Bear Ridge Resources Ltd.
TSX : BER

Bear Ridge Resources Ltd.

November 14, 2005 09:00 ET

Bear Ridge Resources Ltd.: Q3 2005 For the Period Ended September 30, 2005

CALGARY, ALBERTA--(CCNMatthews - Nov. 14, 2005) -

Report to Shareholders

Bear Ridge Resources Ltd. (TSX:BER) ("Bear Ridge") is very pleased to report its financial and operating results for the third quarter and the nine months ended September 30, 2005. The Company has made significant progress on a number of fronts in its initial nine months of operations and has taken a number of very positive steps to position Bear Ridge as a solid junior exploration and production company focused on generating profitable growth in shareholder value.

Highlights of the Company's first nine months of operations and the quarter ended September 30, 2005 include:

- Production growth from 285 boe per day at startup in January, 2005 to an average of 628 boe per day over the Company's initial nine month period of operations. Production averaged 784 boe per day in the third quarter and, based on wells that have already been successfully completed and are in various stages of being tied in, Bear Ridge is on track to exceed its 2005 exit target of 2,000 boe per day.

- Exploration and development drilling programs have been very successful with 12 (5.77 net) wells drilled and completed in the third quarter for a 100% success rate and 20 (12.27 net) wells drilled with a 95% success rate year to date.

- Our 2005 exploration program is highlighted by several new pool discoveries, including the previously announced discovery at Mica in northeast British Columbia in the third quarter. The Mica discovery well had an extended AOF test of 9 mmcf per day and is expected to commence production in December, 2005 at a restricted rate of 4 mmcf per day. Bear Ridge owns a 100% working interest in this discovery.

- Cash flow from operations exceeded $6 million ($0.25 per share) for the initial nine months of 2005 and $2.7 million ($0.10 per share) for the third quarter.

- Net earnings are well above industry averages due to Bear Ridge's sizeable tax pool position exceeding $105 million. For the nine months ended September 30, 2005 net earnings exceeded $10.3 million ($0.43 per share).

- Top decile operating netbacks of $40.99 for the first nine months of the year and $42.38 for the third quarter are indicative of Bear Ridge's high quality production base.

- Undeveloped lands have more than doubled from 23,000 net undeveloped acres in January, 2005 to approximately 45,000 net undeveloped acres in the third quarter of 2005.

Third Quarter Operations

Bear Ridge invested $11.1 million in its exploration and development drilling program during the third quarter which included drilling 12 (5.77 net) wells with a success rate of 100%. We drilled 2 (0.6 net) light oil wells at Weirhill in Southeast Saskatchewan, 2 (1.25 net) natural gas wells and 1 (0.85 net) light oil well at Sounding in Central Alberta, 2 (1.0 net) natural gas wells at Nelson in Central Alberta, 2 (0.75 net) natural gas wells at Goodwin in Central Alberta and 2 (1.6 net) natural gas wells at Mica in Northeast British Columbia. Our most exciting exploration success to date was a 100% working interest new pool natural gas discovery at Mica in Northeast British Columbia that tested at rates in excess of 9 mmcf per day and is expected to start production in December, 2005 at a facilities restricted rate of approximately 4 mmcf per day.


Approximately 200 boe per day of production at Sounding in Central Alberta was shut in for the bulk of the third quarter due to third party facility limitations. Wet ground conditions during the third quarter delayed a number of our pipeline construction projects and contributed to lower than forecast average production for the quarter. We plan to complete construction of a new pipeline in December, 2005 that will bring the Sounding production back on stream and complete additional pipeline projects that are in various stages of construction at Nelson and Pembina in our Central Alberta region and at Mica in northeast British Columbia to tie in new gas discoveries. Based on completion of these pipeline projects Bear Ridge expects to exit 2005 ahead of our guidance of 2,000 boe per day.

Due to our mix of light oil and high heat content natural gas, Bear Ridge continues to receive premium pricing for its product stream and expects to deliver some of the best operating margins in the industry. Bear Ridge realized an operating netback of $42.38 for the third quarter and $40.99 for the initial nine months of 2005. We did not hedge any natural gas during 2005 and have not hedged any 2006 natural gas volumes at this time. For calendar 2006 the company has hedged 200 barrels of oil on a costless collar basis with a floor of $55.00 WTI and a ceiling of $73.00 WTI.

Management Team Appointments

Effective September 30, 2005, Bear Ridge made a number of new appointments to its management team in conjunction with the termination of its Technical Services Agreement. Bear Ridge is very pleased to announce its complete management team:

- Russell Tripp, Chief Executive Officer

- Douglas Hibbs, President

- Brian Baker, Vice President Finance & Chief Financial Officer

- Cal Jaycock, Vice President Exploration

- Colin Witwer, Manager, Engineering & Operations

- Andrew Wiacek, Manager, Geophysics

Messrs. Tripp, Hibbs, Jaycock, Witwer and Wiacek were instrumental in the successful growth of Bear Creek Energy Ltd. and have all played key roles in Bear Ridge's startup growth phase since mid January, 2005. Insiders own 17 percent of the Company and with a fully dedicated and aligned team now in place, Bear Ridge is in a strong position to execute an aggressive capital program and capture additional value-adding growth opportunities.

Fourth Quarter Update

Based on the continued success of our 2005 exploration and development program, the Company's Board of Directors has approved a $9 million increase in our 2005 capital budget to $45 million for the year. The expanded capital budget will allow Bear Ridge to accelerate our winter drilling program and provides capital for additional land and seismic acquisitions in the Company's key operating areas. A second drilling rig has been contracted for the 2006 program and we expect to accelerate our current pace of activity early in the new year.

Bear Ridge currently has 4 wells drilling; a Triassic test at Sinclair on the Peace River Arch, a Shundra test at Pembina and 2 Elkton tests at Ferrier in west central Alberta. We currently have two service rigs conducting completion operations; one at Sinclair completing a recently drilled Triassic well and one at Pembina completing a prospective Basal Quartz zone. Additional drilling is planned at Mica in Northeast British Columbia prior to the end of the year. During the fourth quarter we are also shooting a 115 square kilometer seismic program in Northeast British Columbia to firm up drilling locations on existing Company acreage and to evaluate open crown lands in the area.

As a result of the success of our 2005 exploration and drilling program we have expanded our credit facility to $25 million (up from $8.5 million) with a Canadian Chartered Bank. Net debt at the end of the quarter was $9.0 million. With a solid balance sheet, a rapidly growing production base, strong commodity prices and a healthy inventory of drilling opportunities, management is very excited about the Company's growth prospects.

Acquisition of Veteran Resources Ltd.

As announced on November 4, 2005, Bear Ridge entered into an agreement to acquire all of the outstanding shares of Veteran Resources Ltd. ("Veteran") for total consideration of $124 million. Bear Ridge will issue Veteran shareholders a combination of $0.48 in cash (to a maximum of $34.7 million) and 0.2358 Bear Ridge shares (to a maximum of 17.0 million shares) for each Veteran share outstanding. Veteran's board of directors have agreed to recommend the transaction and Bear Ridge received lock-up agreements from insiders representing 19 percent of Veteran's outstanding shares. Completion of the transaction is expected in mid January, 2006.

Veteran has been a very successful, technically-driven junior exploration company and has grown production primarily through the drillbit to approximately 2,050 boe per day at the time of the announcement. The Veteran assets are very complimentary to Bear Ridge's existing Peace River Arch/Northeast B.C. properties and exploration focus with 80 percent of Veteran's production and 74 percent of its 58,600 net undeveloped acreage position concentrated in this key region. Veteran's extensive seismic database of 630 square kilometers of 3D seismic and 2,095 kilometers of 2D seismic and a deep inventory of drilling opportunities targeting multi-zone natural gas and light oil is an ideal fit with Bear Ridge's exploration strategy in this region.

In addition to the excellent fit with our properties, technical expertise and exploration focus, the acquisition is strongly accretive on all metrics to Bear Ridge and provides Bear Ridge the opportunity base and necessary critical mass to undertake an expanded capital program and to capture additional strategic growth opportunities.

