Caza Oil & Gas, Inc.
TSX : CAZ
AIM : CAZA

Caza Oil & Gas, Inc.

November 05, 2009 02:00 ET

Caza Oil & Gas Announces Third Quarter Results

HOUSTON, TEXAS--(Marketwire - Nov. 5, 2009) - Caza Oil & Gas, Inc. ("Caza" or the "Company") (TSX:CAZ)(AIM:CAZA) is pleased to provide unaudited financial and operational results for the three month period ended September 30, 2009.

Operational highlights for the quarter include:

- Lucky Penny 10 State #1 and Moore Bailout 11 State #1 wells placed on production in New Mexico;

- Drilling operations in New Mexico continue at the Bada Bing 23 State #1; scheduled to be followed by drilling of the Moore Cowbell 27 State #1;

- Caza continues to increase its acreage position in the Abo-Wolfcamp play in New Mexico;

- Caza's production was 116,016 Mcfe for the period, up 27% from 91,463 Mcfe for the comparative period in 2008.

Financial highlights for the quarter include:

- Caza had a positive funds flow from operations for the period of $157,545 as compared to $117,808 funds flow used in operations in the 2nd quarter 2009 and $841,092 funds flow used for the same period in 2008;

- G&A expenses for the period were $267,295, down from $1,857,337 for the comparative period in 2008, due to reductions in G&A expenses and reimbursements from joint venture partners;

- Caza maintained a cash balance of $11.1 million for the period, relatively unchanged from the previous quarter ($11.2 million) despite drilling and leasing activity.

W. Michael Ford, Chief Executive Officer commented:

"We have been active during the quarter acquiring acreage and drilling along with our partners Endeavour International and Wise Oil & Gas. The Endeavour farmout de-risked and accelerated our drilling activities, which provides Caza opportunities for growth in both production and reserves. Additionally, Caza has maintained its strong cash position and posted positive funds flow from operations for the quarter."

Copies of the Company's unaudited financial statements for the third quarter ended September 30, 2009, and the accompanying management's discussion and analysis are available on SEDAR at www.sedar.com and the Company's website at www.cazapetro.com.

In accordance with AIM Rules - Guidance Note for Mining, Oil and Gas Companies, the information contained in this announcement has been reviewed and approved by Anthony B. Sam, Vice President Operations of Caza who is a Petroleum Engineer and a member of The Society of Petroleum Engineers.

ADVISORY REGARDING FORWARD LOOKING STATEMENTS

Information in this news release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws. Such information is often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "schedule", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. Information regarding the Endeavour farmout agreement contained in this news release constitutes forward-looking information within the meaning of securities laws.

Implicit in this information, particularly in respect of "joint ventures", "Endeavour farmout", "operations" and "leasing and drilling activity" are assumptions regarding projected revenue and expenses. Specifically, the Company has assumed that these agreements and/or activities will produce positive results. These assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual future operating results and economic performance of the Company are subject to a number of risks and uncertainties, including general economic, market and business conditions and could differ materially from what is currently expected as set out above.

For more exhaustive information on these risks and uncertainties you should refer to the Company's most recently filed annual information form which is available at www.sedar.com. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time.

Mcfe may be misleading, particularly if used in isolation. An Mcfe conversion ratio of 1 bbl:6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following interim Management's Discussion and Analysis ("MD&A") of the financial results for Caza Oil & Gas, Inc. ("Caza" or the "Company") should be read in conjunction with the unaudited consolidated interim financial statements as at and for the three and nine month periods ended September 30, 2009, the audited consolidated financial statements and MD&A for the year ended December 31, 2008 and the corresponding Annual Information Form. Additional information relating to the Company can be found on SEDAR at www.sedar.com. All figures herein have been prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP") unless otherwise stated. This MD&A is dated November 5, 2009.

Forward Looking Information

In addition to historical information, the MD&A contains forward-looking statements that are generally identifiable as any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events of performance (often, but not always, through the use of words or phrases such as "will", "may", "will likely result", "expected", "is anticipated", "believes", "estimated", "intends", "plans", "projection" and "outlook"), are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements.

These statements are based on certain factors and assumptions regarding the results of operations, the performance of projected activities and business opportunities. Specifically, we have used historical knowledge and current industry trends to project budgeted expenditures for 2009 and into 2010. While we consider these assumptions to be reasonable based on information currently available to us, they may prove to be incorrect.

Actual results achieved will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Such factors include, but are not limited to: risks associated with the Company's stage of development; competitive conditions; share price volatility; risks associated with crude oil and natural gas exploration and development; risks related to the inherent uncertainty of reserves and resources estimates; possible imperfections in title to properties; the volatility of crude oil and natural gas prices and markets; environmental regulation and associated risks; loss of key personnel; operating and insurance risks; the inability to add reserves; risks associated with industry conditions; the ability to obtain additional financing on acceptable terms if at all; non operator activities; the inability of investors in certain jurisdictions to bring actions to enforce judgments; equipment unavailability; potential conflicts of interest; risks related to operations through subsidiaries; risks related to foreign operations; currency exchange rate risks and other factors, many of which are beyond the control of the Company. Accordingly, there is no representation by Caza that actual results achieved during the forecast period will be the same in whole or in part as that forecast. Further, Caza undertakes no obligation to update or revise any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as required by applicable securities laws.

Financial outlook information contained in this MD&A about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this MD&A should not be used for purposes other than for which it is disclosed herein.

Non-GAAP Measures

The financial data presented herein has been prepared in accordance with GAAP. The Company has also used certain measures of financial reporting that are commonly used as benchmarks within the oil and natural gas production industry in the following MD&A. The measures are widely accepted measures of performance and value within the industry, and are used by investors and analysts to compare and evaluate oil and natural gas exploration and producing entities. Most notably, these measures include "operating netback" and "funds flow from (used in) operations". Operating netback is a benchmark used in the crude oil and natural gas industry to measure the contribution of oil and natural gas sales and is calculated by deducting royalties and operating expenses from revenues. Funds flow from (used in) operations is cash flow from operating activities before changes in non-cash working capital, and is used to analyze operations, performance and liquidity. These measures are not defined under GAAP and should not be considered in isolation or as an alternative to conventional GAAP measures. These measures and their underlying calculations are not necessarily comparable or calculated in an identical manner to a similarly titled measure of another entity. When these measures are used, they are defined as "non GAAP" and should be given careful consideration by the reader.

