Bulldog Energy Inc.
TSX : BDE.A
TSX : BDE.B

Bulldog Energy Inc.

November 08, 2005 08:00 ET

Bulldog Energy Inc. 2005 Third Quarter Report & News Release

CALGARY, ALBERTA--(CCNMatthews - Nov. 8, 2005) - Bulldog Energy Inc. (TSX:BDE.A) (TSX:BDE.B)

Highlights

- Bulldog Energy announced its intention to effect a strategic corporate arrangement whereby

-- the majority of the company's operations will be sold to Crescent Point Energy Trust

-- the remainder of the company's assets will be transferred into an exciting new publicly traded company, Bulldog Resources Inc., which will be run by the management and directors of Bulldog Energy Inc.

- Realized top quartile field and corporate netbacks of $51.74/bbl and $42.72/bbl (after cash income taxes) respectively.

- Increased oil production for the 15th consecutive quarter to average 1,926 bbls per day

- Increased cash flow to $7.6 million (after cash income taxes) or $0.22 per share



------------------------------------------------------------------------
Three months Nine months
ended September 30 ended September 30
2005 2004 2005 2004
------------------------------------------------------------------------
FINANCIAL
(000s except per share)

Revenues $ 12,554 $ 6,108 $ 28,167 $ 13,800
Cash flow from
operations $ 7,568 $ 3,673 $ 18,131 $ 7,758
Per share - diluted $ 0.22 $ 0.11 $ 0.52 $ 0.24
Net income $ 3,165 $ 1,502 $ 7,334 $ 2,639
Per share - diluted $ 0.09 $ 0.04 $ 0.21 $ 0.08
Capital expenditures $ 10,100 $ 5,642 $ 30,803 $ 11,549
------------------------------------------------------------------------
------------------------------------------------------------------------
OPERATING
Production volumes
Crude oil and NGL's
(bbls/day) 1,926 1,225 1,677 963
Natural gas
(mcf/day)(1) - 772 - 893
Oil equivalent
(boe/day) 1,926 1,354 1,677 1,112

Average price
realizations
Crude oil and
NGL's/bbl $ 70.86 $ 50.09 $ 61.52 $ 45.77
Natural gas/mcf $ - $ 6.49 $ - $ 7.01
Royalties ($/boe) $ (11.95) $ (10.25) $ (9.85) $ (10.04)
Operating expense
($/boe) $ (7.17) $ (6.24) $ (6.38) $ (6.23)
------------------------------------------------
Field netback ($/boe) $ 51.74 $ 32.53 $ 45.29 $ 29.00
General and
administrative ($/boe) $ (1.28) $ (1.86) $ (1.65) $ (2.34)
Interest and financial
($/boe) $ (0.97) $ (1.18) $ (0.90) $ (1.21)
Current income taxes
($/boe) $ (6.77) $ - $ (3.14) $ -
------------------------------------------------
Corporate netback
($/boe) $ 42.72 $ 29.49 $ 39.60 $ 25.45
------------------------------------------------------------------------
------------------------------------------------------------------------

(1) Rosevear natural gas property sold at the end of 2004.


On October 3, 2005, Bulldog Energy announced its intention to effect a strategic corporate arrangement whereby the majority of the company's operations will be sold to Crescent Point Energy Trust with the remainder of the company's assets transferred into an exciting new publicly traded company, Bulldog Resources Inc., owned by the current Bulldog Energy shareholders. The reorganization is the result of a thorough strategic review of Bulldog Energy's options undertaken over the past few months by management and the Board of Directors.

Management and the Board of Directors concluded that the sale to Crescent Point and the creation of Bulldog Resources is in the best interests of all shareholders. The proposed transactions will be effected pursuant to a Plan of Arrangement under the Business Corporations Act (Alberta) and is subject to shareholders' approval. Should Bulldog Energy shareholders approve the transactions, the effective date is expected to be November 28, 2005. The Board of Directors has unanimously approved the proposed transactions and recommends shareholder approval. The directors and officers of Bulldog Energy have entered into lock-up agreements with Crescent Point to tender all of their securities. Tristone Capital Inc. is acting as financial advisor to Bulldog Energy and has provided the Bulldog Energy Board of Directors with its opinion that the consideration to be received by Bulldog Energy shareholders is fair, from a financial point of view.

A summary of the proposed transactions is described in the October 3, 2005 press release. The Information Circular, which describes the Plan of Arrangement, the fairness opinion of Tristone Capital Inc., Crescent Point Energy Trust and Bulldog Resources Inc., was mailed to shareholders of record as of October 28, 2005. The press release and circular are available on SEDAR (www.sedar.com) and Bulldog's website (www.bulldogenergy.ca).

