Bear Ridge Resources Ltd.
TSX : BER

Bear Ridge Resources Ltd.

May 15, 2006 09:30 ET

Bear Ridge Announces 2006 First Quarter Results

CALGARY, ALBERTA--(CCNMatthews - May 15, 2006) - Bear Ridge Resources Ltd. (TSX:BER) is pleased to present its financial and operating results for the three month period ended March 31, 2006.



Financial Review and Operating Highlights
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FINANCIAL Three Months Ended March 31
(in 000s, except share amounts) 2006 2005 % Change
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Petroleum and natural gas revenue (1) 16,279 1,191 1,267 %
Cash flow from operations (1) 7,961 406 1,861 %
Per share - basic ($) 0.18 0.02 800 %
Per share - diluted ($) 0.17 0.02 750 %
Net loss (1,078) (208) 418 %
Per share - basic ($) (0.02) (0.01) 200 %
Per share - diluted ($) (0.02) (0.01) 200 %
Capital Expenditures
Related to acquisitions 109,594 21,436 411 %
Related to current operations 36,729 4,986 637 %
Working capital surplus (deficiency) (29,200) 4,460 (755)%
Bank debt (62,879) - -
Shares outstanding (000s)
At period end 46,980 24,622 91 %
Weighted average during period, basic 43,229 19,184 125 %
Weighted average during period, diluted 46,045 21,000 119 %

OPERATING
Production (1)
Natural gas (mcf/d) 17,262 1,381 1,150 %
Oil and NGL's (bbls/d) 678 57 1,089 %
Oil and equivalent (boe/d) 3,555 287 1,104 %
Average wellhead prices
Natural gas ($/mcf) $ 7.96 $ 7.26 9.6 %
Oil and NGL's ($/bbl) $ 64.59 $ 58.76 9.9 %
Oil equivalent ($/boe) $ 50.89 $ 46.09 10.4 %

Operating costs ($/boe) $ 7.28 $ 6.45 12.8 %
General and administrative costs ($/boe) $ 2.06 $ 10.48 (80)%
Operating Netback ($/boe) $ 28.43 $ 26.24 8.4 %

Wells Drilled
Gross 25 7 257 %
Net 12.3 6.25 89 %
Net success rate 84 % 86 % (2.3)%

Undeveloped land (net acres) 118,300 32,600 263 %
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(1) The amounts provided are prior to an acquisition adjustment, for
accounting purposes, for the first 19 days of January, 2006 prior to
closing the acquisition of Veteran Resources Inc. by Bear Ridge.


FIRST QUARTER 2006 ACHIEVEMENTS

Bear Ridge's first quarter of 2006 was highlighted by the following corporate, operational and financial achievements:

1. Closed the strategic acquisition of Veteran Resources Inc., effectively doubling the Company's production, reserve and undeveloped land base.

2. Recorded a substantial 284 square kilometers of 3D seismic at a net cost of $7.1 million to evaluate exploration projects at Josephine and Clear Hills, Peace River Arch ("PRA") and Helmet, Northeast British Columbia ("NEBC"). Coupled with our existing 520 square kilometers miles of 3D seismic at Earring, PRA and Tupper, NEBC and our new 250 square kilometer 3D project at Eaglesham, PRA, Bear Ridge has assembled 1,060 square kilometers of 3D seismic in five high-impact exploration projects in our PRA and NEBC focus regions.

3. Grew our undeveloped land base to 118,300 net acres, up 263 percent from 32,600 net acres in the first quarter, 2005, and secured options to earn interests in an additional 71,000 acres in our Helmet, Tupper, Clear Hills and Earring 3D project areas.

4. Production averaged 3,555 boe per day in the quarter, despite having approximately 500 boe per day shut in since early January due to facility constraints and production restrictions at Earring, and was up 1,100 percent from 287 boe per day in the first quarter of 2005.

5. Successful first quarter operations have grown productive capacity to 4,900 boe, comprised of current production of approximately 4,000 boe per day, 500 boe at Earring expected to be back on stream in the second quarter and another 400 boe awaiting tie-in, excluding potential volumes from 9 (6.2 net) wells waiting on completion.

6. Drilled a record 25 (12.3 net) wells with an 84% success rate, highlighted by a new Devonian gas pool discovery in our Earring project area.

7. Completed 54 kilometers of new pipeline infrastructure at Earring, which allowed us to bring on volumes from new discoveries at Earring and provides a new exit for current shut in and future volumes from this growing core area.

8. Increased cash flow from operations by 1,860 percent compared to first quarter of 2005, or 750 per cent on a per share basis.

9. Reduced our cash costs, including operating, general and administrative and interest, to $11.05 per boe from an average of $13.97 per boe in 2005.

Message to Shareholders

Bear Ridge has grown rapidly since commencing operations in mid January, 2005. Our successful exploration and development drilling program has generated substantial growth and we completed a strategic corporate acquisition of Veteran Resources Ltd. in the first quarter of 2006 that had a significant impact on the Company's year over year performance.

Production averaged 3,555 boe per day for the first quarter of 2006, up 1,100 percent from the 287 boe per day realized in the prior year quarter. First quarter production was below budget volumes of 4,100 boe per day due to operational delays experienced in the quarter and the loss of 500 boe per day shut in due to third party facility constraints and production restrictions at Earring. Successful first quarter operations has grown productive capacity to 4,900 boe per day, comprised of current rates of approximately 4,000 boe, 500 boe of shut in volumes at Earring expected to be back on stream in the second quarter and an additional 400 boe of behind pipe tested volumes waiting on tie in, excluding potential volumes from 9 (6.2 net) wells cased in the first quarter and awaiting completion.

Cash flow from operations for the first quarter of 2006 was up 1,600 per cent, or 700 per cent on a per share basis, to $8.0 million from $0.4 million in the first quarter of 2005. First quarter cash flow was below budget estimates of $11.7 million due primarily to the 500 boe of shut in volumes at Earring and operational delays experienced in the quarter. All in cash costs, including operating, general and administrative and interest costs, improved to $11.05 per boe from $13.97 average 2005 cash costs.

Bear Ridge accelerated its capital program into the first quarter to capture several attractive opportunities. We invested $36.7 million in the quarter to drill 25 wells, shoot 284 kilometers of 3D seismic at Josephine, Clear Hills and Helmet, acquire significant land positions at Tupper, Earring, Josephine and Clear Hills and construct 54 kilometers of key pipeline infrastructure at Earring.

Although timing of our first quarter drilling and completion operations was impaired due to rig delays and service shortages, Bear Ridge drilled 25 (12.3 net) wells during the quarter and realized an 84 percent success rate. The highlight of our exploration program was our 8-28 Devonian gas discovery at Earring. We conducted extended completion operations on 8-28 to evaluate this long reserve life pool and initiated construction of 28 kilometers of 4 inch and 6 inch pipelines to tie in this discovery well and provide egress for additional development and exploration drilling at Earring. We completed pipeline construction early in the second quarter and brought 8-28 on stream. Bear Ridge is moving ahead with plans to drill two development wells this year to delineate this new pool. Lengthy completion operations on 8-28 delayed our completion schedule on a number of other prospective wells drilled and successfully cased in the first quarter. Our second quarter completion program is now underway and we are looking forward to results of these operations.