With the closing of the Veteran transaction scheduled for mid-January 2006, management has provided initial 2006 guidance of 5,200 to 5,700 boe per day based on an estimated $80 million 2006 capital program that includes a 65 well exploration and development drilling program. Our balance sheet remains very healthy and, upon closing, Bear Ridge credit facilities will increase to $60 million. With 2006 cash flow forecasted in the $73 to $80 million range our projected debt remains well below 1.0 times 2006 forecast cash flow.

Outlook

We are extremely pleased with Bear Ridge's progress and growth in its initial nine months of operations. The current high commodity price environment is fuelling tremendous increase in activity levels. Access to services and increased competition for growth opportunities will represent increasing challenges for the entire sector. With 2 drilling rigs contracted for 2006, a deep inventory of Bear Ridge and Veteran drilling opportunities and a strong balance sheet, we are confident that Bear Ridge is in a strong position to deliver continued profitable growth to its shareholders.

I would like to take this opportunity to acknowledge the tremendous contribution and hard work of our entire staff during the Company's exciting startup period. On behalf of all shareholders I would like to thank all of the Company's directors for their strong support and advice in what has been a very eventful initial 9 months of operations.



On behalf of the Board of Directors


Russell J. Tripp
Chief Executive Officer


Financial Review and Operating Highlights

Nine months
Three months ended ended
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Sept. 30 June 30 Sept. 30
2005 2005 % Change 2005
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FINANCIAL (in 000s, except share amounts)
Gross oil and natural
gas revenue 4,585 4,175 9.8 9,952
Cash flow from operations 2,741 2,927 (6.4) 6,075
Per share - basic ($) 0.10 0.12 (16.7) 0.25
Per share - diluted ($) 0.09 0.11 (18.2) 0.23
Net Earnings 9,259 1,255 638 10,307
Per share - basic ($) 0.33 0.05 560 0.43
Per share - diluted ($) 0.30 0.05 500 0.39
Capital Expenditures 11,163 19,958 (44.1) 57,542
Related to the Arrangement - - - 21,436
Related to current
operations 11,163 19,958 (44.1) 36,106
Working capital surplus
(deficiency) (9,018) (560) 1,510 (9,018)
Shares outstanding (000s)
At period end 27,928 27,928 - 27,928
Weighted average
during period, basic 27,927 24,913 12.1 24,040
Weighted average during
period, diluted 30,727 26,619 15.4 26,547
------------------------------------------------------------------------

OPERATING
Production
Natural gas (mcf/d) 2,795 2,365 18.2 2,186
Oil and NGL's (bbls/d) 318 413 (23.0) 264
Oil and equivalent
(boe/d) 784 808 (2.9) 628
Average wellhead prices
Natural gas ($/mcf) 9.63 8.03 19.9 8.56
Oil and NGL's ($/bbl) 72.10 65.03 10.9 67.19
Operating Netback ($/boe) 42.38 44.80 (5.4) 40.99

Wells Drilled
Gross 12 1 20
Net 5.77 0.25 12.27
Net success rate 100% 100% 95%

Undeveloped land
(net acres) 45,000 42,000 45,000
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Management's Discussion and Analysis

Management's discussion and analysis ("MD&A") as of November 11, 2005, should be read in conjunction with the Company's unaudited consolidated financial statements for the nine month period ended September 30, 2005 and the audited consolidated financial statements and related notes for the year ended December 31, 2004 which have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and have been filed on sedar (www.sedar.com).

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

Non-GAAP Measurements - The Management's Discussion and Analysis contains the term cash flow from operations, which should not be considered an alternative to, or more meaningful than cash flow from operating activities as determined in accordance with Canadian generally accepted accounting principles as an indicator of the Company's performance. Bear Ridge's determination of cash flow from operations may not be particularly comparable to that reported by other companies, especially those in other industries. The reconciliation between net earnings and cash flow from operations can be found in the consolidated statement of cash flows in the unaudited consolidated financial statements. The Company also presents cash flow from operations per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of earnings per share. The Company will also use operating netback as an indicator of operating performance. Operating netback is calculated on a per boe basis taking the sales price and deducting off royalties and operating expenses.

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

Basis of Presentation - Bear Ridge Resources Ltd. ("Bear Ridge" or the "Company") was incorporated as 1142356 Alberta Ltd. on December 14, 2004 under the Business Corporations Act (Alberta). The Company participated in the Plan of Arrangement (the "Arrangement") entered into by Ketch Resources Trust, Ketch Resources Ltd, Bear Creek Energy Ltd., Bear Ridge Resources Ltd. and Kereco Energy Ltd. which resulted in Bear Ridge acquiring certain oil and gas asset formerly owned by Bear Creek Energy Ltd. As a result of the Arrangement there are no historical comparisons presented.

BUSINESS COMBINATION

Pursuant to an Arrangement agreement ("the Agreement") dated November 4, 4005 Bear Ridge agreed to complete a business combination with Veteran Resources Inc. ("Veteran"), a public oil and gas company, by way of a Plan of Arrangement. Under the terms of the Agreement Bear Ridge will acquire all of the issued and outstanding shares of Veteran for consideration consisting of $34,651,059 and 17,022,333 Bear Ridge common shares. The combination will be treated as an acquisition of Veteran by Bear Ridge. The Arrangement, which is subject to regulatory and shareholder approval, is expected to close in January 2006.

The combined Company will be a natural gas focused, exploration and development company with a concentrated asset base located in the Peace River Arch ("PRA") and Northeast British Columbia ("NEBC") areas. Veteran's focused positions at Earring in the PRA and Gunnell in NEBC are an excellent fit with Bear Ridge's existing properties and exploration activity in these regions.

PETROLEUM AND NATURAL GAS SALES

Petroleum and natural gas revenues increased 9.8% to $4.6 million for the three months ended September 30, 2005 when compared to $4.2 million for the second quarter of 2005. The increase was the result of a 11.9 % increase in the overall price per boe received combined with a slight decrease of 2.9% in the Company's boe/d average on a quarter over quarter basis.

Natural gas production had the biggest impact on sales revenue as production increased from 2,365 mcf/d in the previous quarter to 2,795 mcf/d for the three months ended September 30, 2005, an increase of 18.2 %. New volumes, which accounted for the increase and replaced natural declines on other properties, were brought on at Ferrier, Sinclair and Edson. Bear Ridge realized a 19.8% increase in the natural gas price received during the quarter, which averaged $9.63/mcf. Higher natural gas production volumes combined with the increase in prices received resulted in natural gas sales revenue of $2.5 million during the third quarter compared to $1.7 million in the previous quarter, an increase of 47%. Bear Ridge expects natural gas sales to continue to climb as all of the Company's current behind pipe production to be tied in during the fourth quarter is natural gas.

Oil and NGL production declined to 318 bbl/d from 413 bbl/d as the result of natural declines on the Sakwatamau 11-16 Viking oil well. Improved pricing, combined with lower oil and NGL production volumes in the third quarter resulted in revenues of $2.1 million compared with $2.4 million from the previous quarter, a decrease of 12.5%. Bear Ridge expects that oil production will continue to slowly decline as the 11-16 well moves towards a stabilized rate.



Nine months
Three months ended ended
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Average daily Sept. 30 June 30 Sept. 30
production volumes 2005 2005 % Change 2005
------------------------------------------------------------------------
Natural gas (mcf/d) 2,795 2,365 18.2 2,186
Oil & NGL's (bbl/d) 318 413 (23.0) 264
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Total (boe/d) 784 808 (2.9) 628
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Bear Ridge sells all of its gas into the daily spot market based on the Alberta AECO reference price. AECO averaged Cdn $9.36 per mcf for the quarter. Oil prices are derived from the WTI average price adjusted for the U.S. $ exchange rate and quality differentials. For the three months ended September 30, 2005, WTI oil averaged $63.19US per bbl and the exchange rate was 0.83. The Company currently produces gas with a high heating value and as such the values expressed on a on a $/mcf basis are generally higher than the AECO per mcf average.



Nine months
Three months ended ended
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Average prices per Sept. 30 June 30 Sept. 30
unit of production 2005 2005 % Change 2005
------------------------------------------------------------------------
Natural gas - $/mcf $ 9.63 $ 8.03 19.8 $ 8.56
Crude oil - $/bbl $ 72.10 $ 65.03 10.9 $ 7.19
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Bear Ridge currently has the following costless collar commodity
contracts in place.

