Bulldog Resources Inc.
TSX : BD

Bulldog Resources Inc.

August 14, 2006 08:00 ET

Bulldog Resources Inc.: 2006 Second Quarter Report & News Release

CALGARY, ALBERTA--(CCNMatthews - Aug. 14, 2006) - Bulldog Resources Inc. (TSX:BD) -

HIGHLIGHTS

- Achieved Q2, 2006 production expenses of $2.36/Boe

- Achieved field netbacks of $61.69/Boe and corporate netbacks of $56.06/Boe

- Drilled 4 gross (2.0 net) oil wells at Fertile and one additional oil well (0.25 net) (100% success rate)

- Completed the expansion of the Fertile production facilities to 2,400 Bbls/day of light oil

- Increase average production 77% to 555 Boe/day in Q2, 2006 from an average of 314 Boe/day in Q1, 2006

- Increased cash flow 167% to $2.8 million in Q2, 2006 from $1.1 million in Q1, 2006



QUARTERLY SUMMARY

Financial
------------------------------------------------------------------------
Six months
ended
(Cdn$ in thousands except share amounts) Q2 Q1 June 30, 2006
------------------------------------------------------------------------
Revenues $ 3,733 $ 1,732 $ 5,465
Cash flow $ 2,829 $ 1,059 $ 3,888
Per share - basic $ 0.12 $ 0.05 $ 0.17
- diluted $ 0.11 $ 0.05 $ 0.16
Net earnings $ 1,635 $ 327 $ 1,962
Per share - basic $ 0.06 $ 0.02 $ 0.08
- diluted $ 0.06 $ 0.01 $ 0.08
Capital expenditures $ 3,901 $ 2,576 $ 6,477
------------------------------------------------------------------------
------------------------------------------------------------------------

Operational (units as noted)

Average daily production
Oil (barrels/day) 549 309 429
Natural gas (mcf/day) 36 29 32
Combined (Boe/day) 555 314 435
Average price realization
Oil/barrel ($Cdn.) $ 74.51 $ 61.61 $ 69.88
Natural gas/mcf ($Cdn.) $ 4.01 $ 7.28 $ 5.47
Combined/Boe ($Cdn.) $ 73.97 $ 61.32 $ 69.43
Production expenses (per Boe) $ 2.36 $ 3.51 $ 2.77
Transportation expenses (per Boe) $ 1.84 $ 1.20 $ 1.61
Field netback (per Boe) $ 61.69 $ 46.77 $ 56.33
Corporate netback (per Boe) $ 56.06 $ 37.49 $ 49.40
------------------------------------------------------------------------
------------------------------------------------------------------------


Capital Structure

As at August 14, 2006, Bulldog's capital structure is:
------------------------------------------------------------------------
Outstanding bank debt (available revolving
operating credit line is $7.0 million) nil
Common shares outstanding 24,959,202
Stock options to purchase common shares
(exercise price $2.19 per share) 432,500
Performance warrants to purchase common shares
(exercise price $1.00 per share) 1,875,000
------------------------------------------------------------------------
Common shares outstanding after exercise of the
performance warrants and stock options 27,266,702
------------------------------------------------------------------------
------------------------------------------------------------------------


REPORT TO SHAREHOLDERS

SUCCESSFUL DRILLING AND OPERATIONS CONTINUE

Our 100% drilling success continued in the second quarter. Bulldog drilled 4 gross (2.0 net) oil wells at Fertile and one additional oil well (0.25 net) in Southeast Saskatchewan. In the first six months of 2006, we have drilled 7 gross (3.5 net) oil wells at Fertile and the additional oil well (0.25 net). In addition, the expansions of our oil production facility and group flow lines were completed at the Fertile property.

STRONG PRODUCTION/CASH FLOW GROWTH AND EFFICIENT OPERATIONS

Our company has grown significantly and efficiently over our first eight months of activity.

Bulldog's production tripled from an average of 180 Boe/day in December 2005 (Bulldog's first month of operation) to average 555 Boe/day in the second quarter. Production per share has increased 165% from 7.67 Boe/day per million diluted shares to 20.36 Boe/day per million diluted shares in the same time period.

Bulldog's 2006 cash flow expanded 167% from $1.1 million in the first quarter to $2.8 million in the second quarter. On a per share basis, the increase was 140% from $0.05 to $0.12.

Our production expenses in the second quarter were $2.36/Boe. Bulldog's field netback in the second quarter was $61.69/Boe. We expect that these benchmarks will rank us in the top 10% of public junior oil and gas companies.

Our approximate average production in July was in excess of 850 Boe/day, a further 53% increase from our Q2 average of 555 Boe/day.

NEW EXPLORATION PROJECTS

We are currently developing new exploration projects in four areas in Southeast Saskatchewan. We are acquiring land and seismic on each of these projects. Due to the competitive nature of exploration plays and associated land acquisition, it would not be prudent to provide further details at this time on these exciting new opportunities. It is anticipated that these prospects will be ready for evaluation drilling later this year.

MARKET COMMENTARY

The combination of our light oil production, efficient operations and strong world oil prices has resulted in premium netbacks. Our operational and financial results have fueled increases in Bulldog's share price. Bulldog's trading price has increased approximately 48% from $1.55/share at the beginning of January 2006 to the $2.30 to $2.35/share range at the end of June 2006. This is significant when compared to the Tristone Capital Index of junior oil and gas companies which shows the average trading price had decreased 20% in this period.

Bulldog's independent analyst research coverage continues to increase with BMO Capital Markets joining Dundee Securities Corporation, Northern Securities Inc. and Research Capital.

LOOKING AHEAD

In the first six months of 2006, we have spent $6.5 million of our planned $15 million capital budget. The remaining 2006 projected capital expenditures of $8.5 million will include the drilling of 14 wells (8.9 net).

