Pine Cliff Energy Ltd.

May 28, 2009 23:59 ET

Pine Cliff Energy Ltd. Announces First Quarter Results

CALGARY, ALBERTA--(Marketwire - May 28, 2009) - Pine Cliff Energy Ltd. (www.pinecliffenergy.com) (TSX-V:PNE) is pleased to announce its financial and operational results for the three months ended March 31, 2009.



Highlights

For the three months ended March 31 December 31 March 31
2009 2008 2008
-------------------------------------------------------------------------
FINANCIAL ($)
Revenue - Oil and Gas 193,725 295,944 143,116
Cash Flow from Operations (229,307) (68,211) (204,923)
Per Share Basic and Diluted (0.01) 0.00 0.00
Net Loss (498,532) (6,423,691) (317,113)
Per Share Basic and Diluted (0.01) (0.14) (0.01)
Capital Expenditures and
Acquisitions 119,786 1,067,843 281,388
Total Assets 4,966,907 5,570,015 12,221,650
Working Capital 1,903,038 2,316,982 7,937,179
Shareholders' Equity 4,644,004 5,044,701 12,003,398
-------------------------------------------------------------------------
OPERATIONS
Oil and NGL's - Barrels Per Day 1 2 4
- Average Price
($ per barrel) 48.06 53.46 56.91
Natural Gas - MCF Per Day 392 453 168
- Average Price
($ per MCF) 5.32 6.92 8.17
Total Barrels of Oil Equivalent
(BOE) Per Day(1) 64 77 32
-------------------------------------------------------------------------
(1) Barrels of oil equivalent (BOE) are calculated using a conversion
ratio of 6 MCF to 1 barrel of oil. The conversion is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead
and as such may be misleading if used in isolation.


Report to Shareholders

Pine Cliff Energy Ltd. ("Pine Cliff" or "the Company") is pleased to report its operating and financial results for the three months ended March 31, 2009.

Pine Cliff realized disappointing drill results in Argentina during 2008 and the potential negative political and economic changes in Argentina continue to provide a difficult environment in which to operate. In addition, positive changes in the Canadian energy sector may mean a domestic focus has once again become more favourable than an international focus.

With due consideration given to these factors, the Board of Directors and Management recognize that there is a need to evaluate the overall direction for the Company and are presently assessing various options and opportunities available to add value on behalf of shareholders.

Operations

During the fourth quarter of 2008, Pine Cliff participated in drilling one natural gas well (15 percent working interest) in the Sundance area of Alberta. The well averaged approximately 320 MCF per day net to the Company during the fourth quarter and anticipated production for 2009 is estimated between 150 to 200 MCF per day net to Pine Cliff.

Pine Cliff is giving consideration to participating in one gross exploration well (0.25 net) in the Laguna de Piedra concession, a property in Argentina which the Company has deemed highly prospective. Drilling is expected to take place in late 2009 or early 2010. The Company's share of the costs to drill well is expected to be approximately $500,000.

Financial:

The Company is currently focused on decreasing general and administrative (G&A) expenses and has reduced its consulting services and other international expenses in the second quarter of 2009. As a majority of the G&A expenses relate to its South American activities, a significant reduction in these costs is anticipated.

As of March 31, 2009, Pine Cliff had positive working capital of $1,907,037. These funds will be used to cover the Company's budgeted 2009 capital expenditures of $750,000 in relation to the drilling of its Laguna de Piedra Concession as well as miscellaneous capital costs in respect of its Canadian oil and gas operations.

Outlook

Pine Cliff is indeed operating within challenging circumstances. However, the Board of Directors and management remain optimistic that it will be able to take advantage of the many opportunities that are available and continue to believe that a domestic perspective may once again be more economic than in foreign jurisdictions. As such, the Company will take an aggressive approach in Canada with regard to pursuing acquisitions and other opportunities to add value.

FORWARD-LOOKING INFORMATION

Certain statements contained in this press release include statements which contain words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "will", "believe" and similar expressions, statements relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about development, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. Forward-looking information in this press release includes, but is not limited to: expected cash provided by continuing operations; future capital expenditures, including the amount and nature thereof; oil and natural gas prices and demand; expansion and other development trends of the oil and natural gas industry; business strategy and outlook; expansion and growth of our business and operations; and maintenance of existing customer, supplier and partner relationships; supply channels; accounting policies; credit risks; and other such matters.

All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties, and assumptions are difficult to predict and may affect operations, and may include, without limitation: the risks of foreign operations; foreign exchange fluctuations; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control. The foregoing factors are not exhaustive.

Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do, what benefits will be derived therefrom. Except as required by law, Pine Cliff disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

The forward-looking information contained herein is expressly qualified by this cautionary statement.