Bear Ridge recorded 284 kilometers of 3D seismic at a net cost of $7.1 million during the first quarter to evaluate exploration projects at Josephine and Clear Hills in the PRA and an exploitation resource project in the Jean Marie at Helmet, NEBC. The Company also invested over $11.9 million in land acquisition during the quarter to capture significant growth opportunities within our 3D projects at Tupper, Josephine, Earring and Clear Hills. Due to competitive reasons, Bear Ridge invested significant capital at a 100 percent interest to acquire large 3D seismic and land positions at Tupper and Josephine. Over the next few months, we expect to bring in partners to recover a portion of this capital and maintain an appropriate risk/reward profile.

The Company invested heavily to construct two new pipelines in our key Earring area. During the quarter, a 26 kilometer pipeline was initiated by the operator of our Kiskatinaw I pool which will allow us to bring back on stream approximately 350 boe per day that was shut in early in January, 2006 due to capacity limitations at a third party facility. Construction of this pipeline is now complete and we are awaiting completion of a new battery by the operator. Production from the Kiskatinaw I pool is expected to resume in the second quarter. Bear Ridge has an additional 150 boe per day shut in at Earring due to production restrictions that we plan to bring back on-stream in the second quarter following completion of a short tie in to our new 26 kilometer pipeline. Together with the new 28 kilometer pipeline that Bear Ridge constructed at Earring to tie in our 8-28 Devonian discovery, Bear Ridge now owns interests in 54 kilometers of new infrastructure that will allow for considerable future development in this core area.

In light of our accelerated capital program in the first quarter and lower than anticipated cash flows Bear Ridge has taken a number of proactive steps to manage our balance sheet and ensure the successful execution of our 2006 capital program. We entered into an agreement in February to offer non-core producing assets of approximately 250 boe per day at auction in May, 2006 and with our Tupper and Josephine 3D seismic and land acquisition programs largely complete, we have moved ahead to secure potential partners in these high impact projects to balance our risk and recover a portion of our capital investment. Bear Ridge recently closed a private placement of flow through common shares at $7.35 per share with net proceeds of $21.9 million. Post financing, the net debt was reduced to approximately $70.0 million and will be further reduced with proceeds from planned non-core property dispositions and re-imbursement of joint venture costs. In addition, the Company hedged 10,000 GJ per day for the May to October period to ensure we are in a position to execute our entire capital program.

Based on the forecast weakness in summer natural gas prices, Bear Ridge hedged approximately 50 percent of current gas production for the May to October summer period. Our summer hedge position secures our $6.00 per mcf budgeted price on 100 percent of our forecast volumes for this period, provided gas prices do not average less than $4.50 CDN per GJ over the entire six month period. At the same time, we are largely exposed to gas pricing upside during this period, as 40 percent of hedged volume has no price cap, 30 percent has a price ceiling of approximately $13.00 CDN and the remaining 30 percent has a price ceiling of $7.55 CDN.

Bear Ridge plans to drill 78 (46 net) wells in 2006, with approximately 50 wells scheduled in the last three quarters of the year. We have 2 drilling rigs under one year contracts and have secured windows on additional drilling rigs to ensure we can execute the entire operated portion of our 2006 drilling program. We have also secured arrangements on 2 service rigs to handle our completion operations and have developed strategic relationships with other service providers to improve our operational efficiencies.

Our 2006 drilling program includes a good mix of high impact, medium and lower risk projects to provide a risk balanced program. 3D seismic is playing an increasingly important role in our programs to reduce risk and capture competitive opportunities. We recently entered into a joint venture at Eaglesham in our PRA focus region, targeting Devonian light oil and Cretaceous natural gas prospects identifiable on a 250 square kilometer 3D seismic data set blanketing this new joint venture area. With the addition of the Eaglesham project, Bear Ridge is actively working on five high impact exploration projects, all of which are driven by an extensive 1,060 square kilometer 3D seismic data base within these exploration project areas. To complement these five high impact projects at Earring, Josephine, Clear Hills, Eaglesham and Tupper, Bear Ridge's 2006 capital program also includes a number of lower risk projects, including a multi-well shallow Dunvegan gas project at Gordondale, a multi-well horizontal Jean Marie resource play at Gunnell, a medium depth Mannville and Devonian gas project at Nelson, Central Alberta, and medium depth gas and light oil targets at Carrot Creek, Pine Creek and Swan Hills in West Central Alberta.

Outlook

Our opportunity base within our West Central, PRA and NEBC focus regions has grown dramatically over the past year, largely as a result of the significant emphasis and capital that Bear Ridge has directed to larger-scale, 3D seismic-driven exploration projects. Bear Ridge is well positioned in a number of high impact exploration projects that have the potential to materially impact the Company's production and reserve base. At the same time our drilling program maintains a good balance of lower-risk exploration and exploitation projects. We intend to continually high grade and refocus the Company's asset base and have listed approximately 250 boe per day of minor interest properties in an upcoming property auction.

In light of drilling and completion delays experienced in the first quarter combined with 500 boe per day of shut in volumes at Earring, lower production from certain wells and expected property dispositions of approximately 250 boe per day, Bear Ridge is targeting the lower end of its 2006 guidance, with a yearly average of approximately 5,000 boe per day and a year end exit of approximately 6,000 boe per day.

Our corporate strategy to focus on drillbit growth complemented by strategic acquisitions has delivered strong per share growth in our first 15 months of operations and we intend to continue to execute this strategy. Most importantly, Bear Ridge's asset and opportunity base has improved considerably and the Company is in a strong position to compete effectively in the current environment. We are excited about our upcoming drilling and completion program and look forward to reporting on our progress.


Russell J. Tripp

Chairman and Chief Executive Officer

May 15, 2006


Management's Discussion and Analysis

Management's discussion and analysis ("MD&A") has been prepared as of May 12 by Bear Ridge Resources Ltd. ("Bear Ridge" or "the Company"). The MD&A should be read in conjunction with the Company's unaudited consolidated financial statements for the three month periods ended March 31, 2006 and 2005, and the consolidated financial statements for the year ended December 31, 2005 which have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and have been filed on sedar at: www.sedar.com.

Given the objectives of the MD&A, certain information presented is of a forward looking nature. Such forward looking financial and operational information involves known and unknown risks and uncertainties, some of which are beyond the Company's control. These include but are not limited to; the impact of general economic conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, government regulations, stock market volatility, and competition from other producers. Although assumptions used in the preparation of forward looking information are considered reasonable by management at the time, actual results could differ materially from those contained in such forward-looking information.

The presentation of the MD&A uses the following terms which, although universally applied in analyzing performance within our industry, are required to be disclosed under GAAP.

Non-GAAP Measurements - The MD&A contains the term cash flow from operations, which 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. Bear Ridge's determination of cash flow from operations may not be comparable to that reported by other companies, especially those in other industries. The reconciliation between net earnings and cash flow from operations can be found in the consolidated statement of cash flows. The Company also presents cash flows from operations per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of earnings per share. The Company also uses operating netback as an indicator of operating performance. Operating netback is calculated on a per boe basis taking the sales price and deducting royalties, operating and transportation expenses.