Hedged
Term Product volumes Floor Ceiling
------------------------------------------------------------------------
August 2005 -
December 2005 Oil 200 bbl/d $US 55.00 $US 71.60
January 2006 -
December 2006 Oil 200 bbl/d $US 55.00 $US 73.00
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ROYALTIES

Royalties increased significantly during the third quarter as the royalty holiday on the Sakwatamau 11-16 well expired early in the quarter. On an overall basis, royalties averaged 20.1% of revenue during the third quarter compared with 6.9% from the previous quarter. The rate of 20.1% incurred during the third quarter is more in line with standard industry rates usually ranging from 23-27%. Bear Ridge expects to maintain royalty rates slightly below industry standard in the near term as many of the wells planned to come on production during the fourth quarter are eligible for royalty relief during the initial stages of production.

The ARTC recovery recorded for the third quarter increased by 15% when compared with the second quarter of 2005 due to the Crown royalties incurred during the third quarter on the previously royalty free Sakwatamau 11-16 well being ARTC eligible.

For the nine months ended September 30, 2005 net royalties of $1,538,583 represents 15.5 percent of revenues.



Nine months
Three months ended ended
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Sept. 30 June 30 Sept. 30
Royalty Category 2005 2005 % Change 2005
------------------------------------------------------------------------
Crown 975,344 419,697 132 1,638,083
Freehold and GORR 155,732 32,841 374 275,500
ARTC (209,742) (165,258) 27 (375,000)
------------------------------------------------------------------------
Total Royalty 921,333 287,280 221 1,538,583
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Nine months
Three months ended ended
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Average royalty rates Sept. 30 June 30 Sept. 30
(% of sales) 2005 2005 % Change 2005
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Royalty Category
Crown 21.3 % 10.1 % 111 16.5 %
Freehold and GORR 3.4 % 0.8 % 325 2.8 %
ARTC (4.6)% (4.0)% 15 (3.8)%
------------------------------------------------------------------------
Total Royalty 20.1 % 6.9 % 191 15.5 %
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OPERATING EXPENSES

Operating costs remained relatively stable totaling $543,194 or $7.53 per boe for the three month period ending September 30, 2005 as compared to $554,610 or $7.55 per boe for the three month period ended June 30, 2005. Bear Ridge did not incur any unusual or non-recurring operating expense during the third quarter and believe the current level of operating costs is sustainable on the existing production base. Increased production volumes coming on stream during the fourth quarter and the completion of an oil pipeline for the Sakwatamau area planned for the winter of 2005 will help Bear Ridge lower operating costs on a boe basis moving forward.

TRANSPORTATION EXPENSES

Transportation expenses for the third quarter of 2005 were $64,238 or $0.89 on a per unit basis as compared to $40,812 or $0.56 per boe for the second quarter of 2005. For the nine month period ending September 30, 2005 transportation costs were $121,211 or $0.71 per boe.

OPERATING NETBACK

Bear Ridge experienced a $2.41 per boe, or 5.4% decrease in its operating netback during the third quarter when compared to the second quarter, as a $6.77 per boe increase in sales price was offset by a $8.87 per boe increase in royalties. The royalty increase was entirely the result of the Sakwatamau 11-16 well coming off of a royalty holiday early in the third quarter. For the nine month period ending September 30, 2005 the operating netback totaled $40.99 per boe.



Nine months
Three months ended ended
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Operating Sept. 30 June 30 Sept. 30
Netback ($/boe) 2005 2005 % Change 2005
------------------------------------------------------------------------
Sales price $ 63.58 $ 56.81 11.9 $ 58.06
Royalties (12.78) (3.91) (227.0) (8.97)
Operating expense (7.53) (7.55) - (7.37)
Transportation expense (0.89) (0.56) (58.9) (0.71)
------------------------------------------------------------------------
Operating Netback $ 42.38 $ 44.79 (5.4) $ 40.99
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GENERAL AND ADMINISTRATIVE EXPENSES ("G&A")

In conjunction with the Plan of Arrangement, Bear Ridge and Ketch Resources Ltd. entered into a Technical Service Agreement which provides for the shared services required to manage Bear Ridge's activities and govern the allocation of general and administrative expenses between the entities. Under the Technical Services Agreement, Bear Ridge is charged a technical services fee by Ketch Resources Ltd., on a cost recovery basis, in respect of management, development, exploitation, operations and marketing activities. The allocation uses production and capital expenditures, for the quarter as the basis for determining how costs are allocated. Bear Ridge is responsible for the payment of G&A expenses that fall outside the scope of the agreement. For the three and nine month periods ended September 30, 2005 the technical services fee was $300,000 and $818,889 respectively. The technical services agreement was terminated effective September 30, 2005.



Nine months
Three months ended ended
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Sept. 30 June 30 Sept. 30
G & A Expense 2005 2005 % Change 2005
------------------------------------------------------------------------
G&A expense (gross) $ 315,385 $ 334,225 (5.6) $ 920,202
Overhead recoveries (16,417) (738) 2124 (17,155)
------------------------------------------------------------------------
G&A expense (net) $ 298,968 $ 333,487 (10.4) $ 903,047
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------------------------------------------------------------------------
G&A expense $ per boe $ 4.15 $ 4.54 (8.6) $ 5.27
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For the three month period ended September 30, 2005 G&A expense totaled $298,968 compared to $333,487 for the three month period ended June 30, 2005, a decrease of 10.4%. On a per unit basis costs in the third quarter decreased by 8.6 percent to $4.15 per boe compared to $4.54 per boe in the second quarter. G&A expenses consist of the monthly management fee charged by Ketch based on the technical services agreement and any other direct costs charged. For the nine month period ended September 30, 2005 G&A expenses were $903,047 or $5.27 per boe. General and administrative are expected to rise in the fourth quarter due to reorganization costs related to the termination of the Technical Services Agreement, additions to Bear Ridge's management team and relocation of office space.

STOCK BASED COMPENSATION

For the three month period ended September 30, 2005, the Company incurred stock based compensation expenses of $216,761 or $3.01 per boe as compared to $298,241 or $4.06 per boe for the three month period ended June 30, 2005. For the nine month period ended September 30, 2005 stock based compensation expense of $703,000 or $4.10 per boe was recognized.

INTEREST EXPENSE

In the three month period ended September 30, 2005, the Company recorded interest expense of $16,422 compared to $32,048 for the three month period ended June 30, 2005. The decrease is due to a reduction in amounts drawn on bank lines from a re-financing closed near the end of the second quarter. For the nine month period ended September 30, 2005 interest expense was $49,302.

DEPLETION, DEPRECIATION AND ACCRETION

Depletion and depreciation in the third quarter of 2005 totaled $2,077,555 as compared to $1,591,455 for the second quarter of 2005. Accretion of the asset retirement obligation for the third quarter was $7,120 compared to $5,858 in the second quarter of 2005. On a per boe basis depletion and depreciation was $28.81 per boe and accretion expense was $0.10 per for the third quarter of 2005 compared to $21.65 per boe and $0.08 respectively. The depletion rate per boe increased as a result of the Company incurring expenditures to acquire new production, which often receives lower reserve assignments due to the unpredictable nature of the new production.

The DD&A rate is impacted by the costs to acquire, explore and develop reserves of crude oil and natural gas, known as finding and development costs. In the early stages of drilling, capital costs may be recognized before proven reserves are fully booked leading to higher initial DD&A rates.



Nine months
Three months ended ended
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Sept. 30 June 30 Sept. 30
2005 2005 % Change 2005
------------------------------------------------------------------------

Depletion and
depreciation $ 2,077,555 $1,591,455 31 $ 4,091,010
Accretion $ 7,120 $ 5,858 21 $ 17,039

Cost per boe
Depletion and
depreciation $ 28.81 $ 21.65 33 $ 23.86
Accretion $ 0.10 $ 0.08 25 $ 0.10
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TAXES

The Company has available approximately $107 million in tax pools to shelter taxable income earned. In the second quarter, Bear Ridge limited the recognition of the benefit of these pools to $2.7 million, the bulk of which relates to reducing the estimated tax liability incurred in the acquisition of an oil and gas partnership. During the third quarter, Bear Ridge reviewed its unrecognized future income tax assets and concluded that it was more likely than not that an amount of the unrecognized future income tax assets will be realized. Accordingly an additional future income tax recovery has been recorded during the third quarter totaling $8,819,000.