Note Regarding Boe and Mcfe

In this MD&A, barrels of oil equivalent ("Boes") are derived by converting gas to oil in the ratio of six thousand cubic feet ("Mcf") of gas to one barrel ("bbl") of oil (6 Mcf:1 bbl) and one thousand cubic feet of gas equivalent ("Mcfes") are derived by converting oil to gas in the ratio of one bbl of oil to six Mcf (1 bbl:6 Mcf). Boes and Mcfes may be misleading, particularly if used in isolation. A Boe conversion of 6 Mcf of natural gas to 1 bbl of oil, or a Mcfe conversion ratio of 1 bbl of oil to 6 Mcf of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.

Currency

References to "dollars" and "$" are of U.S. dollars and references to "CDN$" are to Canadian dollars.

FINANCIAL AND OPERATING RESULTS

Petroleum and Production Revenue



Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
Natural gas
Production (Mcf) 92,429 83,727 263,034 257,655
Revenue ($) 297,718 772,393 934,274 2,483,020
Price ($/Mcf) 3.22 9.23 3.55 9.64
--------------------------------------------------------------------------

Natural gas liquids
Production (bbls) 248 884 1,011 1,361
Revenue ($/bbl) 16,227 85,583 45,039 136,554
Price ($/bbl) 65.38 96.78 44.53 100.34
--------------------------------------------------------------------------

Oil Production
Production (bbls) 3,682 405 13,655 702
Revenue ($/bbl) 239,848 47,079 689,479 82,129
Price ($/bbl) 65.13 116.22 50.49 116.94
--------------------------------------------------------------------------

Combined
Production (Mcfe) 116,013 91,463 351,032 270,033
Revenue ($) 553,793 905,055 1,668,792 2,701,703
Price ($/Mcfe) 4.77 9.90 4.74 10.01
--------------------------------------------------------------------------


Mcfe/d 1,261 994 1,286 989
--------------------------------------------------------------------------
Boe/d 210 166 214 165
--------------------------------------------------------------------------


Revenues from oil and gas sales decreased 39% to $553,793 for the three-month period ended September 30, 2009 from $905,055 for the three-month period ended September 30, 2008 (the "comparative period") and were 38% lower than the nine-month period ended September 30, 2008. Caza's production increased 27% to 116,016 Mcfe for the three-month period ended September 30, 2009, up from 91,463 Mcfe for the comparative period. This represents an average daily production rate increase of 267 Mcfe/d for the three months ended September 30, 2009 to 1,261 Mcfe/d, as compared to 994 Mcfe/d for the comparative period. The average natural gas price received by Caza decreased 52% to $4.77 per Mcfe during the three-month period ended September 30, 2009 from $9.90 per Mcfe during the comparative period. The decrease in revenues from the third quarter of 2008 is a result of the decrease in commodity prices. Presently the Company has not hedged any of its production and does not have any commodity price management programs in place.

Operating Netback Summary

The following table reconciles the Company's operating netback which is considered to be a non-GAAP measure:



Three months ended Nine months ended
September 30, September 30,
(on a Mcfe basis) 2009 2008 2009 2008
--------------------------------------------------------------------------
Oil and natural gas
revenue $ 4.77 $ 9.90 $ 4.75 $ 10.01
Production expense (1.36) (0.77) (1.33) (0.74)
Severance expense (0.35) (0.73) (0.34) (0.71)
Transportation expense (0.18) (0.17) (0.13) (0.14)
--------------------------------------------------------------------------
Operating netback
(non-GAAP) 2.88 8.23 2.95 8.42


Production Expenses

Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
Severance ($) 40,867 67,074 119,433 190,857
Transportation ($) 21,079 15,489 45,863 37,672
Production ($) 157,763 70,766 467,950 199,764
--------------------------------------------------------------------------
Severance, transportation
and production ($) 219,709 153,329 633,246 428,293
Severance, transportation
and production ($/Mcfe) 1.89 1.68 1.80 1.59
--------------------------------------------------------------------------


Severance taxes and transportation expenses totaled $61,946 ($0.53/Mcfe) for the three-month period ended September 30, 2009, representing a decrease of 25% from $82,563 ($0.90/Mcfe) incurred during the comparative period. Severance tax is a tax imposed by states on natural resources such as crude oil, natural gas and condensate extracted from the ground. The tax is calculated by applying a rate to the dollar amount of production from the property or a set dollar amount applied to the volumes produced from the property. The decrease in severance taxes and transportation costs are a result of a 52% decrease in the average commodity price received by Caza during the third quarter of 2009.

Production expenses for the three-month period ended September 30, 2009 was $157,763 compared to $70,766 for the comparative period. Caza's average lifting cost for the three-month period ended September 30, 2009 was $1.36 per Mcfe versus $0.77 per Mcfe for the comparative period. This increase in lifting costs occurred as a result of the natural decline in production of certain wells and the bringing on of new wells which currently have higher lifting costs than our historical average.

Depletion, Depreciation and Accretion



Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
Depletion and
depreciation ($) 614,251 320,042 2,006,738 991,152
Accretion ($) 6,154 3,566 18,461 10,698
--------------------------------------------------------------------------
Depletion, depletion
and accretion ($) 620,405 323,608 2,025,199 1,001,850
Depletion, depletion
and accretion ($/Mcfe) 5.35 3.54 5.77 3.71
--------------------------------------------------------------------------


Depletion, depreciation, amortization and accretion expense for the three months ended September 30, 2009 increased to $620,405 ($5.35/Mcfe) from $323,608 ($3.54/Mcfe) in the comparative period. The increase resulted from drilling costs associated with, and production from, the wells drilled by Caza during 2008.

Costs of acquiring unproved properties of $11,364,481 were excluded from depletable costs in accordance with Canadian Institute of Chartered Accountants Accounting Guideline 16. A proportionate amount of the carrying value will be transferred to the depletable pool as reserves are proven up through the execution of Caza's exploration programs.