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

PETROLEUM AND NATURAL GAS SALES

In its first full year of operations, Bear Ridge grew production significantly by over 1,104% when compared with the first quarter of 2005. Production for the quarter averaged 3,555 boe per day compared to 287 boe per day for the three months ended March 31, 2005. Current production is approximately 4,000 boe per day with an additional 850 boe per day of shut-in and behind pipe volumes scheduled to be brought on stream over the next few months. An additional 9 wells are standing waiting on completion and have not been included in Bear Ridge's behind pipe numbers.

Tie-in delays and access to service rigs prevented Bear Ridge from bringing more volumes on during the quarter. In addition, approximately 500 boe per day was shut-in during the first quarter due to capacity constraints in the Earring area. Bear Ridge committed significant resources to the tie-in of its 8-28 discovery in Earring prior to breakup as this is a winter access only area. Bear Ridge completed the project to the plant gate by the end of April and the plant operator brought the well on production during the first week of May. This significant investment in infrastructure will allow Bear Ridge to flow gas that had been previously shut in, after completion of two short tie-ins, and give the Company control over its ability to flow future production. Post break up Bear Ridge will begin the process of completing standing wells and tie-ins of shut-in and other completed wells.

Natural gas production during the first quarter of 2006 increased to 17,262 mcf per day from 1,381 mcf per day in the first quarter of 2005 and 2,858 mcf/d in the fourth quarter of 2005, increases of 1,269% and 504% respectively. Increases over the fourth quarter were primarily the result of the Veteran acquisition and production brought on late in 2005.

Oil and NGL production totaled 678 bbl/d for the first quarter of 2006, representing increases of 1,089% and 204% from the first and fourth quarters of 2005. The increase was a result of the Veteran Resources Inc. ("Veteran") acquisition, high levels of condensate production from Bear Ridge's 15-6 well in Mica and new oil production in Earring.

Revenues for the three months ended March 31, 2005 reached $16.3 million, representing an increase of over 1,000% compared to the three months ended March 31, 2005 and surpassed revenues earned for the entire year ended December 31, 2005.

Although Bear Ridge's natural gas sales price increased from an average of $7.26 per mcf in the first quarter of 2005 to $7.96 per mcf during the first quarter of 2006, average prices were down from $12.41 per mcf in the fourth quarter of 2005. First quarter pricing when combined with significant growth in volumes resulted in Bear Ridge recording natural gas revenues of $12,364,206 representing an increase of 981% over revenues of $1,143,784 in the first quarter of 2005.

Oil prices for the three months ended March 31, 2006 averaged $63.84 per bbl, an increase of 8.6% from the average for the first quarter of 2005 of $58.76 per bbl. While average oil prices increased slightly from the fourth quarter of 2005, Bear Ridge's price as a percentage of Edmonton par decreased from 98% to 90% due to higher differentials on Veteran oil production. NGL prices received by Bear Ridge increased significantly to $67.14 per bbl during the first quarter compared to $50.08 in the first quarter of 2005. These prices combined with increased volumes resulted in oil and NGL revenues of $3,941,536, representing an increase of 1,109% over the first quarter of 2005.



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Three months ended

March 31, March 31,
Results of Operations 2006 2005 % Change
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Revenues
Natural gas $12,364,206 $ 903,050 1,269 %
Oil and NGL's 3,941,536 287,477 1,271 %
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Total revenues $16,278,742 $ 1,190,527 1,267 %
Less acquisition adjustment (1) 1,691,764 - -
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Total revenues per financial
statements $14,586,978 $ 1,190,527 1,125 %
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Average Daily Production Volumes
Natural gas (mcf/d) 17,262 1,381 1,150 %
Oil & NGL's (bbl/d) 678 57 1,089 %
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Total production (boe/d) 3,555 287 1,104 %
Acquisition adjustment (1) 329 - -
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(1) The acquisition adjustment relates to revenues and production
volumes allocated, for accounting purposes, to the first 19 days of
January, 2006 prior to closing the acquisition of Veteran Resources
Inc. by Bear Ridge.


PRICES AND MARKETING

Oil prices are derived from the WTI average price adjusted for the U.S. dollar exchange rate and quality differentials. Bear Ridge sells its natural gas into the daily spot market based on the Alberta AECO reference price. The Company currently produces gas with a high heating value and as such the values expressed on a $ per mcf basis are generally higher than the AECO per mcf average. A comparison of Bear Ridge's natural gas and crude oil pricing with AECO and WTI benchmark pricing is as follows:



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Three months ended

March 31, March 31,
2006 2005 % Change
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Bear Ridge's Average Selling Price
Natural gas - $/mcf $ 7.96 $ 7.26 9.6 %
Crude oil - $/bbl $ 63.84 $ 58.76 8.6 %
NGL's - $/bbl $ 67.14 $ 50.08 34.1 %
Benchmark Pricing
AECO gas daily spot - $/mcf $ 7.53 $ 7.12 5.8 %
WTI oil - US $/bbl $ 63.26 $ 50.50 25.3 %
Edmonton par - CDN $/bbl $ 70.64 $ 63.35 11.5 %
US/CDN average exchange rate 0.87 0.81 (7.4)%
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Bear Ridge is exposed to fluctuations in natural gas and oil prices and occasionally enters into future price contracts specifying either a fixed future settlement price or a range of prices. The primary reason for doing so is to protect cash flows to ensure the Company has the necessary resources to complete its capital program. Bear Ridge currently has the following costless collar commodity contracts and put options in place.



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Term Hedged volumes Floor Ceiling
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Oil
January 2006 - December 2006 200 bbl/d $ 55.00US $ 73.00US

Natural Gas
April 1 to October 31, 2006 2,000GJ/d $ 9.00CDN $ 12.85CDN
April 1 to October 31, 2006 1,000GJ/d $ 9.00CDN $ 13.05CDN
May 1 to October 31, 2006 3,000 GJ/d $ 6.50CDN $ 7.55CDN
May 1 to October 31, 2006 (1) 4,000 GJ/d $ 6.50CDN -
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(1) Put options guarantee a floor price of $6.50 and have no price
ceiling. The cost of each put to the company is approximately $0.52
per GJ


ROYALTIES

For the three months ended March 31, 2006 royalties, net of the Alberta Royalty Tax Credit ("ARTC"), totaled $3,983,015 or 27.3 % of total revenues. This rate is consistent with the comparable quarter from 2005 and is an increase of 2.9%, as a percentage of revenue, from the fourth quarter of 2005. The increase from the fourth quarter is a result of a significant well acquired as part of the Veteran acquisition carrying a non-convertible GORR royalty in addition to its Crown royalty. As more production is brought on and as this well begins to decline, the average royalty rate is expected to decrease to the 25% range.

ARTC recoveries for the first quarter of 2006 totaled $125,000 compared to no recoveries during the first quarter of 2005. Bear Ridge did not have properties eligible for ARTC during the first quarter of 2005, but all subsequent Alberta drilling has been eligible. Based on the level of Alberta crown royalties paid by Bear Ridge, the Company expects to receive the maximum credit of $500,000 during 2006.