As the result of various flow-through share offerings completed by Bear Ridge during 2005, the Company is committed to incur and renounce to subscribers $7.2 million in qualifying expenditures related to flow through arrangements by December 31, 2006. As at September 30, 2005 $1.3 million of the commitment remains.

CASH FLOW AND NET INCOME

Cash flow from operations declined slightly to $2,741,273 ($0.10 per share) in the third quarter of 2005 from $2,927,289 ($0.12 per share) for the second quarter of 2005. Increased royalties resulting from the Sakwatamau 11-16 royalty holiday expiring early in the third quarter was the primary factor offsetting sales price increases reducing the Company's operating netback and cash flow. For the nine months ended September 30, 2005, cash flow from operations totaled $6,075,009 ($0.25 per share).

The Company recorded net income of $9,258,837 in the third quarter of 2005 compared to $1,255,335 generated in the second quarter. The increase in the net income was due to a future income tax recovery relating to Bear Ridge's large unrecognized tax pool balance. For the nine months ended September 30, 2005 net income totaled $10,306,560.



Nine months
Three months ended ended
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Sept. 30 June 30 Sept. 30
2005 2005 % Change 2005
------------------------------------------------------------------------
Cash flow from operations
- $ per share
Basic 0.10 0.12 (16.7) 0.25
Diluted 0.09 0.11 (18.2) 0.23
------------------------------------------------------------------------
Net income - $ per share
Basic 0.33 0.05 560 0.43
Diluted 0.30 0.05 500 0.39
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CAPITAL EXPENDITURES

During the third quarter of 2005, the Company drilled 12 (5.77 net) wells resulting in 9 (4.32 net) gas wells and 3(1.45 net) oil wells, for a 100 percent success rate. Capital expenditures during the third quarter of 2005 totaled $11.2 million. Capital expenditures for 2005 are as follows:




Nine months
Three months ended ended
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Sept. 30 June 30 Sept. 30
Capital Expenditures ($) 2005 2005 Change 2005
------------------------------------------------------------------------
Land $ 1,800,963 $ 2,504,736 (28.1) $ 4,888,488
Property
acquisitions - 2,000,000 - 23,636,121
Geological
& geophysical 143,957 471,344 (69.5) 703,301
Drilling & completions 7,959,451 5,639,750 41.1 17,316,870
Equipment & facilities 1,116,818 904,722 23.4 2,021,540
Office and furniture 43,750 5,635 676 49,385
Asset retirement
obligation 97,731 87,253 12 582,668
Corporate acquisition - 8,344,050 - 8,344,050
------------------------------------------------------------------------
Total Capital
Expenditures $ 11,162,670 $19,957,490 (44) $ 57,542,421
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The Company records the fair value of future obligations associated with the retirement of long-lived tangible assets, such as oil and gas wells, well sites and facilities. Accounting for the recognition of this obligation results in an increase to the carrying values of these assets. This amount has been shown as the Company's Asset Retirement obligation.

LIQUIDITY AND CAPITAL RESOURCES

As at September 30, 2005, Bear Ridge had drawn $5.9 million on its credit facility and had a working capital deficiency of $3.1 million for total net debt of $9.0 million. The Company's revolving demand loan facility currently has a maximum of $8.5 million. Effective November 4, 2005, Bear Ridge agreed to a new credit facility which increased the maximum amount available under its revolving production loan to $25.0 million.

During the second quarter, Bear Ridge closed two private placements issuing a total of 3,327,385 common shares at an average price of $3.79 per share for gross proceeds of $12,600,163 ($11,888,375 after fees).

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

CRITICAL ACCOUNTING ESTIMATES

The significant accounting policies used by Bear Ridge are disclosed in Note 2 of the unaudited interim consolidated financial statements as at September 30, 2005. Certain accounting policies require management to make appropriate decisions in determining estimates and making assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Management reviews its estimates regularly. The emergence of new information and changed circumstance may result in actual results or changes to estimated amounts that may differ materially from current estimates. The following discussion helps assess the accounting policies and practices of the Company as they relate to estimates and the likelihood of material differences occurring.

Proved Oil and Gas Reserves

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

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

Depletion

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

Unproved Properties

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

Ceiling Test

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

Asset Retirement Obligations

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

Income Taxes

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

Stock-based Compensation

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



Bear Ridge Resources Ltd.
Consolidated Balance Sheet (note 1)
(unaudited)


As at September 30 2005
------------------------------------------------------------------------
ASSETS
Current
Accounts receivable $ 3,426,345
Deposits and prepaid expenses 255,841
------------------------------------------------------------------------
3,682,186
Future income tax asset (note 8) 9,457,000
Property and equipment (note 3) 53,451,411
------------------------------------------------------------------------
$ 66,590,597
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Revolving production loan (note 5) $ 5,946,430
Accounts payable and accrued liabilities 6,753,628
------------------------------------------------------------------------
12,700,058
Asset retirement obligations (note 7) 599,707
------------------------------------------------------------------------
13,299,765
------------------------------------------------------------------------
Shareholders' equity
Share capital (note 6(b)) 43,624,029
Warrants (note 6(C)) 711,354
Contributed surplus 703,000
Retained earnings 8,252,449
------------------------------------------------------------------------
53,290,832
------------------------------------------------------------------------
$ 66,590,597
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes


On behalf of the Board:


David Ambedian
Director

Russell J. Tripp
Director


Bear Ridge Resources Ltd.
Consolidated Statements of Income and Deficit (note 1)
(unaudited)

Three Months Nine Months
Ended Ended
September 30 September 30
2005 2005
------------------------------------------------------------------------
REVENUE
Petroleum and natural gas sales $ 4,585,429 $ 9,951,482
Royalties, net of
Alberta Royalty Tax Credit (921,334) (1,538,583)
------------------------------------------------------------------------
3,664,095 8,412,899
------------------------------------------------------------------------
EXPENSES
Operating 543,194 1,264,330
Transportation 64,238 121,211
General and administrative 298,968 903,047
Stock based compensation (note 6(d)) 216,761 703,000
Interest on revolving production loan 16,422 49,302
Depletion, depreciation and accretion 2,084,675 4,108,049
------------------------------------------------------------------------
3,224,258 7,148,939
------------------------------------------------------------------------

Income before future income
tax recovery 439,837 1,263,960
Future income tax recovery (note 8) 8,819,000 9,042,600
------------------------------------------------------------------------
Net Income 9,258,837 10,306,560
Defcit, beginning of period (901,388) (2,981,589)
Settlement of debt (note 9) - 1,032,478
Preferred share dividend (note 6(b)) (105,000) (105,000)
------------------------------------------------------------------------
Retained earnings, end of period $ 8,252,449 $ 8,252,449
------------------------------------------------------------------------
------------------------------------------------------------------------
Net income per share (note 6(e))
Basic $ 0.33 $ 0.43
Diluted $ 0.30 $ 0.39
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes


Bear Ridge Resources Ltd.
Consolidated Statements of Cash Flows (note 1)
(unaudited)

Three Months Nine Months
Ended Ended
September 30 September 30
2005 2005
------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 9,258,837 $ 10,306,560
Items not involving cash:
Depletion, depreciation and accretion 2,084,675 4,108,049
Future income tax recovery (8,819,000) (9,042,600)
Stock based compensation 216,761 703,000
------------------------------------------------------------------------
Funds provided by operations 2,741,273 6,075,009
Change in non-cash working capital (1,484,713) (2,712,351)
------------------------------------------------------------------------
Cash provided by operating activities 1,256,560 3,362,658
------------------------------------------------------------------------