We will continue to develop the Fertile pool with a sound technical and business approach emphasizing reserve additions. Eight wells (4.0 net) are planned for the Fertile property over the last half of 2006.

We are expanding our drilling opportunities through land and seismic acquisition on new projects. These new projects will gain more emphasis in the fourth quarter of 2006 and in 2007. In addition, we continue to evaluate potential acquisitions that present a synergistic fit with our current activities.

At June 30, 2006, Bulldog had $7 million of working capital and an undrawn line of credit of $7 million. We expect that these resources and our expanding cash flow will readily finance the balance of our 2006 capital expenditure program and leave a significant positive working capital at year end. Our strong financial position gives us the capability to expand our activities.

We look forward to up-dating our shareholders on our progress.

"signed"

Kenneth D. McKay, P. Geol.

President and Chief Executive Officer

August 14, 2006

ADVISORIES

Management's Discussion & Analysis

The intention of Bulldog Resources Inc. ("Bulldog") management's discussion and analysis (MD&A) is to present management's analysis of operational results, current financial position and future prospects. This interim MD&A is an update to Bulldog's annual MD&A for the period from incorporation on October 24, 2005 to December 31, 2005 that is included in the 2005 Annual Report. Bulldog's 2005 Annual Report is available on SEDAR at www.sedar.com and our website (www.bulldogresources.ca)

Certain statements included in this MD&A constitute forward-looking statements under applicable securities legislation. Forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "instead", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this MD&A include but are not limited to capital expenditures, business strategy and objectives, net revenue, future production levels, developments plans and the timing thereof, operating and other costs, royalty rates etc. 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, and the availability of qualified personnel and services, stock market volatility, and the access to sufficient capital from internal and external sources.

Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. Although Bulldog believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Bulldog can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Bulldog and described in the forward-looking statements or information.

Finally, in the presentation of the MD&A Bulldog uses three terms that are universally applied in analyzing corporate performance within the oil and gas industry as explained below.

- 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.

- Operating Income and Field Netback - Operating income is defined as revenues less royalties, transportation expenses and production expenses. Field netback is the term used when these items are expressed on a BOE of production basis.

- Funds Flow from Operations - This measure is commonly referred to as cash flow and 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 generally accepted accounting principles ("GAAP") requires that "cash flow from operating activities" be the measurement focus. This latter term is derived from "funds flow from operations" as defined by Bulldog adjusted for the change in non-cash working capital. Bulldog believes "funds flow from operations" and "funds flow from operations per share" to be more meaningful measures of our performance and therefore have used these terms throughout this MD&A. Accordingly, Bulldog is 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.

CORPORATE ORIGIN

Bulldog Resources is a Calgary based oil and natural gas company engaged in the exploration, acquisition, development and production of oil and natural gas reserves in the Western Canadian Sedimentary Basin. We commenced operations on November 30, 2005 as a result of the Plan of Arrangement between Bulldog Energy Inc. and Crescent Point Energy Trust. The Plan of Arrangement, through a series of transactions, resulted in Bulldog Energy shareholders exchanging their shares in exchange for units of Crescent Point and common shares of Bulldog Resources.

CAPITAL EXPENDITURES

The following summarizes Bulldog's capital expenditure program for the first six months of 2006:



------------------------------------------------------------------------
Six months
ended
($ 000's) Q2 Q1 June 30, 2006
------------------------------------------------------------------------
Lease acquisitions and retentions $ 415 $ 39 $ 454
Seismic 217 158 375
Drilling & completions 2,229 1,637 3,866
Equipping, tie-ins and facilities 1,013 732 1,745
Head office 27 10 37
------------------------------------------------------------------------
Total $ 3,901 $ 2,576 $ 6,477
------------------------------------------------------------------------
------------------------------------------------------------------------


In the second quarter, Bulldog drilled 4 gross (2.00 net) oil wells at Fertile and one other oil well (0.25 net) in southeast Saskatchewan. In the six month period ended June 30, 2006, Bulldog has drilled 8 gross (3.75 net) oil wells in southeast Saskatchewan. This drilling program had a 100% success rate and 7 of the wells were operated by Bulldog. The Company also expanded its prospect inventory through additional undeveloped land purchases and seismic programs. Bulldog's undeveloped land has increased 15% to 8,491 net acres from 7,380 net acres in May 2006.

Bulldog's 2006 projected capital expenditure program is $15 million. The remaining 2006 projected capital expenditures of $8.5 million include the drilling of 14 wells (8.9 net).



RESULTS OF OPERATIONS

Production Volumes
------------------------------------------------------------------------
Six months
ended
Q2 Q1 June 30, 2006
------------------------------------------------------------------------
Total volumes
Oil (barrels) 49,927 27,810 77,737
Natural gas (thousand of cubic feet) 3,240 2,610 5,850
Barrels of oil equivalent (BOE) 50,467 28,245 78,712
------------------------------------------------------------------------
Daily averages
Oil (barrels per day) 549 309 429
Natural gas (thousand cubic
feet per day) 36 29 32
Barrels of oil equivalent
(BOE per day) 555 314 435
------------------------------------------------------------------------
------------------------------------------------------------------------


Bulldog's second quarter production volumes increased 77 percent from the first quarter as a result of oil volume increases from the successful drilling program at Fertile. Bulldog's oil production is 36 degree API light oil and as a result receives premium pricing. The Company expects additional volumes increases in the third and fourth quarters of 2006 as a result of its remaining 2006 drilling program.