CONSIDERATION TO BE RECEIVED BY BULLDOG ENERGY SHAREHOLDERS

Should the Arrangement be approved, Bulldog Energy's Class A shareholders will receive 0.130 of a Crescent Point unit and 1.0 common share of Bulldog Resources (prior to a 2:1 consolidation) for each Class A share held. Bulldog Energy is currently entitled to call its Class B shares for conversion. Pursuant to the proposed transactions, each Class B share will be converted into 3.257 Class A shares based upon the result of $10.00 divided by $3.07 being the weighted average trading price of the Class A shares for the 10 day period following the public announcement on October 3, 2005.

Concurrent with the announcement of the proposed transactions, Crescent Point announced a 5% increase in its monthly cash distribution to $0.20/unit/month upon implementation of the Plan of Arrangement. Crescent Point has also agreed that should the effective date of the proposed transactions be later than the record date for its November monthly distribution, Crescent Point will deliver a cash payment of $0.026 per Bulldog Energy Class A share on closing.

REASONS FOR THE ARRANGEMENT

In its decision to recommend that the Arrangement be accepted by shareholders, the Board of Directors reached the following conclusions:

- The Arrangement allows shareholders to realize the value of Bulldog's producing assets through the receipt of equity units in an established royalty trust with a demonstrated track record of enhancing unitholder value and with a diversified asset base. Furthermore, the shareholders were receiving top decile metrics for the more mature producing assets being sold to the trust.

- A large portion of Bulldog's drilling inventory was recognized by GLJ in their September 30, 2005 report. GLJ recognized 46 proven undeveloped and probable locations which represented approximately 66% of Bulldog's drilling location inventory. The projected future development capital for these locations was $42 million; under the Arrangement, shareholders can realize the value of the undrilled wells without the necessity of financing the capital expenditure program.

- The attractiveness of Bulldog's infill development program made it a saleable entity. The challenge of continuing to increase Bulldog's production at historical rates of growth would have reduced Bulldog's drilling location inventory and attractiveness to an acquiring party.

- The Board of Directors of Bulldog was concerned about potentially over capitalizing the asset base if Bulldog were to continue on without material asset diversification into other geographic areas. The Board of Directors of Bulldog believed the sale of these Bulldog assets as contemplated in the Arrangement was an appropriate way to obviate this concern having regard to the much broader asset base of the trust.

- The remaining exploration and development opportunities at Tilston, Fremantle and Browning, would be available to shareholders through Bulldog Resources. Management considers Tilston to be a high potential, high impact project which is immature in its development.

- The trust's market valuation was reasonable in relation to its peers, and the addition of Bulldog's assets was strategic to the trust's business model. This provided an opportunity for shareholders to continue their investment in the Bulldog asset base (with increased asset diversification in the trust) for those choosing to participate in the continuing development of Bulldog's assets through the energy trust model.

- Oil prices were at historically high levels.

- Bulldog was facing an imminent current cash income tax horizon if it were to continue on without changing its business model. At the end of the third quarter, $1,400,000 was recorded as the current income tax liability.

- The transaction contemplated in the Arrangement would, overall, provide increased liquidity to shareholders.

Bulldog Energy's officers and directors firmly believe based on our technical knowledge of the properties, the recognition of a large reserve value on our properties at a time of historically high oil prices, the current attractiveness of the company's development drilling program to an acquirer, and the income tax horizon, that this is the optimum time to crystallize gains in Bulldog Energy.

The Board of Directors, management and Tristone Capital Inc., Bulldog's financial advisers, considered all available strategic alternatives, and comprehensively analyzed the suitability of parties other than Crescent Point to combine with Bulldog. Tristone provided its opinion on the interest level of potential acquirers of Bulldog and recommended Crescent Point as the best candidate.

The proposed transactions crystallize the value of the sale assets by exchanging Bulldog Energy common shares for Crescent Point units. It provides a diversification of assets, liquidity, and an attractive yield in a well run, growing royalty trust. The upside potential of the Bulldog Energy sale properties will be realized through the ownership of the Crescent Point units as well as through Crescent Point's future distributions and operational activities.

TRANSACTION METRICS

Bulldog Energy's current production is averaging approximately 2,125 bbls/day divided as to 1,925 bbls/day in the properties to be sold and approximately 200 bbls/day in Bulldog Resources. The sale properties have 3,337,000 bbls proven and 5,275,000 bbls proven and probable of reserves. Crescent Point will issue approximately 4.6 million units which if valued at $21.70/unit (the market value at the time of announcement) together with the assumption of $18.1 million of indebtedness results in total consideration for the sale assets of $118 million. This consideration resulted in the highest metrics (both on a flowing barrel basis and per unit of reserves) paid for Southeast Saskatchewan assets to-date. The transaction metrics were $35.36 per proven barrel, $22.37 per proven and probable barrel, and $61,300 per flowing barrel.

