Birchcliff Energy Ltd.
TSX : BIR

Birchcliff Energy Ltd.

November 13, 2007 08:00 ET

Birchcliff Energy Ltd. Announces Solid Third Quarter Results

CALGARY, ALBERTA--(Marketwire - Nov. 13, 2007) -

THIS PRESS RELEASE IS NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Birchcliff Energy Ltd. ("Birchcliff") (TSX:BIR) is pleased to announce its financial and operating results for the third quarter of 2007. The full text of Birchcliff's Third Quarter Report containing the Financial Statements for the three and nine month periods ended September 30, 2007 and the related Management's Discussion and Analysis are set forth below and are available on SEDAR at www.sedar.com.

Third Quarter Highlights

- Production averaged 6,014 boe per day, a 5% increase from the second quarter of 2007 and an 8% increase from the third quarter of 2006.

- Cash flow was $9.3 million or $0.15 per share.

- Drilled 9 (8.7 net) wells, which were all cased including 5 net new pool discoveries. Birchcliff drilled a 100% working interest, exploration, Triassic natural gas well; including initial test rates of approximately 4 MMCF per day (666 boe per day) of raw gas, expected to be on production by year end.

- Initiated the drilling of our first Montney/Doig 100% working interest horizontal natural gas well, on time and on budget. Initial test rates are between 4 - 5 MMCF per day of raw gas (666 - 833 boe per day), expected to be n production by year end.

- Announced and completed the $263 million acquisition, financing and integration of the Worsley property which consisted of approximately 3,400 boe per day (2,580 bbls per day 38 degrees light oil and natural gas liquids and 4.9 MMCF of natural gas) located in the Peace River Arch area of Alberta.

- The operating cash flow from the Worsley property from July 1, 2007 to September 30, 2007 was approximately $15 million, significantly more than all of Birchcliff's cash flow for the quarter.

- Increased our undeveloped land to 294,224 gross (247,788 net) acres.

2007 Outlook

Production averaged approximately 9,000 boe per day in October, 2007. Birchcliff expects to exit 2007 at approximately 10,300 - 10,500 boe per day.

Birchcliff recently completed the drilling of its second Montney/Doig 100% working interest horizontal natural gas well on budget. Birchcliff expects to test, complete and bring this horizontal natural gas well on production before year end. Birchcliff is at various stages of testing and tying in its other new pool discoveries.

Birchcliff Energy Ltd - Third Quarter 2007 Report

The full text of the 2007 Third Quarter Report follows.

November 12, 2007

Dear Shareholder,

On behalf of the management team, I am very pleased to report our third quarter results to you. Birchcliff had one of its most active quarters, with an extremely active drilling program and completion of a large acquisition, equity issue and debt financing. As you are aware on September 27th, 2007 we successfully completed the $263.3 million acquisition of certain oil and natural gas properties producing approximately 3,400 BOE per day (2,580 bbls per day of 38 degree light oil and natural gas liquids and 4.9 mmcf per day of natural gas) located in the Peace River Arch area of Alberta, approximately 100 miles north of Grande Prairie, which is in close proximity to Birchcliff's existing assets (the "Worsley Property"). It is very important to note that the acquisition, equity issue and increase in our indebtedness all took place at the END of the third quarter. Accordingly, although the full amount of the DEBT incurred in respect of this transaction ($154.6 million) is accounted for at the end of the quarter, the CASH FLOW and PRODUCTION from the Worsley Property have no appreciable effect on our cash flow and, production for the quarter.

Current Production

Production averaged approximately 9,000 BOE per day during the month of October, consisting of 37% light oil and natural gas liquids and 63% natural gas.

Birchcliff expects to exit 2007 at approximately 10,300 to 10,500 BOE per day.

2007 Third Quarter Results

Production

Production averaged approximately 6,014 BOE per day during the third quarter of 2007. This is an 8% increase from the third quarter of 2006 and an 5% increase from the second quarter of 2007.

Cash Flow and Earnings

Cash flow was $9.3 million or $0.15 per share for the third quarter of 2007 as compared to $10.7 million or $0.18 per share for the same quarter of 2006, with the Worsley Property being included in the third quarter of 2007 for only 4 days of the 92 day quarter.

Birchcliff has a net loss of $5.7 million or $0.09 per share for the third quarter of 2007 as compared to a net loss of $0.7 million or $0.01 per share in the second quarter of 2007 and as compared to a net loss of $1.3 million or $0.02 per share in the third quarter of 2006.

Although our natural gas drilling has been successful, and our production continues to increase, we find our cash flow falling each quarter as a result of weak natural gas prices. For example average monthly AECO natural gas spot pricing fell 27% from the second to third quarter of 2007.

Capital Expenditure and Drilling

During the third quarter, capital spending aggregated $288.3 million including $263.3 million paid in respect of the Worsley Property.

Birchcliff activities during the third quarter included the drilling to 9 gross (8.7 net) wells which resulted in 7 gross (6.7 net) natural gas wells and 2 gross (2.0 net) oil wells and no dry holes. This drilling resulted in 5 potential new pool discoveries with a large number of contingent follow up drilling locations.

Indebtedness

Total indebtedness at September 30, 2007, including working capital deficiency was $262.6 million. At the end of the third quarter, Birchcliff was drawn to $250.8 million on its $300 million credit facilities.

Land

Birchcliff has continued to grow its land position in the Peace River Arch area of Alberta, spending $909,000 on land during the third quarter of 2007. At the end of the third quarter Birchcliff owned 294,224 gross (247,788 net) undeveloped acres which was a result of land purchases together with 39,853 gross (34,774 net) undeveloped acres that were acquired with the Worsley acquisition.

Operational Update

Operational activity relating to drilling, completion and tie in of new wells has been extremely high at Birchcliff. We are focused on executing a number of critical projects that will contribute to our 2007 exit production targets and to further production and reserve growth in 2008. In light of this drilling activity, we continue to expect to meet our 2007 exit production target of 10,300 to 10,500 BOE per day.

Montney/Doig Resource Gas Play

During the third quarter we initiated the field operations on our Montney/Doig horizontal drilling program. I am extremely pleased to advise you that our first Montney/Doig horizontal well (100% working interest) has been successfully drilled, cased and completed and will be brought on production, on time and under budget. We are currently conducting an extended flow test on this well and rates are within our expectations of 4-5MMcf/d of raw gas. With the success of the first well we have accelerated our project planning. Our second Montney/Doig horizontal well (100% working interest) has just finished drilling and completion operations will commence shortly. We anticipate both these horizontal wells to be on production by year end contributing to our exit target. These wells represent the first of a potentially very large, repeatable drilling program with at least 60 more net locations, on the basis of 2 wells per section. This program represents a significant potential addition to Birchcliff's future natural gas reserves and production. However, the economics of this program are very dependant on natural gas price, cost, long term production rates and now the proposed new royalty regime. (discussed below).

We have recently drilled our fifth well as part of our previously announced strategic farm-in at South Pouce Coupe. This well has been drilled, cased and completed and it is anticipated to be on production during the first quarter of 2008. Our drilling under this farm-in is now finished and in total, we earned 10 gross (7 net) sections of land under this farm-in that extend our Montney/Doig resource play potential.

Worsley Property Development

Our technical team has been very busy evaluating and initiating new operations during the last five weeks since we acquired these assets. Activities to date include:

1.) Preparing the necessary regulatory applications and operational logistics to initiate down spacing on the main part on the pool;

2.) Preparing the necessary applications and operational logistics to expand the existing water flood;

3.) Conducting detailed geological and geophysical mapping to identify delineation drilling locations, currently planned to start in the first quarter of 2008;

4.) Identifying in excess of 30 wells having behind pipe by-passed pay;

5.) Initiating an eight well recompletion program on existing wells to test behind pipe by-passed pay, 2 of which have already been recompleted; and

6.) Initiating the evaluation of existing horizontal wells for re-entry and stimulation opportunities.

High Impact Exploration

We recently drilled a 100% working interest exploration well, which discovered a new Triassic natural gas pool. This well tested at approximately 4 mmcf per day (666 BOE per day) of raw gas. We also drilled a 100% working interest exploration well that discovered a new Triassic oil pool. We are currently planning the logistics to shoot a 3-D seismic program over this discovery to help determine the size of the discovery.

The Acquisition of the Worsley Property

As we have stated to you in the past 18 months, Birchcliff has been very interested in continuing its growth through strategic acquisitions while remaining an active exploration and development company in the Peace River Arch of Alberta. We believe that broadening our footprint in the Peace River Arch will ultimately lead to greater value creation for our shareholders. The challenge is to find the right acquisition at the right price. We will continue to be very selective and will only execute on an acquisition if it fits within our corporate strategy.

It is noteworthy that oil prices have moved from the $65 range when we made the decision to purchase Worsley to the current $94 range. However, offsetting this is the recent change in the Canadian/US dollar exchange rate.

The Worsley Property is an operated grade "A", 38 degree API light oil pool, with essentially 100 per cent working interests and significant upside opportunities. Birchcliff has identified more than 80 potential infill and development drilling locations and over 30 recompletion candidates. The light oil pool also has significant water flood potential. Worsley is in the Peace River Arch, and is very proximal to our current asset base. As a result, we do not have to take our eye off our current asset base, the Worsley property is in our backyard. Because the light oil pool has significant upside and capital investment opportunities, Birchcliff is now in the enviable position that it can legitimately choose alternative capital investments in light oil opportunities or natural gas opportunities. These investment decisions will be based on corporate strategy, economics and quality of opportunity.

For those of you who like statistics, as a result of the acquisition our average working interest in our production increased from 70% to 81%; our operated production increased from 80% to 85%; 4 properties made up 85% of our production, now 5 properties make up 90% of our production. Our undeveloped land increased from 242,059 gross (199,097 net) undeveloped acres to 294,224 gross (247,788 net) undeveloped acres, an average 84% working interest. We also purchased a large operated 100% working interest natural gas plant and numerous operated oil batteries and 27 field satellites. Our reserve life index increased on a pro forma proven basis to 7.4 years and proven and probable to 12.5 years. Finally, the acquisition was done on an asset basis which increased our tax pools by the full amount of the $263.3 million net purchase price.

Simply put, we purchased an operated, high working interest light oil property (with infrastructure), in the Peace River Arch, close to our existing production, with significant exploration, exploitation and development potential, and a reasonably high working interest undeveloped land base surrounding or close to the Worsley production base. In the future we see this property adding significant oil reserves as the water flood and other recovery enhancements take effect. We see a reasonable amount of light oil production growth, but the real prize is the potential to prove up significantly more oil in place, and to increase the amount of that oil that will ultimately be recovered. The Worsley Property will be a continuing story about developing and booking oil reserves.

Birchcliff was entitled to the cash flows from the Worsley Property from July 1, 2007 onward and the cash flow for the period from July 1, 2007 to September 26, 2007 was netted against the purchase price of the Worsley Property. It is interesting to note that the estimated cash flow from the netback of the Worsley Property per the interim statement of adjustments for the period from July 1, 2007 to September 30, 2007 was approximately $15 million with an average production rate of just under 3,500 BOE per day for that same period. The cash flow from the Worsley Property during this time period was greater than the cash flow from all of Birchcliff's current properties. There will be increased interest expense and general and administrative costs that go along with this acquisition but it is highly accretive based on current commodity prices. This cash flow engine is what we will be using to continue to develop our oil and natural gas projects.

New Royalty Framework

On October 25, 2007, the Government of Alberta announced significant changes to conventional oil and natural gas royalties with new royalties being applied effective January 1, 2009. Birchcliff is conducting a review of its assets using the royalty information currently available and has determined the impact of the changes to our natural gas properties will be minimal at current natural gas prices. We are analyzing the impact of these proposed royalties on the various opportunities we have so that we will be in a position to vigorously pursue the opportunities that attract the least royalty burden and still achieve our corporate objectives.