FINANCING ACTIVITIES
Issue of common shares, net of
issue costs (29,671) 19,161,750
Issue of preferred shares - 6,200,000
Repurchase of preferred shares - (24,999)
Advances on revolving production loan 5,946,430 5,946,430
Repayment of debt (note 1) - (2,000,000)
------------------------------------------------------------------------
Cash provided by financing activities 5,916,759 29,283,181
------------------------------------------------------------------------

INVESTING ACTIVITIES
Acquisition of properties - (3,051,889)
Expenditures on property and equipment (11,064,939) (24,979,585)
Acquisition of partnership (note 4) - (8,344,050)
Change in non-cash working capital 312,214 3,249,283
------------------------------------------------------------------------
Cash used in investing activities (10,752,725) (33,126,241)
------------------------------------------------------------------------
Change in cash during the period (3,579,406) (480,402)
Cash and cash equivalents,
beginning of period $ 3,579,406 $ 480,402
------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ - $ -
------------------------------------------------------------------------
------------------------------------------------------------------------
Supplementary disclosure
Cash interest paid $ 16,422 $ 49,302
Capital taxes paid $ - $ -
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes


Notes to the Consolidated Financial Statements
September 30, 2005
(unaudited)


1. BASIS OF PRESENTATION

Bear Ridge Resources Ltd. ("Bear Ridge" or the "Company") was incorporated as 1142356 Alberta Ltd. on December 14, 2004 under the Business Corporations Act (Alberta) as a wholly-owned subsidiary of Ceyba Inc. (the "Parent"). On December 16, 2004 the Parent and Ceyba Corp.("Ceyba") entered into the Bear Ridge Come-Along Agreement with Bear Creek Energy Ltd. (Bear Creek") and Ketch Resources Ltd. ("Ketch") to participate in the Plan of Arrangement involving the two companies.

Pre Plan of Arrangement Transactions

On January 5, 2005 the Company acquired Ceyba from the Parent. Prior to August 1, 2003, Ceyba developed and marketed optical technology for the telecommunications industry. On August 1, 2003 Ceyba made an assignment in bankruptcy under the Bankruptcy and Insolvency Act (Canada). Ceyba subsequently disposed of substantially all of its intellectual property asset to an arm's length third party. The trustee in bankruptcy for Ceyba entered into an agreement with a third party investor wherein the investor agreed to fund the amounts necessary to satisfy the creditor proposal in consideration for an exchangeable debenture convertible into preferred shares of Bear Ridge. Bear Ridge acquired all the shares of Ceyba and all inter-company debt between the Parent and Ceyba by the issuance of Class A common shares of the Company.

As Ceyba and the Company were under common control of the Parent, the accompanying consolidated financial statements of the Company have been accounted for on a "continuity of interests' basis" with all assets and liabilities of Ceyba consolidated with the Company at their former carrying values. The financial statements assume the Company and subsidiary have been combined since inception. No comparative information has been presented due to loss of financial information. All inter-company accounts have been eliminated. At December 31, 2004, prior to the acquisition of Ceyba the Company had cash and issued capital of $1 each.

On January 14, 2005 there was an Initial Private Placement ("Private Placement") of 3,404,256 Bear Creek Finance Ltd. ("Finco") common shares at $1.175 per share to employees, contractors, officers and directors of Bear Ridge. Attached to each share is 0.84 of a share purchase warrant with an exercise price of $1.41 per whole warrant. On January 18, 2005 each Finco common share and corresponding warrant was exchanged for one Bear Ridge Series I preferred share and a share purchase warrant on a one for one basis. Each warrant will entitle the holder to purchase one Bear Ridge preferred share. The Private Placement is subject to a contractual holding period whereby a third of the shares can be sold on the first, second and third anniversary dates of the Private Placement. The warrants vest evenly on the second and third anniversary date of the Private Placement and expire one year after vesting. Subsequent to the Plan of Arrangement as described below, Finco was wound up into Bear Ridge on January 18, 2005

On January 15, 2005, the Company issued for cash, a $2.2 million convertible debenture to an unrelated third party which was immediately converted to 2,800,000 preferred shares of the Company. The cash proceeds received were used to satisfy all the terms of a creditor's proposal under the Bankruptcy and Insolvency Act (Canada) related to Ceyba.

On January 17, 2005, the articles of incorporation of the Company were amended and the previously issued 700,000 issued Class A shares were converted into 723,404 new Class A common shares of the Company and the previously issued 2,800,000 preferred shares were converted into 2,893,617 new preferred shares of the Company. On January 17, 2005 Ceyba amended its articles of incorporation to change its name to Bear Ridge Exploration Ltd.

Plan of Arrangement

On October 27, 2004, Ketch and Bear Creek jointly announced that their respective Boards of Directors had unanimously approved a proposal to combine the two entities pursuant to a Plan of Arrangement ("Arrangement") which resulted in the creation of Ketch Resources Trust, the creation of Kereco Energy Ltd. ("Kereco") as a public oil and gas exploration and development company which initially owns certain oil and gas assets of Ketch and the creation of Bear Ridge as a public oil and gas exploration and development company which initially owned certain oil and gas assets of Bear Creek. The Arrangement was completed on January 18, 2005 and shareholders of Ketch received: (i) 1.0 trust unit of the Trust, (ii) 0.4 of a Kereco common share or $1.06 in cash, and (iii) 0.4 of a Bear Ridge common share or $0.48 in cash for each Ketch common share owned. Shareholders of Bear Creek received: (i) 0.5 of a trust unit of the Trust, (ii) 0.2 of a Kereco common share or $0.54 in cash, and (iii) 0.2 of a Bear Ridge common share or $0.245 in cash for each Bear Creek common share owned.

Under the Arrangement, Bear Creek transferred to Bear Ridge certain producing and exploratory petroleum and natural gas properties and a portion of its bank debt. As the former Ketch shareholder group was the controlling shareholder group resulting from the Arrangement, the properties have been transferred and accounted for at their fair market value as follows:



Amount
------------------------------------------------------------------------
Net Assets Received:
Petroleum and natural gas properties $ 21,700,009
Bank debt assumed (2,000,000)
Asset retirement obligations (263,888)
------------------------------------------------------------------------
$ 19,436,121
------------------------------------------------------------------------
------------------------------------------------------------------------

Consideration given:
15,400,375 Common Shares issued (Note 7(d)) $ 18,584,232
Cash 851,889
------------------------------------------------------------------------
$ 19,436,121
------------------------------------------------------------------------
------------------------------------------------------------------------


Relationship with Ketch Resources Ltd.

In conjunction with the Arrangement, Bear Ridge and Ketch (a wholly owned subsidiary of Ketch Resources Trust) entered into a Technical Service Agreement which provides for the shared services required to manage Bear Ridge's activities and govern the allocation of general and administrative expenses between the entities. Under the Technical Services Agreement, Bear Ridge is charged a technical services fee by Ketch, on a cost recovery basis, in respect of management, development, exploitation, operations and marketing activities using production and capital expenditures as the basis for determining the allocation. For 2005 the technical services fee charged to September 30 totaled was $818,919. The Technical Services Agreement with Ketch was terminated effective September 30, 2005.

2. SIGNIFICANT ACCOUNTING POLICIES

These interim consolidated financial statements of the Company have been prepared by management in accordance with Canadian generally accepted accounting principles, the significant accounting policies of which are set out below. Certain information and footnotes normally included in financial statements have been condensed or eliminated. The interim financial statements should be read in conjunction with the most recent annual financial statements as at and for the period ended December 31, 2004 as the interim financial statements do not conform in all respects to the note disclosure requirements of Canadian generally accepted accounting principals in respect of annual financial statements. Because a precise determination of many assets and liabilities is dependant upon future events, the preparation of financial statements involves the use of estimates and approximations, which have been made using careful judgment. The interim consolidated financial statements have, in management's opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below.

Principles of consolidation

The consolidated financial statements include the Company and its subsidiary. All inter-company balances and transactions have been eliminated.

Measurement uncertainty

The amounts recorded for depletion and depreciation of property and equipment and asset retirement obligations and the ceiling test calculation are based on estimates of proved reserves, production rates, oil and natural gas prices, future costs and other relevant assumptions. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future years could be significant.