MARKET COMMENTARY

During October 2005, market prices for oil and gas income trust units decreased an average of 8.7%. Junior oil and gas share prices declined an average 9.2%. The timing of the general market drop immediately after our announcement of the transaction with Crescent Point was unfortunate. However, the underlying business reasons for completing the transaction are unchanged. We believe the trust has accumulated high quality assets and as a result has positioned itself to maintain and potentially increase distributions in the future while maintaining a low payout ratio.

WHY CREATE BULLDOG RESOURCES?

Management's first choice would have been to achieve a sale price for the entire company which exceeded the market price. This was not possible. We achieved the highest sale metrics to date in Southeast Saskatchewan. However, the amount that potential acquirers would pay for the assets was limited by acceptable transaction metrics.

Bulldog Resources was created to bridge the gap between the price of our shares in the market and the best price achievable for the sale assets. It allows our shareholders to continue to have growth opportunities in immature properties from Bulldog Energy and through the efforts of management to create new prospects.

Bulldog Resources is poised for significant growth through a light oil focused multi-location drilling program. Bulldog Resources will initially focus its activities in Southeast Saskatchewan where we achieved top decile industry performance for field and corporate cash flow per BOE. Bulldog Energy increased its oil production every quarter in its fifteen quarter corporate history.

Bulldog Resources will commence operations with approximately 175 - 200 bbls/day of light oil production from three operated properties in Southeast Saskatchewan: Fremantle (100% working interest), Browning (96% working interest) and Tilston (50% working interest). All of the properties have oil production facilities and will be operated by Bulldog Resources.

The Tilston property has excellent potential for multi-well production and reserve additions. A vertical stratigraphic information well was cored in our zones of interest. 3-D seismic indicates the play may extend over a large area on lands controlled by Bulldog and its partner. A follow-up horizontal well drilled two legs in two separate zones with net pays of approximately 600 meters and approximately 400 meters. The well produces 34 degree API oil at current rates of approximately 240 bbls/day (120 bbls/day net). Tilston is a high quality, high impact prospect which requires further drilling to establish additional value for our shareholders. Bulldog Resources intends to initiate a drilling program on this property as soon as possible.

The success of Bulldog Resources will depend on the skills, ideas and execution abilities of its people to create new opportunities. Upon closing, Bulldog Energy's Board of Directors, management, and employees will join Bulldog Resources which at the inception of trading will be owned by the current Bulldog Energy shareholders. This management group has demonstrated the ability to start, efficiently grow junior oil and natural gas companies, and create value for their shareholders.

In conjunction with the proposed transactions, management, staff and directors will be offered the opportunity to participate in a private placement for Bulldog Resources' common shares. The private placement will raise up to $4.0 million through the issuance of up to 4,000,000 common shares at $1.00/share equating to approximately two times the post consolidation net asset value per common share; 50% of this issue will be on a flow through basis for income tax purposes. These shares will be subject to escrow provisions for a period of 18 months. We believe in the alignment of management's interests with shareholders' objectives through substantial investment and ownership - this subscription for common shares at a premium to net asset value demonstrates management's commitment to the success of Bulldog Resources.

The purpose of the Bulldog Resources private placement is: (a) to provide additional capital to the company for use in its exploration and development program; (b) to align the interests of shareholders and employees through the capital commitment being made under the private placement by Bulldog Resources' employees; (C) to allow Bulldog Resources to meet the challenges in retaining qualified personnel in a very competitive employment market, particularly in the context of Bulldog's historical cash compensation levels; and (d) to allow all employees to increase their ownership position in the company, at a fair price and in a manner which encourages continued employment due to the employment escrow conditions. The Board of Directors believes that the private placement is important to Bulldog Resources to retain key employees and to allow the company to conduct an exploration and development program.

After completion of the private placement, it is anticipated that Bulldog Resources will commence operations with:

- The current management and professional group of Bulldog Energy:

- The current Board of Directors of Bulldog Energy:

- Approximately 21.9 million common shares outstanding (post a 2:1 consolidation) to be trading on the TSX Exchange

- Cash resources of approximately $4,000,000

- No debt; our bank has indicated a line of credit for $1,500,000 will be available based on the reserve report.

- Initial average daily production of approximately 175 to 200 bbls/day of light oil.

- Corporate cash flow of approximately $2.0 million on an annualized basis based on a US$60/bbl WTI price and an $0.84 exchange rate.

- Reserves of 186,000 bbls proved and 425,000 bbls proved and probable based on the September 30, 2005 GLJ report.

Bulldog Resources will initially focus on pursuing medium depth (1,000 to 1,500m) light oil reservoirs in Southeast Saskatchewan where this team has demonstrated excellent success. The company will be an active driller and acquirer in this area. We expect to initiate Bulldog Resources' drilling program as soon as possible after the closing of the proposed transactions. After evaluation of this program, we intend to provide 2006 guidance on capital expenditures, production and cash flow forecasts.

With a strong platform for value creation, a proven exploration team, solid management, and projected continuing strength in commodity prices, the future of Bulldog Resources is exciting. This is management's third start-up of a junior oil and gas company. In our view, this is the best starting point we have had to create value for our shareholders.