We have not yet conducted a similar royalty review of our new Worsley Property as we are currently working with our independent evaluation engineers to generate the required information to conduct a proper review. The new royalty regime, commodity prices and industry cost structures will ultimately determine the economics of our investment opportunities. We are extremely concerned that although our current assets are not materially affected at current prices, the future economics of the basin will be difficult. We are reviewing our capital spending programs and in the coming months will develop a more definitive understanding of the impact of the proposed new royalty regime.

Outlook

We are extremely excited about our growth potential at Birchcliff. We have the opportunity to invest significant capital in our natural gas drilling programs with specific focus on our Montney/Doig natural gas resource play. Alternatively, we have the opportunity to invest significant capital in our Worsley light oil property which over time should add significant reserves. We remain concerned about natural gas prices and do not want to commit our capital until we see how the winter months are playing out. We intend to complete our review of the proposed new royalty regime, analyze the results from our Montney/Doig horizontal drilling program and our initial recompletions at Worsley, before we finalize our 2008 budgets which we expect will occur in late February of 2008.

We expect to spend all of our cash flow in 2008; however we are being very careful allocating available capital. Obviously, with extremely high oil prices a significant amount of our capital will be directed to light oil opportunities.

Thank you

I would like to take this opportunity to welcome a number of new employees to Birchcliff, some of whom have recently joined us as a result of the Worsley acquisition, including Mr. Darin McLarty and his team, who operated these assets for the prior owner. Darin is now our new Assistant Field Foreman at Worsley. Welcome to all of you. I also note that Mr. Mike Cordingley has been appointed Assistant Field Foreman in the Grande Prairie area. Both Mike and Darin report to Mr. Vince Zylinski, Area Production Foreman, who continues to be our greatest asset in the field. I would also advise you that Mr. Rick Hoath has tendered his resignation as Vice President, Engineering but will be helping us transition until January 31, 2008. Mr. Hoath has been a significant contributor to Birchcliff from its inception and we wish him all the best in the future.

I would also like to welcome one of our new shareholders, Mr. Seymour Schulich, who has recently announced that he has a 16% ownership position in Birchcliff. Mr. Schulich is a very successful Canadian businessman and a significant philanthropist who is highly regarded in the investment community. I have had numerous meetings and conversations with Mr. Schulich and as with all our shareholders, I welcome his views and suggestions. We look forward to a long and profitable relationship.

As a final comment, a special thank you to the employees of Birchcliff that have worked very very hard in the last number of months to plan and execute not only our drilling programs but also the acquisition and integration of the Worsley Property.

Submitted on behalf of the Birchcliff Management Team and the Directors,

A. Jeffery Tonken, President and Chief Executive Officer



FINANCIAL AND OPERATIONAL HIGHLIGHTS

Three Three Nine Nine
months months months months
ended ended ended ended
September September September September
30, 2007 30, 2006 30, 2007 30, 2006
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OPERATING
Daily Average Production
Light Oil - barrels 804 779 750 764
Natural Gas - thousands of
cubic feet 30,134 26,996 29,524 25,368
NGLs - barrels 188 293 181 210
Total - barrels of oil
equivalent (6:1) 6,014 5,571 5,852 5,202
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Average Sales Price
($ Canadian)
Light Oil - per barrel 76.95 74.88 70.48 70.45
Natural Gas - per thousand
cubic feet 5.48 5.91 6.86 6.82
NGLs - per barrel 75.38 76.06 69.36 72.85
Total - per barrel of oil
equivalent (6:1) 40.10 43.11 45.80 46.53
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Undeveloped Land
Gross (acres) 294,224 217,299 294,224 217,299
Net (acres) 247,788 173,200 247,788 173,200
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NETBACK AND COST
($ per barrel of oil
equivalent at 6:1)
Petroleum & natural gas
revenue 40.60 43.98 46.50 47.90
Royalties, net of ARTC (7.24) (7.95) (7.22) (8.28)
Operating expense (9.55) (8.94) (9.08) (8.41)
Transportation and
marketing expense (1.65) (1.64) (1.64) (1.65)
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Netback 22.16 25.45 28.56 29.56
General & administrative
expense (2.51) (2.12) (3.09) (2.74)
Stock-based compensation
expense - - (0.03) (0.10)
Interest expense (2.75) (2.53) (2.53) (2.05)
Other income - - - -
Taxes (0.05) - (0.17) -
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Cash Flow Netback 16.85 20.80 22.74 24.67
Depletion and depreciation (28.34) (22.14) (27.81) (20.97)
Accretion (0.66) (0.37) (0.52) (0.41)
Stock-based compensation
expense (1.34) (1.29) (0.81) (1.39)
Risk management contracts (2.12) - (0.74) -
Future income tax recovery
(expense) 5.29 0.38 2.24 (1.05)
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Net Earnings(Loss) (10.32) (2.62) (4.90) 0.85
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FINANCIAL
Petroleum & Natural Gas
Revenue ($000) 22,467 22,546 74,298 68,019
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Cash Flow from Operations
($000) 9,327 10,666 36,364 35,030
Per share - basic ($) 0.15 0.18 0.57 0.60
Per share - diluted ($) 0.14 0.18 0.56 0.57
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Net Earnings (Loss)
($000) (5,707) (1,342) (7,787) 1,200
Per share - basic ($) (0.09) (0.02) (0.12) 0.02
Per share - diluted ($) (0.09) (0.02) (0.12) 0.02
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Common Shares Outstanding
End of Period - Basic 94,472,583 58,174,413 94,472,583 58,174,413
End of Period - Diluted 103,046,582 66,383,746 103,046,582 66,383,746
Weighted Average for
Period - Basic 64,205,283 58,173,508 64,187,801 58,168,296
Weighted Average for
Period - Diluted 64,836,852 60,681,252 65,116,650 61,397,054
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Capital Expenditures
($000) 288,321 25,274 319,867 89,577
Working Capital
(Deficiency) ($000) (11,766)(1) (14,973) (11,766)(1) (14,973)
Non-Revolving Credit
Facility ($000) (97,431) - (97,431) -

Revolving Credit
Facilities ($000) (153,360) (100,127) (153,360) (100,127)
Total Debt ($000) (262,557) (115,100) (262,557) (115,100)
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(1) This amount excludes the accrued liability for oil price risk management
contracts of $1.1 million.


MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") in respect of the three and nine month periods ended September 30, 2007 (the "Reporting Periods") as compared to the three and nine month periods ended September 30, 2006 (the "Comparable Prior Periods") is dated November 12, 2007.

The following discussion and analysis is management's assessment of the historical financial and operating results of Birchcliff Energy Ltd. (the "Corporation" or "Birchcliff") and should be read in conjunction with the unaudited financial statements of the Corporation for the Reporting Periods and the audited financial statements as at and for the years ended December 31, 2005 and 2006 together with the notes thereto, all of which has been prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP").

Additional information relating to the Corporation is available on SEDAR at www.sedar.com. Birchcliff is listed for trading on the Toronto Stock Exchange ("TSX") under the symbol "BIR".

All dollar amounts are stated in Canadian dollars unless otherwise stated.

FORWARD LOOKING STATEMENTS

This disclosure includes forward-looking statements and assumptions respecting the Corporation's strategies, future operations, expected financial results, financing sources, commodity prices, costs of production and quantum of petroleum and natural gas reserves and discusses certain issues, risks and uncertainties that can be expected to impact on any of such matters.

By their nature, forward-looking statements are subject to numerous risks and uncertainties that can significantly affect future results. Actual future results may differ materially from those assumed or described in such forward-looking statements as a result of the impact of issues, risks and uncertainties whether described herein or not, which the Corporation may not be able to control. The reader is therefore cautioned not to place undue reliance on such forward-looking statements.

The Corporation disclaims any intention or obligation to update or revise these forward-looking statements as a result of new information, future events or otherwise, except to the extent required by law.

NON-GAAP MEASURES

This MD&A and the Corporation's Third Quarter Report for 2007 make references to terms commonly used in the petroleum and natural gas industry, such as cash flow or cash generated from operations, cash flow per share, operating netback, netback and cash flow netback.

Cash flow, as discussed in this MD&A and in the Corporation's Annual Report for 2006, appears as a separate line on the Corporation's Statement of Cash Flows above "changes in non-cash working capital" and is reconciled to net earnings or loss. In the Corporation's disclosure, netback and/or operating netback denotes petroleum and natural gas revenue less royalties (net of ARTC), less operating expenses and less transportation and marketing expenses. Cash flow netback as used herein denotes net earnings plus future income tax expense (less any recovery), depletion, depreciation and accretion expense, unrealized losses from risk management contracts (less unrealized gains) and non-cash stock-based compensation expense.

These terms are not defined by Generally Accepted Accounting Principles and consequently, they are referred to as non-GAAP measures. The reader should be cautioned that these amounts may not be directly comparable to measures for other companies where similar terminology is used.

BOE CONVERSION

Barrel of oil equivalent ("BOE") amounts may be misleading, particularly if used in isolation. A BOE conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel and is based on an energy equivalent conversion method primarily applicable at the burner tip and does not necessarily represent an economic value equivalency at the wellhead. This conversion basis conforms to National Instrument 51-101 Standards for Oil and Gas Activities of the Canadian Securities Administrators.

OVERALL PERFORMANCE

Average production in the third quarter of 2007 was 6,014 BOE/d, as compared to 5,712 BOE/d in the second quarter of 2007 and 5,571 BOE/d for the Comparable Prior Period. This represents an 8% increase from the Comparable Prior Period. Four days of production relating to the oil and natural gas property acquired in Worsley, Alberta (the "Worsley Acquisition") are included in the third quarter average, which accounts for approximately 155 BOE/d over the 92 day period. The remainder of the increase was due to new wells coming on production. Planned third-party turnarounds at non-operated facilities partially mitigated the production increases during the three month Reporting Period.

Cash flow for the three month Reporting Period of $9.3 million was 32% lower than the cash flow of $13.6 million for the second quarter of 2007 mainly due to low natural gas prices even though the average production was 5% higher. The AECO daily spot natural gas prices averaged $5.16/mmbtu in the three month Reporting Period compared to $7.07/mmbtu in the second quarter of 2007 which is a 27% decrease. Although prices decreased, Birchcliff continued with its third quarter capital program in anticipation of getting the wells on production in the fourth quarter of 2007 and the first quarter of 2008 when natural gas prices are expected to be stronger.

The Corporation pursued potential acquisitions in its core area during the three month Reporting Period and as a result Birchcliff was able to complete the Worsley Acquisition, which is mainly oil production, to complement its natural gas asset base. Cash flow from the Worsley Acquisition provides Birchcliff with increased financial ability to continue to preserve, expand and develop its natural gas asset base in times of low natural gas prices and to generate healthy returns from its oil properties in time of high oil prices. For details of this acquisition see the discussion under the heading "Major Transactions Affecting Financial Results".

Total indebtedness at September 30, 2007 was $262.6 million as compared to $87.8 million at December 31, 2006. The total indebtedness of the Corporation increased $174.8 million due to $12.3 million of capital spending in excess of cash flow, $154.6 million relating to the Worsley Acquisition and $7.9 million relating to minor acquisitions. The Worsley Acquisition further strengthens Birchcliff's position in the Peace River Arch and provides the Corporation with additional drilling and production opportunities without adding significant overhead expense. Birchcliff continues to seek this type of targeted acquisition on an on-going basis as a part of its normal business strategy.