General and Administrative Expenses



Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
General and
administrative ($) 938,483 1,889,194 3,179,031 4,606,074
Joint venture partner
reimbursements ($) (608,854) - (1,184,676) -
General and
administrative
recovery ($) (62,334) (31,857) (109,384) (148,921)
--------------------------------------------------------------------------
Net general and
administrative ($) 267,295 1,857,337 1,884,971 4,457,153
General and
administrative ($/Mcfe) 8.09 20.66 9.05 17.08
Net general and
administrative ($/Mcfe) 2.30 20.31 5.37 16.52
--------------------------------------------------------------------------


Net general and administrative expenses were $267,291 for the three-month period ended September 30, 2009 and $1,857,337 for the comparative period. Stock-based compensation expense in the amount of $114,229 is included in general and administrative expenses for the three-month period ended September 30, 2009 ($149,215 in 2008). During the three-month period ended September 30, 2009, Caza capitalized general and administrative expenses relating to exploration and development activities of $58,887, of which $39,422 related to capitalized stock-based compensation. Under certain joint venture agreements Caza receives reimbursements of general and administrative expenses.

Net loss

Caza incurred a net loss of $553,423 for the three-month period ended September 30, 2009 compared to a net loss of $2,164,475 during the comparative period. The decrease in net loss from the comparative period occurred as a result of significant reductions in general and administrative expenses, reimbursements from joint venture partners and the de-recognition of future income tax assets in the second quarter of 2008.

Investments

Interest income for the three-month period ended September 30, 2009 was $193 down from $132,295 during the same period in 2008. Caza invested its cash in short-term money market funds. The Company does not hold any asset backed commercial paper.

Funds flow from (used in) operations (Non-GAAP)

The following is a reconciliation of funds flow used in operations to net loss:

The Company had a funds flow from operations for the three month period ended September 30, 2009 of $157,545 as compared to a funds flow used in operations for the three month period ended September 30, 2008 of $841,092.



Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
Net loss (553,423) (2,164,475) (2,871,550) (3,336,861)
Depletion, depreciation,
amortization and
accretion 620,405 323,608 2,025,199 1,001,850
Stock-based compensation 90,563 149,215 363,212 401,441
Asset retirement
obligations settled - - - (9,767)
Future income tax
expense (recovery) - 850,560 - 426,082
--------------------------------------------------------------------------
Funds flow from (used in)
operations 157,545 (841,092) (483,139) (1,517,255)

--------------------------------------------------------------------------
Funds loss per share
- basic and diluted 0.00 (0.01) (0.00) (0.01)
--------------------------------------------------------------------------


Capital Expenditures

Three months ended Nine months ended
September 30, September 30,
By Type ($) 2009 2008 2009 2008
--------------------------------------------------------------------------
Drilling and completions (79,393) 4,283,732 150,765 9,840,167
Seismic - - 19,427 166,314
Facilities and lease
equipment 28,616 175,690 230,765 1,438,223
Office furnishings and
equipment 7,464 47,761 7,464 121,969
Leasehold/geological
/geophysical 286,301 1,664,782 922,950 1,955,737
Other costs (recovery) 118,323 519,147 142,907 559,009
--------------------------------------------------------------------------
Total 361,311 6,691,112 1,474,278 14,081,419


During the nine month period ended September 30, 2009 Caza initiated the 2009 drilling schedule with the Lucky Penny 10 State #1 and the Moore Bailout 11 State #1 wells located in Lea County, New Mexico. Caza plans to drill sequentially 4 Abo-Wolfcamp wells in 2009. During the nine month period ended September 30, 2009, as a result of joint venture agreements the Company received payments for prior period costs of $556,589 of lease acquisition costs and seismic reprocessing costs of $435,500. In addition, the Company increased its working interests in certain oil and gas properties in consideration for the settlement of certain joint venture accounts receivable due to the Company.

Outstanding Share Data

Caza is authorized to issue an unlimited number of common shares without par value, of which 119,319,000 common shares are currently issued and outstanding. An additional 26,502,000 common shares are issuable pursuant to certain exchange rights attached to certain outstanding common shares of Caza Petroleum.

The following table sets forth the classes and number of outstanding securities of the Company and the number of issued and issuable Common Shares on a fully diluted basis. See note 5 to the corresponding interim financial statements.



Issued and
Issuable
Securities
Common Shares
Issued and outstanding 119,319,000
Issuable from exchangeable shares 26,502,000
Issuable from exercise of warrants 19,800,000
Issuable from exercise of broker warrants 700,000
Issuable from exercise of stock options 6,118,334
-----------
Total Common Shares issued and issuable 172,439,334
-----------
-----------


Warrants Issued
Warrants to purchase common shares 19,800,000
Broker warrants 700,000
-----------
Total warrants 20,500,000
-----------

Stock Options Issued
Total stock options outstanding 6,118,334
-----------


Commitments

The following is a summary of the estimated amounts required to fulfill Caza's remaining contractual commitments as at September 30, 2009:



less
Type of than 1-3 4-5
Obligation ($) Total 1 Year Years Years Thereafter
----------------------------------------------------------------------------
Operating leases 48,674 48,674 - - -
Asset obligations retirement 767,972 11,714 105,909 79,259 571,090
----------------------------------------------------------------------------
Total commitments contractual 816,646 60,388 105,909 79,259 571,090
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Liquidity and Capital Resources

At September 30, 2009, Caza had a working capital surplus of $8,854,631 (December 31, 2008 $10,812,048). The decrease in working capital of $1,957,416 for the nine month period was a result of a net funds outflow from operations of $483,139 and capital expenditures of $1,474,278. During the quarter ended September 30, 2009 the Company's cash position decreased to $11,116,454 from $14,103,827 at December 31, 2008. This was a result of joint venture partner lease acquisition reimbursements of $992,089 offset by a net outflow of working capital of $1,029,956 which was accompanied by a net use of funds in operations of $483,139 and by exploration and leasehold expenditures of $2,466,367. Caza had no bank credit facilities drawn or in place.