"signed"

Ken McKay
President and Chief Executive Officer
November 7, 2005


Financial Reports

MANAGEMENT'S DISCUSSION AND ANALYSIS

As a preface to this disclosure for the 2005 third quarter, the reader is advised that Bulldog Energy announced on October 3, 2005 its intention to enter into a Plan of Arrangement whereby the majority of the company's operations will be sold to Crescent Point Energy Trust with the remainder of the company's assets transferred into a new publicly traded company, Bulldog Resources, initially owned by the current Bulldog Energy shareholders. The Arrangement is scheduled to be considered at a shareholders'meeting to be held November 28, 2005.

Advisories

The intention of Management's Discussion and Analysis (MD&A) is for Bulldog to present management's analysis of the results of its operations, current financial position, and future prospects. MD&A complements and supplements the financial statements that have been prepared according to Canadian generally accepted accounting principles (GAAP). This interim MD&A for the three and nine months ended September 30, 2005 is an update to the annual MD&A for the year ended December 31, 2004 that is included in Bulldog's 2004 Annual Report and is also available on SEDAR (www.sedar.com) and Bulldog's website (www.bulldogenergy.ca).

Given the objectives of the MD&A, certain information presented is of a forward looking nature. Such forward looking information involves substantial known and unknown risks and uncertainties. Most of these are beyond Bulldog's control and include: the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, the availability of qualified personnel, stock market volatility, and the access to sufficient capital from internal and external sources. The reader is cautioned that assumptions used in the preparation of such information, while considered reasonable by Bulldog at the time, may prove to be incorrect. Bulldog's actual results could differ materially from those expressed in, or implied by, such forward looking information.

Finally, in the presentation of the MD&A Bulldog uses two terms that are universally applied in analyzing corporate performance within our industry but which regulators require that we provide disclaimers.

- Barrel of Oil Equivalent (BOE) - Our industry commonly expresses production volumes and reserves on a "barrel of oil equivalent" basis (BOE) whereby natural gas volumes are converted at the ratio of six thousand cubic feet to one barrel of oil. The intention is to sum oil and natural gas measurement units into one basis for improved analysis of results and comparisons with other industry participants. Throughout this MD&A Bulldog has used the 6:1 BOE measure which is the approximate energy equivalency of the two commodities at the burner tip. BOE does not represent a value equivalency at the plant gate which is where Bulldog sells its production volumes and therefore may be a misleading measure if used in isolation.

- Cash Flow from Operations (Cash flow) - This measure is considered critical within our industry both in terms of measuring success in our historical operations and being an indicator of funding sources for on-going efforts to replace production volumes and increase reserve volumes. Canadian GAAP requires that "cash flow from operating activities" be the measurement focus. This latter term is derived from "cash flow" as defined by Bulldog adjusted for the change in non-cash working capital. Bulldog believes "cash flow" and "cash flow per share" to be more meaningful measures of our performance and therefore have used these terms throughout this MD&A. Accordingly, we are required to advise the reader that: (a) these are non-GAAP measures for purposes of Canadian accounting standards; and (b) our determinations may not be comparable to those reported by other companies.



Capital Expenditures and Operational Activity

------------------------------------------------------------------------
Nine months ended September 30 (000s) 2005 2004
------------------------------------------------------------------------
Lease acquisitions and retentions $ 2,168 $ 194
Seismic 1,469 293
Drilling & completions 20,729 7,230
Equipping, pipelines and facilities 6,344 3,673
Property acquisition 83 134
Helmsman acquisition - 19,507
Head office 10 24
------------------------------------------------------------------------
Total capitalized costs $ 30,803 $ 31,055
------------------------------------------------------------------------
------------------------------------------------------------------------


In Southeast Saskatchewan, Bulldog operated and drilled 10 (9.3 net) wells. Seven of these oil wells went on production in the third quarter and two more were placed on production in early October. This brings our year-to-date drilling total to 28 (26 net) wells of which 26 (24.5 net) are currently producing light oil, one is a stratigraphic test well and one is a suspended oil well.

Results of Operations

Revenues

PRODUCTION VOLUMES

Our successful drilling program resulted in oil production for the third quarter of 2005 averaging 1,926 bbls/day, a 17% increase from the 1,653 bbls/day average achieved in the prior quarter. Currently Bulldog is producing approximately 2,125 bbls/day.

COMMODITY PRICES

WTI benchmark oil prices averaged US$63.84/bbl in the third quarter of 2005, a 20% increase from the previous quarter's average of US$53.20/bbl. This improvement was further enhanced by a narrowing of corporate differentials while the appreciation of the Canadian dollar negated some of the increase. The net effect was a 24% increase in our wellhead realization in the third quarter to Cdn$70.86/bbl. While fourth quarter benchmark oil prices have weakened from the hurricane induced spikes in September, they still remain at historically high levels.

