Caribou Resources Corp.
TSX VENTURE : CBU

Caribou Resources Corp.

April 11, 2007 17:25 ET

Caribou Resources Corp. 2006 Financial and Operating Results

CALGARY, ALBERTA--(CCNMatthews - April 11, 2007) - Caribou Resources Corp. (TSX VENTURE:CBU):



Summary Highlights

Three months ended Twelve months ended
December 31 December 31 % change
2006 2005 2006 2005 (12 months)
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Financial
($000's, except
shares and per
share amounts)
Oil and natural
gas revenues 5,384 10,590 25,738 32,484 (21)
Funds flow from
operations (1) (1,173) 5,642 5,460 16,024 (66)
Per share -
basic &
diluted (1) (0.03) 0.16 0.15 0.53 (72)
Net gain (loss) (54,345) 1,276 (60,266) (1,293) 4,561
Per share -
basic &
diluted (1.41) 0.04 (1.63) (0.04) 3,975
Total assets 69,332 119,683 69,332 119,683 (42)
Bank debt 10,829 10,545 10,829 10,545 3
Short-term
bridge facility 14,500 13,500 14,500 13,500 7
Shareholders'
equity 16,570 70,174 16,570 70,174 (76)
Working capital
deficiency 43,064 22,158 43,064 22,158 94
Common shares
outstanding 38,529,540 34,849,924 38,529,540 34,849,924 11
Weighted
average
- basic 38,529,540 34,821,575 36,926,639 30,254,873 22
Weighted
average
- diluted 38,529,540 34,976,255 36,926,639 30,343,760 22
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Operating (boe -
6:1 basis)

Sales volumes
Crude oil and
NGL's
(bbls/day) 463 638 515 698 (26)
Natural gas
(mcf/day) 4,572 6,391 5,647 4,846 17
Total oil
equivalent
(boe/day) 1,225 1,703 1,456 1,506 (3)

Product prices
($)
Crude oil and
NGL's per bbl 55.83 63.50 65.24 63.04 3
Natural gas per
mcf 7.14 11.61 6.53 9.28 (30)
Operating
expense per boe
($) 33.59 14.25 22.29 13.46 66
Netback per boe
($) (2) 6.11 41.66 22.09 35.68 (38)
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(1) Funds flow from operations and funds flow from operations per share are
non-GAAP terms that represent net loss adjusted for non-cash items. The
Company evaluates its performance based on these measures. These
measures may not be comparable to other companies. The Company considers
funds flow from operations a key measure as it demonstrates the
Company's ability to generate cash flow necessary to fund future growth
through capital investment and to repay debt.

(2) Netback per boe is a non-GAAP term that is calculated as total revenue
less royalties, operating costs and transportation costs on a boe basis.
The Company evaluates its performance based on this measure. Netback per
boe does not have a standardized measure prescribed by Canadian
Generally Accepted Accounting Principles and therefore may not be
comparable with the calculations of similar measures for other
companies.


Caribou Resources Corp. ("Caribou") (TSX VENTURE:CBU) presents its annual report for the year ended December 31, 2006:

The year 2006 has been an extremely challenging year for your company from many perpectives. Caribou undertook the single largest capital expenditure program in its history, the results of which were signifcantly less than expected on both a production and reserves basis. The results were compounded by the unprecedented competition and cost escalation experienced for services, equipment and people, the loss of two significant wells in the second quarter of 2006, and the lower gas price environment. Due to capital constraints, the Company has expended limited capital since mid 2006 and did not conduct a winter program. Approximately $1.5 million was expended in the last quarter of 2006 to complete pipelining at Redwater and to conduct several workovers.

On January 30, 2007, the Company obtained creditor protection under the Companies' Creditors Arrangement Act (Canada), ("CCAA") pursuant to an Order from the Alberta Court of Queen's Bench (the "Court"). CCAA protection stays creditors and others from enforcing claims against Caribou and affords Caribou the opportunity to restructure its affairs. The Court initially granted CCAA protection for a period of 30 days, expiring February 28, 2007, which was subsequently extended to May 3, 2007. While under CCAA protection, the Board of Directors maintains its usual role and management of Caribou remains responsible for the day-to-day operations of the Company under the supervision of a Court-appointed monitor who is responsible for reviewing Caribou's ongoing operations, assisting with the development and filing of a Plan of Arrangement ("Plan"), liaising with creditors and other stakeholders and reporting to the Court. The Board of Directors and management are primarily responsible for formulating the Plan for restructuring Caribou's affairs.

This Plan will describe how Caribou proposes to restructure its affairs. The Plan requires approval by the Court and the requisite number and value of the affected stakeholders. Despite the liquidity challenges we face, the Company has assembled a solid foundation for future growth from its asset base.