The Corporation is always reviewing potential property acquisitions, joint venture opportunities and corporate mergers and acquisitions with the intention of completing such a transaction if acceptable terms can be negotiated. As a result, Birchcliff is continuously involved in negotiations with other parties in respect of property acquisitions and corporate merger acquisition opportunities. Management is confident that in the current environment, the Corporation is capable of raising sufficient equity and/or debt financing to fund one or more of these transactions should it be necessary.

MAJOR TRANSACTIONS AFFECTING FINANCIAL RESULTS

The Corporation closed the Worsley Acquisition on September 27, 2007 for total cash consideration of $263.3 million, after interim closing adjustments and related costs. Approximately 3,400 BOE/d of production was acquired, 75% of which is light oil production. Essentially all of the production is operated, the related infrastructure is owned, and the lands are large contiguous blocks at mainly 100% working interest. The Worsley Acquisition was effective July 1, 2007, for purposes of adjusting the purchase price. Production, revenues and expenses will be recorded by Birchcliff from September 27, 2007 forward. The Corporation expects the final adjustment to the purchase price to be completed early in the second quarter of 2008. The adjustments to purchase price included on the interim statement of adjustments are estimates based on information and knowledge at the time of the closing. The final purchase price adjustments may vary materially from the interim purchase price adjustments.

In order to finance the Worsley Acquisition, Birchcliff issued 30,263,170 common shares at $3.80 per common share for gross proceeds of approximately $115 million. In addition, the Corporation's $120 million syndicated revolving credit facilities were increased to $200 million and a new syndicated $100 million non-revolving credit facility was added in conjunction with the Worsley Acquisition. The terms of the syndicated revolving credit facilities remained the same. The syndicated non-revolving credit facility was drawn in full on September 27, 2007 and matures one year thereafter.

LIQUIDITY AND BANK DEBT

The Corporation's working capital deficit (current assets less current liabilities) of $110.3 million at September 30, 2007 includes $97.4 million of short-term debt relating to the $100 million non-revolving facility drawn to complete the Worsley Acquisition and an accrued liability of $1.1 million relating to an unrealized loss on oil price risk management contracts. Excluding the non-revolving facility and the oil price risk management contracts, the working capital deficit at September 30, 2007 was $11.8 million which directly compares to just under $15 million at September 30, 2006. The difference of approximately $3.2 million relates to a lower level of drilling activity in the three month Reporting Period as compared to the Comparable Prior Period.

Throughout this MD&A the Corporation has excluded from its working capital deficit the accrued liability for its unrealized loss on oil price risk management contracts as the benefit the Corporation receives from higher oil prices in the future will offset substantially all of this liability. This liability is categorically different than the other current liabilities in that it does not represent an indebtedness but rather an opportunity cost when oil prices go beyond the ceiling price in the oil price risk management contracts. In order to estimate this liability, future oil prices were estimated beyond the ceiling of our costless collars, yet there is no offsetting asset recorded for the future value that the same estimated future oil price will provide Birchcliff in increased cash flows. Therefore Birchcliff believes excluding this amount from the working capital deficit calculation is appropriate.

At September 30, 2007 the largest component of Birchcliff's current assets (35%) is the cash to be received from its marketers in respect of September 2007 production which was subsequently received in October 2007. In contrast, the current liabilities (excluding the non-revolving credit facility and oil price risk management contracts) consist of trade payables (53%); accrued capital and operating costs (31%); and royalties and other minor amounts. Management expects this working capital deficiency to continue into the foreseeable future as result of its continuing capital program in the Peace River Arch area.

The Corporation's bank debt or revolving credit facilities which have an aggregate limit of $200 million were drawn to $153.4 million at September 30, 2007 as compared to $100.1 million for the Comparable Prior Period. The significant increase is due to the Worsley Acquisition during the three month Reporting Period. In contemplation of the Worsley Acquisition the credit limit was raised to $200 million from $120 million during the three month Reporting Period and the syndicate of banks now consists of three banks rather than two. The Corporation's revolving credit facilities consist of a $20 million working capital facility and a $180 million syndicated facility.

The Corporation's non-revolving credit facility which has an aggregate limit of $100 million was drawn in full to $97.4 million at September 30, 2007, the $2.6 million difference being the discounted interest amount for bankers acceptances. The non-revolving facility was not in existence prior to the three month Reporting Period and was established in contemplation of the Worsley Acquisition. The non-revolving facility matures in one year from the draw down date of September 27, 2007. The Corporation is reviewing all of its options for refinancing or repaying this amount. Birchcliff does not expect the maturity of this facility at or within its one year time frame to create any liquidity issues.

At September 30, 2007 the interest rate applicable to the working capital facility was 6.25% plus a 0.65% margin which is based on the Corporation's current debt level as compared to its cash flow before interest and taxes. The effective interest rate for the syndicated revolving facility is slightly less due to banker's acceptances being utilized, which have a lower effective rate of interest.

Overall, the Corporation did not have any liquidity issues with respect to the operations of its petroleum and natural gas business in the Reporting Periods nor does it anticipate a liquidity issue in the foreseeable future.

The Corporation intends to finance its oil and natural gas business primarily through cash generated from operations, proceeds from bank debt, proceeds from long-term debt arrangements and equity financings to the extent required. Management expects to be able to continue to raise additional equity and debt financing sufficient to meet both its short-term and long-term growth requirements in the current environment. Birchcliff is now at such a size that it anticipates it will not require additional equity except to pay down all or a portion of its existing $100 million non-revolving facility, to fund a significant acquisition or to significantly increase its capital spending.

Cash Generated by Operations

Cash generated by the Corporation was $9.3 million and $36.4 million for the three and nine month Reporting Periods as compared to $10.7 million and $35.0 million for the Comparable Prior Periods. The $1.4 million decrease from the three month Reporting Period to the Comparable Prior Period was due to increased operating, general and administrative and interest costs. Although production increased and oil prices were slightly higher, these factors were mitigated by lower natural gas prices. With respect to the nine month Reporting Period the increase in cash flow of $1.4 million from the Comparable Prior Period was mainly due to increased production mitigated by increased operating, general and administrative and interest costs. Future cash flow will be dependent mainly on production levels and commodity prices.

OUTSTANDING SHARE DATA

The common shares of Birchcliff began trading on the TSX on July 21, 2005 under the symbol "BIR" and were at the same time de-listed from the TSX Venture Exchange where they were trading under the same symbol prior to such time. The following table summarizes the common shares issued from December 31, 2006 to September 30, 2007 which are the only class of shares outstanding:



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Common Shares
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at December 31, 2006 64,139,413
Issue of Common Shares upon Exercise of Options 50,000
----------------------------------------------------------------------------
Balance at March 31, 2007 and June 30, 2007 64,189,413
Issue of Common Shares upon Exercise of Options 20,000
Issue of Common Shares(1) 30,263,170
----------------------------------------------------------------------------
Balance at September 30, 2007 94,472,583
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Common shares issued in conjunction with the Worsley Acquisition.


RESULTS OF OPERATIONS

Petroleum and Natural Gas Revenue

Petroleum and natural gas revenues totaled $22.5 million for the three month Reporting Period and $74.3 million for the nine month Reporting Period as compared to $22.5 million and $68.0 million for the three and nine month Comparable Reporting Period. With respect to the three month Reporting Period, revenues were not significantly different from the Comparable Prior Period because the increased natural gas production was offset by lower natural gas prices and lower NGL production. With respect to the nine month Reporting Period, revenues increased by $6.3 million from the Comparable Prior Period mainly as a result of increased natural gas production. The following table details Birchcliff's petroleum and natural gas revenue, production and sales prices by category for each of the Reporting Periods and Comparable
Prior Periods:



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Three months ended
September 30, 2007 September 30, 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Average Total Average
Revenue Daily Average Revenue Daily Average
($000's) Production % ($/unit) ($000's) Production % ($/unit)
----------------------------------------------------------------------------
Natural Gas
(mcf) 15,194 30,134 84 5.48 14,681 26,996 81 5.91
Light oil
(bbls) 5,694 804 13 76.95 5,366 779 14 74.88
Natural gas
liquids
(bbls) 1,301 188 3 75.38 2,051 293 5 76.06
----------------------------------------------------------------------------
Total
petroleum
and natural
gas sales
(BOE) 22,189 6,014 100 40.10 22,098 5,571 100 43.11
Royalty
revenue 278 0.50 448 0.87
----------------------------------------------------------------------------
Total
petroleum
and
natural
gas
revenue 22,467 40.60 22,546 43.98
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Nine months ended Nine months ended
September 30, 2007 September 30, 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Average Total Average
Revenue Daily Average Revenue Daily Average
($000's) Production % ($/unit) ($000's) Production % ($/unit)
----------------------------------------------------------------------------
Natural Gas
(mcf) 55,307 29,524 84 6.86 47,211 25,368 81 6.82
Light oil
(bbls) 14,432 750 13 70.48 14,687 764 15 70.45
Natural gas
liquids
(bbls) 3,434 181 3 69.36 4,181 210 4 72.85
----------------------------------------------------------------------------
Total
petroleum
and
natural
gas
sales
(BOE) 73,173 5,852 100 45.80 66,079 5,202 100 46.53
Royalty
revenue 1,125 0.70 1,940 1.37
----------------------------------------------------------------------------
Total
petroleum
and
natural
gas
revenue 74,298 46.50 68,019 47.90
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Commodity Prices

Birchcliff sells virtually all of its natural gas production at the AECO daily spot price. Birchcliff receives premium pricing for its natural gas due to the high heat content of its natural gas. The following table details the average sales price and differential received by Birchcliff:



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Three months ended
September 30, 2007 September 30, 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Average Sales Price ($/mcf) 5.48 5.91
Average of the AECO Daily Spot
Prices ($/mmbtu) (1) 5.16 5.65
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Positive Differential 0.32 0.26
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Nine months ended Nine months ended
September 30, 2007 September 30, 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Average Sales Price ($/mcf) 6.86 6.82
Average of the AECO Daily Spot
Prices ($/mmbtu) (1) 6.55 6.40
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Positive Differential 0.31 0.42
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) $1.00/mmbtu = $1.00/mcf based on a standard heat value mcf.


The price the Corporation receives for its production depends on a number of factors, including AECO Canadian dollar spot market prices for natural gas, Canadian dollar Edmonton par oil prices, U.S. dollar oil prices, the U.S./Canadian dollar exchange rate, and transportation and product quality differentials. Birchcliff regularly considers managing the risks associated with fluctuating spot market prices for natural gas and U.S. dollar oil prices and the U.S./Canadian dollar exchange rate. Birchcliff currently has no fixed commodity price contracts or other hedge type contracts for its natural gas production, but has the following oil price risk management contracts in place for its light oil production:



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Term Type Quantity WTI Price (USD)(3)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
November 1, 2007 -
December 31, 2007(1) Bought put 2,500 $65.00
----------------------------------------------------------------------------
November 1, 2007 -
December 31, 2007(1) Sold call 2,500 $81.00
----------------------------------------------------------------------------
January 1 -
March 31, 2008(2) Bought put 1,000 $67.50
----------------------------------------------------------------------------
January 1 -
March 31, 2008(2) Sold call 1,000 $81.40
----------------------------------------------------------------------------
January 1 -
December 31, 2008 Costless collar 1,000 $67.50 - $79.10
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Each contract was entered into separately on different dates but the two
contracts essentially form a costless collar.
(2) Each contract was entered into separately on different dates but the two
contracts essentially form a costless collar.
(3) Each contract is settled on the average of the daily NYMEX WTI US$
price.


The Corporation entered into the above contracts during the month of September 2007 and did not enter into any new contracts during the month of October 2007. Due to the recent spike in oil prices during late October 2007 the Corporation is monitoring the market closely to determine whether any additional contracts are warranted.