On April 8, 2009, the Company entered into a participation agreement with Endeavour Operating Corporation to participate in a jointly established exploration and development program in the United States. The exploration program will primarily focus on Caza's existing onshore acreage position and portfolio of identified opportunities throughout Texas, Louisiana and New Mexico. Under the terms of the Agreement, Endeavour has the right to participate in assets presented to it in its sole discretion. With respect to those assets in which Endeavour elects to participate, Endeavour will fund the acquisition, exploration and appraisal activity costs attributable to Caza's interest in such assets. In consideration for these payments, Endeavour will earn a 75% participating interest in any interest then owned by Caza in any particular asset in which Endeavour elects to participate. The term of the Agreement will run for two years. Endeavour has also agreed to pay a program fee of US$3 million per annum to be paid monthly. However, either party may terminate the Agreement as of the end of each anniversary period by giving 60 days prior written notice. If neither party terminates the Agreement, it shall automatically renew for subsequent one-year periods.

Caza will typically use four sources of funding to finance its capital expenditure program: internally generated cash flow from operations, proceeds from the sale of properties, bank debt where appropriate and if available new equity issues.

The Company's investing activities in the quarter consisted primarily of expenditures on its capital program. As a result of the current international credit crisis, capital markets with respect to both equities and debt have tightened significantly. However, due to the $21.4 million financing completed in 2008 and the joint venture with Endeavour Operating Corporation completed on April 8, 2009, management anticipates that the Company will have adequate liquidity to fund its operations and budgeted capital expenditures.

Caza and its subsidiary, Caza Petroleum, Inc. ("Caza Petroleum") may be considered to be "related parties" for the purposes of Multilateral Instrument 61-101 of the Canadian Securities Administrators. As a result, Caza or Caza Petroleum may therefore be required to obtain a formal valuation or disinterested shareholder approval before completing certain transactions with the other party.



Summary of Quarterly Results

Three months Three months Three months Three months
ended ended ended ended
September 30, June 30, March 31, December 31,
2009 2009 2009 2008
--------------------------------------------------------------------------
Petroleum and
natural gas
sales 553,793 561,083 553,916 650,186
Net income (loss) (553,423) (982,247) (1,335,880) (1,749,825)
Per share
- basic and diluted (0.00) (0.01) (0.01) (0.01)
Funds flow
from operations
(non-GAAP)(1) 157,545 (117,808) (522,877) (1,046,915)
Per share
- basic and diluted 0.00 (0.00) (0.00) (0.00)
Net capital
expenditures
(recovery) (361,311) (202,139) 1,315,105 3,851,867
Average daily
production (mcfe/d) 1,261 1,338 1,258 1,130
Weighted average
shares
outstanding 145,821,000 145,821,000 145,821,000 145,821,000


Three months Three months Three months Three months
ended ended ended ended
September 30, June 30, March 31, December 31,
2008 2008 2008 2007
--------------------------------------------------------------------------
Petroleum and
natural gas sales 905,055 1,067,364 729,284 600,431
Net income (loss) (2,164,475) (536,701) (635,685) (554,402)
Per share
- basic and diluted (0.01) (0.01) (0.01) (0.01)
Funds flow from
(used in)
operations
(non-GAAP)(1) (841,092) (326,850) (349,312) (427,152)
Per share
- basic and diluted (0.01) (0.00) (0.00) (0.01)
Net capital
expenditures 6,691,112 3,237,140 4,153,166 3,047,631
Average daily
production (mcfe/d) 994 1,005 957 1,019
Weighted average
shares
outstanding 145,675,139 97,723,874 95,821,000 80,782,196

(1) Calculated based on cash flow from operating activities before changes
in non-cash working capital.


Factors that have caused variations over the quarters:

- In 2009 Caza acquired all of the working interest of Probe Resources, Inc. in the Safari Project located in Wharton County, Texas. The acquisition dated April 1, 2009, included among other lease hold Probe's 19.2% working interest in the Andel #2201 well, 18.36% working interest in the Hinton #1501 well, 18.36% working interest in the Rachunek #201 well and 19.2% working interest in the Gavranovic #701 well. All four wells are operated by Caza.

- In 2009 the Company drilled 2 gross (0.25 net) wells in Lea County New Mexico. The two wells are the Lucky Penny 10 State #1 and the Moore Bailout 11 State #1, both wells are currently undergoing completion operations.

- On April 8, 2009, the Company completed a participation agreement with Endeavour Operating Corporation to participate in a jointly established exploration and development program in the United States.

- The Company drilled 16 gross (6.15 net) wells in Texas, New Mexico and Louisiana during 2007 and 2008 of which 13 gross (4.33 net) wells were completed. One well is waiting further completion operations pending the drilling of an appraisal well.

Financial Instruments

For a discussion about financial instruments, please refer to the corresponding September 30, 2009 consolidated interim financial statements and our Management's Discussion and Analysis for the year ended December 31, 2008 available at www.sedar.com.

Critical Accounting Estimates

Certain of our accounting policies require that we make appropriate decisions with respect to the formulation of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. For a discussion about those accounting policies, please refer to our annual management's discussion and analysis and Note 2 of the corresponding audited consolidated financial statements for the year ended December 31, 2008 available at www.sedar.com.

Recent Accounting Pronouncements

The Company has assessed new and revised accounting pronouncements that have been issued that are not yet effective and determined that the following may have a significant impact on the Company: In February 2008, the Canadian Accounting Standards Board (AcSB) confirmed that effective January 1, 2011, Canadian GAAP for publicly accountable entities will be replaced in full with International Financial Reporting Standards (IFRS) as promulgated by the International AcSB. Management is currently assessing the impact of adopting IFRS and is developing a plan to achieve convergence to IFRS by January 1, 2011. Based on management's initial assessments, the Company has identified that the accounting and disclosure of capital assets are the areas that will have the greatest potential impact upon conversion.

In February 2008, the AcSB issued Section 3064, Goodwill and Intangible Assets and amended Section 1000, Financial Statement Concepts clarifying the criteria for recognizing assets, intangible assets and internally developed intangible assets. Items that no longer meet the definition of an asset are no longer recognized with assets. The standard was adopted on January 1, 2009 and did not have a material impact on our results of operations or financial position.