Caribou Resources Corp. was formed in December 2003 from a private company with approximately 200 boe/d of non-operated 17% WI production, and 50,000 acres of undeveloped land. With the subsequent investment of approximately $116 million of capital ($106 million net of dispositions) from that time (including land, seismic, infrastructure, capital expenditures and acquisitions) to the end of December 2006, the Company now has:

- Approximately 178,000 net acres of high working interest (80% WI) undeveloped land independently evaluated effective January 31, 2007 by Seaton-Jordan & Associates Ltd. at a value of $12.9 million;

- Ownership and access to extensive seismic over its lands (3D - 142 km and 2D - 4,345 km);

- 3,647 mboe of Total Proved plus Probable reserves (64% natural gas and 36% oil) comprised of 1,648 mboe of Total Proved and 1,999 mboe of Total Probable reserves as evaluated by McDaniel & Associates Ltd. at December 31, 2006;

- Estimated sales production for Q1 2007 of between 1,100 and 1,200 boe/d comprised of 60% gas and 40% oil, of which 85% is operated;

- Extensive ownership of facilities and significant infrastructure to facilitate future growth;

- Generated cash flow of over $30 million since inception;

- Expended approximately $40 million of CEE on higher risk exploration projects. While some of these projects were not successful, the exploration risk taken has resulted in several lower risk development and exploitation projects for the future. Caribou has proven up two significant hydrocarbon discoveries for development. The first is a light oil Keg River discovery at Steen River in Northern Alberta, and the second is an Ellerslie Sand light oil and gas development with water flood potential at Redwater in Central Alberta, which are discussed in more detail in the Operations section of the MD&A;

- Accumulated tax pools of approximately $90.6 million, which fully shelter proved plus probable pre-tax net income as evaluated by McDaniel.

In conjunction with the CCAA process, Scotia Waterous Inc. has been engaged by the Company to act as its financial advisor and to assist management in identifying business opportunities.



On behalf of the Board of Directors,

Christina M. Fehr, BA, MSc Ross G. Robertson, P.Eng
Vice Chairman and CEO President and COO
April 4, 2007


Reserves

The Company's reserves were evaluated by McDaniel & Associates Ltd. as at December 31, 2006.

The McDaniel's report is prepared in accordance with National Instrument 51-101 (NI 51-101), the standard of disclosure for oil and gas activities as mandated by the Canadian Securities Administrators.

NI 51-101 replaced the former National Policy 2-B and requires a higher degree of confidence in the assignment of oil and gas reserves. Under NI 51-101 Proved Reserves are defined to have a 90 percent probability that the actual reserves recovered will equal or exceed the assigned estimates, while probable reserves are defined as having a 50 percent probability that the actual reserves recovered will equal or exceed the assigned estimates.

Gross reserves are the Company's working interest share of reserves prior to deducting royalty burdens and do not include royalties received by the Company. Net Reserves are the Company's working interest share of the reserves less all royalties owned by others including Crown, freehold lessors and overriding royalty owners. Net reserves include all royalties received by the Company.

According to this methodology the McDaniel December 31, 2006 reserves for Caribou are as follows:



Summary of gross reserves
(Forecast Prices: December 31, 2006)

Natural
Light/ Natural Gas Oil
Reserves category Medium Oil Gas Liquids Equivalent
----------------------------------------------------------------------------
mbbls mmcf mmbls mboe
Proved
Proved producing 380.8 4,185.9 17.7 1,096.2
Proved non-producing 32.1 1,903.2 3.0 352.3
Proved undeveloped 196.1 20.0 - 199.4
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Total proved 609.0 6,109.1 20.7 1,647.9
Probable 639.8 7,940.3 35.9 1,999.1
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Proved plus probable 1,248.8 14,049.4 56.6 3,647.0
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Net present values of future net revenue, before tax
(Forecast Prices: December 31, 2006)

Reserves category ($000's) 0% 5% 10% 15%
----------------------------------------------------------------------------
Proved
Proved producing 24,803.5 22,780.8 21,093.0 18,462.6
Proved non-producing 3,775.3 3,531.9 3,296.0 2,872.5
Proved undeveloped 2,516.3 2,027.5 1,627.7 1,041.9
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Total proved 31,095.1 28,340.2 26,016.7 22,377.0
Probable 33,039.4 26,448.2 21,613.2 15,189.9
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Proved plus probable 64,134.5 54,788.4 47,629.9 37,566.9
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For comparison, 2005:

Net present values of future net revenue, before tax
(Forecast Prices: December 31, 2005)

Reserves category ($000's) 0% 5% 10% 15%
----------------------------------------------------------------------------
Total proved 72,338 66,011 61,034 56,951
Probable 70,032 58,173 49,558 43,001
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Proved plus probable 142,370 124,184 110,592 99,952
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Summary of gross reserves
(Constant Prices: December 31, 2006)