Operating Income
------------------------------------------------------------------------
Six months
ended
($ 000's except Q2 Q1 June 30, 2006
per BOE) Total Per BOE Total Per BOE Total Per BOE
------------------------------------------------------------------------
Oil and gas
revenue $ 3,733 $ 73.97 $ 1,732 $ 61.32 $ 5,465 $ 69.43
Royalties (408) (8.08) (278) (9.84) (686) (8.72)
Transportation
expenses (93) (1.84) (34) (1.20) (127) (1.61)
Production
expenses (119) (2.36) (99) (3.51) (218) (2.77)
------------------------------------------------------------------------
Operating income
(field netback) $ 3,113 $ 61.69 $ 1,321 $ 46.77 $ 4,434 $ 56.33
------------------------------------------------------------------------
------------------------------------------------------------------------


Bulldog's operating income is anticipated to increase in the remaining quarters of 2006 as a result of the projected increase in production volumes and continuing strong oil prices.

Revenue

Bulldog's oil and gas revenue in the second quarter of 2006 was comprised of $3,720,000 of oil sales (99.7%) and $13,000 of natural gas sales (0.3%). The WTI benchmark oil price continued to increase in the second quarter. The oil price differential between WTI and Edmonton benchmark prices was significantly reduced in the second quarter in comparison to the first quarter. Bulldog's oil production is priced based on a benchmark of Cromer light crude subject to quality adjustments. The oil price differential between the Edmonton and Cromer benchmark crude oil prices also reduced in the second quarter. These two reduced crude oil price differentials resulted in approximately a $7.00 per barrel increase in Bulldog's realized oil price in the second quarter.

The strong benchmark oil prices combined with the reduced oil price differentials resulted in Bulldog's realized oil price increasing 21 % in the second quarter.



------------------------------------------------------------------------
Six months
ended
Q2 Q1 June 30, 2006
------------------------------------------------------------------------
WTI benchmark price
($ U.S. per barrel) $ 70.70 $ 63.48 $ 67.09
Market differential
($U.S. per barrel) (0.71) (3.75) (2.26)
Exchange - $U.S./$Cdn 0.891 0.866 0.879
------------------------------------------------------------------------
Edmonton light benchmark
($Cdn per barrel) $ 78.55 $ 68.96 $ 73.75
Cromer differential and quality
adjustments ($Cdn per barrel) (4.04) (7.35) (3.87)
------------------------------------------------------------------------
Bulldog average oil price
($Cdn per barrel) $ 74.51 $ 61.61 $ 69.88
------------------------------------------------------------------------
------------------------------------------------------------------------


Royalties
------------------------------------------------------------------------
Six months
ended
($ 000's except per BOE) Q2 Q1 June 30, 2006
------------------------------------------------------------------------
Royalties $ 408 $ 278 $ 686
Per BOE $ 8.08 $ 9.84 $ 8.72
Percentage of revenue 11% 16% 13%
------------------------------------------------------------------------
------------------------------------------------------------------------


Bulldog's royalties as a percentage of revenue declined in the second quarter as a result of the new wells at Fertile receiving the benefit of the reduced royalty rates. The horizontal wells at Fertile drilled on Crown lands are eligible for the reduced Crown royalty rate of 2.5 % on the first 37,500 barrels of gross cumulative oil production. After this reduced royalty period, the eligible wells are subject to sliding scale Crown royalties with these royalty rates dependent on production volumes.

Approximately 71 % of Bulldog's total oil production for the six months ended June 30, 2006 benefited from these reduced royalty rates. Bulldog's revenue is derived from Saskatchewan properties and is subject to a 2 % (1.9% effective July 1, 2006) Saskatchewan resource revenue surcharge and this surcharge is included in the above royalties.



Transportation Expenses
------------------------------------------------------------------------
Six months
ended
($ 000's except per BOE) Q2 Q1 June 30, 2006
------------------------------------------------------------------------
Transportation expenses $ 93 $ 34 $ 127
Per BOE $ 1.84 $ 1.20 $ 1.61
------------------------------------------------------------------------
------------------------------------------------------------------------


Transportation expenses are the trucking of Bulldog's oil from its central facilities to the purchaser's pipeline terminals. The second quarter "spring break up" with the associated road use regulations resulted in reduced oil volumes per truck load. As a result Bulldog's per barrel trucking fee increased in the second quarter.



Production Expenses
------------------------------------------------------------------------
Six months
ended
($ 000's except per BOE) Q2 Q1 June 30, 2006
------------------------------------------------------------------------
Production expenses $ 119 $ 99 $ 218
Per BOE $ 2.36 $ 3.51 $ 2.77
------------------------------------------------------------------------
------------------------------------------------------------------------


The significant increase in Bulldog's second quarter oil volumes resulted in reduced per boe production expenses as a result of ongoing production efficiencies.

Other Expenses



General and Administrative
------------------------------------------------------------------------
Six months
ended
($ 000's except Q2 Q1 June 30, 2006
per BOE) Total Per BOE Total Per BOE Total Per BOE
------------------------------------------------------------------------
Gross expenses $ 617 $ 12.23 $ 489 $ 17.31 $ 1,106 $ 14.05
Operator
recoveries (60) (1.19) (41) (1.45) (101) (1.28)
Capitalized
overhead (213) (4.22) (167) (5.91) (380) (4.83)
------------------------------------------------------------------------
Net expenses $ 344 $ 6.82 $ 281 $ 9.95 $ 625 $ 7.94
------------------------------------------------------------------------
------------------------------------------------------------------------


General and administrative expenses directly related to exploration and development activities were capitalized and represented 38 percent of general and administrative expenses net of third party recoveries for the period ended June 30, 2006. Bulldog expects that its general and administrative expenses on a BOE basis will continue to trend downwards as production volumes are increased.

Bulldog's gross general and administrative expenses increased $128,000 in the second quarter. This increase results mainly from a provision recorded in Q2 for an employee bonus expected to be incurred in 2006 as a direct result of the Company's strong performance. Bulldog's directors and management accepted reduced compensation in comparison to the compensation they received from Bulldog Energy as a result of the smaller initial production base. As at June 30, 2006, Bulldog had 9 employees. The Company has the staff in place to efficiently manage significant levels of growth.