Royalties

Royalties increased marginally as a percentage of revenues to 16.9% for the third quarter from 16.0% in the second quarter of 2005. Bulldog expects the royalty percentage of revenues to remain constant at 17% for the balance of the year.

Operating Expenses

Operating expenses were $7.17/BOE in the third quarter of 2005 compared to $5.88/BOE for the first six months of the year - the increase is attributable to the trucking of production volumes from several recently drilled Manor/Carlyle and Tilston wells that were not flowlined until October 2005; in addition a major well workover was required at Wauchope. Bulldog expects operating expenses to average approximately $6.00/BOE for the remainder of the year.

General and Administrative Expenses

General and administrative expenses averaged $1.28/BOE in the third quarter of 2005 compared to the 2004 yearly average of $2.49/BOE. We continue to benefit from the economies of scale from higher production volumes. We expect 2005 general and administrative expenses to average less than $2.00/BOE for the year.

Interest Expenses

Interest expense for the third quarter of 2005 has increased slightly from $0.89/BOE in the previous quarter to $0.97/ BOE due to higher debt levels and, to a lesser degree, higher interest rates. We expect interest expense to average approximately $0.90/BOE for the balance of the year.

Depletion and Depreciation Expense

Our depletion and depreciation provision was $23.82/BOE in the third quarter compared to $15.91/BOE in the second quarter of 2005. Bulldog commissioned a reserve report effective September 30, 2005 which served as the basis for the calculation. While reserve volumes increased, there was a significant increase in future development costs that were recognized - the overall impact was a significant increase in the depletion and depreciation rate per unit of production. Bulldog expects this rate to remain the same for the fourth quarter.

Income Taxes

Bulldog's apparent income tax rate for the third quarter of 2005 was 33%. Bulldog benefits from the resource allowance deduction which is in excess of the non-deductible Crown royalties. We expect this benefit to continue throughout 2005.

Bulldog has enjoyed substantially higher cash flows in 2005 as a result of increased production volumes and robust oil prices. These cash flows have now reached the point where they are in excess of our available tax deductions and accordingly we are incurring a current income tax liability. Cash income taxes provided at September 30, 2005 are based on a proration of the full year projection of income taxes using the critical parameters as outlined in our updated corporate guidance.

Liquidity and Capital Resources

Our indebtedness at September 30, 2005 totalled $19.9 million consisting of bank loans of $12.8 million, a term facility of $0.8 million with an investment fund and a working capital deficiency of $6.3 million. The ratio of indebtedness outstanding at September 30, 2005 to third quarter annualized cash flow was 8 months. We expect this ratio to continue through the balance of the year.

Our current available lines of credit total $21.2 million. Based on the September 30, 2005 reserve report, it is anticipated that an expanded line of credit would be available if requested by Bulldog.

Updated 2005 Guidance

On October 3, 2005, Bulldog Energy announced its intention to enter into a Plan of Arragement whereby the majority of the company's operations will be sold to Crescent Point Energy Trust with the remainder of the company's assets transferred into a new publicly traded company, Bulldog Resources owned by the current Bulldog Energy shareholders. The Arrangement is scheduled to be considered by shareholders at a meeting to be held November 28, 2005. If approved, Bulldog Energy will cease to be a publicly traded company and its shareholders will be issued equity units of Crescent Point and publicly traded common shares of Bulldog Resources. The reader is cautioned that all guidance projections included herein are provided without giving effect to the Plan of Arrangement.

We have updated our 2005 forecast without giving effect to the Arrangement to incorporate a benchmark WTI oil price average of US$60.00/bbl for the fourth quarter (annual average US$56.75/bbl) and an exchange rate of US$0.84 to Cdn$1.00 (annual average of $0.82). These pricing parameters combined with anticipated production volumes averaging 1,750 bbls/day will result in Bulldog's cash flow before income taxes and costs related to the Arrangement approximating $27.5 million or $0.79 per diluted share. However, we will incur a current income tax liability that can only be properly determined at year end; most likely it will result in a 10% reduction in projected 2005 cash flows. Should the Arrangement not be approved, transaction costs of approximately $0.5 million will also be incurred.