Quarterly Financial and Operational Highlights

2009 2008
-------------------------------------------------------------------------
1st 4th 3rd 2nd 1st
Financial ($)
Revenue - Oil
and Gas 193,725 295,944 129,537 138,415 143,116
Cash Flow from
Operations (229,307) (68,211) (305,368) (224,141) (204,923)
Per Share
Basic and
Diluted (0.01) (0.00) (0.01) (0.00) (0.00)
Net Loss (498,532) (6,423,691) (505,953) (295,111) (317,113)
Per Share
Basic and
Diluted (0.01) (0.14) (0.01) (0.01) (0.01)
Capital
Expenditures
and
Acquisitions 119,786 1,067,843 1,511,745 2,516,214 281,388
Total Assets 4,966,907 5,570,015 11,621,915 12,043,617 12,221,650
Working
Capital 1,903,038 2,316,982 3,440,165 5,278,074 7,937,179
Shareholders'
Equity 4,644,004 5,044,701 11,400,311 12,043,617 12,003,398
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operations
Oil and
liquids
(barrels per
day) 1 2 1 - 4
Natural Gas
(MCF per day) 392 453 146 142 168
-------------------------------------------------------------------------
-------------------------------------------------------------------------


2007
-------------------------------------------------------------------------
4th 3rd 2nd 1st
Financial ($)
Revenue - Oil and Gas 112,685 95,160 176,590 198,515
Cash Flow from Operations (234,653) (172,281) (262,144) (115,860)
Per Share Basic and
Diluted (0.01) (0.01) (0.01) (0.00)
Net Loss (381,561) (383,540) (346,274) (270,109)
Per Share Basic and
Diluted (0.01) (0.01) (0.01) (0.01)
Capital Expenditures and
Acquisitions 193,350 174,289 233,648 2,196,476
Total Assets 12,445,994 4,173,333 3,946,888 4,211,984
Working Capital 8,378,110 (314,684) 182,319 602,650
Shareholders' Equity 12,205,066 3,371,089 3,749,025 4,008,304
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operations
Oil and liquids (barrels
per day) 2 1 5 7
Natural Gas (MCF per day) 182 163 226 226
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Production
Three months ended
March 31, December 31, March 31,
2009 2008 2008
-------------------------------------------------------------------------
Crude oil and NGLs (barrels per day) 1 2 4
Natural gas (MCF per day) 392 453 168
Total BOE per day(1) 64 77 32
-------------------------------------------------------------------------
(1) Barrels of oil equivalent (BOE) are calculated using a conversion
ratio of 6 MCF to 1 barrel of oil. The conversion is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead
and as such may be misleading if used in isolation.


During the fourth quarter the Company completed and placed on production one gross (0.15 net) natural gas well. The well averaged approximately 320 MCF per day net to the Company during the fourth quarter. Production for 2009 from this well is 258 MCF per day net to the Company. The Company has an expected annual decline rate of approximately 20 percent on its other production.



Revenue

Three months ended
March 31, December 31, March 31,
($) 2009 2008 2008
-------------------------------------------------------------------------
Revenue:
Oil and gas sales 193,725 295,944 143,116
Average Realized Prices
Crude oil and NGLs (per barrel) 48.06 53.46 56.91
Natural gas (per MCF) 5.32 6.92 8.17
-------------------------------------------------------------------------


Revenue from petroleum and natural gas sales for Q1 2009 increased by $50,609 from Q1 2008 due to increased production volumes. A decrease in revenue from Q4 2008 to Q1 2009 was primarily due to lower production volumes and reduced commodity prices for natural gas. The Company did not have hedging agreements in either 2009 or 2008 and presently does not have any future hedging agreements.



Royalties

Three months ended
March 31, December 31, March 31,
($) 2009 2008 2008
-------------------------------------------------------------------------
Crown royalties 44,556 74,834 34,130
Gross overriding royalties 4,796 10,204 2,738
-------------------------------------------------------------------------
Total royalty expense 49,352 85,038 36,868
-------------------------------------------------------------------------


Crown royalties are higher in the first quarter of 2009 compared to the first quarter of 2008 due to higher production volumes and revenue. Gross overriding royalties are also higher for the same reason. Crown and gross overriding royalties were lower for Q1 2009 compared to Q4 2008 due to lower commodity prices and production volumes in Q1 2009.



Interest Income

Three months ended
March 31, December 31, March 31,
($) 2009 2008 2008
-------------------------------------------------------------------------
Interest income 5,781 13,580 68,168
-------------------------------------------------------------------------


The Company maintains both Canadian and U.S. investment accounts that pay interest at prime less various percentages as long as the Company maintains certain minimum account balances. The Company was earning interest at higher rates and on an increased cash balance throughout the first quarter of 2008. Interest income for Q1 2009 and Q4 2008 decreased significantly due to the lower cash balance on hand as $5,377,000 was spent on capital projects in Canada and Argentina in 2008.