Gain or Loss on Oil Price Risk Management Contracts

Although Birchcliff considers all of its oil price risk management contracts to be effective economic hedges, they may not meet the definition prescribed by Canadian GAAP due to the significant costs and time required to document the effectiveness of the contracts as hedges. Accordingly, Birchcliff will not account for the contracts as hedges in its financial statements. The contracts will be recorded at their fair values (mark to market) at each period end date and realized and unrealized gains or losses on risk management contracts are shown as a separate category in the statement of income.

As a result of changes in the fair value of its oil price risk management contracts during the Reporting Periods, the Corporation recorded an unrealized oil price risk management loss of $1.2 million in the third quarter of 2007. Until this quarter, Birchcliff had no commodity price risk management contracts in place so the 2006 Comparative Prior Periods is $NIL. There were no actual cash settlements under the respective contracts during the Reporting Periods, accordingly there was no realized gain or loss.

Royalties and ARTC

The following table illustrates the Corporation's royalty expense as well as the impact of ARTC and prior year adjustments:



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

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

$000's
Oil & natural
gas royalties 4,007 4,200 11,528 12,291
ARTC (1) - (127) - (527)
----------------------------------------------------------------------------
Oil & natural gas
royalties,
net of ARTC 4,007 4,073 11,528 11,764
----------------------------------------------------------------------------
----------------------------------------------------------------------------

$/BOE
Oil & natural gas
royalties 7.24 8.20 7.22 8.65
ARTC (1) - (0.25) - (0.37)
----------------------------------------------------------------------------
Oil & natural gas
royalties, net of ARTC 7.24 7.95 7.22 8.28
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Overall effective
royalty rate 18% 18% 16% 17%
Impact of 2005
adjustments(2) ($/BOE) - - - (1.65)
Impact of 2006
adjustments(2) ($/BOE) - - (0.90) 0.90
----------------------------------------------------------------------------
Overall effective
royalty rate without
prior year adjustments 18% 18% 17% 19%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The Alberta Royalty Tax Credit program was discontinued effective
December 31, 2006.
(2) The adjustments include custom processing adjustment, operating cost
adjustment and capital cost adjustment.


The proportion of Crown royalties to total royalties in the three and nine Reporting Periods was generally consistent with the Comparable Prior Periods at approximately 96% and 95% of total royalties paid respectively. This is expected to remain consistent as most of Birchcliff's new drilling is on Crown land.

Proposed Changes to Alberta's Royalty Regime

Proposed changes to Alberta's royalty regime were announced on October 25, 2007 which will take effect on January 1, 2009. All of the Corporation's assets are in Alberta and will be subject to this new royalty framework. The Corporation is currently reviewing the proposal and evaluating, in detail, the impact the changes will have on Birchcliff's operating results, cash flows and reserves valuation. While the extent of the impact has not yet been fully quantified, it is apparent that beginning in 2009, the reserves valuation and cash flow will be adversely affected by the proposed changes. The degree to which cash flow will be adversely affected depends mainly on the commodity price level. The higher the prices the higher Birchcliff's effective royalty rate will be. This will result in Birchcliff having less cash flow to reinvest in its properties than it otherwise would have had under the existing royalty regime.

Any estimate of the effect of the new regime based on current or past production may be misleading because wells decline, and new wells are brought on that can change the production mix and thus the effective royalty rates. Birchcliff expects that its current high volume wells will decline and be replaced by different wells which may or may not be subject to the same royalty treatment depending on depth, productive capacity and commodity prices. As an example, the Corporation currently has no horizontal wells producing from its Montney/Doig resource play, whereas in 2009 a significant portion of its production may come from this play type. Birchcliff anticipates that its 2007 year end reserve report will incorporate the new royalty regime for 2009 and beyond and will therefore provide shareholders with a reasonable estimate of the impact of this new regime on cash flows and Birchcliff's net asset value.

Operating Costs

Operating costs were $5.3 million ($9.55 per BOE) for the three month Reporting Period and $14.5 million ($9.08 per BOE) for the nine month Reporting Period as compared to $4.6 million ($8.94 per BOE) and $11.9 million ($8.41 per BOE) for the Comparable Prior Periods. The 5% increase in operating costs per BOE resulted predominantly from increased gas processing fees in areas where Birchcliff's production additions are processed through third-party gas plants. The combination of higher fees and lower third party recoveries resulted in an increase to operating costs of $1.22 per BOE and $0.58 per BOE respectively in the three and nine month Reporting Periods over the Comparable Prior Periods. Property taxes and regulatory fees are also on the rise. A non-routine reclamation event in the three month Reporting Period further increased operating expenses by $100,000 or $0.18 per BOE and $0.06 per BOE in the three and nine month Reporting Periods. The following table compares operating costs for the Reporting Periods and the Comparable Prior Periods:



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

Operating Costs Three months ended Three months ended
($000's) September 30, 2007 September 30, 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Total
($000's) $/BOE ($000's) $/BOE
----------------------------------------------------------------------------
Field operating costs 5,141 9.29 4,271 8.34
Expensed workovers and other(1) 142 0.26 310 0.60
----------------------------------------------------------------------------
Total operating costs 5,283 9.55 4,581 8.94
----------------------------------------------------------------------------
----------------------------------------------------------------------------


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

Operating Costs Nine months ended Nine months ended
($000's) September 30, 2007 September 30, 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Total
($000's) $/BOE ($000's) $/BOE
----------------------------------------------------------------------------
Field operating costs 14,173 8.87 10,952 7.71
Expensed workovers and other(1) 330 0.21 995 0.70
----------------------------------------------------------------------------
Total operating costs 14,503 9.08 11,947 8.41
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Expensed workovers and other includes $100,000 in the three months ended
September 30, 2007 relating to a reclamation event. The Corporation
believes the costs of this loss will be covered by insurance, so only
the deductible has been accrued.


Operating costs are somewhat mitigated by the impact of third party revenues Birchcliff receives for processing, treating and transporting other producers' production, water disposal fees and other minor recoveries. In the three and nine month Reporting Periods, these recoveries reduced operating costs by $0.88 per BOE and $0.79 per BOE respectively as compared to a $0.68 per BOE and $0.97 per BOE reduction in the Comparable Prior Periods. One of Birchcliff's strategic objectives is to maximize the use of its underutilized facilities in order to bring unit production costs down. This has proved challenging in the current environment because the production of third party wells has declined and few new third party wells have been tied in due to a significant decrease in operational activity during the last three quarters.

Birchcliff continues to implement strategies aimed at lowering its operating costs on a per BOE basis, but these decreases are being offset by rising processing fees at third party plants and general increases in costs of necessary services.

Transportation and Marketing Expenses

Transportation and marketing expenses were $911,000 ($1.65 per BOE) and $2.6 million ($1.64 per BOE) for the three and nine month Reporting Periods as compared to the Comparable Prior Periods of $842,000 ($1.64 per BOE) and $2.3 million ($1.65 per BOE). These costs consist primarily of transportation costs. Birchcliff expects that its transportation costs (both on an aggregate and a per unit basis) will increase by a material amount as a result of the Worsley Acquisition because all of the light oil produced at Worsley is transported by truck a significant distance to a sales terminal.

General and Administrative Expense

Net general and administrative costs in the three and nine month Reporting Periods were $1.4 million ($2.51 per BOE) and $4.9 million ($3.09 per BOE) as compared to the Comparable Prior Periods of $1.1 million ($2.12 per BOE) and $3.9 million ($2.74 per BOE).



The components of G&A are as follows:

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

General and Administrative Expense Three months ended Three months ended
($000's) September 30, 2007 September 30, 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Salaries, benefits and consultants 1,407 58% 1,356 71%
Other 1,027 42% 541 29%
----------------------------------------------------------------------------
G & A expense, gross 2,434 100% 1,897 100%
Overhead recoveries (802) (33%) (553) (29%)
Capitalized overhead (242) (10%) (259) (14%)
----------------------------------------------------------------------------
G & A expense, net 1,390 57% 1,085 57%
----------------------------------------------------------------------------
G & A expense, net per BOE $2.51 $2.12
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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

General and Administrative Expense Nine months ended Nine months ended
($000's) September 30, 2007 September 30, 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Salaries, benefits and consultants 4,426 62% 3,928 65%
Other 2,736 38% 2,105 35%
----------------------------------------------------------------------------
G & A expense, gross 7,162 100% 6,033 100%
Overhead recoveries (1,435) (20%) (1,447) (24%)
Capitalized overhead (795) (11%) (700) (12%)
----------------------------------------------------------------------------
G & A expense, net 4,932 69% 3,886 64%
----------------------------------------------------------------------------
G & A expense, net per BOE $3.09 $2.74
----------------------------------------------------------------------------
----------------------------------------------------------------------------


G&A not related to salaries, benefits and consultants has increased as a proportion of total G&A in the three month Reporting Period primarily due to a significant increase in the accrual for the expected year end reserve report costs due to the Worsley Acquisition, other compliance and regulatory cost increases, increases in office rent and corporate travel costs in regards to the Worsley Acquisition and related common share issue.

Interest Expense

Interest expense for the three and nine month Reporting Periods was $1.5 million ($2.75 per BOE) and just over $4.0 million ($2.53 per BOE). In the Comparable Prior Periods it was $1.3 million ($2.53 per BOE) and $2.9 million ($2.05 per BOE). The increase in aggregate interest expense and interest expense per BOE result directly from the Corporation maintaining a higher debt level and being subject to slightly higher interest rates during the Reporting Period. The Corporation's debt increased substantially on September 27, 2007 with the closing of the Worsley Acquisition.

Depletion, Depreciation and Accretion Expense ("DD&A")

Depletion, depreciation and accretion ("DD&A") expenses in the three and nine month Reporting Periods were approximately $16.0 million ($29.00 per BOE) and $45.3 million ($28.33 per BOE) as compared to the three and nine month Comparable Prior Periods of $11.5 million ($22.51 per BOE) and $30.4 million ($21.38 per BOE). The DD&A on a per BOE basis is 29% and 33% higher in the three and nine month Reporting Periods than in the Comparable Prior Periods mainly due to the increased cost of services and reduced amount of proven reserve additions for the dollars spent, resulting in higher finding costs, which are ultimately reflected in DD&A over time. The components of DD&A are as follows:



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

DD&A Expense Three months ended Three months ended
September 30, 2007 September 30, 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Total
($000's) $/BOE ($000's) $/BOE
----------------------------------------------------------------------------
Depletion & depreciation 15,684 28.34 11,347 22.14
Accretion 364 0.66 191 0.37
----------------------------------------------------------------------------
Total DD&A 16,048 29.00 11,538 22.51
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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

DD&A Expense Nine months ended Nine months ended
September 30, 2007 September 30, 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Total
($000's) $/BOE ($000's) $/BOE
----------------------------------------------------------------------------
Depletion & depreciation 44,428 27.81 29,776 20.97
Accretion 834 0.52 585 0.41
----------------------------------------------------------------------------
Total DD&A 45,262 28.33 30,361 21.38
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Depletion and depreciation expense is a function of the proved reserve additions and the cost of petroleum and natural gas properties in the full cost pool attributable to those proved reserves. At September 30, 2007, Birchcliff has excluded from its full cost pool $33.9 million (September 30, 2006 - $54.9 million) of costs for undeveloped land acquired by Birchcliff and for unproved properties acquired relating to opportunities in the probable reserve category and the potential drilling, recompletion and workover opportunities which have not yet been assigned any reserves. The Corporation intends that over time it will, for depletion calculation purposes, continue to reduce the cost amount excluded from the full cost pool in respect of unproved properties as those unproved properties are drilled and developed, or have their value confirmed or impaired by new information or circumstances.