In January 2009, the AcSB issued Section 1582, Business Combinations, which replaces former guidance on business combinations. Section 1582 establishes principles and requirements of the acquisition method for business combinations and related disclosures. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 2011 with earlier application permitted. Management does not expect the adoption of this section to have a material impact on the results of operations or financial position.

In January 2009, the AcSB issued Sections 1601, Consolidated Financial Statements, and 1602, Non-controlling Interests, which replaces existing guidance. Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602 provides guidance on accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. These standards are effective on or after the beginning of the first annual reporting period beginning on or after January 2011 with earlier application permitted. Management does not expect the adoption of this section to have a material impact on the results of operations or financial position.

Risks and Uncertainties

For a discussion about risk and uncertainties, please refer to our Management's Discussion and Analysis and Annual Information Form for the year ended December 31, 2008 available at www.sedar.com.

Internal Control Over Financial Reporting

There was no change to Caza's internal control over financial reporting during the nine month period ended September 30, 2009 that would materially affect, or is reasonably likely to materially affect, Casa's internal control over financial reporting.



Caza Oil & Gas, Inc.
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
(In United States dollars) 2009 2008
--------------------------------------------------------------------------
Assets

Current
Cash and cash equivalents $ 11,116,454 $ 14,103,827
Accounts receivable 2,173,605 3,346,720
Prepaid and other 47,562 215,301
------------ ------------
13,337,621 17,665,848

Property and equipment (Note 3) 36,684,362 37,112,470
------------ ------------

$ 50,021,983 $ 54,778,318
------------ ------------


Liabilities

Current
Accounts payable and accrued liabilities $ 4,482,990 $ 6,853,800

Asset retirement obligations (Note 4) 526,929 493,919
------------ ------------
5,009,919 7,347,719
------------ ------------


Shareholders' Equity
Share capital (Note 5(b)) 51,481,597 51,481,597
Contributed surplus (Note 5(f)) 4,670,150 4,217,135
Deficit (11,139,683) (8,268,133)
------------ ------------
45,012,064 47,430,599
------------ ------------

$ 50,021,983 $ 54,778,318
------------ ------------

See accompanying notes to the interim consolidated financial statements


Caza Oil & Gas, Inc.
Consolidated Statements of Net Loss, Comprehensive Loss, and Deficit
(Unaudited)

Three months ended Nine months ended
September 30, September 30,
(In United States dollars) 2009 2008 2009 2008
--------------------------------------------------------------------------

Revenue
Petroleum and
natural gas $ 553,793 $ 905,055 $ 1,668,792 $ 2,701,703
Interest income
and other income 193 132,295 3,074 277,208
-----------------------------------------------------
553,986 1,037,350 1,671,866 2,978,911
-----------------------------------------------------

Expenses
Production 219,709 153,329 633,246 428,293
General and
administrative 267,295 1,857,337 1,884,971 4,457,153
Depletion,
depreciation,
amortization
and accretion 620,405 323,608 2,025,199 1,001,850
-----------------------------------------------------
1,107,409 2,334,274 4,543,416 5,887,296
-----------------------------------------------------

Loss before income
taxes (553,423) (1,296,924) (2,871,550) (2,908,385)

Income taxes
Current income taxes - 16,991 - 2,394
Future income tax
recovery - 850,560 - 426,082
-----------------------------------------------------
- 867,551 - 428,476
-----------------------------------------------------

Net loss and
comprehensive loss (553,423) (2,164,475) (2,871,550) (3,336,861)

Deficit, Beginning
of Period (10,586,260) (4,353,826) (8,268,133) (3,181,440)
-----------------------------------------------------

Deficit, End of
Period $(11,139,683) $(6,518,301) $(11,139,683) $(6,518,301)
-----------------------------------------------------
-----------------------------------------------------

Loss per share
basic and diluted $ (0.00) $ (0.01) $ (0.02) $ (0.03)
-----------------------------------------------------
-----------------------------------------------------

Weighted average
shares
outstanding
basic and
diluted(1) 145,821,000 145,675,139 145,821,000 113,192,322
-----------------------------------------------------
-----------------------------------------------------

(1) The options and warrants have been excluded from the diluted loss per
share computation as they are anti-dilutive.

See accompanying notes to the interim consolidated financial statements


Caza Oil & Gas, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
(In United States dollars) 2009 2008 2009 2008
--------------------------------------------------------------------------
CASH FLOWS RELATED TO
THE FOLLOWING ACTIVITIES:
OPERATING
Net loss (553,423) (2,164,475) (2,871,550) (3,336,681)

Adjustments for
items not affecting
cash:
Depletion,
depreciation,
amortization
and accretion 620,405 323,608 2,025,199 1,001,850
Stock-based
compensation 90,563 149,215 363,212 401,441
Future income
tax expense
(recovery) - 850,560 - (426,082)
Asset retirement
obligations settled - - - (9,767)
Changes in non-cash
working capital
(Note 8(a)) (232,037) 1,529,745 (2,928,631) 1,232,985
-----------------------------------------------------
Cash flows from
(used in)
operating
activities (74,492) 688,653 (3,411,770) (284,270)
-----------------------------------------------------

FINANCING
Proceeds from
issuance of shares,
net of issue costs - 3,084,668 - 21,386,409
Changes in non-cash
working capital
(Note 8(a)) - - - (650,899)
-----------------------------------------------------
Cash flows from
financing
activities - 3,084,668 - 20,735,510
-----------------------------------------------------

INVESTING
Exploration and
development
expenditures (775,835) (6,643,351) (2,458,903) (13,959,449)
Purchase of
equipment (7,464) (47,761) (7,464) (121,970)
Partner reimbursement - - 992,089 -
Changes in
non-cash working
capital (Note 8(a)) 758,431 (780,235) 1,898,675 (1,770,723)
-----------------------------------------------------
Cash flows used
in investing
activities (24,868) (7,471,347) 424,397 (15,852,142)
-----------------------------------------------------

INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (99,360) (3,698,026) (2,987,373) 4,599,098

CASH AND CASH
EQUIVALENTS,
BEGINNING OF PERIOD 11,215,814 21,491,713 14,103,827 13,194,589
-----------------------------------------------------

CASH AND CASH
EQUIVALENTS,
END OF PERIOD 11,116,454 17,793,687 11,116,454 17,793,687
-----------------------------------------------------
-----------------------------------------------------


1. Basis of Presentation

Caza Oil & Gas, Inc. ("Caza" or the "Company") was incorporated under the laws of British Columbia on June 9, 2006 for the purposes of acquiring shares of Caza Petroleum, Inc. ("Caza Petroleum"). The Company and its subsidiaries are engaged in the exploration for and the development, production and acquisition of, petroleum and natural gas reserves.