Production Costs

Three months ended
March 31, December 31, March 31,
($) 2009 2008 2008
-------------------------------------------------------------------------
Production costs 57,809 49,159 26,249
$ per BOE(1) 10.08 7.27 9.55
-------------------------------------------------------------------------
(1) Barrels of oil equivalent (BOE) are calculated using a conversion
ratio of 6 MCF to 1 barrel of oil. The conversion is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead
and as such may be misleading if used in isolation.


Production costs were higher in Q1 2009 versus Q1 2008 due to higher production volumes that result in higher compression and processing costs. The increase in production costs in the first quarter of 2009 compared to the fourth quarter of 2008 was due to gas compression and processing cost adjustments.



General and Administrative

Three months ended
March 31, December 31, March 31,
($) 2009 2008 2008
-------------------------------------------------------------------------
G&A expense 324,997 339,344 282,129
-------------------------------------------------------------------------


General and administrative expenditures were similar between Q1 2009 and Q4 2008. The increase in G&A expenses in Q1 2009 compared to Q1 2008 is primarily due to continuous disclosure costs and contractor fees for services provided to the Company's South American activities. The majority of the G&A expenses pertain to the Company's operations in Argentina. With the unsuccessful completion of the three-well drill program on the Canadon Ramirez Concession, the Company's Board of Directors and management are reviewing the Company's involvement in Argentina and have reduced its consulting services and other international expenses in Q2 2009.

Pine Cliff does not have any employees at the present time but has engaged Bonterra Energy Corp. (Bonterra Corp) a related party (see Related Party section), to provide management services and engage the services of consultants on a contract or temporary basis. Pine Cliff's subsidiary CanAmericas Energy Ltd. (CanAmericas) has also engaged the consulting services of an individual professional as senior management and officer of CanAmericas.



Foreign Exchange Loss (Gain)

Three months ended
March 31, December 31, March 31,
($) 2009 2008 2008
-------------------------------------------------------------------------
Foreign exchange loss (gain) 7,043 (71,892) (2,310)
-------------------------------------------------------------------------


The Company maintains foreign denominated bank accounts to facilitate its foreign operations. The loss on foreign exchange in Q1 2009 relates to the appreciation of the Canadian dollar with the Argentine pesos. The first and fourth quarter gain on foreign exchange relates to the depreciation of the Canadian dollar with the U.S. dollar.



Stock-Based Compensation

Three months ended
March 31, December 31, March 31,
($) 2009 2008 2008
-------------------------------------------------------------------------
Stock based compensation 97,834 68,081 115,445
-------------------------------------------------------------------------


The Company has a stock-based compensation plan. The Company records a compensation expense over the vesting period based on the fair value of options granted to employees of the management company (see section "Related Party Transactions"), directors and service providers in respect of the Company. No new options were issued in the first quarter of 2009. Of the options outstanding as of March 31, 2009, $42,500 of stock-based compensation is remaining to be expensed in 2009.

Depletion, Depreciation, and Accretion and Dry Hole Exploration Costs

During the first quarter of 2009, the Company expensed $106,540 (2008 - $65,469) for depletion, depreciation and accretion of its property and equipment. The increase is related to increased production volumes in the first quarter of 2009. The fourth quarter of 2008 had a slightly higher depletion, depreciation and accretion amount of $129,129 due to slightly higher production. The fourth quarter of 2008 also had $6,171,140 of capital costs expensed to dry hole costs as the three well exploration program on the Canadon Ramirez Concession in Argentina was unsuccessful. No amounts were expensed to dry hole costs in 2009.

Income Taxes

The Company follows the liability method of accounting for income taxes under which the income tax provision is based on the temporary differences in the accounts calculated using income tax rates expected to apply in the year in which the temporary differences will reverse. The Company has sufficient tax pools such that it is not liable for current income tax. However the Company is subject to a one percent Argentina capital tax on assets in Argentina. These amounts are deductible from future income earned in Argentina.

The Company has the following tax pools which can be used to reduce future taxable income:



Rate of
Utilization % Amount
-------------------------------------------------------------------------
Undepreciated capital costs 25 $ 393,268
Foreign exploration expenditures 10 5,815,989
Share issue costs 20 71,018
Canadian exploration expenditures 100 392,110
Canadian development expenditures 30 544,084
Canadian oil and gas expenditures 10 575,231
Non-capital loss carry forward(*) 100 4,098,164
-------------------------------------------------------------------------
$11,889,864
-------------------------------------------------------------------------
(*) $377,869 expires 2026, $929,726 expires 2027, $1,955,891 expires in
2028 and $834,678 expires in 2029


Non-Controlling Interest

A private foreign company (Foreign Corp.) owns seven percent of CanAmericas Energy Ltd. (CanAmericas), a 93 percent owned subsidiary of Pine Cliff. In 2008, losses in CanAmericas exceeded the non-controlling interest investment and therefore none of CanAmericas' loss in 2009 was allocated to the non-controlling interest.



