marked-to-market was an
        increase of $3,105,000 to investments, a decrease in future tax asset
        of $510,000 and an increase in accumulated other comprehensive income
        of $2,595,000.

        The Company selected January 1, 2003 as its transition date for
        embedded derivatives. An embedded derivative is a component of a
        financial instrument or another contract of which the characteristics
        are similar to a derivative. This had no impact on the consolidated
        financial statements.

        Comprehensive income

        On January 1, 2007, the Company adopted Section 1530 of the CICA
        Handbook, "Comprehensive Income". It describes reporting and
        disclosure recommendations with respect to comprehensive income and
        its components. Comprehensive income is the change in shareholders'
        equity, which results from transactions and events from sources other
        than the Company's shareholders. These transactions and events
        include unrealized gains and losses from changes in fair value of
        certain financial instruments.

        The adoption of this Section implied that the Company now presents a
        consolidated statement of comprehensive income as a part of the
        consolidated financial statements.


        On January 1, 2007, the Company adopted Section 3251 of the CICA
        Handbook "Equity" replacing Section 3250 "Surplus". It describes
        standards for the presentation of equity and changes in equity for
        reporting periods as a result of the application of Section 1530
        "Comprehensive Income".

        Accounting changes

        The Company also adopted Section 1506, "Accounting Changes," the only
        impact of which is to provide disclosure of when an entity has not
        applied a new source of GAAP that has been issued but is not yet
        effective. This is the case with Section 3862, "Financial Instruments
        Disclosures" and Section 3863, "Financial Instruments Presentations"
        which are required to be adopted for fiscal years beginning on or
        after October 1, 2007. The Company will adopt these standards on
        January 1, 2008 and it is expected the only effect on the Company
        will be incremental disclosures regarding the significance of
        financial instruments for the entity's financial position and
        performance; and the nature, extent and management of risks arising
        from financial instruments to which the entity is exposed.


        The Company paid a management fee to Bonterra Energy Corp. (Bonterra
        Corp) (a wholly owned subsidiary of Bonterra Energy Income Trust
        (Bonterra Trust) a publicly traded oil and gas income trust on the
        Toronto Stock Exchange) a company with common directors and
        management, of $225,000 (2006 - $225,000). Services provided by
        Bonterra Corp include executive services (CEO and CFO duties),
        accounting services, oil and gas administration and office
        administration. Bonterra Corp owns 689,682 (December 31, 2006 -
        689,682) common shares in the Company. Bonterra Corp is the
        administrator of Bonterra Trust.

        As of September 30, 2007, the Company owns 204,633 (December 31, 2006
        - 204,633) units in Bonterra Trust representing approximately
        one percent of the outstanding units of Bonterra Trust. The units
        have an accounting cost of $5,910,000 (December 31, 2006 -
        $2,321,000) and a quoted market value of $5,910,000 (December 31,
        2006 - $5,233,000). The Company received distributable income in the
        first nine months of 2007 of $360,000 (September 30, 2006 -

        The Company also owns shares in Pine Cliff Energy Ltd. (Pine Cliff).
        Pine Cliff has common directors and management with the Company. The
        Company owns 277,000 (December 31, 2006 - 277,000) common shares
        representing less than one percent of the total issued and
        outstanding common shares of Pine Cliff. The shares have an
        accounting cost of $360,000 (December 31, 2006 - $42,000) and a
        quoted market value of $360,000 (December 31, 2006 - $180,000). There
        have been no transactions between Pine Cliff and the Company.
        Subsequent to September 30, 2007, the Company exercised its right
        (part of a rights offering to all shareholders of Pine Cliff) to
        acquire an additional 69,250 common shares at a price of $1.10 per



        Unlimited number of common shares without nominal or par value
        Unlimited number of first preferred shares

                                                         Number       Amount
        Common Shares
        Balance, January 1, 2007                     39,451,771  $44,922,000
        Issued pursuant to private placement          6,000,000   26,700,000
        Issue costs on private placement                      -   (1,743,000)
        Issued exercise of stock options                510,200      638,000
        Transfer of contributed surplus to
         share capital                                        -      345,000
        Future tax adjustment on share issue costs            -      506,000
        Balance, September 30, 2007                  45,961,971  $71,368,000

        The Basic weighted average common shares for September 30, 2007 were
        44,580,230 (September 30, 2006 - 38,808,281) and the Diluted weighted
        average common shares were 45,193,430 (September 30, 2006 -

        The Company provides a stock option plan for its directors, officers,
        employees and consultants. Under the plan, the Company may grant
        options for up to 10 percent of the outstanding common shares which
        as of September 30, 2007 was 4,596,197. The exercise price of each
        option granted equals the market price of the Company's stock on the
        date of grant and the option's maximum term is five years. Options
        generally vest one-third each year for the first three years of the
        option term.