The interim unaudited consolidated financial statements of Caza have been prepared by management, in accordance with Canadian generally accepted accounting principles. The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the interim consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The interim consolidated financial statements have, in management's opinion, been properly prepared using careful judgment with reasonable limits of materiality. These interim consolidated financial statements do not include all the note disclosures required for annual financial statements and therefore they should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2008. The interim consolidated financial statements have been prepared following the same significant accounting policies as the most recently reported audited consolidated financial statements of Caza except as disclosed in Note 2.

Caza's reporting currency is the United States ("US") dollar as the majority of its transactions are denominated in that currency.

2. Changes in Significant Accounting Policies

The Canadian Institute of Chartered Accountants ("CICA") issued the following new Handbook Sections, which were effective for interim periods beginning on or after January 1, 2009.

(a) The Company adopted Section 3064, Goodwill and Intangible Assets and amended Section 1000, Financial Statement Concepts clarifying the criteria for recognizing assets, intangible assets and internally developed intangible assets. Items that no longer meet the definition of an asset are no longer recognized with assets. The adoption of this section did not have a material impact on the results of operations or financial position.

(b) On January 20, 2009 the Emerging Issues Committee ("EIC") issued a new abstract EIC 173 "Credit risk and the fair value of financial assets and financial liabilities". This abstract concludes that an entity's own credit risk and the credit risk of the counterparty should be taken into account when determining the fair value of financial assets and financial liabilities, including derivative instruments. This abstract is to apply to all financial assets and liabilities measured at fair value in interim and annual financial statements for periods ending on or after January 20, 2009. The adoption of this abstract did not have a significant impact on the Company's financial statements.

(c) In February 2008, the AcSB confirmed that all Canadian publicly accountable enterprises will be required to adopt International Financial Reporting Standards (IFRS) for interim and annual reporting purposes for fiscal years beginning on or after January 1, 2011. Management is currently assessing the impact of the convergence of Canadian GAAP with IFRS on the results of operations, financial position and disclosures.

(d) In January 2009, the AcSB issued Section 1582, Business Combinations, which replaces former guidance on business combinations. Section 1582 establishes principles and requirements of the acquisition method for business combinations and related disclosures. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 2011 with earlier application permitted. Management is currently assessing the impact of the adoption of this section on the results of operations, financial position and disclosures.

(e) In January 2009, the AcSB issued Sections 1601, Consolidated Financial Statements, and 1602, Non-controlling Interests, which replaces existing guidance. Section 1601 establishes standards for the preparation of consolidated financial statements. Section1602 provides guidance on accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. These standards are effective on or after the beginning of the first annual reporting period beginning on or after January 2011 with earlier application permitted. Management is currently assessing the impact of the adoption on the results of operations or financial position.

3. Property and Equipment



--------------------------------------------------------------------------
September 30, 2009
----------------------------------------
Accumulated
depletion
and Net Book
Cost depreciation Value
----------------------------------------
Petroleum and natural gas
properties and equipment $40,902,047 $4,589,352 $36,312,695

Office equipment and furniture $ 725,987 $ 354,320 $ 371,667
----------------------------------------

$41,628,034 $4,943,672 $36,684,362
----------------------------------------

--------------------------------------------------------------------------
December 31, 2008
----------------------------------------
Accumulated
depletion
and Net Book
Cost depreciation Value
----------------------------------------
Petroleum and natural gas
properties and equipment $39,330,883 $2,681,632 $36,649,251

Office equipment and furniture $ 718,523 $ 255,304 $ 463,219
----------------------------------------

$40,049,406 $2,936,936 $37,112,470
----------------------------------------


At September 30, 2009 the cost of petroleum and natural gas properties includes $11,364,481 (December 31, 2008 - $10,778,079) relating to unproven properties which have been excluded from costs subject to depletion and depreciation. No events or circumstances suggest that the undeveloped properties, and all associated costs are impaired at September 30, 2009. Future development costs of proved undeveloped reserves of $4,366,750 were included in the depletion calculation at September 30, 2009 and $11,224,800 was included in the depletion calculation at December 31, 2008.

During the nine month period ended September 30, 2009 the Company received reimbursements of prior period costs as a result of joint exploration agreements with other companies. This resulted in a decrease of $992,089 to the petroleum and natural gas properties and equipment. In addition the Company increased its working interest in certain oil and gas properties in consideration for the settlement of certain accounts receivable of the Company.

During the three and nine month periods ended September 30, 2009 the Company capitalized general and administrative expenses of $58,887 and $481,492 respectively (three and nine month periods ended September 30, 2008 - $305,469 and $909,416) directly relating to exploration and development activities of which $39,422 and $154,687 related to stock based compensation for the period ended September 30, 2009 (2008 - $49,276 and $166,865 respectively).

4. Asset Retirement Obligations

The following table presents the reconciliation of the beginning and ending aggregate carrying amount of the obligation associated with the retirement of oil and gas properties:



September December
30, 2009 31, 2008
--------- ---------
Asset retirement obligation, beginning of period $ 493,919 $ 286,019
Obligations incurred 14,549 203,405
Accretion expense 18,461 14,262
Obligations settled - (9,767)
--------- ---------
Asset retirement obligation, end of period $ 526,929 $ 493,919
--------- ---------


The undiscounted amount of cash flows, required over the estimated reserve life of the underlying assets, to settle the obligation, adjusted for inflation, is estimated as at September 30, 2009 to be $767,972 (December 31, 2008 - $740,472). The obligation was calculated using a credit-adjusted risk free discount rate of 6 percent and an inflation rate of 3 percent.