Loss

Three months ended
March 31, December 31, March 31,
($) 2009 2008 2008
-------------------------------------------------------------------------
Loss 498,532 6,423,691 317,113
Loss per share 0.01 0.14 0.00
-------------------------------------------------------------------------


The increase in the first quarter loss of 2009 compared to Q1 2008 was predominantly due to decreased interest income, increased depletion costs and increased general and administrative costs. The decrease in the Q1 2009 loss compared to Q4 2008 loss was predominantly due to the provision for dry hole costs of $6,171,140 relating to the unsuccessful exploration drill program on the Canadon Ramirez Concession in the fourth quarter of 2008.



Cash Flow from Operations

Three months ended
March 31, December 31, March 31,
($) 2009 2008 2008
-------------------------------------------------------------------------
Cash flow from operations (229,307) (68,211) (204,923)
Cash flow from operations per share (0.01) (0.00) (0.00)
-------------------------------------------------------------------------


Cash flow deficiency increased in the first quarter of 2009 compared to Q1 2008 as the Company had decreased interest income, increased general and administrative costs and increased production costs which were partially offset by higher oil and gas sales and a reduction in non-cash working capital adjustments. The reduction in cash flow from Q1 2009 compared to Q4 2008 was primarily due to decreased oil and gas sales.

Related Party Transactions

Pine Cliff has a management agreement with Bonterra Corp, a wholly owned subsidiary of Bonterra Oil & Gas Ltd. (a company with common directors and management with Pine Cliff), to have Bonterra Corp provide executive services (President and CEO, CFO and COO), accounting services, oil and gas administration and office administration. The management fee consists of a monthly fee of $10,000 (2008 - $19,800), three percent of net earnings before income taxes plus minor general and administrative expenses incurred by Bonterra that were specifically attributable to Pine Cliff. Total fees for 2009 were $30,000 (2008 - $59,400). As at March 31, 2009, amounts owing to Bonterra Corp were $64 (December 31, 2008 - $592).

Commitments

The Company has a related party management agreement with Bonterra Corp that can be cancelled by giving 90 days notice.

Liquidity and Capital Resources

As of March 31, 2009, Pine Cliff had positive working capital of $1,907,037 (December 31, 2008 - $2,316,982). These funds will be used to cover the Company's budgeted 2009 capital expenditures of $750,000 in relation to the drilling of its Laguna de Piedra Concession if it is drilled in 2009 as well as miscellaneous capital costs in respect of its Canadian oil and gas operations. The Company is currently focusing on reducing general and administrative expenses related to its Argentina operations.

The following consolidated financial statements and notes to the

consolidated financial statements have been provided for further details.




Consolidated Balance Sheets

As at March 31, 2009 (unaudited) and December 31, 2008

2009 2008
-------------------------------------------------------------------------
Assets
Current
Cash $ 2,013,898 $ 2,624,556
Accounts receivable 92,979 107,200
Prepaid expenditures 37,114 29,602
-------------------------------------------------------------------------
2,143,991 2,761,358
-------------------------------------------------------------------------
Property and Equipment (Note 5)
Property and equipment 3,998,337 3,878,550
Accumulated depletion and depreciation (1,175,421) (1,069,893)
-------------------------------------------------------------------------
Net Property and Equipment 2,822,916 2,808,657
-------------------------------------------------------------------------
$4,966,907 $5,570,015
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued liabilities $240,954 $444,376

Asset Retirement Obligations 81,950 80,938
Non-Controlling Interests (Note 4) - -
-------------------------------------------------------------------------
322,904 525,314
-------------------------------------------------------------------------
Commitments
Shareholders' Equity
Share capital (Note 7) 14,588,722 14,588,722
Contributed surplus 820,802 722,968
Deficit (10,765,521) (10,266,989)
Accumulated other comprehensive income - -
-------------------------------------------------------------------------
4,644,003 5,044,701
-------------------------------------------------------------------------
$4,966,907 $5,570,015
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Consolidated Statements of Loss,
Comprehensive Loss and Deficit

For the three months ended March 31 (unaudited)