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Three months ended

March 31, March 31,
Royalty Category 2006 2005 % Change
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Crown $ 3,557,466 $ 243,042 1,364 %
Freehold and GORR 550,549 86,928 533 %
ARTC (125,000) - -
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Total Royalty $ 3,983,015 $ 329,970 1,107 %
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Three months ended

March 31, March 31,
Average royalty rates (% of sales) 2006 2005 % Change
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Royalty Category
Crown 24.4 % 20.4 % 19.6 %
Freehold and GORR 3.8 % 7.3 % (47.9)%
ARTC (0.9)% - -
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Total Royalty 27.3 % 27.7 % (1.4)%
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OPERATING EXPENSES

Bear Ridge's operating costs for the three months ended March 31, 2006 totaled $2,114,560 compared to $166,525 during the first quarter of 2005. On a boe basis, operating costs during the first quarter averaged $7.28 per boe, down significantly from $9.93 in the fourth quarter of 2005, and also down 7.3% when compared to operating expenses of $8.07 per boe for the year ended December 31, 2005. Included in operating expenses during the first quarter of 2006 is approximately $140,000, or $0.48 per boe, representing compensation payments to another operator who had production backed out as a result of high pressure Bear Ridge production. Facilities were installed to correct the problem and equalization payments are no longer required by Bear Ridge going forward.

Operating costs have increased from the three months ended March 31, 2005 as a result of increased volume and a larger scale operation. The decrease in operating expenses per boe from the fourth quarter is the result of workover and maintenance work performed during the fourth quarter of 2005, and higher volumes during the first quarter of 2006

As more behind pipe production is brought on stream the Company feels that it will be able to further improve operating costs per boe.

TRANSPORTATION EXPENSES

Transportation expenses for the first quarter ended March 31, 2006 totaled $424,026 or $1.46 per boe. For the fourth quarter of 2005, transportation expenses were $79,365 or $1.23 per boe. Increased charges are the result of higher transportation costs per unit on natural gas combined with the Company producing more gas compared to oil.

OPERATING NETBACK

During the first quarter, the Company's netback totaled $28.43 per boe, representing a 8.3% increase over netbacks during the same period of 2005. When compared to the fourth quarter of 2005, although Bear Ridge has realized improvements in operating expenses and royalties per boe, netbacks have decreased from $43.72 to $28.43, primarily as a result of a decrease in the combined products sales price from $72.70 to $50.24, a decrease of 30.1%.



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Three months ended

March 31, March 31,
Operating Netback ($/boe) 2006 2005 % Change
------------------------------------------------------------------------
Sales price $ 50.89 $ 46.09 10.4 %
Royalties (13.72) (12.77) (7.4)%
Operating expense (7.28) (6.45) (12.9)%
Transportation expense (1.46) (0.63) (131.7)%
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Operating Netback $ 28.43 $ 26.24 8.3 %
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GENERAL AND ADMINISTRATIVE EXPENSES ("G&A")

G&A expenses for the first quarter of 2006 totaled $596,860 or $2.06 per boe, a significant reduction from $5.26 per boe for the year ended December 31, 2006. The first quarter was an active quarter as the Company consolidated office space and tripled the size of its staff as a result of the Veteran acquisition. As production increases throughout the year, the Company expects G&A costs per boe to decline further due to better economies of scale. As expected, G&A costs on an overall basis have increased while costs per boe have decreased when compared with previous periods. G&A costs for the first quarter of 2005 and fourth quarter of 2005 totaled $270,592 ($10.48 per boe) and $337,911 ($5.52 per boe) respectively.

Capitalized G&A amounted to $397,948, or 37.2%, of total gross G&A costs incurred during the first quarter of 2006. No G&A was capitalized during the first quarter of 2005, but the Company capitalized 30.7% of G&A for 2005 as a whole. The increase in capitalized G&A percentages is a result of the Company employing a large exploration staff after the acquisition of Veteran. The Company maintains the policy of capitalizing only those costs directly attributable to exploration activities and does not include an allocation of administrative overhead.



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Three months ended

March 31, March 31,
G & A Expense 2006 2005 % Change
------------------------------------------------------------------------
G&A expense (gross) $ 1,067,562 $ 270,592 295 %
G&A capitalized (397,948) - -
Overhead recoveries (72,754) - -
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G&A expense (net) $ 596,860 $ 270,592 121 %
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G&A expense $ per boe $ 2.06 $ 10.48 (80.3)%
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STOCK BASED COMPENSATION

Stock based compensation measures the implicit cost of compensating key personnel through the issuance of stock options and special performance units as further described in the audited financial statements.

For the three month period ended March 31, 2006, the Company incurred stock based compensation expenses of $485,000 or $1.67 per boe compared to $188,000 or $7.28 per boe for the three month period ended March 31, 2005.

INTEREST EXPENSE

Interest expense for the three months ended March 31, 2006 totaled $496,643. Draws on the Company's credit facilities to fund the cash component of the Veteran acquisition and to execute Bear Ridge's capital budget resulted in higher interest charges when compared to the fourth quarter of 2005 where interest totaled $100,319. Bear Ridge incurred only $831 of interest expense in the first quarter of 2005 as the company was in start up phase and carried virtually no debt.

DEPLETION, DEPRECIATION AND ACCRETION

Depletion and depreciation totaled $6.7 million for the three months ended March 31, 2006 or $22.79 per boe. The depletion rate decreased from $29.09, the fourth quarter 2005 rate, as a result of the Veteran acquisition and first quarter reserve additions.

The depletion rate is impacted by the costs to acquire, explore and develop reserves of crude oil and natural gas, known as finding and development costs. In the early stages of exploration, capital costs may be recognized before proven reserves are fully booked leading to higher initial depletion rates. In addition higher depletion rates also result as new production often receives lower reserves assignments under NI 51-101 due to the naturally unpredictable nature of newer production.

Accretion expense increased in the first quarter of 2006 to $56,000 compared to $11,345 in the fourth quarter of 2005 due to the Company recognizing a larger asset retirement base as a result of the Veteran acquisition and new wells drilled. Accretion expense in the first quarter of 2005 totaled only $4,061 due to a small asset base at that point in time. The Company expects its accretion expense to continue to increase on a quarterly basis as more wells are drilled and the asset retirement obligation continues to grow.



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Three months ended

March 31, March 31,
2006 2005 % Change
------------------------------------------------------------------------
Total costs
Depletion and depreciation $ 6,618,757 $ 422,000 1,468 %
Accretion 56,000 4,061 1,278 %
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Combined $ 6,674,757 $ 426,061
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Cost per boe
Depletion and depreciation $ 22.79 $ 16.34 39.5 %
Accretion $ 0.19 $ 0.16 18.8 %
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TAXES

As at March 31, 2006, Bear Ridge had available approximately $178 million in tax pools to shelter taxable income earned. During 2005, Bear Ridge recognized a future income tax asset of approximately $9.5 million and had additional unrecognized assets related to additional tax pools of approximately $11.5 million. Upon acquisition of Veteran, Bear Ridge revisited its unrecognized future income tax asset and with the increased revenues from the acquired properties Bear Ridge recognized the full value of previously unrecognized tax pools against the tax liability acquired as part of the Veteran acquisition. The future tax liability acquired from Veteran, totaling $12 million, when combined with Bear Ridge's recognized tax asset from 2005 and the tax effect of flow-through share renouncements made during the first quarter of 2006 resulted in a future tax liability on Bear Ridge's balance sheet as at March 31, 2006. Tax deductions taken in the first quarter in excess of book deductions added an additional $890,000 to the liability.