Stock based compensation
------------------------------------------------------------------------
Six months
ended
($ 000's except per BOE) Q2 Q1 June 30, 2006
------------------------------------------------------------------------
Stock based compensation $ 113 $ 112 $ 225
Per BOE $ 2.24 $ 3.97 $ 2.86
------------------------------------------------------------------------
------------------------------------------------------------------------


For purposes of calculating stock-based compensation expense it was assumed that 100 percent of the stock options and performance warrants would vest. The per share fair value of the 432,500 stock options granted on June 27, 2006 and the 1,875,000 performance warrants granted in December 2005 were estimated based on the date of grant using the Black-Scholes option pricing model.



Depletion, depreciation and accretion
------------------------------------------------------------------------
Six months
ended
($ 000's except per BOE) Q2 Q1 June 30, 2006
------------------------------------------------------------------------
Depletion, depreciation and accretion $ 513 $ 344 $ 857
Per BOE $ 10.17 $ 12.18 $ 10.89
------------------------------------------------------------------------
------------------------------------------------------------------------


Bulldog's depletion, depreciation and accretion expense per BOE has decreased 52 percent from the December 2005 rate of $21.00 per BOE as a result of Bulldog's successful Fertile area drilling program and the associated increase in proven oil reserves.

Depletion and depreciation expense is calculated using the unit-of-production method which is based on BOE production volumes in relation to the BOE proven reserve base. As at June 30, 2006 land and seismic costs associated with unproven properties that were excluded from costs subject to depletion and depreciation were $ 2.0 million. The estimated salvage values of $0.9 million reduced the costs of equipment subject to depreciation. Estimated future development costs on proved reserves of $2.3 million as at June 30, 2006 are included in the calculation of depletion and depreciation.



Income taxes
------------------------------------------------------------------------
Six months
ended
($ 000's) Q2 Q1 June 30, 2006
------------------------------------------------------------------------
Earnings before income taxes $ 2,203 $ 603 $ 2,806
Current income taxes $ 0 $ 0 $ 0
Future income taxes $ 568 $ 276 $ 844
Effective income tax rate 26% 46% 30%
------------------------------------------------------------------------
------------------------------------------------------------------------


In April 2006 both Alberta and Saskatchewan announced changes to their respective corporate income tax rates. The Alberta corporate income tax rate decreased from the current rate of 11.5% to 10.0% effective April 1, 2006. The Saskatchewan corporate income tax rate will decrease from the current rate of 17.0% to 14.0% effective July 1, 2006, 13.0% effective July 1, 2007 and 12.0% effective July 1, 2008. The Federal corporate income tax rate will decrease from the current rate of 23.0% to 21.0% effective January 1, 2007, 20.5% effective January 1, 2008, 20.0% effective January 1, 2009 and 19.0% effective January 1, 2010. The Federal corporate income tax surcharge of 1.1% will be eliminated effective January 1, 2008.

These corporate income tax rate reductions resulted in a $221,000 reduction in Bulldog's future income tax liability with a corresponding decrease in the second quarter's future income tax expense. This reduction resulted in an effective tax rate of 26% in the second quarter.

Bulldog's does not expect to incur current income taxes in 2006. Bulldog's current income tax horizon after 2006 will be affected by future production volumes, capital expenditures, and the oil price environment at that time.



Funds Flow from Operations
------------------------------------------------------------------------
Six months
($ 000's except per BOE and ended
per share amounts) Q2 Q1 June 30, 2006
------------------------------------------------------------------------
Funds flow from operations $ 2,829 $ 1,059 $ 3,888
Per BOE $ 56.06 $ 37.49 $ 49.40
Per common share
Basic $ 0.12 $ 0.05 $ 0.17
Diluted $ 0.11 $ 0.05 $ 0.16
------------------------------------------------------------------------
------------------------------------------------------------------------


Bulldog's second quarter funds flow from operations increased 167% in comparison to the first quarter as a result of the significant production volume growth and the increase in Bulldog's operating netback to $61.69 per boe from $46.77 per boe in the first quarter.

Bulldog estimates that its funds flow from operations will continue to increase in the remaining quarters of 2006 as a result of the Company's anticipated production volume growth and the continuation of strong oil prices.



Net Earnings
------------------------------------------------------------------------
Six months
($ 000's except per BOE and ended
per share amounts) Q2 Q1 June 30, 2006
------------------------------------------------------------------------
Net earnings (000's) $ 1,635 $ 327 $ 1,962
Per BOE $ 32.40 $ 11.58 $ 24.93
Per common share
Basic $ 0.06 $ 0.02 $ 0.08
Diluted $ 0.06 $ 0.01 $ 0.08
------------------------------------------------------------------------
------------------------------------------------------------------------


Bulldog's significant growth in net earnings in the second quarter of 2006 were a result of the strong growth in funds flow from operations, the reduction in per boe depletion, depreciation and accretion expense and the reduced corporate income tax rates.

LIQUIDITY AND CAPITAL RESOURCES

In the second quarter Bulldog issued by way of a private placement 3,378,000 common shares at a price of $1.80 per share for net proceeds, after estimated share issue expenses, of $5.6 million. Bulldog's directors, officers, employees and their immediate families purchased 465,000 of these common shares (a total of $837,000). The Company has considerable financial strength, through our June 30, 2006 working capital of $7.0 million, funds flow from operations and an unused $7 million bank operating credit facility, to fund Bulldog's third and fourth quarter planned capital expenditure program totaling $8.5 million.