2009 2008
-------------------------------------------------------------------------
Revenue
Oil and gas sales $193,725 $143,116
Royalties (49,352) (36,868)
Interest income 5,781 68,168
-------------------------------------------------------------------------
150,154 174,416
-------------------------------------------------------------------------
Expenses
Production costs 57,809 26,249
General and administrative 324,997 282,129
Foreign exchange loss (gain) 7,043 (2,310)
Stock based compensation 97,834 115,445
Depletion, depreciation and accretion 106,540 65,469
-------------------------------------------------------------------------
594,223 486,982
-------------------------------------------------------------------------
Loss Before Taxes and Non-Controlling Interests (444,069) (312,566)
-------------------------------------------------------------------------
Taxes (Note 6)
Current 54,463 27,889
Future - -
-------------------------------------------------------------------------
54,463 27,889
-------------------------------------------------------------------------
Loss before Non-Controlling Interests (498,532) (340,455)
Loss applicable to non-controlling interests
(Note 4) - 23,342
-------------------------------------------------------------------------
Loss and Comprehensive Income for the Period (498,532) (317,113)
Deficit, Beginning of Period (10,266,989) (2,725,121)
-------------------------------------------------------------------------
Deficit, End of Period ($10,765,521) ($3,042,234)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Loss Per Share - Basic and Diluted ($0.01) ($0.01)
-------------------------------------------------------------------------

Weighted Average Common Shares
Basic 45,275,695 45,275,695
Diluted 45,477,048 46,133,294
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Consolidated Statements of Cash Flow

For the three months ended March 31 (unaudited)

2009 2008
-------------------------------------------------------------------------
Operating Activities
Loss for the period ($498,532) ($317,113)
Items not affecting cash
Stock based compensation 97,834 115,445
Depletion, depreciation and accretion 106,540 65,469
Foreign exchange loss (gain) - (2,310)
Loss applicable to non-controlling interests - (23,342)
-------------------------------------------------------------------------
(294,158) (161,851)
-------------------------------------------------------------------------
Change in non-cash working capital
Accounts receivable 14,221 (34,543)
Prepaid expenditures (7,512) (5,059)
Accounts payable and accrued liabilities 58,142 (3,470)
-------------------------------------------------------------------------
64,851 (43,072)
-------------------------------------------------------------------------
Cash Used in Operating Activities (229,307) (204,923)
-------------------------------------------------------------------------
Financing Activities - -
-------------------------------------------------------------------------
Cash Provided by Financing Activities - -
-------------------------------------------------------------------------
Investing Activities
Property and equipment expenditures (119,786) (281,388)
Proceeds on disposal of restricted term
investments - 2,689,601
Change in non-cash working capital
Accounts payable and accrued liabilities (261,565) 3,704
-------------------------------------------------------------------------
Cash Provided by (Used in) Investing Activities (381,351) 2,411,917
-------------------------------------------------------------------------
Foreign Exchange (Loss) Gain on Cash Held in
Foreign Currency - 2,310
-------------------------------------------------------------------------
Net Cash Inflow (Outflow) (610,658) 2,209,304
Cash, Beginning of Period 2,624,556 5,769,448
-------------------------------------------------------------------------
Cash, End of Period $ 2,013,898 $ 7,978,752
-------------------------------------------------------------------------

Cash interest paid $ - $ -
Cash taxes paid $ 7,717 $ -
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Notes to the Consolidated Financial Statements

Periods ended March 31, 2009 and 2008 (unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies and methods of application followed in the
preparation of the interim financial statements are the same as those
followed in the preparation of Pine Cliff Energy Ltd.'s (the Company
or Pine Cliff) 2008 annual financial statements except as described
below. These interim financial statements do not include all
disclosures required for annual financial statements. The interim
financial statements as presented should be read in conjunction with
the 2008 annual financial statements.

In February 2008, the Canadian Institute of Chartered Accountants
(CICA) issued Section 3064, "Goodwill and intangible assets",
replacing Section 3062, "Goodwill and other intangible assets" and
Section 3450, "Research and development costs". Various changes have
been made to other sections of the CICA Handbook for consistency
purposes. The new Section is applicable to financial statements
relating to fiscal years beginning on or after October 1, 2008.
Accordingly, the Company adopted the new standards for its fiscal
year beginning January 1, 2009. It establishes standards for the
recognition, measurement, presentation and disclosure of goodwill
subsequent to its initial recognition and of intangible assets by
profit-orientated enterprises. Standards concerning goodwill are
unchanged from the standards included in the previous Section 3062.
The adoption of this Standard did not have an impact on the
Consolidated Financial Statements.

In January 2009, the CICA issued EIC-173, "Credit Risk and the Fair
Value of Financial Assets and Financial Liabilities". The EIC
provides guidance on how to take into account credit risk of an
entity and counterparty when determining the fair value of financial
assets and financial liabilities, including derivative instruments.
This standard is effective for the Company's fiscal periods ending on
or after January 20, 2009 with retrospective application. The
application of this EIC did not have a material effect on the
Consolidated Financial Statements.

Effective January 1, 2009, the Company prospectively adopted the
Canadian Institute of Chartered Accountants (CICA) 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. The adoption of this Standard did not have an impact on
the Consolidated Financial Statements.