Natural
Light/ Natural Gas Oil
Reserves category Medium Oil Gas Liquids Equivalent
----------------------------------------------------------------------------
mbbls mmcf mmbls mboe
Proved
Proved producing 381.4 4,118.9 17.5 1,085.4
Proved non-producing 32.1 1,903.2 3.0 352.3
Proved undeveloped 196.1 20.0 - 199.4
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Total proved 609.6 6,042.1 20.5 1,637.1
Probable 640.7 6,378.6 34.0 1,737.8
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Proved plus probable 1,250.3 12,420.7 54.5 3,374.9
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Net present values of future net revenue, before tax
(Constant Prices: December 31, 2006)

Reserves category ($000's) 0% 5% 10% 15%
----------------------------------------------------------------------------
Proved
Proved producing 20,618.6 19,016.2 17,663.4 16,514.6
Proved non-producing 2,659.0 2,570.5 2,454.4 2,328.4
Proved undeveloped 2,864.4 2,301.2 1,850.0 1,489.0
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Total proved 26,142.0 23,887.9 21,967.8 20,332.0
Probable 26,225.6 21,137.9 17,402.0 14,591.7
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Proved plus probable 52,367.6 45,025.8 39,369.8 34,923.7
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For comparison, 2005:

Net present values of future net revenue, before tax
(Constant Prices: December 31, 2005)

Reserves category ($000's) 0% 5% 10% 15%
----------------------------------------------------------------------------
Total proved 90,106 79,973 72,305 66,235
Probable 99,382 80,796 67,524 57,601
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Proved plus probable 189,488 160,769 139,829 123,836
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Summary of forecast pricing assumptions
(McDaniel December 31, 2006)

Edmonton Exchange
Year WTI Light AECO Spot Rate
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($US/bbl) ($Cdn/bbl) ($Cdn/GJ) $US/$Cdn
2007 62.50 70.80 6.85 0.87
2008 61.20 69.30 7.05 0.87
2009 59.80 67.70 7.40 0.87
2010 58.40 66.10 7.50 0.87
2011 56.80 64.20 7.70 0.87
2012 58.00 65.60 7.90 0.87
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Reconciliation of gross reserves by product type

Oil
Total proved Oil Gas NGL Equivalent
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(mbbl) (mmcf) (mbbl) (mboe)
December 31, 2005 514 12,516 43 2,642
Production (166) (1,988) (17) (514)
Acquisitions - - - -
Dispositions (77) (370) - (139)
Discoveries 184 111 - 202
Technical revisions 135 (2,682) - (312)
Minor revisions 19 (1,479) (5) (232)
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December 31, 2006 609 6,108 21 1,648
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Oil
Total proved plus probable Oil Gas NGL Equivalent
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(mbbl) (mmcf) (mbbl) (mboe)
December 31, 2005 1,276 25,602 109 5,652
Production (166) (1,988) (17) (514)
Acquisitions - - - -
Dispositions (126) (646) - (234)
Discoveries 306 509 - 391
Technical revisions (88) (6,618) - (1,191)
Minor revisions 47 (2,810) (35) (456)
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December 31, 2006 1,249 14,049 57 3,647
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Based upon production:
------------------------
Three
months
Year ended ended
December December
Reserves life index 31, 2006 31, 2006
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Production rate (boe/d) 1,456 1,225
Proved reserves (mboe) 1,648 1,648
Proved reserves life ratio (years) 3.1 3.7
Proved plus probable reserves (mboe) 3,647 3,647
Proved plus probable reserves life ratio (years) 6.9 8.2
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Before tax net asset value
(Using McDaniel December 31, 2006 Forecast Prices)

At December 31, 2006 (000's; except per share
amounts) 5% dcf 10% dcf
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Proved plus probable reserves 54,788 47,630
Undeveloped land (estimated at $70 per undeveloped
acre) 13,067 13,067
Seismic (estimated at $500 per km) 2,244 2,244
Net debt (December 31, 2006) (43,064) (43,064)
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Net asset value 27,036 19,877
Shares outstanding 38,530 38,530
Net asset value per share 0.70 0.52
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After tax net asset value is equal to before tax net asset value because the
Company's tax pools fully shelter estimated future revenue.


Management's Discussion and Analysis

Management's Discussion & Analysis ("MD&A") is intended to assist in the understanding of the trends and significant changes in the financial condition and results of operations of Caribou. The following information has been prepared by management and should be read in conjunction with the audited financial statements for the years ended December 31, 2006 and 2005 together with the notes related thereto. All data is presented in Canadian dollars. The calculation of barrels of oil equivalent ("boe") is based on a conversion ratio of six thousand cubic feet of natural gas to one barrel of oil to estimate relative energy content and does not represent a value equivalency at the wellhead. Boes may be misleading, particularly if used in isolation. Additional information relating to Caribou is available at www.sedar.com.