Petroleum and Natural Gas Properties Impairment Test

The Corporation follows the full cost method of accounting which requires periodic review of capitalized costs to ensure that they do not exceed the recoverable value of the petroleum and natural gas properties and that they do not exceed the fair value of the assets.

Birchcliff performed an impairment (ceiling) test review at September 30, 2007 on its petroleum and natural gas assets. Based on this review, Birchcliff determined there was no impairment of its petroleum and natural gas assets.

Taxes

Birchcliff recorded a future income tax recovery of $2.9 million ($5.29 per BOE) and $3.6 million ($2.24 per BOE) during the three and nine month Reporting Periods, as compared to a recovery of $193,000 ($0.38 per BOE) and an expense of just under $1.5 million ($1.05 per BOE) during the Comparable Prior Periods. This change results primarily from the reduced net income recorded during the Reporting Periods as compared to the Comparable Prior Periods.

Birchcliff incurred $28,000 ($0.05 per BOE) and $269,000 ($0.17 per BOE) of Part XII.6 taxes in the three and nine month Reporting Periods as a result of the issue of $16,029,000 of flow-through shares in November 2006. During the three and nine month Comparable Prior Periods, the Corporation did not incur any Part XII.6 taxes. At September 30, 2007 Birchcliff had fulfilled its obligation with respect to the flow-through share issue.

Stock-Based Compensation

Birchcliff accounts for its stock-based compensation programs, including performance warrants and stock options, using the fair value method. Under this method, the Corporation records compensation expense related to the stock-based compensation programs in the income statement over the vesting period.

During the three month Reporting Period, the Corporation granted options to purchase 227,000 common shares at a weighted average exercise price of $4.34 per common share.

The Corporation recorded a $738,000 expense ($1.34 per BOE) and a $1.3 million expense ($0.84 per BOE) for stock-based compensation relating to stock options in the three and nine month Reporting Periods, as compared to $663,000 ($1.29 per BOE) and $2.1 million ($1.49 per BOE) during the Comparable Prior Periods. The stock-based compensation expense recorded for the nine month Reporting Period is less than for the Comparable Prior Period because it includes a credit resulting from the forfeiture of outstanding options during that Reporting Period.

During the three month Reporting Period, the Corporation issued 20,000 shares due to exercise of vested stock options, and stock options in respect of 152,666 common shares were forfeited. In addition, the cancellation of vested stock options resulted in a cash-paid stock-based compensation expense of $NIL and $44,000 in the three and nine month Reporting Periods as compared to $NIL and $137,000 in the Comparable Prior Periods. The cash-paid expense is included in total stock-based compensation expense.

CAPITAL EXPENDITURES AND CAPITAL RESOURCES

Capital expenditures amounted to $288.3 million and $319.9 million during the three and nine month Reporting Periods. In the Comparable Prior Periods, $25.3 million and $89.6 million of capital expenditures were incurred. The increase in expenditures was the result of the Worsley Acquisition for approximately $263.3 net of interim closing adjustments and related costs. Excluding the Worsley Acquisition, capital expenditures totalled $25.0 million and $56.6 million during the three and nine month Reporting Periods. The nine month Reporting Period total is $33.0 million lower than the Comparable Prior Period due to natural gas prices not being high enough to sustain a significantly larger capital program.

The following table sets forth a summary of the Corporation's capital expenditures incurred for the Reporting Periods and the Comparable Prior Periods:



Capital Expenditures

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended September 30 ($000's) 2007 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Land 909 998
Exploration(1) - drilling and completions 9,423 13,020
Exploration (1) - seismic 655 (12)
Exploration(1) - other 216 62
Development - drilling and completions 7,722 1,819
Development - other 240 28
Well equipment and facilities 3,166 8,947
Capitalized general and administrative
expenses 243 259
----------------------------------------------------------------------------
Total Finding & Development Costs 22,574 25,121
Acquisitions 265,721 140
----------------------------------------------------------------------------
Total Finding, Development & Acquisition
Costs 288,295 25,261
Administrative assets 26 13
----------------------------------------------------------------------------
Total Capital Expenditures 288,321 25,274
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The exploration categorization is based on internal criteria, mainly
utilizing information from the well license and does not necessarily
coincide with the Canadian Exploration Expense classification under the
Income Tax Act.


----------------------------------------------------------------------------
----------------------------------------------------------------------------
Nine months ended September 30 ($000's) 2007 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Land 3,612 11,629
Exploration(1) - drilling and completions 16,030 24,749
Exploration (1) - seismic 1,583 2,560
Exploration(1) - other 440 493
Development - drilling and completions 16,261 23,223
Development - other 636 34
Well equipment and facilities 9,293 24,506
Capitalized general and administrative
expenses 796 700
----------------------------------------------------------------------------
Total Finding & Development Costs 48,651 87,894
Acquisitions 271,159 1,629
----------------------------------------------------------------------------
Total Finding, Development & Acquisition
Costs 319,810 89,523
Administrative assets 57 54
----------------------------------------------------------------------------
Total Capital Expenditures 319,867 89,577
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The exploration categorization is based on internal criteria, mainly
utilizing information from the well license and does not necessarily
coincide with the Canadian Exploration Expense classification under the
Income Tax Act.

The following table sets forth a summary of the Corporation's capital
resources for the Reporting Periods and the Comparable Prior Periods:


Capital Resources

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended September 30 ($000's) 2007 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash generated by operations 9,327 10,666
Changes in working capital from
operations 779 (4,473)
Equity issues, net of issue costs 108,976 26
Increase in non-revolving credit
facility 97,431 -
Increase in revolving credit facility 64,527 14,828
Asset retirement expenditures (320) (198)
Changes in working capital from
investing 7,601 4,425
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Capital Resources 288,321 25,274
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
----------------------------------------------------------------------------
Nine months ended September 30 ($000's) 2007 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash generated by operations 36,364 35,030
Changes in working capital from
operations (783) 590
Equity issues, net of issue costs 109,126 (11)
Increase in non-revolving credit
facility 97,431 -
Increase in revolving credit facility 72,055 63,513
Asset retirement expenditures (396) (198)
Changes in working capital from
investing 6,071 (9,346)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Capital Resources 319,868 89,578
----------------------------------------------------------------------------
----------------------------------------------------------------------------


SELECTED QUARTERLY INFORMATION

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Quarter Ended
($000's, except share September 30, June 30, March 31, December 31,
and per share amounts) 2007 2007 2007 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Petroleum and natural
gas production
(BOE per day) 6,014 5,712 5,829 5,861
Petroleum and natural
gas commodity price
($ per BOE) 40.10 48.20 49.43 46.86
Natural gas commodity
price at wellhead
($ per mcf) 5.48 7.39 7.78 7.33
Total petroleum and natural
gas revenue 22,467 25,462 26,369 25,750
Total royalties,
net of ARTC(1) (4,007) (3,233) (4,288) (4,407)
Total interest and
other revenue - - 1 28
Total revenues, net 18,460 22,229 22,082 21,371
Capital expenditures 288,321 13,727 17,819 12,577

Net income (loss) (5,707) (707) (1,373) (2,313)
Per share basic (0.09) (0.01) (0.02) (0.04)
Per share diluted (0.09) (0.01) (0.02) (0.04)

Cash generated by
operations 9,327 13,641 13,396 11,657
Per share basic 0.15 0.21 0.21 0.19
Per share diluted 0.14 0.21 0.21 0.19

Book value of total
assets 644,876 359,423 360,164 362,255
Non-revolving credit
facility (97,431) - - -
Revolving credit
facilities (153,360) (88,833) (85,431) (81,304)
Total indebtedness (262,557) (92,218) (92,099) (87,783)
Shareholders' equity 342,451 240,250 241,065 246,399

Common shares outstanding
- end of period
Basic 94,472,583 64,189,413 64,189,413 64,139,413
Diluted 103,046,582 72,709,078 73,709,246 72,168,746
Weighted average common
shares outstanding
Basic 64,205,283 64,189,413 64,168,302 60,701,424
Diluted 64,836,852 65,394,368 64,174,235 61,347,463
----------------------------------------------------------------------------
----------------------------------------------------------------------------



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Quarter Ended
($000's, except share September 30, June 30, March 31, December 31,
and per share amounts) 2006 2006 2006 2005
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Petroleum and natural
gas production
(BOE per day) 5,571 4,760 5,271 5,009
Petroleum and natural
gas commodity price
($ per BOE) 43.11 45.42 51.24 72.65
Natural gas commodity
price at wellhead
($ per mcf) 5.91 6.48 8.09 12.23
Total petroleum and
natural gas revenue 22,546 20,515 24,958 34,175
Total royalties,
net of ARTC(1) (4,073) (2,820) (4,871) (8,269)
Total interest and
other revenue - - 3 1
Total revenues, net 18,473 17,695 20,090 25,907
Capital expenditures 25,273 24,627 39,677 38,485

Net income (loss) (1,342) 961 1,581 126
Per share basic (0.02) 0.02 0.03 -
Per share diluted (0.02) 0.02 0.03 -

Cash generated by
operations 10,666 11,068 13,296 18,112
Per share basic 0.18 0.19 0.23 0.32
Per share diluted 0.18 0.18 0.22 0.30

Book value of total assets 359,073 345,092 329,632 311,364
Non-revolving credit
facility - - - -
Revolving credit
facilities (100,127) (85,299) (66,601) (36,614)
Total indebtedness (115,100) (100,321) (86,708) (60,344)
Shareholders' equity 219,066 219,719 218,124 223,894

Common shares outstanding
- end of period
Basic 58,174,413 58,167,747 58,167,747 58,147,747
Diluted 66,383,746 66,277,414 66,292,746 65,091,912

Weighted average common
shares outstanding
Basic 58,173,508 58,167,747 58,163,525 56,614,330
Diluted 60,681,252 61,499,413 61,827,830 59,964,046
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) ARTC is not applicable to periods after December 31, 2006.


DISCUSSION OF QUARTERLY RESULTS

Production increased in the current quarter as compared to the quarter ended June 30, 2007 by 5%, yet cash flow decreased by 32%, due to a low natural gas price and higher costs. The quarter ended September 30, 2007 had the lowest natural gas price as compared to all previous seven quarters and was 26% lower than the previous quarter. Birchcliff's production in the three months ended September 30, 2007 was approximately 84% natural gas.

The Corporation's capital expenditures, book value, shareholders' equity, common shares outstanding and total debt all increased substantially during the three month Reporting Period due to the Worsley Acquisition completed on September 27, 2007. With the Worsley Acquisition being so close to the quarter end it did not have a material impact on the quarterly results as is evidenced by the minimal effect it had on the weighted average common shares outstanding for the period.

RISKS AND UNCERTAINTIES

All of Birchcliff's properties are currently located within the province of Alberta. There is a risk that although the Corporation believes it is making an economic investment at the time all of the upfront capital is invested in facilities or drilling, completing and equipping an oil or natural gas well, the Government may at any point in the economic life of that project, expropriate without compensation a portion of the expected profit under a new royalty/tax regulation or regime with no grandfathering provisions. Without the grandfathering provisions this may cause that particular project to become uneconomic once the new royalties or taxes take effect. This type of possible future government action is unpredictable and cannot be forecast by the Corporation.

OUTLOOK

As a result of the Worsley Acquisition, Birchcliff is well positioned to withstand the current low natural gas prices as its oil properties will generate a significant amount of cash flow. The Corporation will balance its capital spending on its new inventory of oil projects while still ensuring that it continues to develop and acquire lands in respect of all its natural gas plays in order to capture future value. Birchcliff believes that as producers cut back on natural gas spending, the supply will decrease which will ultimately result in higher natural gas prices in the future. The timing of when this will happen is uncertain, but management is committed to ensuring Birchcliff is well positioned when it does.