Effective January 1, 2009, the Company prospectively adopted CICA
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. The
adoption of this Standard did not have an impact on the Consolidated
Financial Statements.

Recent Accounting Pronouncements

The Accounting Standards Board has confirmed the convergence of
Canadian GAAP with International Financial Reporting Standards (IFRS)
will be effective January 1, 2011. The Company has performed an
initial scoping process in order to ensure successful implementation
within the required timeframe. The impact on the Company's
consolidated financial statements is not reasonably determinable at
this time. Key information will be disclosed as it becomes available
during the transition period.

2. BANKING AGREEMENT

The Company has a line of credit through its subsidiary CanAmericas
to the lower of its available amount of cash or US $3,690,000, which
can be drawn by means of letters of guarantee and letters of credit.
The line of credit may be cancelled without notice. No letters of
guarantee or credit are currently outstanding.

3. RELATED PARTY TRANSACTIONS

Bonterra Oil & Gas Ltd. ("Bonterra O&G") an oil and gas corporation
publicly traded on the Toronto Stock Exchange with common directors
and management with Pine Cliff and a former parent of the Company,
through its wholly owned subsidiary Bonterra Energy Corp. ("Bonterra
Corp") provides management services and office administration to the
Company. Total fees for the three month period were $30,000 (2008 -
$59,400) plus minimal administrative costs. As of March 31, 2009 Pine
Cliff owed Bonterra Corp $64 (December 31, 2008 - $592).

These transactions are in the normal course of operations and are
measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.

4. NON-CONTROLLING INTERESTS

The Company has incorporated a subsidiary company, CanAmericas Energy
Ltd. ("CanAmericas") to explore and develop oil and gas properties
primarily in South America. CanAmericas is owned 93 percent by the
Company and seven percent by a foreign private corporation ("Foreign
Corp."). CanAmericas was initially financed by investments of
$1,400,000 U.S. for 5,600,000 common shares from the Company and
$100,000 U.S. for 400,000 common shares from Foreign Corp.
Changes to non-controlling interest were as follows:



March 31, December 31,
2009 2008
---------------------------------------------------------------------
Non-controlling interest, January 1 $ - $ 25,179
Loss applicable to non-controlling
interest ($ -) (25,179)
---------------------------------------------------------------------
Non-controlling interest, end of period $ - $ -
---------------------------------------------------------------------


Foreign Corp. has been granted an option to acquire an additional
1,000,000 common shares of CanAmericas at $0.25 U.S. per common
share. Fifty percent of the options vested on January 13, 2007, and
the remaining 50% vested on January 13, 2008, and all of the options
will expire on January 13, 2011.



5. PROPERTY AND EQUIPMENT

March 31, 2009 December 31, 2008
---------------------------------------------------------------------
Accumulated Accumulated
Depletion Depletion
and and
Cost Depreciation Cost Depreciation
---------------------------------------------------------------------
Petroleum and
natural gas
properties and
related
equipment $3,944,825 $1,145,005 $3,825,038 $1,041,902
Furniture,
equipment and
other 53,512 30,416 53,512 27,991
---------------------------------------------------------------------
$3,998,337 $1,175,421 $3,878,550 $1,069,893
---------------------------------------------------------------------


Exploration costs of $1,384,487 included in petroleum and natural gas
properties and related equipment presently have been excluded from
costs subject to depletion and depreciation.

6. TAXES

The Company has accrued $54,463 current tax expense related to
Argentina capital tax. A 1% Argentina capital tax is payable in
respect of the exploration costs for the Canadon Ramirez and the
Laguna de Piedra Concessions.

The Company continues to record a full valuation allowance for its
future income tax assets as the recoverability is uncertain.

7. SHARE CAPITAL

Authorized

Unlimited number of Common Shares without nominal or par value.

Unlimited number of Class B Preferred Shares without nominal or par

value which may be issued in one or more series.



Issued Number Amount
---------------------------------------------------------------------
Common Shares
Balance, January 1, 2009 45,275,695 $14,588,722
---------------------------------------------------------------------
Balance, March 31, 2009 45,275,695 $14,588,722
---------------------------------------------------------------------

A summary of the changes to the Company's contributed surplus is
presented below:

Contributed surplus

($) 2009 2008
---------------------------------------------------------------------
Balance, January 1 722,968 341,465
Stock-based compensation expensed
(non-cash) 97,834 115,445
---------------------------------------------------------------------
Balance, March 31 820,802 456,910
---------------------------------------------------------------------


The deficit balance is composed of accumulated earnings.
A summary of the status of the Company's stock option plan as of
March 31, 2009 and December 31, 2008, and changes during the three
month and twelve month periods ending on those dates is presented as
follows:



March 31, 2009 March 31, 2008
---------------------------------------------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Options Price Options Price
---------------------------------------------------------------------
Outstanding at
beginning of period 3,118,000 $0.63 3,053,000 $0.62
Options granted - - 65,000 1.15
Options exercised - - - -
Options cancelled 12,000 1.15 - -
---------------------------------------------------------------------
Outstanding at
end of period 3,106,000 $0.62 3,118,000 $0.63
---------------------------------------------------------------------
Options exercisable
at end of period 2,022,500 $0.34 2,003,500 $0.33
---------------------------------------------------------------------
---------------------------------------------------------------------

The following table summarizes information about stock options
outstanding at March 31, 2009:

Options Outstanding Options Exercisable
-------------------------------------------------------------------------
Weighted-
Average Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 3/31/09 Life Price at 3/31/09 Price
-------------------------------------------------------------------------
$0.15 1,090,000 0.8 years $0.15 1,090,000 $0.15
0.50 - 0.60 825,000 0.8 years 0.51 825,000 0.51
0.70 - 0.75 80,000 0.8 years 0.72 80,000 0.72
1.10 - 1.20 1,071,000 1.2 years 1.18 7,500 1.18
1.40 - 1.50 40,000 1.8 years 1.49 20,000 1.49
-------------------------------------------------------------------------
$0.15 - $1.50 3,106,000 1.0 years $0.62 2,022,500 $0.34
-------------------------------------------------------------------------


The Company records a compensation expense over the vesting period
based on the fair value of options granted to employees, directors
and consultants. Unvested options as of March 31, 2009 vest 1,026,000
in 2009 and 57,500 in 2010.

8. SEGMENTED INFORMATION

The Company has operations in Canada and in South America. All
operating activities are related to exploration, development and
production of petroleum and natural gas:



South
($) Canada America Total
---------------------------------------------------------------------
March 31, 2009
Revenue, gross 197,748 1,758 199,506
Loss before non-controlling
interest 182,880 315,652 498,532
Capital expenditures 1,448 118,338 119,786
Property and equipment 1,315,038 1,507,878 2,822,916
Total assets 3,264,287 1,702,620 4,996,907

March 31, 2008
Revenue, gross 191,226 20,058 211,284
Loss before non-controlling
interest 154,203 186,252 340,455
Capital expenditures 7,426 273,962 281,388

December 31, 2008
Property and equipment 1,416,693 1,391,964 2,808,657
Total assets 3,884,908 1,685,107 5,570,015
---------------------------------------------------------------------


9. FINANCIAL AND CAPITAL RISK MANAGEMENT

Financial Risk Factors

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

The Company undertakes transactions in a range of financial
instruments including:

- Cash deposits;

- Receivables;

- Payables;

The Company's activities result in exposure to a number of financial
risks including market risk (commodity price risk, interest rate
risk, foreign exchange risk, credit risk, and liquidity risk).
Financial risk management is carried out by senior management under
the direction of the Board of Directors.

The Company does not enter into risk management contracts. The
Company sells its oil and gas commodities at market prices at the
date of sale in accordance with the Board directive.

Capital Risk Management

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

The Company's objectives when managing capital are to safeguard the
Company's ability to continue as a going concern, to continue
providing returns to its Shareholders and benefits for other
stakeholders, and to maintain an optimal capital structure to reduce
the cost of capital. In order to maintain or adjust the capital
structure, the Company may issue debt or new shares.

The Company monitors capital on the basis of the ratio of budgeted
exploration capital requirements to current working capital. This
ratio is calculated using the projected cash requirements for a year
in advance and maintaining a working capital balance of at least six
months to satisfy this requirement on a continuous basis.

The Company believes that maintaining approximately a six month
current working capital balance to the exploration capital budget
requirement is an appropriate basis to allow it to continue its
future development of the Company's assets.

The following section (a) of this note provides a summary of our
underlying economic positions as represented by the carrying values,
fair values and contractual face values of our financial assets and
financial liabilities. The Company's working capital to capital
expenditure requirement ratio is also provided.

The following section (b) addresses in more detail the key financial
risk factors that arise from the Company's activities including its
policies for managing these risks.

a) Financial assets, financial liabilities

The carrying amounts, fair value and face values of the Company's
financial assets and liabilities other than cash are shown in
Table 1.



Table 1
As at March 31, 2008
($000) Carrying Value Fair Value Face Value
---------------------------------------------------------------------
Financial assets
Accounts receivable 93 93 145
Financial liabilities
Accounts payable and
accrued liabilities 237 237 237
---------------------------------------------------------------------

The budgeted capital expenditure to working capital base figures for
March 31, 2009 is presented below:

($000) March 31, 2009
---------------------------------------------------------------------
Budgeted capital expenditure(1) 750
---------------------------------------------------------------------
Current assets 2,144
Current liabilities (241)
---------------------------------------------------------------------
Working capital 1,903
---------------------------------------------------------------------
Working capital to budgeted capital
expenditure (in months) 30.5
---------------------------------------------------------------------

(1) Budgeted capital expenditure represents the Company's estimated
future twelve month capital expenditures.


b) Risks and mitigations

Market risk is the risk that the fair value or future cash flow of
the Company's financial instruments will fluctuate because of changes
in market prices. Components of market risk to which Pine Cliff is
exposed are discussed below.