For 2006, Bear Ridge does not expect to incur cash income tax expense on cash flows generated from operations and with recent federal budget proposals does not expect to incur capital taxes.

As the result of various flow-through share offerings completed by Bear Ridge during 2005, the Company renounced to subscribers $17.2 million in qualifying expenditures related to flow through arrangements during February 2006. As at March 31, 2006, Bear Ridge had incurred all eligible expenditures under the flow through agreements.

CASH FLOW AND NET INCOME

Cash flow from operations totaled $7.9 million for the three months ended March 31, 2006 or $0.18 basic cash flow per share, prior to the 19 day adjustment for the Veteran acquisition. After adjusting for the first 19 days of January, cash flow from operations totaled $7.0 million. This translates into basic cash flow per share of $0.16 and diluted cash flow of $0.15 per share.

Cash flow was impacted by lower netbacks as a result of a decrease in natural gas prices and lower production due to tie-in delays, access to service rigs and approximately 350 boe per day of production shut-in during January in the Earring area due to capacity constraints.

The Company recorded a net loss of $1.1 million during the three month period ended March 31, 2006. The net loss was in part due to the 19 day accounting adjustment, higher depletion, stock based compensation expense and future income tax expense.



------------------------------------------------------------------------
Three months ended

March 31, March 31,
2006 2005 % Change
------------------------------------------------------------------------
Cash flow from operations per share
Basic $ 0.16 $ 0.02 700 %
Diluted $ 0.15 $ 0.02 650 %
Net loss - per share
Basic and diluted $ (0.02) $ (0.01) 100 %
------------------------------------------------------------------------
------------------------------------------------------------------------


CAPITAL EXPENDITURES

The first quarter of 2006 was an active quarter, in which Bear Ridge completed the acquisition of Veteran early in January and then went on to drill more wells in the first quarter than the entire previous year. The company drilled a total of 25 (12.3 net) wells resulting in 19 (9.2 net) gas wells and 2 (0.8 net) oil wells and 4 (2.3 net) abandoned wells, for a 84 percent success rate.

Capital expenditures during the quarter focused on the drilling of the above mentioned wells, completion of the 8-28 discovery in Earring and the completion of an infrastructure project and battery which will allow Bear Ridge to tie in approximately 500 boe per day of production. This project will also allow Bear Ridge to produce the 8-28 and future volumes from the area.

Bear Ridge was also very active in continuing to expand its extensive 3D seismic base in the Earring, Tupper, Helmut and Clearhills areas. Bear Ridge also invested heavily at Crown land sales during the quarter to secure large land positions covered by the 3D to allow for future exploration activities and growth. In total land and seismic costs amounted to $14.8 million or approximately 39% of capital expenditures in the first quarter, excluding the Veteran acquisition.



Capital expenditures for the first quarters of 2006 and 2005 are
outlined as follows:

------------------------------------------------------------------------
Three months ended

Capital Expenditures $ March 31, 2006 March 31, 2005
------------------------------------------------------------------------
Land $ 10,903,218 $ 582,789
Geological & geophysical 3,103,146 88,000
Drilling & completions 18,045,988 3,717,669
Equipment & facilities 4,558,180 -
Office and furniture 38,411 -
Asset retirement obligation 80,000 397,684
Property acquisitions - 21,636,121
Veteran acquisition 109,594,000 -
------------------------------------------------------------------------
Total Expenditures $146,322,943 $ 26,422,263
------------------------------------------------------------------------
------------------------------------------------------------------------


The Company records the fair value of future obligations associated with the retirement of long-lived tangible assets, such as oil and gas wells, well sites and facilities. Accounting for the recognition of this obligation results in a corresponding increase to the carrying values of these assets. This amount has been classified above as the Company's Asset Retirement obligation.

EQUITY

During the first quarter of 2006 Bear Ridge issued 413,638 shares as the result of the exercise of stock options and special performance units and another 62,100 shares as part of a small flow through share private placement. Proceeds generated from these issuances totaled $517,717.

Effective April 24, 2006 the Company entered into a bought deal financing arrangement whereby the Company agreed to issue 3,150,000 common shares, on a flow through basis, at a price of $7.35 per share for total proceeds of $23,152,500. The financing closed on May 12, 2006.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2006 Bear Ridge had drawn $62.9 million on its credit facility and had a working capital deficiency of $29.2 million for total net debt of $92.1 million. The Company has a revolving demand loan facility to a maximum of $70.0 million and is scheduled for review in July of 2006. The Company is in breach of its working capital covenant and the lender waived compliance as at March 31, 2006. During late May and early June, Bear Ridge expects to realize proceeds of approximately $22.0 million from land and seismic reimbursement under its Tupper and Josephine joint ventures as well as the sale of certain minor working interest assets. These transactions will bring the working capital covenant under compliance with the lender. In addition, Bear Ridge closed a $23.2 million private placement of flow through shares at $7.35 per share on May 12, 2006 to be used as funding for planned future exploration opportunities.

On an ongoing basis, the Company will typically utilize three sources of funding to finance its capital expenditure program; internally generated cash flow from operations, debt where deemed appropriate and new equity issues if available on favorable terms. When financing corporate acquisitions the Company may also assume certain future liabilities. In addition, the Company may adjust its capital expenditure program depending on the commodity price outlook, and further opportunities that are identified.

CRITICAL ACCOUNTING ESTIMATES

The significant accounting policies used by Bear Ridge are disclosed in Note 2 of the audited consolidated financial statements as at December 31, 2005. Certain accounting policies require management to make appropriate decisions in determining estimates and making assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Management reviews its estimates regularly. The emergence of new information and changed circumstance may result in actual results or changes to estimated amounts that may differ materially from current estimates. The following discussion helps assess the accounting policies and practices of the Company as they relate to estimates and the likelihood of material differences occurring.

Proved Oil and Gas Reserves

Under National Instrument 51-101, "Proved" reserves are defined as those reserves that can be estimated with a high degree of certainty to be recoverable. In accordance with this definition, the level of certainty targeted by the reporting company should result in at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated Proved reserves. In the case of "Probable" reserves it must be equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated Proved plus Probable reserves. With respect to the consideration of certainty, in order to report reserves as Proved plus Probable, the reporting company must believe that there is at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated Proved plus Probable reserves.

Reserve estimates are made using all available geological and reservoir data, as well as historical production information. Estimates are reviewed internally on a quarterly basis, and at least annually by external engineers, and are revised as appropriate. Revisions can occur as a result of various factors including: actual reservoir production, changes in commodity price forecasts and relevant operating costs or changes in the Company's plans. Changes in proved oil and gas reserves will impact financial results as reserves are used in the depletion calculation and are used to assess asset valuation and impairment. Reserve changes also affect other industry financial benchmarks such as finding and development costs; recycle ratios and net asset value calculations.

Depletion

The Company applies the full cost method of accounting for exploration and development activities. Under this method, all costs associated with the acquisition of, exploration for, and development of petroleum and natural gas reserves are capitalized whether or not the activities are successful. The aggregate of net capitalized costs and estimated future development costs, less undeveloped land, is depleted using the unit-of-production method based on production volumes in relation to estimated proven reserves. An increase in estimated proved oil and gas reserves would result in a corresponding reduction in depletion expense. A decrease in estimated future development costs would also result in a corresponding reduction in depletion expense.