BIRCHCLIFF ENERGY LTD.
Balance Sheets
(Unaudited) ($000's)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
September 30, 2007 December 31, 2006
-------------------- -------------------
ASSETS
CURRENT
Cash and cash equivalents 66 65
Accounts receivable 13,638 13,498
Prepaid and other 3,046 3,240
-------------------- -------------------
16,750 16,803

Future income tax asset 7,330 6,689
Petroleum and natural gas
properties and equipment (Note 4) 620,796 338,763
-------------------- -------------------
644,876 362,255
-------------------- -------------------
-------------------- -------------------

LIABILITIES
CURRENT
Accounts payable and accrued
liabilities 28,516 23,282
Non-revolving credit facility
(Note 5) 97,431 -
Risk management contracts (Note 6) 1,099 -
-------------------- -------------------
127,046 23,282
-------------------- -------------------

Risk management contracts (Note 6) 76 -
Revolving credit facilities (Note 7) 153,360 81,304
Asset retirement obligations (Note 8) 18,300 11,270
SHAREHOLDERS' EQUITY
Share capital (Note 9) 342,451 236,158

Contributed surplus (Note 10) 10,179 8,990
Retained earnings (deficit) (6,536) 1,251
-------------------- -------------------
346,094 246,399
-------------------- -------------------
644,876 362,255
-------------------- -------------------
-------------------- -------------------

See accompanying notes to the financial statements.

APPROVED BY THE BOARD

"Werner A. Siemens"

Werner A. Siemens, Director

"A. Jeffery Tonken"

A. Jeffery Tonken, Director


BIRCHCLIFF ENERGY LTD.
Statements of Net Income (Loss), Comprehensive Income (Loss) and Retained
Earnings (Deficit)
(Unaudited) ($000's)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2007 2006 2007 2006
-------------------------------------------
REVENUES
Petroleum and natural gas 22,467 22,546 74,298 68,019
Royalties (4,007) (4,073) (11,528) (11,764)
Interest and other - - 1 3
-------------------------------------------
18,460 18,473 62,771 56,258

Loss on risk management
contracts (Note 6)
Unrealized (1,175) - (1,175) -
-------------------------------------------
17,285 18,473 61,596 56,258
-------------------------------------------

EXPENSES
Production 5,283 4,581 14,503 11,947
Transportation 911 842 2,613 2,343
General and administrative 1,390 1,085 4,932 3,886
Stock-based compensation 738 663 1,333 2,110
Depletion, depreciation
and accretion 16,048 11,538 45,262 30,361
Interest 1,521 1,299 4,046 2,915
-------------------------------------------
25,891 20,008 72,689 53,562
-------------------------------------------
INCOME (LOSS) BEFORE TAXES (8,606) (1,535) (11,093) 2,696

TAXES
Capital and other taxes 28 - 269 -
Future income taxes
(recovery) (2,927) (193) (3,575) 1,496
-------------------------------------------
(2,899) (193) (3,306) 1,496
-------------------------------------------

NET INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) (5,707) (1,342) (7,787) 1,200

RETAINED EARNINGS (DEFICIT),
BEGINNING OF PERIOD (829) 4,906 1,251 2,364
-------------------------------------------
RETAINED EARNINGS (DEFICIT),
END OF PERIOD (6,536) 3,564 (6,536) 3,564
-------------------------------------------
-------------------------------------------

Net income (loss) per
common share basic and
diluted ($0.09) ($0.02) ($0.12) $ 0.02

Weighted average common
shares basic and diluted 64,205,283 58,173,508 64,187,801 58,168,296

See accompanying notes to the financial statements.


BIRCHCLIFF ENERGY LTD.
Statements of Cash Flows
(Unaudited) ($000's)

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

CASH FLOWS RELATED TO THE
FOLLOWING ACTIVITIES:

OPERATING
Net income (loss) (5,707) (1,342) (7,787) 1,200
Adjustments for items not
affecting cash:
Depletion, depreciation and
accretion 16,048 11,538 45,262 30,361
Stock-based compensation
(Note 10) 738 663 1,289 1,973
Future income tax (recovery) (2,927) (193) (3,575) 1,496
Loss on risk management
contracts (Note 6) 1,175 - 1,175 -
---------------------------------------------
9,327 10,666 36,364 35,030
Changes in non-cash working
capital (Note 12) 779 (4,473) (783) 590
Asset retirement expenditures
incurred (320) (198) (396) (198)
---------------------------------------------
9,786 5,995 35,185 35,422
---------------------------------------------

FINANCING
Increase in non-revolving
credit facility 97,431 - 97,431 -
Increase in revolving
credit facility 64,527 14,828 72,055 63,513
Issuance of share capital,
net of issue costs (Note 9) 108,976 26 109,126 (11)
---------------------------------------------
270,934 14,854 278,612 63,502
---------------------------------------------

INVESTING
Purchase of petroleum and
natural gas properties and
equipment (Note 3) (265,721) (140) (271,159) (1,629)
Development of petroleum and
natural gas properties and
equipment (22,600) (25,134) (48,708) (87,948)
Changes in non-cash working
capital (Note 12) 7,601 4,425 6,071 (9,346)
---------------------------------------------
(280,720) (20,849) (313,796) (98,923)
---------------------------------------------

NET INCREASE IN CASH AND CASH
EQUIVALENTS - - 1 1

CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 66 65 65 64
---------------------------------------------

CASH AND CASH EQUIVALENTS,
END OF PERIOD 66 65 66 65
---------------------------------------------
---------------------------------------------

Cash interest paid 1,521 1,299 4,046 2,915
Cash taxes paid - - 6 60

See accompanying notes to the financial statements.


BIRCHCLIFF ENERGY LTD.
Notes to the Financial Statements
For the Three and Nine Months Ended September 30, 2007
(Unaudited)

1. BASIS OF PRESENTATION

Birchcliff Energy Ltd. ("Birchcliff" or the "Corporation") is engaged in the exploration for and the development, production and acquisition of, petroleum and natural gas reserves in Western Canada. Birchcliff's financial year end is December 31.

The interim financial statements of Birchcliff Energy Ltd. have been prepared by management in accordance with accounting principles generally accepted in Canada and are unaudited. The interim financial statements have been prepared following the same accounting policies and methods of computation as the audited financial statements for the period ended December 31, 2006 except as discussed in Note 2. The disclosures which follow do not include all disclosures required for the annual financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2006.

2. CHANGES IN ACCOUNTING POLICIES

Financial Instruments - Recognition and Measurement

Effective January 1, 2007, the Corporation adopted the Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3855 - Financial Instruments - Recognition and Measurement and Section 3861 - Financial Instruments - Presentation and Disclosure. These sections establish the standards for recognizing and measuring financial instruments in the balance sheet and the standards for reporting gains and losses relating to financial instruments in the financial statements. All financial instruments are classified into specific categories; financial assets available for sale, assets and liabilities held for trading, loans and receivables, investments held to maturity and other financial liabilities. Financial instruments are measured at fair value with subsequent measurement based on initial classification. Non-exempt derivative and embedded derivative financial instruments, part of a hedging relationship or not, have to be measured at fair value. All changes in their fair value are recorded in net income unless hedge accounting is utilized, which then requires any changes in fair value to be recorded in other comprehensive income until such time as the underlying hedged transaction is recognized in net income. If a hedge ceases to be effective it is immediately recognized in net income.

The Corporation has made the following classifications:

a) Cash and cash equivalents are classified as financial assets held for trading and are measured at fair value. Gains and losses from revaluation are recognized in net income.

b) Accounts receivable are classified as loans and receivables and are initially measured at fair value. Subsequent revaluations are recorded at amortized cost using the effective interest rate method.

c) Revolving credit facilities, accounts payable and accrued liabilities are classified as other liabilities and are initially measured at fair value. Subsequent revaluations are recorded at amortized cost using the effective interest rate method.

The Corporation has adopted these sections retroactively without restatement and has therefore not restated prior periods. Further, because the Corporation did not have any financial instruments that were impacted at the time of adoption, the adoption of these sections has had no material impact on the Corporation's net earnings, cash flows or retained earnings at January 1, 2007.

Derivative Financial Instruments

Birchcliff is exposed to market risks resulting from fluctuations in commodity prices, foreign exchanges rates and interest rates in the normal course of operations. The Company uses various derivative instruments to reduce its exposure to fluctuations in commodity prices. The fair values of these derivative instruments are based on an estimate of the amounts that would have been received or paid to settle these instruments prior to maturity. Birchcliff considers all of these transactions to be effective economic hedges, however, the majority of the contracts do not qualify or have not been designated as effective hedges for accounting purposes.

The Company applies the fair value method of accounting by recording an asset or liability on the balance sheet and recognizing changes in the fair value of the instruments in the statement of income for the current period.

Foreign Currency Translation

Monetary assets and liabilities denominated in a foreign currency are translated at the rate of exchange in effect at the balance sheet date. Revenues and expenses are translated at the period average rates of exchange. Translation gains and losses are recorded in income in the period in which they arise.

Comprehensive Income

Effective January 1, 2007, the Corporation adopted the CICA Handbook Section 1530 - Comprehensive Income. This section describes reporting and disclosure recommendations with respect to comprehensive income and its components. Comprehensive income is the change in shareholders' equity resulting from transactions and events from sources other than the Corporation's shareholders. These transactions and events include changes in currency translation adjustments and unrealized gains and losses resulting from changes in fair value of certain financial instruments. The adoption of this Section requires the Corporation to present a statement of comprehensive income as part of the financial statements. The adoption of this section has had no impact on Birchcliff's retained earnings at January 1, 2007.

Equity

Effective January 1, 2007, the Corporation adopted the CICA Handbook Section 3251 - Equity. This section establishes the standards for presentation of equity and recognizing changes in equity occurring in the reporting period as a result of the adoption and application of Section 1530 - Comprehensive Income discussed above.

Accounting Changes

Effective January 1, 2007 the Corporation also adopted Section 1506 - Accounting Changes, the only effect of which is to provide disclosure and the resulting impact to the Corporation when an entity has not applied a new source of Generally Accepted Accounting Principles ("GAAP") that has been issued but is not yet effective.

This applies to Section 1535 - Capital Disclosures which is required to be adopted for fiscal years beginning on or after October 1, 2007. Birchcliff intends to adopt these standards on January 1, 2008 and requires disclosure regarding the Corporation's definition of capital and its objectives, policies and processing for managing capital. In addition, the section requires disclosure as to whether the Corporation has complied with externally imposed capital requirements. The adoption of this section will have no impact on the financial amounts the Corporation reports in its financial statements.

This applies to 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. Birchcliff intends to adopt these standards on January 1, 2008 and it is expected the only effect on the Corporation 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 to which the entity is exposed arising from financial instruments.

3. ACQUISITIONS

On September 27, 2007, Birchcliff acquired certain oil and natural gas assets in the Worsley area ("Worsley Acquisition"), effective July 1, 2007, for $270 million before closing adjustments and related costs.

The following table details the purchase price allocation for the Worsley Acquisition:




----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net assets acquired: $000's
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Petroleum and natural gas properties and equipment 269,210
Asset retirement costs (5,919)
----------------------------------------------------------------------------
Total net assets acquired 263,291
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consideration: $000's
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Purchase price, net of adjustments, paid in cash 261,477
Costs related to the Worsley Acquisition 1,814
----------------------------------------------------------------------------
Total consideration paid 263,291
----------------------------------------------------------------------------
----------------------------------------------------------------------------


In relation to the Worsley Acquisition, the Corporation has made its best estimate as to the net assets acquired and the consideration given. The final purchase price adjustment has not yet been determined by the Corporation and the vendor, and all costs have not yet been finalized. Therefore, the above amount may be subject to adjustment.