The oil and gas industry operates within several parameters affecting its liquidity and capital resources:

- It is capital intensive requiring cash infusions on a regular basis as it seeks to grow its business.

- Its inventory of product for sale - its reserves - needs to be constantly replenished and augmented.

- It is a price taker when selling its inventory of oil and natural gas reserves.

Given these constraints, Bulldog plans to finance its capital expenditures primarily through funds flow from operations supplemented as required by equity financings and bank credit facilities. The Company will maintain credit facilities to finance incremental exploration and development activities, and acquisitions.

2006 GUIDANCE

Bulldog issued a press released on June 19 outlining its initial guidance for 2006. As a result of the continuing strong oil price environment, we have revised our estimate of oil prices. Our revised 2006 guidance assumes a WTI oil price of $71.50 U.S. per barrel for the period July 1 to December 31, 2006 resulting in a projected Bulldog realized oil price of $73.20 Cdn. per barrel for that period. Our initial 2006 Guidance released on June 19 utilized an oil price assumption for the period July 1 to December 31, 2006 of WTI $63.50 U.S. per barrel resulting in a projected Bulldog realized oil price of $58.60 Cdn. per barrel. This increase in the oil price assumption results in projected total funds flow from operations for the year ended December 31, 2006 increasing from $8.2 million per Bulldog's June 19 initial 2006 guidance ($0.34 per common share) to $10.0 million ($0.42 per common share). Based on our results to date, we continue to expect that we are on track to meet or exceed these projections. We will provide updates to our guidance throughout the balance of 2006.



------------------------------------------------------------------------
Average 2006 production volumes
(Barrels per day of light oil) 600
Average 2006 oil prices
WTI oil price U.S. $/barrel $ 69.30
Bulldog realized 2006 oil price Cdn $/barrel $ 71.90
Foreign exchange rate of U.S.$ to Cdn $1.00 $ 0.88
Average oil prices (July - December 2006)
WTI oil price U.S. $/barrel $ 71.50
Bulldog realized oil price Cdn $/barrel $ 73.20
Expenses
Average royalty percentage of revenue 21%
Production and transportation expense (per boe) $ 6.00
Administration costs (net of recoveries and
capitalized admin. in 000's) $ 1,300
Capital expenditures (000's) $ 15,000
Funds flow from operations (000's) $ 10,000
Per common share (basic) $ 0.42
------------------------------------------------------------------------
------------------------------------------------------------------------


Sensitivities

Current forward prices for oil are higher than our Q4 oil price assumptions. Our funds flow from operations sensitivities to changes in production volumes, oil prices and exchange rates over the last half of the year are as follows:



------------------------------------------------------------------------
Amount
(for July to December 2006) (in 000's) Per share
------------------------------------------------------------------------
Production volumes
Change of 50 bbls/day of average
oil production $ 450 $ 0.02
Oil prices
Change of US $1.00/barrel in the
benchmark WI oil price $ 120 $ 0.01
Exchange rate
Change of $0.01 in the US$/Cdn$ exchange rate $ 100 $ 0.00
------------------------------------------------------------------------
------------------------------------------------------------------------

ADDITIONAL DISCLOSURES

Share capital
------------------------------------------------------------------------
Six months Year ended
ended June 30, December 31,
2006 2005
------------------------------------------------------------------------
Weighted average shares outstanding
Basic 23,204,882 10,008,673
Diluted 24,113,387 10,008,673
Outstanding securities
Common shares 24,959,202 21,581,202
Performance warrants 1,875,000 1,875,000
Stock options 432,500 -
------------------------------------------------------------------------
Total outstanding securities 27,266,702 23,456,202
------------------------------------------------------------------------
------------------------------------------------------------------------


Contractual obligations

Bulldog enters into various contractual obligations in the normal course of its operations, including the purchase of various operational services, operating agreements, lease obligations for office space and office equipment. These contractual obligations were entered into in the ordinary course of business and the terms reflect market conditions.

In February 2006 Bulldog renounced $2.0 million of Canadian Exploration Expenditures effective December 31, 2005 related to the November 29, 2005 issue of two million common shares on a flow through basis. Bulldog has incurred the required qualifying expenditures as at June 30, 2006.

Bulldog does not have any off balance sheet arrangements or obligations.

Related Party Transactions

A director of Bulldog is a partner in a law firm that provides legal services to Bulldog related to administrative activities and share issue costs. These expenditures totaled $103,000 in the six months ended June 30, 2006.

Commodity prices

As at June 30, 2006, there are no commodity price risk management contracts outstanding. Bulldog's exposure to fluctuations in oil prices will continually be reviewed and at the current time there are no plans to hedge oil production.




Selected Quarterly Information
------------------------------------------------------------------------
Six months
(Cdn $ in thousands except ended
per share amounts) Q2 Q1 June 30, 2006
------------------------------------------------------------------------
Revenue $ 3,733 $ 1,732 $ 5,465
Expenses $ 2,098 $ 1,405 $ 3,503
Net earnings $ 1,635 $ 327 $ 1,962
Funds flow from operations $ 2,829 $ 1,059 $ 3,888
Funds flow from operations
per share
Basic $ 0.12 $ 0.05 $ 0.17
Diluted $ 0.11 $ 0.05 $ 0.16
Net earnings per share
Basic $ 0.06 $ 0.02 $ 0.08
Diluted $ 0.06 $ 0.01 $ 0.08
Working capital $ 6,983 $ 2,434 $ 6,983
Total assets $ 22,038 $ 12,602 $ 22,038
Total liabilities $ 6,162 $ 4,270 $ 6,162
Shareholder's equity $ 15,876 $ 8,332 $ 15,876
Common shares outstanding 24,959,202 21,581,202 24,959,202
------------------------------------------------------------------------
------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEETS

As at
------------------------------------------------------------------------
June 30, December 31,
(Cdn $ in thousands) (Unaudited) 2006 2005
------------------------------------------------------------------------

Assets
Current assets
Cash and term deposits $ 8,983 $ 4,289
Accounts and taxes receivable 1,918 577
Prepaid expenses 145 41
------------------------------------------------------------------------
11,046 4,907
Property, plant and equipment (note 2) 10,992 5,185
------------------------------------------------------------------------
$ 22,038 $ 10,092
------------------------------------------------------------------------
------------------------------------------------------------------------

Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 4,063 $ 956
Asset retirement obligations (note 4) 554 367
Future income taxes (note 5) 1,545 109
Shareholders' equity
Share capital (note 6) 13,684 8,655
Contributed surplus (note 7) 263 38
Retained earnings (deficit) 1,929 (33)
------------------------------------------------------------------------
15,876 8,660
------------------------------------------------------------------------
$ 22,038 $ 10,092
------------------------------------------------------------------------
------------------------------------------------------------------------
Commitments (note 12)

See accompanying notes.


CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS

------------------------------------------------------------------------
Three months Six months
ended June 30, ended June 30,
(Cdn $ in thousands) (Unaudited) 2006 2006
------------------------------------------------------------------------
Oil and gas revenue $ 3,733 $ 5,465
Royalties (408) (686)
Transportation expenses (93) (127)
Production expenses (119) (218)
------------------------------------------------------------------------
3,113 4,434
Other expenses
General and administrative 344 625
Stock-based compensation (note 7) 113 225
Depletion, depreciation and accretion 513 857
------------------------------------------------------------------------
970 1,707
Other income
Interest income 60 79
------------------------------------------------------------------------
Earnings before income taxes 2,203 2,806
Income taxes
Future income taxes (note 5) 568 844
------------------------------------------------------------------------
Net earnings for the period 1,635 1,962
Retained earnings (deficit),
beginning of period 294 (33)
------------------------------------------------------------------------
Retained earnings, end of period $ 1,929 $ 1,929
------------------------------------------------------------------------
------------------------------------------------------------------------
Net earnings per share (note 8)
Basic $ 0.06 $ 0.08
Diluted $ 0.06 $ 0.08
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes.


CONSOLIDATED STATEMENT OF CASH FLOWS

------------------------------------------------------------------------
Three months Six months
ended June 30, ended June 30,
(Cdn $ in thousands) (Unaudited) 2006 2006
------------------------------------------------------------------------

Cash provided by (used in):

Operating activities
Net earnings for the period $ 1,635 $ 1,962
Items not involving cash:
Depletion, depreciation, and accretion 513 857
Future income taxes 568 844
Stock-based compensation 113 225
------------------------------------------------------------------------
Funds flow from operations 2,829 3,888
Change in non-cash operations
working capital (note 11) (216) (539)
------------------------------------------------------------------------
2,613 3,349
------------------------------------------------------------------------

Financing activities

Issue of common shares, net of issue costs 5,621 5,621
Change in non-cash financing
working capital (note 11) 29 29
------------------------------------------------------------------------
5,650 5,650
------------------------------------------------------------------------

Investing activities

Expenditures on property, plant and equipment (3,901) (6,477)
Change in non-cash investing
working capital (note 11) 904 2,172
------------------------------------------------------------------------
(2,997) (4,305)
------------------------------------------------------------------------
Increase in cash and term deposits 5,266 4,694
Cash and term deposits, beginning of period 3,717 4,289
------------------------------------------------------------------------
Cash and term deposits, end of period $ 8,983 $ 8,983
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes.


NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2006
(Tabular amounts in Cdn. $ thousands)
(Unaudited)


1. Basis of Presentation

Bulldog Resources Inc. ("Bulldog") was incorporated under the Business Corporations Act (Alberta) on October 24, 2005 and commenced operations on November 30, 2005 upon completion of the Plan of Arrangement ("Arrangement") involving Bulldog Energy Inc. and its subsidiaries and Crescent Point Energy Trust. Bulldog's principal business activity is the exploration, exploitation, development and production of petroleum and natural gas reserves in Western Canadian Sedimentary Basin.

The consolidated financial statements include the accounts of Bulldog, it's wholly owned subsidiary Bulldog Ventures Ltd. and Bulldog Partnership. These interim consolidated financial statements have not been audited and have been prepared by management in accordance with Canadian generally accepted accounting principles and follow the same accounting policies and methods as used in the annual financial statements for the period ended December 31, 2005. These interim consolidated financial statements should be read in conjunction with the audited financial statements included in Bulldog's 2005 annual report.



2. Property, Plant and Equipment
------------------------------------------------------------------------
June 30, December 31,
(Cdn $ in thousands) 2006 2005
------------------------------------------------------------------------
Property, plant and equipment $ 11,952 $ 5,308
Accumulated depletion and depreciation (960) (123)
------------------------------------------------------------------------
Net book value $ 10,992 $ 5,185
------------------------------------------------------------------------
------------------------------------------------------------------------


During the three months period ended June 30, 2006, Bulldog capitalized general and administrative costs of $213,000 ($380,000 for the six month period ended June 30, 2006) which is included in property, plant and equipment.

As at June 30, 2006 land and seismic costs associated with unproven properties that were excluded from costs subject to depletion and depreciation were $1,980,000. Estimated salvage values of $966,000 reduced the costs of equipment subject to depreciation. Estimated future development costs on proved reserves of $2,250,000 as at June 30, 2006 are included in the calculation of depletion and depreciation.