Non-GAAP measurements

The MD&A contains the term funds flow from operations which should not be considered an alternative to, or more meaningful than, cash flow from operating activities or net earnings as determined in accordance with Canadian Generally Accepted Accounting Principles ("GAAP") as an indicator of Caribou's performance. Caribou's determination of funds flow from operations may not be comparable to that reported by other companies. The reconciliation between net earnings and cash flow from operations, (which is also called "funds flow from operations") can be found in the statements of cash flows. The Company also presents funds flow per share, whereby funds flow from operations is divided by the weighted average number of shares outstanding to determine per share amounts. This measure does not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies. In addition, management uses Netback, a non-GAAP term, to analyze operating performance. Netback is calculated as total revenue less royalties, operating costs and transportation calculated on a boe basis.

Forward looking statements

Statements throughout this report that are not historical facts may be considered "forward looking statements." These forward looking statements sometimes include words to the effect that management believes or expects a stated condition or result. All estimates and statements that describe the Company's objectives, goals or future plans are forward looking statements. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to any number of factors, including such variables as new information regarding recoverable reserves, changes in demand for, and commodity prices of crude oil and natural gas, legislative, environmental and other regulatory or political changes, competition in areas where the Company operates and other factors discussed in this report.

The Company

Caribou Resources Corp. ("Caribou" or the "Company") is a full cycle exploration and development company primarily focused on exploring for oil and natural gas in Northern and Central Alberta. The following discussion and analysis is dated April 4, 2007, and is management's assessment of Caribou's three months and year ended December 31, 2006 operating and financial results, compared to the corresponding periods for 2005.

Operations

In 2006, Caribou participated in the drilling of 11 gross (7.8 net) wells, 9 gross (6.3 net) completions, 5 gross (4.35 net) recompletions, and 12 gross (10 net) tie-ins.

This activity was carried out in Q1 and Q2, with the exception of a successful drilling of one well (15% WI) in the Legal area of Central Alberta, and including the successful tie-in of three wells (average 78% WI) in the Redwater area.

These activities resulted in five producing gas wells , five producing oil and gas wells and one producing oil well. In addition, there are eight shut-in potential gas wells and one abandoned well.

Caribou experienced the unexpected loss of two strong wells which had commenced production in excess of 470 boe/d in total on a working interest basis. In one instance, this loss was due to premature depletion. In the second case, it was due to poor mechanical condition of an acquired wellbore. In this case, Caribou believes that there is significant potential to recover reserves from this same gas accumulation, however achieving that will require expending funds for the drilling of a new wellbore.

Although overall production was increased in 2005 and part of 2006, the additional production from the new wells drilled during 2006 has not offset normal production declines or replaced the production lost from the two wells referred to above.

Other operations in 2006 included the acquisition of approximately 22km2 of 3D seismic data in the Redwater (7.5km2), Wizard Lake (6.7km2) and Westlock (7.8km2) areas of Central Alberta. These data sets have been processed and interpreted resulting in a number of exploration prospects in Redwater and Wizard Lake.

Caribou's 2006 production averaged 1,456 boe/d, comprised of 515 bbl/d of oil and liquids and 5,647 mcf/d of gas. This compares to average 2005 production of 1,506 boe/d, comprised of 698 bbl/d of oil and liquids and 4,846 mcf/d of gas. Q4 2006 average production was 1,225 boe/d, comprised of 463 bbl/d of oil and liquids and 4,572 mcf/d of gas.

January 2007 production averaged 1,129 boe/d, comprised of 464 bbl/d of oil and liquids and 3,992 mcf/d of gas.

With the exception of the Legal well and the Redwater tie-ins discussed above, a very limited Central Alberta summer program was conducted as a result of the Company's financial position. In addition, for the same reason, no winter 2006/2007 program was carried out.

Effective September 1, 2006, Caribou sold its non-core Westlock property (approximately 30 boe/d) for $1.2 million. This represented a substantial premium to the value carried for the property by the Company's independent reserve auditors.

Effective December 21, 2006, Caribou sold certain non-operated assets (17% average WI) in Northern Alberta for $5.6 million. The assets included production of approximately 70 boe/d, seismic data and 220 mboe of proved and probable reserves based on the Company's independent reserve report. Proceeds from these divestitures were used to reduce debt.

In 2006, the Company implemented a risk management program consisting of both fixed price contracts and costless collars as a strategy to help mitigate commodity price volatility. In total, 246 boe/d and 2,480 GJ/d are covered for 2007. In 2008, 162 boe/d and 1,758 GJ/d are covered. In 2009, 116 boe/d and 1,192 GJ/d are covered. These contracts are summarized in the Risk Management Program section of this MD&A.