These financial statements incorporate the operations of the Worsley Acquisition from September 27, 2007 forward.



4. PETROLEUM AND NATURAL GAS PROPERTIES AND EQUIPMENT

----------------------------------------------------------------------------
----------------------------------------------------------------------------
September 30, 2007
Accumulated Depletion
Cost and Depreciation Net Book Value
$000's $000's $000's
----------------------------------------------------------------------------
Petroleum and natural gas
properties and equipment 728,029 (107,696) 620,333
Office and other
equipment 1,084 (621) 463
----------------------------------------------------------------------------
729,113 (108,317) 620,796
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, 2006
Accumulated Depletion
Cost and Depreciation Net Book Value
$000's $000's $000's
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Petroleum and natural gas
properties and equipment 401,626 (63,468) 338,158
Office and other
equipment 1,027 (422) 605
----------------------------------------------------------------------------
402,653 (63,890) 338,763
----------------------------------------------------------------------------
----------------------------------------------------------------------------


As at September 30, 2007, the cost of petroleum and natural gas properties includes $33.9 million (as at December 31, 2006 - $48.3 million) relating to unproved properties which have been excluded from costs subject to depletion and depreciation. The majority of these costs relate to unproved properties acquired in the Corporation's significant acquisition in June of 2005.

Birchcliff capitalized general and administrative costs of $796,000 in the nine month period ended September 30, 2007 (nine months ended September 30, 2006 - $700,000) and $243,000 in the three month period ended September 30, 2007 (three months ended September 30, 2006 - $259,000) related to exploration and development activities.

5. NON-REVOLVING CREDIT FACILITY

Birchcliff entered into an Acquisition Credit Agreement with a syndicate of banks on September 4, 2007. The agreement allowed for Birchcliff to make a one time draw of up to $100 million on a non-revolving credit facility for the purpose of closing the Worsley Acquisition. The credit facility matures one year from the date of drawdown and has no other terms for extension. The interest applicable to prime loan advances under the agreement is prime plus 2.5% for the first six months and prime plus 3% for the final six months. The interest applicable to advances using bankers acceptances would be the prevailing bankers acceptance rate at the time plus a 3.5% stamping fee. On September 27, 2007 the Corporation gave notice to draw the entire amount of the credit facility in bankers acceptances. The drawn amount at September 30, 2007 is $97.4 million with the $2.6 million difference being the discounted value from the $100 million credit facility limit based on the market interest rate at that time for bankers acceptances. This facility is subordinate to the revolving term credit facilities.

6. RISK MANAGEMENT CONTRACTS

Birchcliff is exposed to a number of financial risks that are part of its normal course of business. The Corporation has implemented a risk management program that includes financial instruments as disclosed in this note. The objective of the risk management program is to mitigate the Corporation's exposure to commodity price fluctuations.

Oil and natural gas prices have fluctuated widely during recent years and are determined by economic and, in the case of oil prices, political factors. Supply and demand factors, including weather and general economic conditions as well as conditions in other oil and natural gas producing regions impact prices. Any movement in oil and natural gas prices could have an effect on Birchcliff's financial condition. The Corporation may manage the risk associated with changes in commodity prices by entering into oil or natural gas price derivative contracts. To the extent that Birchcliff engages in risk management activities related to commodity prices, it will be subject to credit risks associated with counterparties with which it contracts.

Financial Instruments

Financial instruments of the Corporation carried on the balance sheet consist mainly of cash and cash equivalents, accounts receivable, reclamation funds, accounts payable and accrued liabilities, non-revolving credit facility, other long-term liabilities, commodity contracts and revolving credit facilities.

Except as noted below, as at September 30, 2007 there were no significant differences between the carrying value of these financial instruments and their estimated fair value due to their short-term nature.

Derivative Contracts

Following is a summary of all derivative contracts in place as at September 30, 2007 in order to mitigate the risks discussed above. Each contract is settled on the average of the daily NYMEX WTI US$ price:




Financial WTI Crude Oil Contracts

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Volume Bought Sold Call
Term Contract (bbls/d) Put($US/bbl) ($US/bbl)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
November 1 -
December 31, 2007 Costless collar 2,500 65.00 81.00
January 1 -
March 31, 2008 Costless collar 1,000 67.50 81.40
January 1 -
December 31, 2008 Costless collar 1,000 67.50 79.10
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The Corporation considers all of these transactions to be effective economic hedges, however, none of the commodity contracts have been designated as effective accounting hedges for accounting purposes. Accordingly, all commodity contracts have been accounted for as assets and liabilities in the balance sheet based on their fair values.

The following table reconciles the movement in the fair value of the financial commodity contracts that have not been designated as effective accounting hedges:



----------------------------------------------------------------------------
----------------------------------------------------------------------------
September September
30, 2007 30, 2006(1)
$000s $000s
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Fair value, beginning of period - -
Fair value, end of period - current portion (1,099) -
Fair value, end of period - non-current portion (76) -
----------------------------------------------------------------------------
Change in fair value of contracts in the period (1,175) -
Realized gains (losses) in the period - -
----------------------------------------------------------------------------
Unrealized loss on risk management contracts (1,175) -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Birchcliff did not have any risk management contracts in place until
September 2007.


At September 30, 2007, the fair value of the contracts that were not designated as accounting hedges was a loss of approximately $1.2 million. The Corporation recorded an unrealized loss on risk management contracts of approximately $1.2 million in the statement of income (loss) for the three and nine months ended September 30, 2007 (three and nine months ended September 30, 2006 - NIL). This amount may include the realized and unrealized gains and losses on risk management contracts that do not qualify as effective accounting hedges.



7. REVOLVING CREDIT FACILITIES

----------------------------------------------------------------------------
----------------------------------------------------------------------------
September December
30, 2007 31, 2006
$000s $000s
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revolving credit facilities
Syndicated credit facility 148,795 75,571
Working capital facility 4,565 5,733
----------------------------------------------------------------------------
153,360 81,304
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The Corporation has available to it an extendible revolving term credit facility with an authorized limit of $180 million and an extendible revolving working capital facility with an authorized limit of $20 million. The $180 million syndicated credit facility is provided by a syndicate of three banks (the "Syndicate"). The $20 million working capital facility is provided by the lead bank in the current bank syndicate. As at September 30, 2007, Birchcliff had drawn $153.4 million on the credit facilities. At September 30, 2007, the prime rate that may be applicable to the working capital facility was 6.25% .

The credit facilities allow for prime rate loans, US base rate loans, bankers' acceptances, letters of credit and LIBOR loans. The interest rates applicable to the drawn loans are passed on a pricing grid and will increase as a result of the increased ratio of outstanding indebtedness to earnings before interest, taxes, depreciation and amortization.

The syndicated credit facility has a conversion date of May 23, 2008 and a maturity date which is two years after the conversion date. Birchcliff may request an extension of the conversion date with such an extension not exceeding 364 days, in order to maintain the revolving term facility. If the Syndicate does not grant an extension of the conversion date, then upon the expiry of the conversion date, the revolving term facility will convert to a term loan whereby all principal and interest will be required to be repaid at the maturity date.

The working capital facility has a conversion date of May 23, 2008 and a maturity date which is two years after the conversion date. Birchcliff may request an extension of the conversion date with such an extension not exceeding 364 days, in order to maintain the revolving working capital facility. If the Syndicate does not grant an extension of the conversion date, then upon 4 months after the expiry of the conversion date, the revolving working capital facility will convert to a term loan whereby all principal and interest will be required to be repaid at the maturity date.

The credit facilities are subject to the Syndicate's redetermination of the borrowing base twice a year as of October 31 and the conversion date. Upon any change in or redetermination of the borrowing base limit which results in a borrowing base shortfall, Birchcliff must eliminate the borrowing base shortfall amount. The facility is secured by a fixed and floating charge debenture, an instrument of pledge, and a general security agreement encompassing all of the Corporation's assets.

8. ASSET RETIREMENT OBLIGATIONS

The Corporation's asset retirement obligations result from net ownership interests in petroleum and natural gas properties including well sites, gathering systems and processing facilities. Birchcliff estimates the total undiscounted amount of cash flows required to settle its asset retirement obligations as at September 30, 2007 to be approximately $59.6 million to be incurred between 2007 and 2056. A credit-adjusted risk-free interest rate of 8% and an inflation rate of 2% were used to calculate the fair value of the asset retirement obligation.

A reconciliation of the asset retirement obligations is provided below:




----------------------------------------------------------------------------
----------------------------------------------------------------------------
September December
($000's) 30, 2007 31, 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Opening Balance 11,270 9,251
Obligations incurred 673 1,387
Obligations acquired (Note 3) 5,919 -
Changes in estimate - 389
Accretion expense 834 813
Actual expenditures incurred (396) (570)
----------------------------------------------------------------------------
Ending Balance 18,300 11,270
----------------------------------------------------------------------------
----------------------------------------------------------------------------


9. SHARE CAPITAL

(a) Authorized:

Unlimited number of voting common shares

Unlimited number of non-voting preferred shares

The preferred shares may be issued in one or more series and the directors are authorized to fix the number of shares in each series and to determine the designation, rights, privileges, restrictions and conditions attached to the shares of each series.



(b) Issued:

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Number of Amount
Common Shares $
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Balance, December 31, 2005 58,147,747 214,951,344

Issued upon exercise of stock options 51,666 245,614
Tax effect of flow-through shares
(Note (c) and (d)) - (7,997,000)
Share issue costs (Note (e)) - (19,321)
Tax effect of share issue costs (Note (e)) - 6,500
Issued, net of costs (Note (f)) 5,940,000 28,437,352
Tax effect of share issue costs (Note (g)) - 533,500
----------------------------------------------------------------------------
Balance, December 31, 2006 64,139,413 236,157,989

Issued upon exercise of stock options 50,000 222,000
Tax effect of flow-through shares (Note (f)) - (4,770,000)
----------------------------------------------------------------------------
Balance, March 31, 2007 and June 30, 2007 64,189,413 231,609,989

Issued upon exercise of stock options 20,000 88,800
Issued, net of costs (Note (h)) 30,263,170 108,915,198
Tax effect of share issue costs (Note (i)) - 1,836,500
----------------------------------------------------------------------------
Balance, September 30, 2007 94,472,583 342,450,487
----------------------------------------------------------------------------
----------------------------------------------------------------------------


(c) On June 2, 2005, Birchcliff issued 2,000,000 flow-through shares at $5.00 per common share in exchange for flow-through share commitments made by Veracel Inc. prior to completion of a Plan of Arrangement, for net proceeds of $9,473,920. As at December 31, 2005 the commitment to spend and renounce $10,000,000 of qualified tax pools with respect to these flow-through shares was fulfilled.

(d) On December 20, 2005, Birchcliff issued 1,482,400 flow-through shares at a price of $9.12 per share for net proceeds of $12,876,768. As at December 31, 2005 Birchcliff renounced $13,519,488 of qualified tax pools with respect to these flow-through shares. As at December 31, 2006 the commitment to spend and renounce $13,519,488 of qualified tax pools with respect to these flow-through shares was fulfilled.

(e) Birchcliff recognized a future tax benefit of $6,500 in respect of share issue costs of $19,321 recorded in 2006 relating to the issuance of flow-through shares on December 20, 2005.

(f) On November 22, 2006, Birchcliff issued 2,740,000 flow-through shares at a price of $5.85 per share and 3,200,000 common shares at a price of $4.40 per share for total net proceeds of $28,437,352. In February 2007, the Corporation filed the necessary forms to renounce $16,029,000 of qualified tax pools, effective December 31, 2006, with respect to the flow-through shares. As at September 30, 2007 the commitment to spend and renounce $16,029,000 of qualified tax pools with respect to these flow-through shares was fulfilled.