3. Bank Credit Facilities

Bulldog has a $7.0 million revolving operating loan credit facility and a $1.0 million non revolving acquisition/development credit facility with a Canadian bank. Borrowings under these facilities are payable on demand and are limited to a borrowing base as determined from time to time by the bank. The revolving operating loan and acquisition/ development credit facilities bear interest at the bank's prime rate plus 0.50 percent and 0.75 percent per annum respectively. The assets of Bulldog are pledged as security for amounts drawn under these facilities and the facilities are also secured by a general security agreement and a floating charge debenture. At June 30, 2006, these credit facilities were undrawn.

4. Asset Retirement Obligations

The future asset retirement obligations were estimated based on Bulldog's net ownership in all wells and facilities, the estimated costs to abandon and reclaim the wells and facilities and the estimated timing of the costs to be incurred in future periods. As at June 30, 2006, the total undiscounted amount of the estimated cash flows required to settle the asset retirement obligations is approximately $0.8 million which will be incurred over the next 15 years, with the majority of the expenditures to be incurred by 2015. A credit adjusted risk-free rate of eight percent and an inflation rate of two percent was used to calculate the fair value of the asset retirement obligations.



Changes to asset retirement obligations were as follows:

------------------------------------------------------------------------
Three months Six months
ended June 30, ended June 30,
(Cdn $ in thousands) 2006 2006
------------------------------------------------------------------------
Balance, beginning of period $ 456 $ 367
Change in estimates (18) (18)
Increase in liabilities 104 185
Accretion expense 12 20
------------------------------------------------------------------------
Balance, end of period $ 554 $ 554
------------------------------------------------------------------------
------------------------------------------------------------------------


5. Future Income Taxes

The provision for income taxes recorded in the financial statements differs from the amount which would be obtained by applying the statutory income tax rate of 37.06 percent to the earnings for the period as follows:



------------------------------------------------------------------------
Three months Six months
ended June 30, ended June 30,
(Cdn $ in thousands) 2006 2006
------------------------------------------------------------------------
Earning before income taxes $ 2,203 $ 2,806
Statutory income tax rate 36.72% 37.06%
------------------------------------------------------------------------
Expected income tax 809 1,040
Increase (decrease) resulting from:
Non-deductible Crown payments 34 77
Resource allowance (94) (135)
Non-deductible stock based compensation 40 83
Change in statutory income tax rates (221) (221)
------------------------------------------------------------------------
Future income tax provision $ 568 $ 844
------------------------------------------------------------------------
------------------------------------------------------------------------



6. Share Capital

Authorized:

Unlimited number of Class A preferred shares

Unlimited number of common voting shares

Issued and outstanding common shares:

------------------------------------------------------------------------
(Cdn$ in thousands except share amounts) Number Amount
------------------------------------------------------------------------
Balance - December 31, 2005 21,581,202 $ 8,655
Changes during the period
Tax effect of flow-through shares (741)
Issued for cash 3,378,000 6,080
Share issue costs, net of
tax benefits of $149 (310)
------------------------------------------------------------------------
Balance, June 30, 2006 24,959,202 $ 13,684
------------------------------------------------------------------------
------------------------------------------------------------------------


On November 29, 2005 Bulldog raised $4.0 million through a private placement of 4,000,000 common shares at a price of $1.00 per share (2,000,000 of these shares were issued on a flow-through basis for income taxes purposes). In February 2006, Bulldog renounced $2.0 million of Canadian Exploration Expenditures effective December 31, 2005 related to the common shares issued on a flow-through basis. Bulldog has incurred the required qualifying expenditures as of June 30, 2006.

On March 13, 2006 Bulldog entered into a bought deal financing agreement with a syndicate of underwriters to issue 3,378,000 common shares at a price of $1.80 per share for net proceeds, after estimated share issue expenses, of $5,621,000. The common shares were issued by way of a private placement. Bulldog's directors, officers, employees and their immediate families purchased 465,000 of these common shares (a total of $837,000). The financing closed on April 4, 2006.

Common shares reserved for issue:

Performance Warrants

On November 29, 2005 Bulldog issued 1,875,000 performance warrants. Each performance warrant will be exercisable for one Common Share at a price of $1.00 per share upon satisfaction of the following vesting provisions:

(a) the first half of each holder's performance warrants shall vest and become exercisable if the holder continues to be a director, officer or employee of Bulldog as at December 1, 2006 and at any time during the term of the performance warrants, the thirty day weighted average trading price of the Common Shares is equal to or greater than $1.50 per share. This share price requirement was achieved on January 20, 2006.

(b) the second half of each holder's performance warrants shall vest and become exercisable if the holder continues to be a director, officer or employee as at December 1, 2007 and at any time during the term of the performance warrants, the thirty day weighted average trading price of the Common Shares is equal to or greater than $2.00 per share. This share price requirement was achieved on April 17, 2006.

At June 30, 2006 none of the performance warrants had vested or become exercisable. The performance warrants expire on November 29, 2010.

Stock Options

Under the Arrangement, the shareholders also approved Bulldog's stock option plan. The number of common shares reserved for options granted under the stock option plan, together with any common shares reserved for issuance pursuant to the exercise of the performance warrants, may not be more than 10% of the aggregate number of the then issued and outstanding common shares. As a result, the 2,495,920 Common Shares authorized for issuance pursuant to the stock option plan of Bulldog as at June 30, 2006 is reduced by the 1,875,000 Common Shares issuable on the exercise of the performance warrants.