5. Share Capital

(a) Authorized

Unlimited number of voting common shares.

(b) Issued



Nine months Ended Year Ended
September 30, 2009 December 31,2008
Shares Amounts Shares Amounts
Opening balance
common shares 119,319,000 $46,423,526 69,319,000 $25,037,117

Private placement - - 50,000,000 21,386,409
--------------------------------------------------------------------------
Balance end of period 119,319,000 $46,423,526 119,319,000 $46,423,526
--------------------------------------------------------------------------

Opening and ending
exchangeable rights 26,502,000 918,571 26,502,000 918,571
--------------------------------------------------------------------------

Opening balance
warrants 20,500,000 4,139,500 25,100,000 4,855,100
Expired broker
warrants
March 22, 2008 - - (2,400,000) (285,600)
Surrendered warrants
May 21, 2008 - - (2,200,000) (430,000)
--------------------------------------------------------------------------
Balance end of
period(i) 20,500,000 4,139,500 20,500,000 4,139,500
--------------------------------------------------------------------------

$51,481,597 $51,481,597
--------------------------------------------------------------------------

(i) The weighted average life of the warrants is 0.98 years (December 2008
- 1.73 years) and the weighted average exercise price is $0.99
(December 2008 - $0.99).


(c) Warrants

The following table summarizes the warrants outstanding as at September 30, 2009.



Number
Remaining Exercisable
Number Exercise Contractual September
Date of Grant Outstanding Price Life Date of Expiry 30, 2009
---------------------------------------------------------------------------
September 22, 16,731,000 1.00 0.98 September 22, 16,731,000
2006 2010
November 20, 2,535,500 1.00 1.14 November 20, 2,535,500
2006 2010
January 17, 533,500 1.00 1.20 December 12, 533,500
2007 2010
December 12, 700,000 0.80 0.20 December 12, 700,000
2007 2009
---------------------------------------------------------------------------
20,500,000 20,500,000
---------------------------------------------------------------------------


(d) Stock options

A summary of the Company's stock option plan as at September 30, 2009 and December 31, 2008 and changes during the respective periods ended on those dates is presented below.



September 30, 2009 December 31, 2008
Weighted Weighted
average average
Number of Exercise Number of exercise
Stock Options options price options price
---------------------------------------------------------------------------
Beginning of period 6,585,000 $ 0.61 6,605,000 $ 0.62
Granted - - 980,000 0.52
Forfeited (466,667) 0.58 (1,000,000) 0.59
-----------------------------------------------------
End of period 6,118,334 $ 0.61 6,585,000 $ 0.61
-----------------------------------------------------
Exercisable, end
of period 4,025,000 $ 0.56 2,876,667 $ 0.58
-----------------------------------------------------
-----------------------------------------------------


Weighted
Average Number
Remaining Exercisable
Number Exercise Contractual September
Date of Grant Outstanding Price Life Date of Expiry 30, 2009
---------------------------------------------------------------------------
January 31, 2,691,667 0.50 7.34 January 31, 2,691,667
2007 2017
May 10, 2007 220,000 0.50 7.59 May 10, 2017 146,667
June 11, 2007 20,000 0.50 7.70 June 11, 2017 13,333
December 12, 2,206,667 0.79 8.20 December 12, 846,667
2007 2017
April 7, 2008 500,000 0.59 8.52 April 7, 2018 166,667
August 11, 2008 480,000 0.44 8.86 August 11, 160,000
2018
---------------------------------------------------------------------------
6,118,334 7.88 4,025,000


(e) Escrowed securities

At September 30, 2009, no securities remained in escrow.

(f) Contributed surplus

The following table presents the changes in contributed surplus:



September 30, December 31,
2009 2008
--------------------------------------------------------------------------
Balance, beginning of period $ 4,217,135 $ 2,787,434

Expired broker warrants - 285,600
Surrendered warrants - 430,000
Stock based compensation(i) 453,015 714,101
--------------------------------------------------------------------------
Balance, end of period $ 4,670,150 $ 4,217,135
--------------------------------------------------------------------------

(i) For the three and nine month periods ended September 30, 2009, $90,563
and $363,212 of stock based compensation expense was recognized in the
statement of net loss (2008 - $149,215 and $401,441) and $39,422 and
$154,686 was capitalized during the respective three and nine month
periods (2008 - $49,276 and $166,865).


6. Related Party Transactions

The aggregate amount of expenditures made to related parties:

In February 2008, Caza Petroleum entered into a farm out agreement with Singular Oil & Gas Sands, LLC ("Singular") to participate in the drilling of the Jonell Cerny well in Wharton County, Texas. Under the terms of that agreement, Singular paid 13.33% of the drilling costs through completion of the Jonell Cerny well to earn a 10.00% interest in the property thereafter. This participation was in the normal course of Caza's business and on the same terms and conditions to those of other joint venture partners. Singular owes the Company $14,760 in joint venture partner receivables as at September 30, 2009. Singular is a related party as it is a company under common control with Zoneplan Limited, which is a significant shareholder of Caza.

All related party transactions are in the normal course of operations and have been measured at the agreed to exchange amounts, which is the amount of consideration established and agreed to by the related parties and which is comparable to those negotiated with third parties.