(g) Birchcliff recognized a future tax benefit of $533,500 in respect of share issue costs of $1,671,649 incurred with respect to the issuance of 5,940,000 shares on November 22, 2006.

(h) On September 27, 2007, Birchcliff issued 30,263,170 common shares at a price of $3.80 per share for total net proceeds of $108,915,198.

(i) Birchcliff recognized a future tax benefit of $1,836,500 in respect of share issue costs of $6,084,848 incurred with respect to the issuance of 30,263,170 common shares on September 27, 2007.

10. STOCK-BASED COMPENSATION

The Corporation has established a stock-based compensation plan whereby officers, employees, directors and consultants may be granted options or performance warrants to purchase one common share for each option or performance warrant granted, at a fixed price not less than the fair market value of the stock at the time of grant, subject to certain conditions being met. Stock options granted under this plan vest over a three year period at the rate of one-third on each anniversary date of the stock option grant. All stock options granted are for a five year term.

In order to calculate the compensation expense, the fair value of the stock options or performance warrants is estimated using the Black-Scholes option-pricing model that takes into account, as of the grant date: exercise price, expected life, current price, expected volatility, expected dividends, and risk-free interest rates.

Stock Options

For the nine months ended September 30, 2007, the Corporation recorded an expense of $1.3 million (2006 - $2.1 million) and for the three months ended September 30, 2007 an expense of approximately $738,000 (2006 - $663,000) of non-cash stock-based compensation expense and a corresponding increase to contributed surplus related to the issuance of stock options and forfeiture of unvested options during the period. During the nine months ended September 30, 2007, the Corporation also recorded cash stock-based compensation expense of $44,000 (nine months ended September 30, 2006 - $137,000). During the three months ended September 30, 2007, the Corporation recorded cash stock-based compensation expense of $NIL (three months ended September 30, 2006 - $NIL).

Using the fair value method, the weighted average fair value of stock options granted during the nine months ended September 30, 2007 was $2.06 per share under option.

At September 30, 2007, the Corporation's Amended and Restated Stock Option Plan permitted the grant of options in respect of 9,447,258 common shares. At September 30, 2007, there remained available for grant options in respect of 4,622,924 common shares.

A summary of the changes during the nine months ended September 30, 2007 is presented below:



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted
Average
Exercise
Price
Number $
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Outstanding, December 31, 2006 4,279,668 4.66

Granted 1,908,000 3.89
Exercised (50,000) (3.00)
Forfeited (322,501) (5.56)
Cancelled (44,999) (3.33)
----------------------------------------------------------------------------
Outstanding, March 31, 2007 5,770,168 4.37

Granted 100,000 4.90
Forfeited (1,095,168) (6.93)
Cancelled (5,000) (3.00)
----------------------------------------------------------------------------
Outstanding, June 30, 2007 4,770,000 3.80

Granted 227,000 4.34
Exercised (20,000) (3.00)
Forfeited (152,666) (4.91)
Outstanding, September 30, 2007 4,824,334 3.79
----------------------------------------------------------------------------
----------------------------------------------------------------------------


A summary of the stock options outstanding and exercisable under the plan at September 30, 2007 is presented below:



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Options outstanding Options exercisable
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Number Weighted Number
Outstanding Average Weighted Exercisable Weighted
at Remaining Average at Average
September Contractual Exercise September Exercise
Date of Grant 30, 2007 Life Price ($) 30, 2007 Price ($)

December 3, 2004 (1) 1,433,334 2.3 3.00 935,001 3.00
Apr 20 to
Jun 22, 2005 901,834 2.6 3.79 599,001 3.79
Jul 4 to
Sep 9, 2005 78,500 2.8 4.35 52,333 4.35
Oct 6 to
Nov 28, 2005 95,000 3.1 6.24 45,000 6.26
Jan 11 to
Mar 6, 2006 86,666 3.3 7.15 31,666 7.14
Apr 11 to
Apr 25, 2006 5,000 3.5 6.86 1,667 6.86
Aug 14 to
Sep 26, 2006 82,000 3.9 5.37 27,333 5.37
Oct 23, 2006 15,000 4.1 4.12 - -
Jan 23 to
Mar 31, 2007 1,800,000 4.3 3.89 - -
May 1 to
May 14, 2007 100,000 4.6 4.90 - -
Jul 16 to
Sep 27, 2007 227,000 4.9 4.34 - -
----------------------------------------------------------------------------

4,824,334 3.4 3.79 1,692,001 3.53
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) All options granted under the stock-based compensation plan vest as to
one-third on each anniversary date of their grant except for the initial
options granted. These options vest one-third on January 1 in each of
the years 2006, 2007 and 2008.


Performance Warrants

At September 30, 2007, there were 3,749,665 performance warrants outstanding with an exercise price of $3.00. Each performance warrant entitles the holder to purchase one common share at the exercise price.

For the nine months ended September 30, 2007, the Corporation recorded $NIL (nine months ended September 30, 2006 - $NIL) compensation expense in the statement of net income (loss) relating to stock based compensation for the performance warrants.

A summary of the changes during the nine months ended September 30, 2007 and the Corporation's outstanding performance warrants as at September 30, 2007 is presented below:



----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted Average
Exercise Price
Number $
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Outstanding, December 31, 2006 3,749,665 3.00
Issued - -
Exercised - -
----------------------------------------------------------------------------
Outstanding, March 31, June 30 and September
30, 2007(1) 3,749,665 3.00
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) No additional performance warrants have been issued and none have been
exercised.


----------------------------------------------------------------------------
----------------------------------------------------------------------------
Number Number
Outstanding Exercisable
at September Exercise at September
Date of Grant 30, 2007 Date of Expiry Price 30, 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------

January 14, 2005 3,749,665 January 31, 2010 $ 3.00 3,749,665
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The fair value of each option and performance warrant was determined on the date of the grant using the Black-Scholes option-pricing model. The weighted average assumptions used in calculating the fair values are set forth below:



----------------------------------------------------------------------------
----------------------------------------------------------------------------
2007 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Risk-free interest rate 4.1% 4.0%
Expected maturity (years) 5.0 5.0
Expected volatility 55.51% 41.4%
Dividend yield 0% 0%
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Contributed Surplus Continuity

----------------------------------------------------------------------------
----------------------------------------------------------------------------
$000's $000's
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, December 31, 2005 6,579
Stock-based compensation expense - stock options 2,707
Stock-based compensation expense - forfeiture of
stock options (153)
Stock-based compensation expense - cancellation of
stock options 137
---------
Stock-based compensation expense - total 2006 2,691

Exercise of stock options (66)
Cancellation of stock options (214)
---------
Balance, December 31, 2006 8,990
Stock-based compensation expense - stock options 858
Stock-based compensation expense - forfeiture of
stock options (141)
Stock-based compensation expense - cancellation of
stock options (24)
---------
Stock-based compensation expense - Q1 2007 693

Exercise of stock options (71)
Cancellation of stock options (35)
---------
Balance, March 31, 2007 9,577

Stock-based compensation expense - stock options 796
Stock-based compensation expense - forfeiture of
stock options (897)
Stock-based compensation expense - cancellation of
stock options 3
---------
Stock-based compensation expense - Q2 2007 (98)

Cancellation of stock options (10)
---------
Balance, June 30, 2007 9,469

Stock-based compensation expense - stock options 804
Stock-based compensation expense - forfeiture of
stock options (66)
Stock-based compensation expense - cancellation of
stock options -
---------
Stock-based compensation expense - Q3 2007 738

Exercise of stock options (28)
Cancellation of stock options -
----------------------------------------------------------------------------
Balance, September 30, 2007 10,179
----------------------------------------------------------------------------
----------------------------------------------------------------------------


11. COMMITMENTS

Office Premises

The Corporation is committed under an operating lease for its current office premises which expires on September 30, 2008. Effective November 30, 2007 Birchcliff intends to surrender this operating lease and will cease to be committed to lease payments for that premises.

The Corporation is committed under a new operating lease beginning December 1, 2007 which expires on November 30, 2017. Birchcliff will not use all of the space and has sublet the excess space to an arms' length party on a basis that recovers approximately 50% of the rental costs for the first five years. The Corporation is committed to the following aggregate minimum lease payments (not reduced by rents receivable by the Corporation):



-------------------------------------------
-------------------------------------------
Year $000s
-------------------------------------------
-------------------------------------------

2007 399
2008 2,836
2009 2,852
2010 2,868
2011 2,884
Thereafter 17,992
-------------------------------------------
-------------------------------------------


It is also committed to March 29, 2011 under an operating lease for another premises that it does not use and has sublet to a credit worthy arm's length party on a basis that recovers all of its rental costs.

Reclamation Costs

During September 2007, a reclamation event occurred at one of Birchcliff's non-operated facilities, the bulk of the costs for which Birchcliff believes will be covered under its insurance policies. The total net cost to Birchcliff is currently estimated to be $357,000. Birchcliff has recorded only its $100,000 insurance deductible in the current period operating costs. Should the costs of this reclamation event not be covered under Birchcliff's insurance policies then the full amount of the costs will be charged to operating expenses in future periods. The insurers are currently in the process of reviewing the matter to determine whether the costs will be covered under the Corporation's existing insurance policies.

Flow-Through Shares

In the fourth quarter of 2006, the Corporation committed to renounce $16,029,000 of exploration expenses pursuant to a flow-through share issue completed on November 22, 2006. Birchcliff has until December 31, 2007 to incur these exploration expenditures. The Corporation is subject to a
Part XII.6 tax based on the prescribed rate and the balance of exploration expenditures not yet incurred at the end of each month subsequent to January 31, 2007. As at September 30, 2007, the Corporation had fulfilled its obligation with respect to the flow-through shares.



12. SUPPLEMENTARY CASH FLOW INFORMATION

The following table details the components of non-cash working capital:

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

Three months Three months Nine months Nine months
ended ended ended ended
September September September September
30, 30, 30, 30,
2007 2006 2007 2006
----------------------------------------------------------------------------
----------------------------------------------------------------------------
$000's $000's $000's $000's
----------------------------------------------------------------------------
Provided by (used in)
Accounts receivable (1,686) 193 (140) 5,927
Prepaid and other (138) 107 194 (1,849)
Accounts payable &
accrued liabilities 10,204 (348) 5,234 (12,834)
----------------------------------------------------------------------------
8,380 (48) 5,288 (8,756)
----------------------------------------------------------------------------

Operating 779 (4,473) (783) 590
Investing 7,601 4,425 6,071 (9,346)
----------------------------------------------------------------------------
8,380 (48) 5,288 (8,756)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Advisory

FORWARD LOOKING STATEMENTS

Certain information set forth in this press release contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond Birchcliff's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the competition for qualified personnel and management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect and, as such, undue reliance should not be placed on forward-looking statements. Birchcliff's actual results, performance or achievement could differ materially from those expressed in or implied by these forward-looking statements, and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits will derive therefrom. Except as required by law, Birchcliff disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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

Birchcliff is a publicly traded company that trades on the
TSX Exchange under the symbol "BIR".

The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Birchcliff Energy Ltd.
    Jeff Tonken
    President and Chief Executive Officer
    (403) 261-6401
    (403) 261-6424 (FAX)
    or
    Birchcliff Energy Ltd.
    Bruno Geremia
    Vice President and Chief Financial Officer
    (403) 261-6401
    (403) 261-6424 (FAX)
    or
    Birchcliff Energy Ltd.
    Jim Surbey
    Vice President, Corporate Development
    (403) 261-6401
    (403) 261-6424 (FAX)