Quarterly Analysis
-------------------------------------------------------------
2005
Q3 Q2 Q1
-------------------------------------------------------------
Production volumes
Oil (bbls/day) 1,926 1,653 1,448
Natural gas (mcf/day) - - -
BOE/day 1,926 1,653 1,448
Average selling price
Oil/bbl $ 70.86 $ 57.13 $ 53.89
Natural gas/mcf $ - $ - $ -
BOE $ 70.86 $ 57.13 $ 53.89
Revenues (000s) $12,554 $ 8,592 $ 7,021
Cash flow (000s) $ 7,568 $ 5,766 $ 4,797
Per share - diluted $ 0.22 $ 0.16 $ 0.14
Net income (000s) $ 3,165 $ 2,394 $ 1,775
Per share - diluted $ 0.09 $ 0.07 $ 0.05
Capital expenditures (000s)(1) $10,100 $11,394 $ 9,309
-------------------------------------------------------------
-------------------------------------------------------------

------------------------------------------------------------------------
2004 2003
Q4 Q3 Q2 Q1 Q4
------------------------------------------------------------------------
Production volumes
Oil (bbls/day) 1,373 1,225 945 717 465
Natural gas (mcf/day) 999 772 1,018 890 883
BOE/day 1,540 1,354 1,115 866 612
Average selling price
Oil/bbl $ 48.23 $ 50.09 $ 45.47 $ 38.71 $ 35.58
Natural gas/mcf $ 7.22 $ 6.49 $ 7.46 $ 6.96 $ 6.28
BOE $ 47.70 $ 49.03 $ 45.36 $ 39.23 $ 36.09
Revenues (000s) $ 6,757 $ 6,108 $ 4,601 $ 3,091 $ 2,032
Cash flow (000s) $ 4,026 $ 3,673 $ 2,419 $ 1,666 $ 946
Per share - diluted $ 0.12 $ 0.11 $ 0.07 $ 0.06 $ 0.05
Net income (000s) $ 1,192 $ 1,502 $ 754 $ 383 $ 100
Per share - diluted $ 0.03 $ 0.04 $ 0.02 $ 0.01 $ 0.01
Capital expenditures
(000s)(1) $ (448) $ 5,642 $ 3,306 $ 2,600 $ 5,120
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) Excludes business combinations and asset retirement costs.


Consolidated Balance Sheets
------------------------------------------------------------------------
September 30 December 31
2005 2004
------------------------------------------------------------------------
(000s) (000s)
(unaudited) (audited)
Assets
Current assets:
Cash $ 749 $ 1,067
Property sale receivable - 5,625
Accounts receivable 4,977 3,629
------------------------------------------------------------------------
5,726 10,321
Petroleum and natural gas properties (note 2) 67,050 44,446
Goodwill 3,443 3,443
------------------------------------------------------------------------
$ 76,219 $ 58,210
------------------------------------------------------------------------

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 10,648 $ 6,570
Bank indebtedness (note 3 (a)) 12,850 10,050
Income taxes payable 1,400 -
Current portion of long-term debt 750 975
------------------------------------------------------------------------
25,648 17,595
Asset retirement obligations (note 4) 2,546 1,960
Future income taxes 10,100 7,378
Shareholders' equity:
Share capital (note 5) 26,286 27,362
Contributed surplus 886 496
Retained earnings 10,753 3,419
------------------------------------------------------------------------
37,925 31,277
------------------------------------------------------------------------
$ 76,219 $ 58,210
------------------------------------------------------------------------
------------------------------------------------------------------------


Consolidated Statements of Income and Retained Earnings (Unaudited)
------------------------------------------------------------------------
Three months ended Nine months ended
September 30 (000s) September 30 (000s)
2005 2004 2005 2004
------------------------------------------------------------------------
Revenues $ 12,554 $ 6,107 $ 28,167 $ 13,800
Royalties (2,117) (1,277) (4,512) (3,061)
Production expenses (1,270) (777) (2,920) (1,899)
------------------------------------------------------------------------
9,167 4,053 20,735 8,840
Expenses:
General and administrative 227 232 756 712
Financial (note 3(b)) 172 147 411 370
Depletion and depreciation 4,220 1,454 8,658 3,649
Accretion of asset
retirement obligations 46 83 127 170
Stock-based compensation 137 75 412 185
------------------------------------------------------------------------
4,802 1,991 10,364 5,086
------------------------------------------------------------------------
Income before income taxes 4,365 2,062 10,371 3,754
Current tax expense 1,200 - 1,437 -
Future income tax expense - 560 1,600 1,115
------------------------------------------------------------------------
Net income 3,165 1,502 7,334 2,639
Retained earnings (deficit),
beginning of period 7,588 725 3,419 (412)
------------------------------------------------------------------------
Retained earnings,end of period $ 10,753 $ 2,227 $ 10,753 $ 2,227
------------------------------------------------------------------------
Net income per common share:
Basic and diluted $ 0.09 $ 0.04 $ 0.21 $ 0.08
------------------------------------------------------------------------
------------------------------------------------------------------------


Consolidated Statements of Cash Flows (Unaudited)
------------------------------------------------------------------------
Three months ended Nine months ended
September 30 (000s) September 30 (000s)
2005 2004 2005 2004
------------------------------------------------------------------------