Caribou continues to see strong production performance from the 11-18 Keg River light oil step out well (100% WI) drilled last winter at Steen River. The well was initially brought on production in May 2006 at 150 boe/d. Optimization efforts undertaken in October 2006 increased production to approximately 180 boe/d. Development plans based on Caribou's on-going interpretation of the 3D seismic indicate between four to ten potential drilling locations on this 100% WI structure. Caribou received EUB approval for the development as a result of a successful "holding" type special spacing application granted in Q3 2006. Pipeline infrastructure constructed during the winter of 2006 will allow further development of this project as well as the tie-in of shut-in gas wells in the vicinity. Caribou has determined that summer access and selective drilling could be conducted on this play, contingent on extending the existing all weather road by approximately three miles.

Caribou remains encouraged about the prospect of continued horizontal development of the Basal Quartz sand, and a new play involving horizontal exploitation and possible waterflood of an Upper Ellerslie sand in its Redwater core area. Well control based on past development of the Basal Quartz at Redwater resulted in Caribou estimating an oil in place volume greater than five million barrels of oil in this Upper Ellerslie sand. Core data for the Upper Ellerslie indicated elevated permeabilities, and the presence of four to six meters of correlatable sand is believed to bode well for horizontal exploitation and waterflooding of this undepleted sand. Preliminary independent waterflood feasibility work carried out to date has suggested that the sand may be a good waterflood candidate. Caribou's Redwater oil battery currently handles significant daily water volumes which could be utilized in a water flood project. Implementation of all the abovementioned projects is subject to capital availability.

In addition to the abovementioned development projects in Northern and Central Alberta, Caribou has significant shut-in gas awaiting tie-in in Northern Alberta, and a grass roots inventory of seismically supported exploration locations in both Central and Northern Alberta.



Net loss and funds flow
Three months ended Year ended
December 31 December 31
$ 2006 2005 2006 2005
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Net loss (54,344,799) 1,276,452 (60,266,125) (1,292,942)
Per share - basic (1.41) 0.04 (1.63) (0.04)
Per share - diluted (1.41) 0.04 (1.63) (0.04)
Funds flow from operations (1,172,937) 5,641,931 5,459,785 16,023,906
Per share - basic (0.03) 0.16 0.15 0.53
Per share - diluted (0.03) 0.16 0.15 0.53
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The Company recorded a loss for the year ended December 31, 2006. In this period, Caribou recorded a $2.6 million writedown of goodwill, a $52.4 million ceiling test impairment, and a $9.5 million writedown of future tax assets. In addition, reduced revenue, higher costs in the field, higher depletion, interest, and G&A costs have all contributed to the loss in 2006.

Normal production declines, the unexpected failure of two significant wells, lower gas prices and higher operating costs have also contributed to lower funds flow from operations.



Oil and natural gas revenues
Three months ended Year ended
December 31 December 31
$ 2006 2005 2006 2005
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Oil and liquids 2,380,426 3,784,712 12,263,188 16,069,965
Per barrel 55.83 63.50 65.24 63.04
Natural gas 3,003,802 6,804,650 13,475,010 16,413,542
Per mcf 7.14 11.61 6.53 9.28
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For the year ended December 31, 2006, oil and liquids revenue decreased 24%, primarily reflecting a 26% decline in oil and liquids production volume, when compared to the corresponding year in 2005. Total revenue decreased 21% largely due to a 17% increase in natural gas production offset by a 30% lower price and a 26% decline in oil and liquids production volume. Since the prior year, the product mix, as determined by production, has changed from 46:54 (oil and liquids : natural gas) to 35:65.



Royalties
Three months ended Year ended
December 31 December 31
$ (except %) 2006 2005 2006 2005
----------------------------------------------------------------------------
Royalties, net of ARTC 908,707 1,830,541 2,154,313 5,469,282
Per boe 8.06 11.68 4.05 9.95
% of revenue 16.9% 17.3% 8.4% 16.8%
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For the year ended December 31, 2006, royalties decreased due to the application of increased gas cost allowances associated with strategic infrastructure acquisitions completed in the fall of 2005. Caribou estimates the total value of these recoveries over 10 years to be approximately $8 million at a 10% NPV discount rate.

Royalties as a percentage of revenue are greater in Q4 2006, compared to the whole year, since the Company's annual gas cost allowance was fully achieved over the first nine months of the year.