Joint operations

Substantially all of the Company's exploration and development activities are conducted jointly with others and, accordingly, these financial statements reflect only the Company's proportionate interest in such activities.

Cash and cash equivalents

Cash and cash equivalents include cash and short term investments with a maturity of less than 90 days.

Property and equipment

Petroleum and natural gas properties and production equipment

The Company follows the full cost method of accounting for its petroleum and natural gas properties and related facilities in accordance with the guideline issued by The Canadian Institute of Chartered Accountants whereby all costs related to the acquisition of, exploration for and development of petroleum and natural gas reserves, whether productive or unproductive, are capitalized in a Canadian cost centre and charged to income as set out below. Such costs include lease acquisition, drilling, geological and geophysical expenditures, lease rentals on non-producing properties, equipment costs and overhead expenses directly related to exploration and development activities. No indirect general and administrative costs have been capitalized.

Proceeds from disposal of properties will normally be applied as a reduction of the cost of the remaining assets, except when such a disposal would alter the depletion and depreciation rate by more than 20 percent, in which case a gain or loss will be recorded.

Depletion and depreciation

Depletion of petroleum and natural gas properties and depreciation of production equipment is provided using the unit-of production method based on estimated proved petroleum and natural gas reserves (gross, before royalties) as determined by independent engineers. The relative amounts of oil and gas production are converted at a ratio of six thousand cubic feet of gas to one barrel of oil. In determining its depletion base the Company excludes costs of acquiring and evaluating unproved properties until it is determined whether or not proven reserves are attributable to the properties or impairment occurs and includes an estimate of future costs to be incurred in developing proven reserves.

Office furniture and fixtures

Office furniture and fixtures are carried at cost and depreciated over the estimated useful lives of the assets at a rate of 20% per annum calculated on a declining balance basis. Depreciation is charged at half rates in the year of acquisition.

Ceiling Test

The net book value of the Company's petroleum and natural gas properties and equipment is subject to a cost recovery test (the "ceiling test"). Impairment is recognized if the carrying amount of the property and equipment less undeveloped land exceeds the sum of the undiscounted cash flows expected to result from the Company's proved reserves. If the carrying value is not fully recoverable, the amount of impairment is measured by comparing the carrying amounts of the property and equipment less undeveloped land to an amount equal to the estimated net present value of future cash flows from proved plus probable reserves. This calculation incorporates risks and uncertainties in the expected future cash flows that are discounted using a risk-free rate. Any excess carrying value above the net present value of the future cash flows would be recorded as a permanent impairment.

Asset retirement obligation

The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of assets. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and depleted and depreciated using a unit of production method over gross proved reserves. Subsequent to the initial measurement of the asset retirement obligations, the obligations are adjusted at the end of each period to reflect the passage of time (accretion) and changes in the estimated future cash flows underlying the obligation.

Income taxes

The Company follows the liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, and measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on future tax assets and liabilities of a change in tax rates is recognized in earnings in the period in which the change becomes substantively enacted. A valuation allowance is recorded against any future income tax asset if the Company is not "more likely than not" to be able to utilize the tax deductions associated with the future income tax asset.

Revenue Recognition

Revenues from the sale of crude oil, natural gas and natural gas liquids are recognized when title transfers to the purchaser.

Financial Instruments

The Company's financial instruments recognized in the Consolidated Balance Sheet consist of accounts receivable, deposits, accounts payable and accrued liabilities. The carrying value of these accounts approximates their fair value.

A substantial portion of the Company's accounts receivable are with joint-venture partners in the oil and gas industry and are subject to normal industry risks.

The Company may enter into commodity price derivative instruments to reduce the Company's exposure to adverse fluctuations in commodity prices. No contracts are entered into for trading or speculative purposes. Gains and losses relating to commodity swaps that meet hedge criteria are recognized as part of petroleum and natural gas revenue concurrently with the hedged transaction.

The Company's most significant market risk exposure relates to crude oil price fluctuations. Crude oil prices and quality differentials are influenced by worldwide factors such as OPEC actions, political events and supply and demand fundamentals. To a lesser extent the Company is also exposed to natural gas price movements. Natural gas prices are generally influenced by North American supply and demand, and to a lesser extent local market conditions.

Stock based compensation

The Company follows the fair-value method of accounting for stock options and special performance units granted to employees and directors. Fair value is determined at the grant date using the Black-Scholes option pricing model and recognized over the vesting period of the options and special performance units granted as stock based compensation expense with a corresponding credit to contributed surplus. The contributed surplus balance is reduced as the options or special performance units are exercised with the amount initially recorded being credited to share capital.

Per share amounts

The Company utilizes the treasury stock method in the determination of diluted per share amounts. Under this method, the diluted weighted average number of shares is calculated assuming the proceeds that arise from the exercise of outstanding, in-the-money options are used to purchase common shares of the Company at their average market price for the period.



3. PROPERTY AND EQUIPMENT
Accumulated
Depletion and Net Book
Cost Depreciation Value
$ $ $
------------------------------------------------------------------------
Petroleum and natural
gas properties and
production equipment 57,493,036 4,087,000 53,403,036
Office equipment 49,385 4,010 45,375
------------------------------------------------------------------------
57,542,421 4,091,010 53,451,411
------------------------------------------------------------------------
------------------------------------------------------------------------


At September 30, 2005, costs of $7.9 million related to unproven properties have been excluded from the depletion calculation.

Bear Ridge performed a ceiling test calculation at September 30, 2005 to assess the recoverable value of the property and equipment. The oil and gas prices used in the calculation are based on the October 1, 2005 bench mark commodity price forecast of our independent reserve evaluators as follows:



Natural Gas Petroleum
------------------------------------------------------------------------
AECO - Company Company
Spot Price Average WTI Average
(Cdn$/mcf) (Cdn$/mcf) (US$/bbl) (Cdn$/bbl)
------------------------------------------------------------------------
2005 (3mo) 13.15 13.75 57.75 68.41
2006 10.35 10.81 60.00 64.96
2007 8.85 9.22 55.00 60.33
2008 8.10 8.43 51.00 55.43
2009 7.55 7.85 48.00 52.64
2010 7.25 7.54 46.50 52.41
2011 6.95 7.21 45.00 51.06
2012 6.95 7.21 45.00 51.09
------------------------------------------------------------------------
------------------------------------------------------------------------


Prices increase at a rate of 2 percent per year after 2012. In this price forecast, US dollars have been converted to Canadian dollars at an exchange rate of 0.84.

Based on these assumptions, the undiscounted value of future net revenues from Bear Ridge's proved reserves exceeded the carrying value of property and equipment as at September 30, 2005.

4. BUSINESS COMBINATION

On April 20, 2005 the Company acquired all of the issued and outstanding units of an oil and gas partnership pursuant to an acquisition agreement dated April 20, 2005, for consideration consisting of $8,344,050 in cash. The Partnership was wound up immediately after the last partners units were acquired in the transaction.



The allocation of the purchase price paid is as follows:

Amount
------------------------------------------------------------------------
Petroleum and natural gas properties $ 8,431,303
Asset retirement obligations (87,253)
------------------------------------------------------------------------
$ 8,344,050
------------------------------------------------------------------------
------------------------------------------------------------------------


On closing, Bear Ridge also assumed a non-cash future income tax liability of approximately $2.5 million representing the difference between the book value and the tax value of the partnership assets acquired. The liability was offset by previously unrecognized Bear Ridge tax deductions and accordingly the tax liability was reduced to nil on acquisition.

5. REVOLVING PRODUCTION LOAN

At September 30, 2005, the Company had a revolving production loan facility with a Canadian financial institution to a maximum of $8.5 million. The facility bears interest at the institution's prime rate per annum, is due on demand and is secured by a general security agreement and a first ranking floating charge on all real property of the Company.

Effective November 4, 2005, Bear Ridge agreed to a new credit facility which will increase the maximum credit available to the Company to $25 million. The new facility will bear interest at prime plus an applicable margin per annum based on the Company's debt to cash flow ratio and will be due on demand. Security will consist of a general consignment of book debts and a debenture with a floating charge over all of the assets of the Company.