Commodity price risk

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

The Company's principal operation is the exploration and possible
development of its oil and gas properties in Argentina. The Company
also engages in the exploration and development of oil and natural
gas properties in Canada. Fluctuations in prices of these commodities
may directly impact the Company's performance and ability to continue
with its operations.

The Company's management currently does not use risk management
contracts to set price parameters for its production.

Sensitivity Analysis

The Company is still in the exploration stage of development of its
exploration properties and as such generates nominal cash flow or
earnings from these properties. In addition, the Company's petroleum
and natural gas operations provide only moderate cash flow and as
such changes in commodity would have no material impact on the
Company.

Interest rate risk

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

Interest rate risk refers to the risk that the value of a financial
instrument or cash flow associated with the instrument will fluctuate
due to changes in market interest rates. Interest rate risk arises
from interest bearing financial assets and liabilities that Pine
Cliff uses. The principal exposure to the Company is on its cash
balances which have a variable interest rate which gives rise to a
cash flow interest rate risk.

Pine Cliff's cash consists of Canadian dollar, US dollar and
Argentinean Pesos investment chequing accounts. Since these funds
need to be accessible for the development of the Company's capital
projects, management does not reduce its exposure to interest rate
risk through entering into term contracts of various lengths. As
discussed above, the Company generally manages its capital such that
its budgeted capital requirements to current working capital ratio
are at least six months.

Foreign exchange risk

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

The Company has foreign operations, but no revenue from production
from the foreign properties and currently sells all of its Canadian
product sales in Canadian currency. The Company has a US cash and
Argentina Pesos cash balance and earns an insignificant amount of
interest on its US and Argentinean Pesos bank accounts. Funds held in
foreign denominated accounts are generally held for short periods of
time, as the Company transfers and converts Canadian funds to foreign
currency as payments for foreign currency denominated payables come
due. As such, Pine Cliff does not mitigate exchange rate risk by
using risk management contracts.

Credit risk
-----------

Credit risk is the risk that a contracting party will not complete
its obligations under a financial instrument and cause the Company to
incur a financial loss. Pine Cliff is exposed to credit risk on all
financial assets included on the balance sheet. To help mitigate this
risk, the Company maintains the majority of its cash balances with a
major Canadian chartered bank and invests in secure financial
instruments.

Substantially all of the accounts receivable balance at March 31,
2009 ($93,000) and December 31, 2008 ($107,000) relates to product
sales with Canadian oil and gas companies and interest income from
major Canadian chartered banks, all of which have consistently been
received within 30 to 60 days. The Company through its subsidiary
CanAmericas also has a receivable of $52,000 for Argentina Value
Added Tax on non-capital expenditures. The Company has taken a full
allowance on the V.A.T., as the Company has no Argentina income
subject to V.A.T. to claim it against.

The Company assesses quarterly if there has been any impairment of
the financial assets of the Company. The Company does not have any
significant credit risk exposure to any single counterparty or any
group of counterparties having similar characteristics.

The carrying value of accounts receivable approximates their fair
value due to the relatively short periods to maturity on this
instrument. Currently no accounts receivable is greater than 90 days.
The maximum exposure to credit risk is represented by the carrying
amount on the balance sheet. There are no material financial assets
that the Company considers past due.

Liquidity risk
--------------

Liquidity risk includes the risk that, as a result of Pine Cliff's
operational liquidity requirements:

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

- Pine Cliff will not have sufficient funds to continue with its
financing of its major exploration projects,

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

- Pine Cliff may be unable to settle or recover a financial asset at
all.

To help reduce these liquidity risks, the Company:

- Has a general capital policy of maintaining at least six months of
budgeted capital requirements as its working capital base.

- Maintains a continuous evaluation approach as to the requirements
for its largest exploration programs; the Canadon Ramirez
Concession and Laguna de Piedra Concession.

Contact Information

  • Pine Cliff Energy Ltd.
    George F. Fink
    President and CEO
    (403) 269-2289
    Fax: (403) 265-7488

    OR

    Pine Cliff Energy Ltd.
    Randy M. Jarock
    COO
    (403) 269-2289
    Fax: (403) 265-7488


    OR


    Pine Cliff Energy Ltd.
    Kirsten Kulyk
    Manager, Investor Relations
    (403) 269-2289
    Fax: (403) 265-7488
    info@pinecliffenergy.com