        A summary of the status of the Company's stock option plan as of
        September 30, 2007 and December 31, 2006 and changes during the nine
        months ended September 30, 2007 and year ending December 31, 2006 is
        presented below:

                              September 30, 2007        December 31, 2006
                                          Weighted-                 Weighted-
                                           Average                   Average
                                          Exercise                  Exercise
                              Options        Price      Options        Price
    Outstanding at
     beginning of period    2,397,200  $      2.77    1,468,000  $      1.34
    Options issued            183,000         4.67    1,827,000         3.20
    Options exercised        (510,200)        1.25     (882,800)        1.25
    Options cancelled         (24,000)        3.20      (15,000)        4.00
    Outstanding at end
     of period              2,046,000  $      3.32    2,397,200  $      2.77
    Options exercisable
     at end of period          44,500  $      2.79      530,200  $      1.30

        The following table summarizes information about options outstanding
        at September 30, 2007:

                         Options Outstanding            Options Exercisable
                                  Average   Weighted-               Weighted-
    Range of          Number    Remaining    Average        Number   Average
    Exercise     Outstanding  Contractual   Exercise   Exercisable  Exercise
    Prices       At 09/30/07         Life      Price   At 09/30/07     Price
    $2.70             60,000    2.4 years      $2.70        40,000     $2.70
     3.20 to 3.60  1,833,000    2.3 years       3.20         4,500      3.60
     4.70 to 5.00    153,000    3.2 years       4.95             -         -
    $2.70 to 5.00  2,046,000    2.4 years      $3.32        44,500     $2.79

        The Company records a compensation expense over the vesting period
        based on the fair value of options granted to employees, directors
        and consultants.


        Nine months ended September 30, 2007

                                           Opening       Income       Ending
        Unrealized gains and losses on
         available-for-sale financial
         assets                        $ 2,595,000  $   707,000  $ 3,302,000


        The Company's activities are represented by two industry segments
        comprised of mineral exploration and oil and gas production:

                                Three months ended         Nine months ended
                                   September 30              September 30
                                 2007         2006         2007         2006
        Gross revenue
           exploration    $   288,000  $   618,000  $   784,000  $ 1,226,000
          Oil and Gas         859,000      840,000    2,781,000    3,171,000
                          ------------ ------------ ------------ ------------
                          $ 1,147,000  $ 1,458,000  $ 3,565,000  $ 4,397,000
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
         accretion, and
           exploration    $    33,000  $    31,000  $    99,000  $    92,000
          Oil and Gas         119,000      140,000      374,000      470,000
                          ------------ ------------ ------------ ------------
                          $   152,000  $   171,000  $   473,000  $   562,000
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
        Net earnings (loss)
           exploration    $  (388,000) $   200,000  $(1,566,000) $   213,000
          Oil and Gas         348,000      450,000    1,085,000    1,257,000
                          ------------ ------------ ------------ ------------
                          $   (40,000) $   650,000  $  (481,000) $ 1,470,000
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
        Property and
           exploration    $ 9,344,000  $ 3,250,000  $16,513,000  $ 8,012,000
          Oil and Gas          71,000        9,000      194,000      138,000
                          ------------ ------------ ------------ ------------
                          $ 9,415,000  $ 3,259,000  $16,707,000  $ 8,150,000
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

        Total assets (2006 amounts
         as of December 31, 2006)
          Mineral exploration                       $82,836,000  $52,475,000
          Oil and Gas                                10,117,000    4,943,000
                                                    ------------ ------------
                                                    $92,953,000  $57,418,000
                                                    ------------ ------------
                                                    ------------ ------------

    %SEDAR: 00001166E

For further information:

For further information: George F. Fink, President, and CEO or Garth E.
Schultz, Vice President - Finance, and CFO or Mark J. Balog, Vice President -
Exploration, Telephone: (403) 265-2846, Fax: (403) 265-7488

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