6. SHARE CAPITAL



a) Authorized
An unlimited number of voting common shares.
An unlimited number of voting Class A common shares.
An unlimited number of non-voting Class B common shares.
An unlimited amount of preferred shares, issuable in series.
An unlimited number of Series 1 preferred shares

b) Issued shares:

Number $
------------------------------------------------------------------------

Common Shares
Bear Ridge Resources Ltd.
(previously 1142356) (i) 1 1
Bear Ridge Exploration Ltd.
(previously Ceyba) (i) 4 6
Balance, December 31, 2004 5 7
Issued on acquisition of shares and debt of
Bear Ridge Exploration (i) 699,999 56,561,972
Amendment to articles of incorporation (iii) 23,404 -
Issued pursuant to the Arrangement (iv) 15,400,375 18,584,232
Issued for cash (vi) 2,200,000 7,810,000
Elimination on consolidation (i) (4) (56,561,978)
Issued for cash (vii)(viii) 3,327,385 12,600,163
Share issue costs (net of tax benefits
of $414,400) - (834,014)
------------------------------------------------------------------------
Balance, September 30, 2005 21,651,164 38,160,382
------------------------------------------------------------------------

Preferred Shares (ix)
Conversion of convertible debenture to
preferred shares (ii) 2,800,000 2,200,000
Amendment to articles of incorporation (iii) 93,617 -
Issued for cash (v) 3,404,256 3,288,646
Re-purchase of shares (21,276) (24,999)
------------------------------------------------------------------------
Balance, September 30, 2005 6,276,597 5,463,647
------------------------------------------------------------------------

Common and Preferred Share Balance,
September 30, 2005 27,927,761 43,624,029
------------------------------------------------------------------------
------------------------------------------------------------------------


i. On January 5, 2005, the Company acquired from Ceyba Inc, all outstanding inter-company debt and all the shares of Ceyba Corp. in consideration for the issuance of 699,999 Class A common shares of the Company. This share transaction eliminated upon consolidation. At the time of the transaction, Ceyba Corp. was involved in bankruptcy proceedings.

ii. On January 15, 2005, the Company issued for cash, a $2.2 million convertible debenture to an unrelated third party which was immediately converted to 2,800,000 preferred shares of the Company. The cash proceeds received were used to satisfy all the terms of a creditor's proposal under the Bankruptcy and Insolvency Act (Canada) related to Ceyba Corp.

iii. On January 17, 2005, the articles of incorporation of the Company were amended and the previously issued 700,000 Class A shares were converted into 723,404 new Class A common shares of the Company and the previously issued 2,800,000 preferred shares were converted into 2,893,617 new preferred shares of the Company.

iv. On January 18, 2005, pursuant to the Plan of Arrangement 15,404,375 common shares were issued to former shareholders of Ketch and Bear Creek. A cash payment of $851,889 was made to shareholders taking the cash option for not participating in the Arrangement.

v. On January 14, 2005 there was an Initial Private Placement ("Private Placement") of 3,404,256 Bear Creek Finance Ltd. ("Finco") common shares at $1.175 per share to employees, contractors, officers and directors of Bear Ridge. Attached to each share is 0.84 of a share purchase warrant with an exercise price of $1.41 per warrant. Each Finco common share and corresponding warrant was exchanged for one Bear Ridge preferred share, Series 1 on a one for one basis on January 18, 2005. Each warrant will entitle the holder to purchase one Bear Ridge preferred share. The Private Placement is subject to a contractual holding period whereby a third of the shares can be sold on the first, second and third anniversary dates of the Private Placement. The warrants vest evenly on the second and third anniversary date of the Private Placement and expire one year after vesting.

vi. On February 16, 2005, the Company closed a private placement of 2,200,000 common shares at $3.55 per share for $7,810,000 (net proceeds of $7,303,045).

vii. On May 31, 2005, the Company closed a private placement to a newly appointed director of 149,250 common shares at $2.68 per share for $399,990 and 57,635 of flow-through eligible shares at $3.47 per share for $199,993.

viii. On June 23, 2005, the Company closed a private placement of 1,492,600 common shares at $3.35 per share for $5,000,210 and 1,627,900 of flow-through eligible shares at $4.30 per share for $6,999,970 (total net proceeds of $11,288,392).

ix. The preferred shares are convertible into common shares on a one-for-one basis and carry a fixed dividend rate of 8% per annum. The shares were not subject to dividends for a six month period from the date of issuance, being January 18, 2005. Accrued but unpaid dividends from July 18 to September 30, 2005 totaling $105,000 have been recorded and are included with accounts payable.



c) Warrants outstanding

Number $
------------------------------------------------------------------------
Balance outstanding , January 1, 2005 - -
Issued pursuant to private placement (v) 2,857,143 711,354
------------------------------------------------------------------------
Balance outstanding, September 30, 2005 2,857,143 711,354
------------------------------------------------------------------------
------------------------------------------------------------------------


d) Stock Based Compensation

Pursuant to the Arrangement the Company established a Stock Option Plan and Special Performance Unit Plan (collectively, the "Plan"). Under the Plan, options and Special Performance Units ("SPUs") may be granted to directors, officers, employees, consultants and services providers of the Company.

i. Stock options:

Under the plan, stock options vest evenly over a 3 year period, starting on the first anniversary of the grant date and expire after 5 years. The stock options are exercisable into Bear Ridge common shares on a one-for-one basis. The exercise price of options granted cannot be less than the five day average closing price immediately preceding the date of grant of the options. A summary of the options outstanding as at September 30, 2005 and the changes for the period then ended is presented below.



Weighted
Average
Exercise
Number Price ($)
------------------------------------------------------------------------
Balance outstanding, January 1, 2005 - -
Granted 821,670 3.64
Cancelled (103,331) 3.65
------------------------------------------------------------------------
Balance outstanding, September 30, 2005 718,339 3.64
------------------------------------------------------------------------
------------------------------------------------------------------------

The following summarizes information about stock options outstanding at
September 30, 2005:

Weighted
Average Weighted
Remaining Average
Grant Number Contractual Exercise
Grant Date Price ($) Outstanding Life Price ($)
------------------------------------------------------------------------
February 2005 3.65 348,339 4.4 3.65
May 2005 3.26 - 3.35 240,000 4.7 3.30
September 2005 4.25 130,000 4.9 4.25
------------------------------------------------------------------------
718,339 4.6 3.64
------------------------------------------------------------------------
------------------------------------------------------------------------


The Company has not incorporated an estimated forfeiture rate for stock options that will not vest, rather the Company accounts for actual forfeitures as they occur. The fair value of each common share option granted was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions. The Company used a risk free interest rate of 3.0 percent, an expected life of 3.5 years and an expected volatility of 36 percent. These assumptions resulted in a weighted average fair value for options granted in 2005 of $1.30 per option.

ii. Special Performance Units

The SPU's will be exercisable for a price of $0.01 per share and will be convertible into the percentage of a Bear Ridge Common Share equal to the closing trading price of the Bear Ridge Common Shares on the Toronto Stock Exchange on which Bear Ridge Common Shares are listed on the trading day prior to conversion less $1.175, divided by the Bear Ridge Closing Price. The SPU's were granted on a one-time basis on the effective date of the Arrangement. The SPU's vest evenly over 3 years, starting on the first anniversary date of their grant, and expire 30 days after vesting. A summary of the SPU's outstanding as at September 30, 2005 and changes for the period then ended is presented below.



Weighted
Average
Exercise
Number Price ($)
------------------------------------------------------------------------
Balance outstanding, January 1, 2005 - -
Granted 1,345,275 0.01
Cancelled (389,999) 0.01
------------------------------------------------------------------------
Balance outstanding, September 30, 2005 955,276 0.01
------------------------------------------------------------------------
------------------------------------------------------------------------


During the second quarter the Company changed to the fair value method of accounting for the special performance units. The fair value is now calculated based on the fair value of a Bear Ridge common share at the grant date less the nominal exercise price of $0.01. At period end the number of common shares issuable under the plan is calculated and year to date compensation expense is determined based on the initial grant date fair value and percentage of special performance units vested. There was no significant impact resulting from this change.

e) Per share amounts

The following table summarizes the weighted average shares outstanding for the three and nine month periods ended September 30, 2005.



e) Per share amounts

The following table summarizes the weighted average shares outstanding
for the three and nine month periods ended September 30, 2005.