Cash provided by (used in):
Operating activities:
Net income $ 3,165 $ 1,502 $ 7,334 $ 2,639
Items not involving cash:
Depletion and depreciation 4,220 1,454 8,658 3,649
Accretion of asset
retirement obligations 46 83 127 170
Stock-based compensation 137 75 412 185
Future income taxes - 560 1,600 1,115
------------------------------------------------------------------------
Cash flow from operations 7,568 3,674 18,131 7,758
Change in non-cash operating
working capital 1,275 176 1,414 (1,988)
------------------------------------------------------------------------
Cash flow from operating
activities 8,843 3,850 19,545 5,770
Financing activities:
Issue of share capital,
net of issue costs - 225 24 13,398
Borrowings on operating loan 2,050 1,080 2,800 10,480
Repayments of long-term debt (75) (125) (225) (375)
------------------------------------------------------------------------
1,975 1,180 2,599 23,503
Investing activities:
Petroleum and natural gas
properties (10,100) (5,643) (30,803) (11,549)
Business combination - (120) - (19,507)
Change in non-cash investing
working capital (642) 1,614 8,341 1,162
------------------------------------------------------------------------
(10,742) (4,149) (22,462) (29,894)
------------------------------------------------------------------------
Increase (decrease) in cash 76 881 (318) (621)
Cash,beginning of period 673 1,270 1,067 2,772
------------------------------------------------------------------------
Cash,end of period $ 749 $ 2,151 $ 749 $ 2,151
------------------------------------------------------------------------
------------------------------------------------------------------------


Notes to Consolidated Financial Statements
(Unaudited)
Nine month period ended September 30, 2005
(Tabular amounts stated in $000s except per share amounts)


1. Basis of presentation:

Bulldog Energy Inc. ("Bulldog") was incorporated under the laws of the Province of Alberta on July 3, 2001 and commenced business in October 2001. Bulldog is engaged in the business of exploration, development and production of petroleum and natural gas.

These interim financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles and follow the same accounting policies as the annual financial statements for the period ended December 31, 2004. These interim financial statements should be read in conjunction with the annual financial statements.



2. Petroleum and natural gas properties:
------------------------------------------------------------------------
September 30 December 31
2005 2004
------------------------------------------------------------------------
Petroleum and natural gas properties $ 67,549 $ 42,641
Production equipment 18,873 12,529
Office furniture and equipment 132 122
------------------------------------------------------------------------
86,554 55,292
Less accumulated depletion and depreciation (19,504) (10,846)
------------------------------------------------------------------------
Net book value $ 67,050 $ 44,446
------------------------------------------------------------------------
------------------------------------------------------------------------


Land and seismic costs associated with unproven properties that were excluded from costs subject to depletion and depreciation for the period ended September 30, 2005 totaled $5,700,000.

3. Financial:

(A) BANK INDEBTEDNESS:

On May 6, 2005 Bulldog increased its operating line of credit to $18,500,000 bearing interest at the bank's prime lending rate plus 1/4%. The interest rate on the acquisition/development line of credit was reduced by 1/4% to the bank's prime lending rate plus 1/2%.

(B) INTEREST EXPENSE:

Interest on long-term debt for the three and nine months ended September 30, 2005 amounted to $21,000 and $70,000 respectively ( September 30, 2004 - $ 50,000 and $158,000 respectively). The balance of interest expense in both periods included interest on the bank indebtedness and other interest charges offset by miscellaneous interest income. Actual interest paid during the three and nine months ended September 30, 2005 was $183,000 and $403,000 respectively (September 30, 2004 - $147,000 and $366,000 respectively).



4. Asset retirement obligations:
------------------------------------------------------------------------
Nine months Twelve months
ended ended
September 30 December 31
2005 2004
------------------------------------------------------------------------
Balance, beginning of year $ 1,960 $ 1,436
Accretion expense 127 242
Liabilities incurred 459 431
Liabilities settled - (149)
------------------------------------------------------------------------
Balance, end of period $ 2,546 $ 1,960
------------------------------------------------------------------------

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


5. Share capital:

(A) ISSUED AND OUTSTANDING:
------------------------------------------------------------------------
Nine months ended Twelve months ended
September 30,2005 December 31,2004
Number Amount Number Amount
------------------------------------------------------------------------
Class A common shares:
Balance, beginning
of year 32,205,798 $ 25,204 18,186,730 $ 8,355
Issued for cash - - 13,600,000 17,040
Warrants exercised - - 397,401 437
Stock options
exercised 70,000 57 21,667 29
Share issue costs - (11) - (1,097)
Income tax effect of
flow-through shares - (1,126) - -
Income tax effect of
share issue costs - 4 - 440
------------------------------------------------------------------------
Balance, end of period 32,275,798 24,128 32,205,798 25,204
Class B common shares:
Balance, beginning and
end of period 372,768 2,158 372,768 2,158
------------------------------------------------------------------------
Total share capital,
end of period $ 26,286 $ 27,362
------------------------------------------------------------------------
------------------------------------------------------------------------


On December 16, 2004 Bulldog issued flow-through shares which resulted in an obligation to expend $3,010,000 on qualifying expenditures prior to December 31, 2005. This obligation has been fulfilled. Future income taxes have been increased and share capital decreased by $1,126,000 being the estimated income tax effect of the deductions renounced in February 2005.