The following table summarizes stock options outstanding as at June
30, 2006

------------------------------------------------------------------------
Number Exercise Remaining
of price life Options
shares per share (years) exercisable
------------------------------------------------------------------------
Balance December 31, 2005 - - - -
Granted June 27, 2006 432,500 $ 2.19 5.0 -
------------------------------------------------------------------------
Balance June 30, 2006 432,500 $ 2.19 5.0 -
------------------------------------------------------------------------
------------------------------------------------------------------------


7. Stock Based Compensation

For purposes of calculating stock-based compensation expense it was assumed that 100 percent of the stock options and performance warrants would vest. The per share fair value of the stock options granted on June 27, 2006 and the performance warrants granted in December 2005 were estimated based on the date of grant using the Black-Scholes option pricing model with the following assumptions:



------------------------------------------------------------------------
Stock Performance
Options Warrants
------------------------------------------------------------------------
Grant-date risk free interest rate (%) 4.28 3.90
Expected life (years) 5 5
Expected volatility (%) 50 50
Expected dividends (%) - -
Grant-date fair value $ 1.06 $ 0.48
------------------------------------------------------------------------
------------------------------------------------------------------------


Contributed Surplus
------------------------------------------------------------------------
Three months Six months
ended June 30, ended June 30,
(Cdn $ in thousands) 2006 2006
------------------------------------------------------------------------
Balance, beginning of period $ 150 $ 38
Stock-based compensation 113 225
------------------------------------------------------------------------
Balance, end of period $ 263 $ 263
------------------------------------------------------------------------
------------------------------------------------------------------------


8. Net Earnings Per Share

The following table summarizes the weighted average common shares used
in calculating net earnings per common share:

------------------------------------------------------------------------
Three months Six months
ended June 30, ended June 30,
2006 2006
------------------------------------------------------------------------
Basic 24,810,718 23,204,882
Diluted 25,719,224 24,113,387
------------------------------------------------------------------------
------------------------------------------------------------------------


The reconciling item between the basic and diluted common shares is the performance warrants as described in Note 7. The stock options are anti dilutive to the diluted earnings per share for the three and six months ended June 20, 2006.

9. Related Party Transactions

A director of Bulldog is a partner in a law firm that provides legal services to Bulldog related to administrative activities and share issue costs, which totaled $103,000 in the six months ended June 30, 2006.

10. Fair Value

The carrying value of accounts and taxes receivable, and accounts payable and accrued liabilities approximated their fair values as at June 30, 2006 due to the short term maturity of these instruments. Bulldog's accounts receivable are with customers and joint venture partners in the petroleum and natural gas industry and are subject to normal credit risks. Bulldog sells substantially all of its production to one credit-worthy purchaser under normal industry sale and payment terms. Amounts receivable from joint venture partners are recoverable from production and, accordingly, Bulldog views credit risks on these amounts as minimal.



11. Supplemental Cash Flow Information

Changes in non-cash working capital were comprised of the following:

------------------------------------------------------------------------
Three months Six months
ended June 30, ended June 30,
(Cdn $ in thousands) 2006 2006
------------------------------------------------------------------------
Accounts and taxes receivable $ (648) $ (1,341)
Prepaid expenses (36) (104)
Accounts payable and accrued liabilities 1,401 3,107
------------------------------------------------------------------------
Net change $ 717 $ 1,662
------------------------------------------------------------------------
------------------------------------------------------------------------
Net change by activity:
Operating $ (216) $ (539)
Financing 29 29
Investing 904 2,172
------------------------------------------------------------------------
Net change $ 717 $ 1,662
------------------------------------------------------------------------
------------------------------------------------------------------------


12. Commitments

At June 30, 2006 Bulldog had an office space lease commitment through to June 2011 totaling $688,000 (2006-$65,000, 2007-$130,000, 2008-$134,000, 2009-
$141,000, 2010-$145,000 and 2011-$73,000).



Shareholder Information

Board of Directors Officers Bankers

E. Craig Lothian, Kenneth D. McKay, National Bank
ll.b.(1)(3) p. geol. Calgary, Alberta
Chairman of the Board President & Chief
Regina, Saskatchewan Executive Officer

Claudio A. Ghersinich, S. Bruce McKay, Auditors
p. eng.(1)(2) c.e.t. KPMG llp
Calgary, Alberta Vice President Chartered Accountants
Production & Chief Calgary, Alberta
Operating Officer

S. Bruce McKay, Michael H. Flanagan,
c.e.t. p. land
Calgary, Alberta Executive Vice
President Land

Kenneth D. McKay, Robert E. Kraft, Solicitors
p. geol. c.a. Heenan Blaikie llp
Calgary, Alberta Chief Financial Barristers & Solicitors
Officer Calgary, Alberta

James M. Pasieka, Evaluation Engineers Stock Exchange
ll.b. (2)(3) GLJ Petroleum The TSX Exchange
Calgary, Alberta Consultants Ltd. Symbol: BD
Calgary, Alberta

John A. Thomson, Transfer Agent
c.a.(1)(3) Olympia Trust Company
Calgary, Alberta Telephone (403) 261-0900

(1) Members of the Audit Committee
(2) Members of the Reserve Committee
(3) Members of the Governance &
Compensation Committee


FORWARD LOOKING INFORMATION

Certain statements included in this interim report and press release constitute forward-looking statements under applicable securities legislation. Forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this interim report and press release include but are not limited to capital expenditures, business strategy and objectives, net revenue, future production levels, development plans and the timing thereof, operating and other costs, royalty rates etc. 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, and the availability of qualified personnel and services, stock market volatility, and the access to sufficient capital from internal and external sources.

Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. Although Bulldog believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Bulldog can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by Bulldog and described in the forward-looking statements or information.

The forward-looking statements or information contained in this interim report and press release are made as of the date hereof and Bulldog undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Contact Information

  • Bulldog Resources Inc.
    Ken McKay
    President & CEO
    (403) 266-6902
    or
    Bulldog Resources Inc.
    Rob Kraft
    Chief Financial Officer
    (403) 266-6902
    or
    Bulldog Resources Inc.
    Suite 805, 734 - 7th Avenue S.W.
    Calgary, AB, T2P 3P8
    (403) 266-6902
    (403) 264-7470 (FAX)
    Email: info@bulldogresources.ca
    Website: www.bulldogresources.ca