Three months Nine months
Weighted Average - ended Sept. 30 ended Sept. 30
Common and Preferred shares 2005 2005
------------------------------------------------------------------------
Basic 27,927,761 24,040,283
Diluted 30,727,247 26,547,048
------------------------------------------------------------------------
------------------------------------------------------------------------


7. ASSET RETIREMENT OBLIGATIONS

The following table presents the reconciliation of the beginning and
ending carrying amount of the Company's asset retirement obligations
for the three and nine month periods ended September 30, 2005.

Three months Nine months
ended Sept. 30 ended Sept. 30
2005 2005
------------------------------------------------------------------------
Balance, beginning of period $ 494,856 $ -
Liabilities incurred in the period 97,731 231,527
Liabilities acquired - 351,141
Liabilities settled in the period - -
Accretion expense 7,120 17,039
------------------------------------------------------------------------
Balance, end of period $ 599,707 $ 599,707
------------------------------------------------------------------------
------------------------------------------------------------------------


Total estimated future asset retirement costs of $1,612,604 have been discounted using an average credit adjusted risk free rate of 7 percent. These obligations are to be settled based on the economic lives of the underlying assets, which currently extend up to 19 years into the future and will be funded from general corporate resources at the time of abandonment.



8. INCOME TAXES

The Company's future income tax assets and liabilities as at September
30, 2005 are as follows:

September 30, 2005
------------------------------------------------------------------------
Temporary differences related to:
Oil and gas properties $ (5,160,000)
Non capital losses carried forward 5,997,000
Share issuance costs 361,000
Scientific research and experimental development costs 17,154,000
------------------------------------------------------------------------
Total future income tax assets 18,352,000
Less: Valuation allowance 8,895,000
------------------------------------------------------------------------
Recognized future income tax asset $ 9,457,000
------------------------------------------------------------------------
------------------------------------------------------------------------


A valuation allowance of $8,895,000 has been recorded to reduce the amount of future income tax assets available to the amount that is more likely than not to be recovered.

The Company has accumulated non-capital losses for income tax purposes of approximately $18.4 million which can be used to offset income in future periods. These losses expire as follows:



Year of expiry Amount
------------------------------------------------------------------------
2010 $ 12,390,870
2011 6,024,102
------------------------------------------------------------------------
$ 18,414,972
------------------------------------------------------------------------
------------------------------------------------------------------------



The Company also has approximately $50.5 million of Scientific Research and Experimental Development Expenses available to reduce future years' income tax payable. These deductions can be carried forward for an indefinite period.

9. SETTLEMENT OF DEBTS

On August 1, 2003 Ceyba made an assignment in bankruptcy under the Bankruptcy and Insolvency Act (Canada). Ceyba subsequently disposed of substantially all of its intellectual property asset to an arm's length third party. The trustee in bankruptcy for Ceyba entered into an agreement with a third party investor wherein the investor agreed to fund the amounts necessary to satisfy the creditor proposal and in consideration for an exchangeable debenture convertible into shares of Bear Ridge, all debts were settled under the agreement at less than the book value which resulted in an adjustment to the Company's deficit of $1,032,478.

10. COMMITMENTS

Pursuant to flow-through share offerings during the second quarter of 2005, Bear Ridge is committed to incur a total of $7.2 million in qualifying expenditures by December 31, 2006. As at September 30, 2005 $1.3 million of the commitment remains.

The Company entered into a lease commitment for its office space for the period October 2005 to December 2007. The amount due under this commitment, including rent and operating costs, is approximately $210,000 per annum.



11. COMMODITY CONTRACTS

The Company currently has the following costless collar arrangements
in place to manage its exposure to oil price fluctuations:

Term Product Hedged Volumes Floor Ceiling
------------------------------------------------------------------------
August 2005 -
December 2005 Oil WTI 200 bbl/d US$ 55.00 US$ 71.60
January 2006 -
December 2006 Oil WTI 200 bbl/d US$ 55.00 US$ 73.00
------------------------------------------------------------------------


As at September 30, 2005 the value of the individual put and call options that comprise the collars represent an unrecognized net loss of approximately $190,000. This loss would only be realized in the event that the Company chose to unwind the costless collar arrangement and settle the put and call options individually.

12. SUBSEQUENT EVENT

Pursuant to an Arrangement Agreement ("the Agreement") dated November 4, 2005 the Company agreed to complete a business combination with Veteran Resources Inc. ("Veteran"), a public oil and gas company, by way of a Plan of Arrangement. Under the terms of the agreement Bear Ridge will acquire all of the issued and outstanding shares of Veteran for consideration consisting of $34,651,059 and 17,022,333 Bear Ridge common shares. The combination will be treated as an acquisition of Veteran by Bear Ridge and consequently Veteran's results of operations will be included with Bear Ridge's operations from the date of close. The Agreement which is subject to regulatory and Veteran shareholder approval is expected to close in January 2006.

ADDITIONAL INFORMATION

Additional information regarding Bear Ridge and its business and operations, including the annual information for Bear Ridge Resources Ltd. for the period ended December 31, 2004, is available on Bear Ridge's website www.bearridge.ca and Bear Ridge's SEDAR profile at www.sedar.com

Forward Looking Statements - Certain information regarding Bear Ridge Resources Ltd. set forth in this document, including management's assessment of Bear Ridge Resources Ltd.'s future plans and operations, contains forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Bear Ridge Resources Ltd.'s control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, current fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Bear Ridge Resources Ltd.'s actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Bear Ridge Resources Ltd. will derive there from.



Corporate Information

DIRECTORS CORPORATE OFFICE
David Ambedian(1)(3) Suite 2200
Independent Businessman 330 - 5th Ave SW
Calgary, AB T2P 0L4
Vincent Chahley Telephone: (403) 537-8440
Independent Businessman Fax: (403) 537-8450
Website: www.bearridge.ca
John Howard(1)(2)
Independent Businessman INVESTOR RELATIONS
www.bearridge.ca
Martin A. Lambert(3)
Partner, Bennett Jones LLP TRUSTEE AND TRANSFER AGENT
Valiant Trust Company
Garry Tanner(1)(2) 310, 606 - 4 Street SW
Senior Vice President & Calgary, Alberta T2P 1T1
Chief Operating Officer Telephone: (403) 233-2801
Enerplus Resources Fund Fax: (403) 233-2857

Russell J. Tripp, L.L.B., P.Land STOCK EXCHANGE
Chairman & Chief Executive Officer, The Toronto Stock Exchange
Trading symbol: BER

(1) member of audit committee BANKER
(2) member of reserve committee Canadian Imperial Bank
(3) member of corporate governance, of Commerce
compensation and environmental Bankers Hall, 855 - 2 Street SW
health and safety committee Calgary, Alberta T2P 4J7

OFFICERS SOLICITOR
Russell J. Tripp, L.L.B., P.Land Bennett Jones LLP
Chief Executive Officer 4500, 855 - 2 Street SW
Calgary, Alberta T2P 4K7
Douglas C. Hibbs, B.Sc., P.Geol.
President AUDITORS
Deloitte & Touche LLP
Calvin E. Jaycock, P.Geol. 3000, 700 - 2 Street SW
Vice President, Exploration Calgary, Alberta T2P 0S7

Brian A. Baker, CA CONSULTING ENGINEERS
Vice President, Finance and Gilbert Laustsen Jung
Chief Financial Officer Associates Ltd.
4100, 400 - 3 Avenue SW
Calgary, Alberta T2P 4J2



Contact Information

  • Bear Ridge Resources Ltd.,
    Russell J. Tripp
    Chief Executive Officer
    or
    Bear Ridge Resources Ltd.
    Douglas C. Hibbs
    President
    or
    Bear Ridge Resources Ltd.
    Brian Baker
    Vice President Finance and Chief Financial Officer
    or
    Bear Ridge Resources Ltd.
    Suite 2200, 330 - 5th Avenue S.W.
    Calgary, AB T2P 0L4, Canada
    Telephone: (403) 537-8440,
    Facsimile: (403) 537-8450;