Operating and transportation
Three months ended Year ended
December 31 December 31
$ 2006 2005 2006 2005
----------------------------------------------------------------------------
Operating 3,625,237 2,014,529 11,090,773 6,672,512
Per boe 32.15 12.86 20.87 12.14
Transportation 162,836 218,433 754,405 727,705
Per boe 1.44 1.39 1.42 1.32
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Total 3,788,073 2,232,962 11,845,178 7,400,217
Per boe 33.59 14.25 22.29 13.46
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Total operating costs for the year ended December 31, 2006 increased 66% on a dollar basis, largely due to increased service rates and field equipment costs, and higher third party gas processing costs, particularly in the Company's northern core area. Transportation costs increased marginally year over year, reflecting increased rates offset by decreased production. In addition, annual operating costs were negatively impacted by approximately $672,000 of prior period costs related to an acquisition completed in 2004, equivalent to $1.26/boe for the year. In Q4, the Company incurred one-time costs of $9.68 per boe related to joint venture audit exceptions and non-recoverable charges.



Netbacks
Three months ended Year ended
December 31 December 31
$/boe 2006 2005 2006 2005
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Revenue 47.76 68.59 48.43 59.09
Royalties, net of ARTC 8.06 11.68 4.05 9.95
Operating and transportation 33.59 14.25 22.29 13.46
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Operating netback 6.11 41.66 22.09 35.68
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General and administrative 6.57 2.99 5.97 4.30
Interest 9.63 2.34 5.78 2.06
Taxes (0.37) 0.31 (0.08) 0.18
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Cash netback (9.72) 36.02 10.42 29.14
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Operating netbacks decreased due to lower revenue per boe caused by a shift in product mix, lower gas prices and increased operating costs, which were somewhat offset by lower royalties.

Cash netbacks were further impacted by higher interest costs associated with increased bank indebtedness, increased short-term bridge facility, and higher interest rates.



General and administrative ("G&A")

Three months ended Year ended
December 31 December 31
$ 2006 2005 2006 2005
----------------------------------------------------------------------------
General and administrative 740,186 468,516 3,173,180 2,362,327
Per boe 6.57 2.99 5.97 4.30
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On a per boe basis, G&A expenses increased 39% compared to the prior year. The Q4 increase in G&A per boe reflects both higher costs and the reduction in production volumes. During the year, Caribou capitalized approximately $1.3 million (2005 -$705,000) of G&A expenses directly related to exploration and development activities. Caribou began capitalizing general and administrative costs in the second quarter of 2005 in order to conform with industry reporting practices.



Stock-based compensation

Three months ended Year ended
December 31 December 31
$ 2006 2005 2006 2005
----------------------------------------------------------------------------
Stock-based compensation 246,498 368,893 689,816 878,328
Per boe 2.19 3.58 1.30 1.60
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For the three and twelve month periods ended December 31, 2006, stock-based compensation decreased, reflecting the expiration of options related to staff reduction.



Interest and other financing charges

Three months ended Year ended
December 31 December 31
$ 2006 2005 2006 2005
----------------------------------------------------------------------------
Interest and other financing
charges 1,085,823 366,864 3,071,366 1,131,608
Per boe 9.63 2.34 5.78 2.06
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The increased loan carrying costs reflect higher levels of principal and subordinated debt carried by the Company, higher interest rates, and one-time financing charges associated with renewing and increasing the bridge facility.

For the first five months of the year, the bridge loan was $13.5 million. In June, the balance increased to $15 million until September, at which time the Company repaid $0.5 million, resulting in a balance of $14.5 million to the end of the year. Interest rates on this bridge loan increased from 8.25% in January to 9% in May, and remained at 9% until the end of the year.

For approximately nine months of the year, the balance owing on the revolving credit facility fluctuated between $15 million and $17 million. In December 2006, the Company made a payment of $5.6 million to reduce the outstanding debt to $10.8 million at December 31, 2006.

In Q4, on a per boe basis, the Company incurred higher interest and financing charges due to approximately $287,000 ($2.55 per boe) in financing fees related to loan applications and due diligence. In addition, the Company had lower production in Q4.



Depletion, depreciation and accretion ("DD&A")

Three months ended Year ended
December 31 December 31
$ 2006 2005 2006 2005
----------------------------------------------------------------------------
Depletion and depreciation 7,753,713 4,417,470 22,561,172 17,405,394
Per boe 68.77 28.20 42.45 31.66
Accretion 103,812 92,902 402,530 287,088
Per boe 0.92 0.59 0.76 0.52
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Year to date, DD&A increased 30% in total, and increased 34% on a per boe basis. DD&A rates during the year were unfavorably impacted by considerable capital expenditures combined with a signficant decrease in reserves. Expiration of undeveloped lands also increased the DD&A rate. At December 31, 2006, Caribou had 240,484 total net acres of which 186,672 was undeveloped.

Using the 5% net present value of proved and probable reserves from the independent December 31, 2006 reserve report, the Company recorded a ceiling test impairment of $52.4 million for the year ended 2006. In addition, the Company has tested the fair value of goodwill and elected to record an impairment loss for the entire balance, being $2.6 million.