Unproved Properties

Certain costs related to the acquisition and evaluation of unproved properties may be excluded from costs subject to depletion. These properties are reviewed quarterly to determine whether any impairment in value has occurred. When proved reserves are assigned or an unproved property is considered to be impaired, the cost of the unproved property or the amount of the impairment will be added to the capitalized costs subject to depletion.

Ceiling Test

The Ceiling test is a two part cost recovery test to assess the valuation of the Company's petroleum and natural gas properties. The first part measures whether impairment has occurred based on undiscounted future cash flows using estimated future prices, costs and proved reserves. When the first part indicates impairment exists, the second part of the test measures the amount of impairment based on discounted future cash flows from proved and probable reserves. The Company reviews the related estimates when it performs its ceiling test on a quarterly basis. The impact of changes in the estimates of future prices and costs applied and the quantity of proved and probable reserves on the financial statements could be material.

Asset Retirement Obligations

In recognizing its asset retirement obligation, the Company records a liability equal to the discounted fair value of the estimated costs to abandon petroleum and natural gas wells, dismantle and remove tangible equipment and return land to its original condition. Arriving at a discounted fair value requires the Company to make estimates relating to the projected timing of incurring costs, inflation rates and risk adjusted discount rates. These estimates will vary over time as new information becomes available and will impact both the liability recorded as well as the accretion expense. These estimates are reviewed by the Company on a quarterly basis to ensure circumstances supporting the estimates are still considered reasonable.

Income Taxes

The determination of the Company's income and other tax liabilities requires interpretation of complex laws and regulations often involving multiple jurisdictions. All tax filings are subject to audit and potential reassessment after the lapse of considerable time. Accordingly, the actual income tax liability may differ significantly from that estimated and recorded by management.

Stock-based Compensation

The fair value of stock options granted is calculated using the Black-Scholes option pricing model and is recorded over the vesting period of the related options. The calculation involves estimates of the expected volatility in the trading value of the Company's shares, the price of the underlying shares, the expected life of the option, expected dividends and the risk-free rate of interest. All of these estimates are subjective and are reviewed by management on a quarterly basis.



QUARTERLY INFORMATION

------------------------------------------------------------------------
2006 2005
Financial ($ thousands except
per share data) Q1 Q4 Q3 Q2 Q1
------------------------------------------------------------------------
Revenues 14,587 4,679 4,585 4,176 1,191
Royalties 3,983 1,146 921 287 330
Operating expenses 2,115 718 607 595 166
Transportation expenses 424 80 64 41 16

Cash flow (000's) 6,972 2,389 2,741 2,927 406
Per share - basic 0.16 0.08 0.10 0.12 0.02
Per share - diluted 0.15 0.08 0.09 0.11 0.02

Net Income (loss) (1,078) 629 9,259 1,255 (208)
Per share - basic (0.02) 0.02 0.33 0.05 (0.01)
Per share - diluted (0.02) 0.02 0.30 0.05 (0.01)

Capital expenditures 36,729 14,602 11,162 9,526 2,045
Acquisition expenditures 109,594 - - 10,344 24,466
------------------------------------------------------------------------
Total expenditures 146,323 14,602 11,162 19,870 26,511
------------------------------------------------------------------------

------------------------------------------------------------------------
2006 2005
Operations Q1 Q4 Q3 Q2 Q1
------------------------------------------------------------------------
Production volumes
Natural gas (mcf/day) 17,262 2,858 2,795 2,365 1,381
Oil and NGL's (bbl/day) 678 223 318 413 57
------------------------------------------------------------------------
Total boe/day 3,555 700 784 808 287
------------------------------------------------------------------------
Average Selling Price
Natural gas ($ per mcf) $ 7.96 $12.41 $ 9.63 $ 8.03 $ 7.26
Oil and NGL ($ per bbl) 64.59 68.80 72.83 64.25 58.76
------------------------------------------------------------------------
Combined ($ per boe) $50.89 $72.70 $63.58 $56.81 $46.09
Royalties ($ per boe) 13.72 17.82 12.78 3.91 12.77
Operating expense ($ per boe) 7.28 9.93 7.53 7.55 6.45
Transportation ($ per boe) 1.46 1.23 0.89 0.56 0.63
------------------------------------------------------------------------
Netback ($ per boe) $28.43 $43.75 $42.38 $44.79 $26.24
------------------------------------------------------------------------



BEAR RIDGE RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2006 2005
------------------------------------------------------------------------

ASSETS
Current
Accounts receivable $ 11,800,192 $ 7,372,473
Investment (note 3) 571,250 -
Deposits and prepaid expenses 176,313 626,376
------------------------------------------------------------------------
12,547,755 7,998,849

Future income tax - 9,457,000
Goodwill (note 2) 31,644,214 -
Property and equipment (note 4) 205,886,308 66,182,124
------------------------------------------------------------------------
$250,078,277 $ 83,637,973
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Revolving production loan (note 5) $ 62,879,489 $ 5,247,541
Accounts payable and accrued liabilities 41,737,011 14,642,478
------------------------------------------------------------------------
104,616,500 19,890,019

Asset retirement obligations (note 6) 2,675,416 519,416
Future income tax 9,258,248 -
------------------------------------------------------------------------
116,550,164 20,409,435
------------------------------------------------------------------------


Shareholders' equity
Share capital (note 7(a)) 123,809,889 52,536,431
Warrants 711,354 711,354
Contributed surplus (note 7(b)) 1,098,066 994,066
Retained earnings 7,908,804 8,986,687
------------------------------------------------------------------------
133,528,113 63,228,538
------------------------------------------------------------------------
$250,078,277 $ 83,637,973
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes


On behalf of the Board:


"David Ambedian" "Russell J. Tripp"
David Ambedian Director Russell J. Tripp Director



BEAR RIDGE RESOURCES LTD.
CONSOLIDATED STATEMENTS OF LOSS
AND RETAINED EARNINGS (DEFICIT)
THREE MONTHS ENDED MARCH 31,
(Unaudited)

2006 2005
------------------------------------------------------------------------
REVENUE
Petroleum and natural gas sales $ 14,586,978 $ 1,190,527
Royalties, net of Alberta Royalty Tax Credit (3,983,015) (329,970)
------------------------------------------------------------------------
10,603,963 860,557
------------------------------------------------------------------------
EXPENSES
Operating 2,114,560 166,526
Transportation 424,026 16,161
General and administrative 596,860 270,592
Stock based compensation 485,000 187,998
Interest on revolving production loan 496,643 831
Depletion, depreciation and accretion 6,674,757 426,061
------------------------------------------------------------------------
10,791,846 1,068,169
------------------------------------------------------------------------

Loss before income taxes (187,883) (207,612)

Income taxes
Future income tax 890,000 -
------------------------------------------------------------------------

Net loss (1,077,883) (207,612)

Retained earnings (deficit),
beginning of period 8,986,687 (1,949,111)
------------------------------------------------------------------------
Retained earnings (deficit), end of period $ 7,908,804 $ (2,156,723)
------------------------------------------------------------------------
------------------------------------------------------------------------

Net loss per share (note 7(d))
Basic and diluted $ (0.02) $ (0.01)
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes



BEAR RIDGE RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
(Unaudited)

2006 2005
------------------------------------------------------------------------

OPERATING ACTIVITIES
Net loss $ (1,077,883) $ (207,612)
Items not involving cash:
Depletion, depreciation and accretion 6,674,757 426,061
Future income tax 890,000 -
Stock based compensation 485,000 187,998
------------------------------------------------------------------------
Cash flow from operations before changes in
non-cash working capital 6,971,874 406,447
Change in non-cash working capital (note 9) 2,699,515 (4,126,760)
------------------------------------------------------------------------
Cash provided by (used in) operating activities 9,671,389 (3,720,313)
------------------------------------------------------------------------

FINANCING ACTIVITIES
Common shares issued, net of issue costs 423,656 7,303,045
Preferred shares issued - 6,200,000
Advances on (repayment of) revolving
production loan 53,208,677 (2,000,000)
------------------------------------------------------------------------
Cash provided by financing activities 53,632,333 11,503,045
------------------------------------------------------------------------

INVESTING ACTIVITIES
Acquisition of properties - (1,051,889)
Expenditures on property and equipment (37,220,193) (4,388,458)
Acquisition of Veteran Resources Inc.
(note 2) (35,752,568) -
Change in non-cash working capital (note 9) 9,669,039 3,183,000
------------------------------------------------------------------------
Cash used in investing activities (63,303,722) (2,257,347)
------------------------------------------------------------------------

Change in cash - $ 5,525,385

Cash and cash equivalents, beginning of period - 480,402
------------------------------------------------------------------------

Cash and cash equivalents, end of period - $ 6,005,787
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes


Notes to the Consolidated Financial Statements
As at and for the period ended March 31, 2006
(Unaudited)


1. BASIS OF PRESENTATION

The interim consolidated financial statements of Bear Ridge Resources Ltd. ("Bear Ridge" or "the Company") have been prepared in accordance with Canadian generally accepted accounting principles and are consistent with the presentation and disclosure in the audited consolidated financial statements and notes thereto for the year ended December 31, 2005. The interim financial statements contain disclosures which are incremental to Bear Ridge's annual financial statements. Certain disclosures, which are normally required to be included in the notes to the financial statements, have been condensed or omitted and as such the interim financial statements do not conform in all respects to the note disclosure requirements of Canadian generally accepted accounting principles for annual financial statements. The interim financial statements should be read in conjunction with Bear Ridge's audited consolidated financial statements and notes thereto for the year ended December 31, 2005.

2. ACQUISITION OF VETERAN RESOURCES INC.

Pursuant to an Arrangement Agreement ("the Agreement") dated November 4, 2005 the Company agreed to complete a business combination with Veteran Resources Inc. ("Veteran"), a public oil and gas company, by way of a Plan of Arrangement. Under the terms of the Agreement, Bear Ridge agreed to acquire all of the issued and outstanding shares of Veteran for consideration consisting of $34,651,144 and 17,022,333 Bear Ridge common shares valued at a five day, pre and post announcement, weighted average price of $4.48 per share. The Agreement received regulatory and Veteran shareholder approval on January 17, 2006 and closed January 19, 2006. The combination is an acquisition of Veteran by Bear Ridge and consequently Veteran's results of operations have been included with Bear Ridge's operations from the date of close, January 19, 2006.



The estimated fair value of the assets and liabilities acquired have
been allocated as follows:

Accounts receivable $ 4,359,248
Deposits and prepaid expenses 160,988
Property and equipment 109,594,000
Goodwill 31,644,214
Accounts payable (15,268,559)
Bank debt (4,423,272)
Asset retirement obligations (2,020,000)
Future income taxes (12,034,000)
------------------------------------------------------------------------
Total $112,012,619
------------------------------------------------------------------------
------------------------------------------------------------------------


On closing, Bear Ridge assumed a future income tax liability of approximately $23.5 million representing the difference between the book value and the tax value of the assets acquired. The liability was offset by previously unrecognized Bear Ridge tax deductions and accordingly the tax liability was reduced to $12.0 million on acquisition.



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

Consideration paid:
17,022,333 common shares issued $ 76,260,051
Cash 34,651,144
Bear Ridge transaction costs 1,101,424
------------------------------------------------------------------------
Total consideration $112,012,619
------------------------------------------------------------------------
------------------------------------------------------------------------


3. INVESTMENT

Effective March 23, 2006 Bear Ridge entered into a joint venture agreement with a private oil and gas company. As part of the agreement, the private company issued Bear Ridge 457,000 shares, valued at the founder's price of $1.25 per share, in consideration for land and seismic costs totaling $571,250 previously incurred by Bear Ridge. Bear Ridge has also agreed to acquire an additional 400,000 shares prior to October 31, 2006 at a price of $1.25 per share.



4. PROPERTY AND EQUIPMENT

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

Accumulated
depletion and
Cost depreciation Net book value
------------------------------------------------------------------------

Petroleum and natural gas
properties $218,179,465 $ 12,538,726 $205,640,739
Office equipment 288,349 42,780 245,569
------------------------------------------------------------------------
$218,467,814 $ 12,581,506 $205,886,308
------------------------------------------------------------------------
------------------------------------------------------------------------


During the period ended March 31, 2006, the Company capitalized general and administrative expenses in the amount of $397,948 related to exploration and development expenditures.

As at March 31, 2006, costs totaling $34.4 million related to unproven properties have been excluded from assets subject to depletion, while estimated future development costs of $4.0 million, related to proven reserves, were included in the calculation of depletion expense.

5. REVOLVING PRODUCTION LOAN

Effective January 19, 2006, in connection with closing the Veteran acquisition, Bear Ridge expanded the maximum amount available under its revolving production loan facility to $60.0 million to provide funds for the payment of the $35 million cash portion of the Veteran acquisition and the assumption of $6.3 million of Veteran bank debt. The maximum facility available was further expanded to $70.0 million effective February 17, 2006 and is scheduled for review in July 2006.

As at March 31, 2006, the Company was in breach of its covenant to maintain a working capital ratio of not less than 1:1. The lender agreed to waive compliance with this covenant as at March 31, 2006, due to activities undertaken by the Company to bring the working capital ratio back into compliance.

6. ASSET RETIREMENT OBLIGATIONS

The following table presents the reconciliation of the beginning and ending carrying amount of the Company's asset retirement obligations for the period ended March 31, 2006.



------------------------------------------------------------------------
Amount
------------------------------------------------------------------------
Balance January 1, 2006 $ 519,416
Liabilities incurred 80,000
Liabilities acquired 2,020,000
Accretion expense 56,000
------------------------------------------------------------------------
Balance March 31, 2006 $ 2,675,416
------------------------------------------------------------------------
------------------------------------------------------------------------


Total estimated future asset retirement costs of $6,674,334 have been discounted using an average credit adjusted risk free rate of 7 percent. An inflation factor of 2 percent has been applied to the estimated asset retirement costs. These obligations are to be settled based on the economic lives of the underlying assets, which currently extend up to 19 years into the future and will be funded from general corporate resources at the time of abandonment.