7. Commitments and Contingencies

As of September 30, 2009, the Company is committed under operating leases for its offices and corporate apartment. The Company is committed to the following aggregate minimum lease payments which are shown below:



2009 $48,674


8. Supplementary Information



(a) net change in non-cash working capital

Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
Provided by (used in)
--------------------

Accounts receivable (426,274) 634,556 1,173,115 164,150
Prepaid and other 88,310 88,463 167,739 248,411
Accounts payable and
accrued liabilities 864,358 26,481 (2,370,810) (1,601,198)
----------------------------------------------
526,394 749,510 (1,029,956) (1,188,637)
----------------------------------------------

Summary of changes
Operating (232,037) 1,529,745 (2,928,631) 1,232,985
Financing - - - (650,899)
Investing 758,431 (780,235) 1,898,675 (1,770,723)
----------------------------------------------
526,394 749,510 (1,029,956) (1,188,637)
----------------------------------------------


(b) supplementary cash flow information

Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------------------
Interest paid 4 6,198 749 10,144
Interest received 193 132,295 3,074 277,208
Taxes paid - 12,891 - 16,046
--------------------------------------------------------------------------


(c) cash and cash equivalents
September 30, December 31,
2009 2008
--------------------------------------------------------------------------
Cash on deposit 3,839,297 1,129,745
Money market instruments 7,277,157 12,974,082
-------------------------
Cash and cash equivalents 11,116,454 14,103,827
-------------------------
-------------------------


The money market instruments bear interest at a rate of 0.01% as at September 30, 2009 (December 31, 2008 - 0.089%).

9. Capital Risk Management

The Company's objectives when managing capital is to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders. The Company defines capital as shareholders' equity ($45,012,064, 2008 - $47,430,599), working capital ($8,854,632, 2008 - $10,812,048) and credit facilities when available. Currently the Company does not have a credit facility in place. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. The Company's objective is met by retaining adequate equity and working capital to provide for the possibility that cash flows from assets will not be sufficient to meet future cash flow requirements. The Board of Directors does not establish quantitative return on capital criteria for management; but rather promotes year over year sustainable profitable growth.

10. Financial Instruments

The Company holds various forms of financial instruments. The nature of these instruments and the Company's operations expose the Company to commodity price, credit, and foreign exchange risks. The Company manages its exposure to these risks by operating in a manner that minimizes its exposure to the extent practical.

(a) Commodity Price Risk

The Company is subject to commodity price risk for the sale of oil and natural gas. The Company may enter into contracts for risk management purposes only, in order to protect a portion of its future cash flow from the volatility of oil, natural gas and natural gas liquids commodity prices. To date the Company has not entered into any forward commodity contracts.

(b) Credit Risk

Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date. A majority of the Company's accounts receivable at the balance sheet date arise from oil, natural gas liquids and natural gas sales and the Company's accounts receivable that are with these customers and joint venture participants in the oil and natural gas industry. Industry standard dictates that commodity sales are settled on the 25th day of the month following the month of production. The Company's natural gas and condensate production is sold to large marketing companies. Typically, the Company's maximum credit exposure to customers is revenue from two months of sales. During the period ended September 30, 2009, the Company sold 40.94% (September 30, 2008 - 91.69%) of its natural gas and condensates to a single purchaser. These sales were conducted on transaction terms that are typical for the sale of natural gas and condensates in the United States. In addition, when joint operations are conducted on behalf of a joint venture partner relating to capital expenditures, costs of such operations are paid for in advance to the Company by way of a cash call by the partner of the operation being conducted. The Company currently holds its cash and cash equivalent balances in a large national bank therefore management believes the credit risk on cash and cash equivalents are minimal.

Caza management assesses quarterly if there should be any impairment of the financial assets of the Company. At September 30, 2009, the Company had overdue accounts receivable from certain joint interest partners of $19,995 which were outstanding for greater than 60 days and $109,432 that were outstanding for greater than 90 days.

During the nine month period ended September 30, 2009, there was no impairment required on any of the financial assets of the Company. At September 30, 2009, the Company's two largest joint venture partners represented approximately 35% and 10% of the Company's receivable balance (December 31, 2008 21% and 15% respectively). The maximum exposure to credit risk is represented by the carrying amount on the balance sheet of cash and cash equivalents, accounts receivable and deposits.

(c) Foreign Currency Exchange Risk

The Company is exposed to foreign currency exchange fluctuations, as certain general and administrative expenses are or will be denominated in Canadian dollars and United Kingdom pounds sterling. The Company's sales of oil and natural gas are all transacted in US dollars. At September 30, 2009, the Company considers this risk to be relatively limited and not material and therefore does not hedge its foreign exchange risk.

(d) Fair Value of Financial Instruments

The Company has determined that the fair values of the financial instruments consisting of cash and cash equivalents, accounts receivable and accounts payable are not materially different from the carrying values of such instruments reported on the balance sheet due to their short-term nature.

All financial assets except for cash and cash equivalents which are classified as held for trading, are classified as either loans or receivables and are accounted for on an amortized cost basis. All financial liabilities are classified as other liabilities. There are no financial assets on the balance sheet that have been designated as held-for-trading or available-for-sale. There have been no changes to the aforementioned classifications in the nine month period ended September 30, 2009.

(e) Liquidity Risk

Liquidity risk includes the risk that, as a result of our operational liquidity requirements:

- The Company will not have sufficient funds to settle a transaction on the due date;

- The Company will be forced to sell financial assets at a value which is less than what they are worth; or

- The Company may be unable to settle or recover a financial asset at all.

The Company's operating cash requirements including amounts projected to complete the Company's existing capital expenditure program are continuously monitored and adjusted as input variables change. These variables include but are not limited to, available bank lines if any, oil and natural gas production from existing wells, results from new wells drilled, commodity prices, cost overruns on capital projects and regulations relating to prices, taxes, royalties, land tenure, allowable production and availability of markets. As these variables change, liquidity risks may necessitate the Company to conduct equity issues or obtain project debt financing. The Company also mitigates liquidity risk by maintaining an insurance program to minimize exposure to insurable losses. The financial liabilities as at September 30, 2009 that impact the Company's liquidity risk are accounts payable and accrued liabilities. The contractual maturity of these financial liabilities is generally the following sixty days from the receipt of the invoices for goods of services and can be up to the following next six months. Management believes that current working capital will be adequate to support these financial liabilities.

The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.

Contact Information

  • Caza Oil & Gas, Inc.
    John McGoldrick
    Executive Chairman
    +1 281 363 4442
    or
    Caza Oil & Gas, Inc.
    W. Michael Ford
    CEO
    +1 432 682 7424
    www.cazapetro.com
    or
    Hanson Westhouse Limited
    Tim Feather/Richard Baty
    +44 (0)20 7601 6100
    or
    Aquila Financial Limited
    Peter Reilly
    +44 (0)118 979 4100