Taxes
Three months ended Year ended
December 31 December 31
$ 2006 2005 2006 2005
----------------------------------------------------------------------------
Capital taxes 41,290 48,548 41,290 97,392
Future income tax
(recovery) (9,932,830) (442,680) (12,928,277) (1,253,962)
----------------------------------------------------------------------------


Caribou follows the liability method of accounting for income taxes whereby future income taxes are calculated based on temporary differences arising from the variance between the tax basis of an asset or liability and its property, plant and equipment carrying value.

The Company has recorded a significant future income tax recovery due mainly to the temporary difference associated with the ceiling test impairment. In addition, the Company recorded a $9.5 million future income tax asset impairment.

The Company has estimated that available tax pools to reduce future taxable income are approximately $90.6 million. The Company has a further $5.7 million CEE to incur by December 31, 2007 in order to honor the commitments of the June 2006 flow-through share issue.



Summary of tax pools Year ended December 31
$ 2006
----------------------------------------------------------------------------
COGPE 11,221,044
CDE 28,509,097
CEE 7,104,241
Undepreciated capital cost 40,380,441
Share issue costs 3,356,338
----------------------------------------------------------------------------
Total 90,571,161
----------------------------------------------------------------------------


Liquidity and capital resources

For the year ended December 31, 2006, the Company experienced liquidity difficulties resulting in current liabilities of $47.8 million, offset by $4.8 million of current assets. Reduced cashflow from lower production and lower natural gas prices, combined with insufficient new equity, were factors contributing to this working capital deficiency.

The Company had a revolving credit facility in the amount of $13 million with a Canadian chartered bank, bearing interest at prime plus 0.25% per annum. The facilities were secured by a $35 million demand debenture with a first floating charge (with a right to fix) over all the present and future property acquisitions. At December 31, 2006 the amount drawn against the existing senior revolving credit facility was $10.8 million. A short-term development bridge facility was obtained during the fourth quarter of 2005 from an independent Canadian lending company. The effective interest rate is at bank prime plus three percent and the maturity date is December 31, 2006. At December 31, 2006, the outstanding balance of this bridge facility was $14.5 million. The bridge facility is subordinated to the above revolving credit facility.

In January 2007, the Company closed the $13 million revolving credit facility, and simultaneously increased the short-term development bridge facility to $28 million. The short-term development bridge facility is a demand loan and bears interest at bank prime plus three percent, maturing March 30, 2007, and is secured by a $35 million demand debenture with a first fixed charge over all the present and future property acquisitions. Subsequent to March 30, 2007, the maturity date of the bridge facility was extended pending the outcome of the CCAA process. For the duration of the CCAA process, this facility bears default interest at an additional 5%.

On January 30, 2007, the Company obtained creditor protection under the Companies' Creditors Arrangement Act (Canada), ("CCAA") pursuant to an Order from the Alberta Court of Queen's Bench (the "Court"). CCAA protection stays creditors and others from enforcing claims against Caribou and affords Caribou the opportunity to restructure its affairs. The Court initially granted CCAA protection for a period of 30 days, expiring February 28, 2007, which was subsequently extended to May 3, 2007. While under CCAA protection, the Board of Directors maintains its usual role and management of Caribou remains responsible for the day-to-day operations of the company, under the supervision of a Court-appointed monitor who is responsible for reviewing Caribou's ongoing operations, assisting with the development and filing of a Plan of Arrangement ("Plan"), liaising with creditors and other stakeholders and reporting to the Court. The Board of Directors and management are primarily responsible for formulating the Plan for restructuring Caribou's affairs.

This Plan will describe how Caribou proposes to restructure its affairs. The Plan requires approval by the Court and the requisite number and value of the affected stakeholders.



Capital expenditures

Three months ended Year ended
December 31 December 31
$ 2006 2005 2006 2005
----------------------------------------------------------------------------
Seismic and geological
evaluation 75,047 647,115 854,047 768,977
Land acquisition and
retention 161,380 32,753 4,331,923 1,188,036
Well drilling, completion,
equipping and pipelining 1,419,690 9,483,470 37,200,730 42,139,035
Disposition (5,600,000) - (6,720,000) (2,750,000)
Office equipment - 6,787 18,257 79,474
----------------------------------------------------------------------------
Total (3,943,883) 10,170,125 35,684,957 41,425,522
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Caribou experienced significant operational cost overruns in the 2006 winter program, both on projects it operated as well as those operated by its partners. The level of overruns were in the 40% to 50% range, consistent with that reported by other industry operators, during a period of unprecedented demand for labor and equipment. In programs not operated by Caribou, overruns were not provided by the operator for approval until several months after the expenditures were incurred. In certain cases, final expenditures were 100% higher than the original authority for expenditures provided by the operator.