7. SHARE CAPITAL

a) Issued and outstanding shares:

------------------------------------------------------------------------
Number $
------------------------------------------------------------------------
Common Shares
------------------------------------------------------------------------
Balance, January 1, 2006 29,482,235 52,536,431
Issued on acquisition of Veteran (note 2) 17,022,333 76,260,051
Flow through private placement 62,100 276,966
Issued on exercise of stock options and special
performance units 413,638 621,751
Future tax effect of flow through shares (i) (5,823,000)
Share issuance costs, net of future tax effect
of $31,752 (62,310)
------------------------------------------------------------------------
Balance, March 31, 2006 46,980,306 123,809,889
------------------------------------------------------------------------

i. Under flow through agreements entered into in during 2005, the
Company committed to incur $17,250,500 in qualifying expenditures by
December 31, 2006. The renouncements to shareholders were made
February 26, 2006 with an effective date of December 31, 2005. The
future income tax effect of this issuance was recorded on the date of
renouncement. As at March 31, 2006, the Company had incurred the
entire amount of qualifying expenditures.

b) Contributed surplus

A summary of the change in the Company's contributed surplus balance for
the three months ended March 31, 2006 is as follows:

------------------------------------------------------------------------
Amount
------------------------------------------------------------------------
Balance, January 1, 2006 $ 994,066
Stock based compensation 485,000
Options and special performance units exercised (381,000)
------------------------------------------------------------------------
Balance, March 31, 2006 $ 1,098,066
------------------------------------------------------------------------
------------------------------------------------------------------------

c) Stock based compensation

i. Stock options:

A summary of the options outstanding as at March 31, 2006 and the
changes for the three month period then ended is presented below:

------------------------------------------------------------------------
Weighted
Average
Number Exercise Price
------------------------------------------------------------------------
Balance outstanding, January 1, 2006 1,231,673 $ 3.82
Granted 1,910,000 4.93
Exercised (65,004) 3.65
------------------------------------------------------------------------
Balance outstanding, March 31, 2006 3,076,669 $ 4.52
------------------------------------------------------------------------
------------------------------------------------------------------------

As at March 31, 2006 256,669 options are exercisable at a price of $3.65
per option.

The following table summarizes information about stock options
outstanding at March 31, 2006:

------------------------------------------------------------------------
Weighted
Average Weighted
Remaining Average
Number Contractual Exercise
Grant Price Outstanding Life Price
------------------------------------------------------------------------
$ 3.25 to $3.65 496,669 3.95 $ 3.48
$ 4.00 to $5.00 2,580,000 4.66 4.72
------------------------------------------------------------------------
3,076,669 4.55 $ 4.52
------------------------------------------------------------------------
------------------------------------------------------------------------

The weighted average fair market value of options granted and the
relevant assumptions used in their calculation for the year ended
December 31, 2005 and the three months ended March 31, 2006 are as
follows:

------------------------------------------------------------------------
2006 2005
------------------------------------------------------------------------

Risk-free interest rate (%) 3.0 3.0
Volatility (%) 40.0 36.0
Expected Life (years) 3.5 3.5
Weighted average fair value per option $1.63 $1.15
------------------------------------------------------------------------

ii. Special Performance Units

A summary of the SPU's outstanding as at March 31, 2006 and changes for
the three month period then ended is presented below:

------------------------------------------------------------------------
Weighted Average
Number Exercise Price ($)
------------------------------------------------------------------------
Balance outstanding, January 1, 2006 955,276 $ 0.01
Exercised (448,426) 0.01
------------------------------------------------------------------------
Balance outstanding, March 31, 2006 506,850 $ 0.01
------------------------------------------------------------------------
------------------------------------------------------------------------

On January 18, 2006, 448,426 SPU's, representing the first third of the
originally granted SPU's, vested and were exercised resulting in the
issuance of 348,634 common shares.

d) Per share amounts

The following table summarizes the weighted average shares outstanding
for three months ended March 31, 2006 and 2005 as follows:

------------------------------------------------------------------------
Weighted average - common
shares outstanding March 31, 2006 March 31, 2005
------------------------------------------------------------------------

Basic 43,228,950 19,184,177
Add dilutive effect of:
Warrants 2,073,410 1,119,145
SPU's 389,516 689,166
Stock Options 353,552 8,251
------------------------------------------------------------------------
Diluted 46,045,428 21,000,739
------------------------------------------------------------------------
------------------------------------------------------------------------


8. FINANCIAL INSTRUMENTS

Commodity price risk management

The Company uses various types of financial and physical sales contracts to manage risk related to fluctuating commodity prices. At March 31, 2006, the Company had the following fixed price financial and physical costless collar arrangements:



------------------------------------------------------------------------
Term Hedged Volumes Floor Ceiling
------------------------------------------------------------------------
Oil
January 2006 - December 2006 200 bbl/d $ 55.00US $ 73.00US

Natural Gas
April 1 - October 31, 2006 2,000GJ/d $ 9.00CDN $12.85CDN
April 1 - October 31, 2006 1,000GJ/d $ 9.00CDN $13.05CDN
------------------------------------------------------------------------


As at March 31, 2006 the value of the individual put and call options that comprise the oil collar represent an unrecognized net loss of approximately CDN$145,000. This loss would only be realized in the event that the Company chose to unwind the costless collar arrangement and settle the put and call options individually. The natural gas collars are commitments to deliver physical volumes and as such are not considered financial instruments for financial statement purposes.

Subsequent to March 31, 2006, the Company entered into an additional costless collar to deliver 3,000GJ/d with a floor price of $6.50/GJ and a ceiling of $7.55/GJ. The Company also purchased put options for 4,000GJ/d at a cost of $0.52 per option to guarantee a floor price of $6.50/GJ. All agreements entered into by the Company are for the period May 1 to October 31, 2006. The collar and put options representing 2,000 GJ/d are physical commitments and as such are not considered financial instruments. The remaining 2,000 GJ/d of put options are a financial contract that is classified as a financial instrument for financial statement purposes.



9. SUPPLEMENTAL CASH FLOW INFORMATION

------------------------------------------------------------------------
Operating Capital
Activities Activities
------------------------------------------------------------------------
Changes in non-cash working capital
Accounts receivable 11,066,640 (6,444,154)
Deposits and prepaid expenses 268,309 67,223
Accounts payable and accrued liabilities (8,635,434) 16,045,970
------------------------------------------------------------------------
2,699,515 9,669,039
------------------------------------------------------------------------

Interest payments included in the statement of cash flows totaled
$496,643.


10. SUBSEQUENT EVENT

On April 24, 2006 the Company entered into a bought deal financing arrangement whereby the Company agreed to issue 3,150,000 common shares, on a flow through basis, at a price of $7.35 per share for total proceeds of $23,152,500. The financing closed on May 12, 2006.

Contact Information

  • Bear Ridge Resources Ltd.
    Russell J. Tripp
    Chairman and Chief Executive Officer
    (403) 537-8440
    or
    Bear Ridge Resources Ltd.
    Douglas C. Hibbs
    President
    (403) 537-8440
    or
    Bear Ridge Resources Ltd.
    Brian A. Baker
    Vice President Finance and Chief Financial Officer
    (403) 537-8440
    or
    Bear Ridge Resources Ltd.
    2200, 330 - 5th Avenue SW
    Calgary, Alberta, T2P 0L4
    (403) 537-8440
    (403) 537-8450 (FAX)