(B) RESERVED FOR ISSUE - STOCK OPTIONS:

As at September 30,2005 the maximum number of stock options that
Bulldog may grant is 3,227,580.
------------------------------------------------------------------------
Weighted
average
exercise
Number price
------------------------------------------------------------------------
Stock options outstanding,December 31,2004 2,490,000 $ 1.10
Granted 7,500 $ 2.40
Exercised (70,000) $ (0.50)
Cancelled (10,000) $ (0.75)
------------------------------------------------------------------------
Stock options outstanding,September 30,2005 2,417,500 $ 1.13
------------------------------------------------------------------------
------------------------------------------------------------------------

(C) CONTRIBUTED SURPLUS:

------------------------------------------------------------------------
Nine months Twelve months
ended ended
September 30 December 31
2005 2004
------------------------------------------------------------------------
Balance,beginning of year $ 496 $ 236
Stock options granted 412 271
Stock options exercised (22) (11)
------------------------------------------------------------------------
Balance,end of period $ 886 $ 496
------------------------------------------------------------------------
------------------------------------------------------------------------


(D) PER SHARE CALCULATIONS:

For the three and nine month periods ended September 30, 2005 the basic weighted average number of common shares outstanding was 33,325,849 (2004 - 33,622,639) and 33,566,692 (2004 - 31,416,275) respectively. The diluted average number of common shares outstanding for the three and nine months periods ended September 30, 2005 was 34,975,321 (2004 - 34,171,684) and 35,039,750 (2004 - 31,933,192) respectively. For purposes of these calculations, the Class B common shares were converted at $3.55 (2004 - $1.16) and $2.87 (2004 - $1.15) being the average trading price for the Class A common shares for the three and nine months ended September 30, 2005.

6. Subsequent event:

On October 3, 2005, Bulldog Energy announced its intention to effect a Plan of Arrangement whereby the majority of the company's operations will be sold to Crescent Point Energy Trust with the remainder of the company's assets transferred into a new publicly traded company, Bulldog Resources Inc., owned by the current Bulldog Energy shareholders. The Arrangement is scheduled to be considered by shareholders at a meeting to be held November 28, 2005. If approved, Bulldog Energy will cease to be a publicly traded company and its shareholders will be issued equity units of Crescent Point and publicly traded common shares of Bulldog Resources. Should the Arrangement be approved, Bulldog Energy's Class A shareholders will receive 0.130 of a Crescent Point unit and 1.0 common share of Bulldog Resources (prior to a 2:1 consolidation) for each Class A share held. Bulldog Energy is currently entitled to call its Class B shares for conversion. Pursuant to the proposed transactions, each Class B share will be converted into 3.257 Class A shares based upon the result of $10.00 divided by $3.07 being the weighted average trading price of the Class A shares for the 10 day period following the public announcement on October 3, 2005.



Shareholder Information
------------------------------------------------------------------------


BOARD OF DIRECTORS OFFICERS BANKERS


E. Craig Lothian, Kenneth D. McKay, National Bank
LLb. (1)(2) P. Geol. Calgary, Alberta
Chairman of the Board President & Chief
Regina, Saskatchewan Executive Officer AUDITORS


Claudio A. Ghersinich, S. Bruce McKay, C.E.T. KPMG LLP
P. Eng. (1)(2) Vice President Chartered Accountants
Calgary, Alberta Production & Chief Calgary, Alberta
Operating Officer
S. Bruce McKay, C.E.T. SOLICITORS
Calgary, Alberta Michael H. Flanagan,
P. Land Heenan Blaikie LLP
Kenneth D. McKay, Vice President Land Barristers & Solicitors
P. Geol. Calgary, Alberta
Calgary, Alberta Ailsa Brereton, C.A.
Controller & Chief STOCK EXCHANGE
James M. Pasieka, Financial Officer
LLb. (2)(3) The TSX Exchange
Calgary, Alberta EVALUATION ENGINEERS Symbols: BDE.A & BDE.B
GLJ Petroleum
John A. Thomson, Consultants Ltd. TRANSFER AGENT
C.A.(1)(3) Calgary, Alberta
Calgary, Alberta CIBC Mellon Trust
(1) Members of the Company
Audit Committee Telephone (403) 232-2400
(2) Members of the
Reserve Committee
(3) Members of the
Governance &
Compensation
Committee



OFFICE ADDRESS


Bulldog Energy Inc.
Suite 805, 734 - 7th Avenue S.W.
Calgary, AB, T2P 3P8
Telephone (403) 266-6902
Facsimile (403) 264-7470
web: http://www.bulldogenergy.ca
email: info@bulldogenergy.ca


Contact Information