Risk management program

Caribou has implemented a risk management program consisting of both fixed price contracts as well as costless collars which will help to mitigate commodity price volatility, provide both downside protection and the opportunity to share in the upside if energy prices move upwards. These contracts are as follows:



Product Volume Period Contract Price
----------------------------------------------------------------------------
Natural
gas 1,200 GJ/day Nov 1/06-Oct 31/07 Fixed $7.14/GJ AECO

Natural
gas 1,280 GJ/day Jan 1/07-Dec 31/07 Fixed $7.70/GJ AECO

Natural $7.00/GJ to
gas 1,758 GJ/day Jan 1/08-Dec 31/08 Costless collar $9.60/GJ AECO

Natural $7.00/GJ to
gas 1,192 GJ/day Jan 1/09-Dec 31/09 Costless collar $8.35/GJ AECO

Oil 123 bbls/day Jan 1/07-Dec 31/07 Fixed US$64.50/bbl WTI

Oil 123 bbls/day Jan 1/07-Dec 31/07 Fixed US$64.80/bbl WTI

Oil 81 bbls/day Jan 1/08-Dec 31/08 Costless collar US$65.00/bbl to
US$70.50/bbl WTI

Oil 81 bbls/day Jan 1/08-Dec 31/08 Costless collar US$65.00/bbl to
US$71.46/bbl WTI

Oil 58 bbls/day Jan 1/09-Dec 31/09 Costless collar US$65.00/bbl to
US$70.35/bbl WTI

Oil 58 bbls/day Jan 1/09-Dec 31/09 Costless collar US$65.00/bbl to
US$71.46/bbl WTI
----------------------------------------------------------------------------


Related party transactions

The following transactions with related parties were done on a fair value basis defined as the amounts that would be agreed upon in an arm's length transaction between knowledgeable, willing parties, who are under no compulsion to act.

During the year ended December 31, 2006, the Company's legal counsel invoiced $244,038 (2005 - $398,311) for legal work charged. The Company's former Corporate Secretary is a partner in the legal firm. Included in accounts payable at December 31, 2006 is $82,431 (2005 - $65,227) due to the Company's legal counsel.

Off-Balance Sheet obligations

The Company has no off-balance sheet obligations.

Business risks

The oil and natural gas industry inherently has many risks associated with it. The risks can be summarized in terms of economic, financial, cost of capital, environmental and human resource risk. Economic risk is the risk of finding and producing reserves at a cost which produces an economic return. Financial risk consists of marketing production at a reasonable price given market conditions. Cost of capital is the risk associated with Caribou's ability to obtain capital to fund its activities at a reasonable cost.

Environmental risk is the risk of carrying out operations with potential for adverse impact upon the environment. Finally, human resource risk is the risk of having access to expertise which will allow Caribou to grow and prosper.

Accounting policies

Caribou's accounting policies are stated in the notes to the financial statements. Caribou follows policies that are in accordance with Canadian generally accepted accounting principles.

In 2005, the Canadian Institute of Chartered Accountants issued the following new Handbook Sections that the Company plans to adopt effective January 1, 2007:

1) Section 1530, Comprehensive Income

2) Section 3251, Equity

3) Section 3855, Financial Instruments - Recognition and Measurement

4) Section 3865, Hedges

These standards will require all financial instruments (except financial instruments qualifying for hedge accounting) be recorded on the balance sheet at fair value, with changes to fair value charged against net income.

The Company does not expect these sections to have a material impact on its financial statements.

Critical accounting estimates

The preparation of the financial statements under Canadian GAAP requires management personnel to make estimates and assumptions for many financial statement items based on their estimate and judgment. The amounts recorded for depletion, depreciation of property and equipment, stock-based compensation, and the provision for asset retirement obligations are based on estimates. The ceiling test is based on estimates of oil and natural gas reserves, production rates, oil and gas prices, future costs and other relevant assumptions. The calculation of future income tax is based on assumptions, which are subject to uncertainty as to timing and which tax rates temporary differences are expected to reverse. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant.

The Company follows the full cost method of accounting for oil and natural gas properties as prescribed by the Canadian Institute of Chartered Accountants (CICA) in Accounting Guideline 16. Under this method all costs associated with the acquisition of, exploration for and the development of oil and natural gas reserves are capitalized. These capitalized costs are depleted or depreciated on the unit-of-production method based on the estimated proved reserves. A revision to the estimate for proved reserves can have a significant impact on earnings as proved reserves are a key component in the calculation of depreciation, depletion and amortization.

Costs related to unproved properties are excluded from capitalized costs being amortized through depletion and depreciation expense. These costs are excluded from the depletion and depreciation calculation until proved reserves are found or until it is determined that the costs are impaired. Including these costs in the calculation could have a significant impact on depletion and depreciation expense for the year. Proceeds on disposal of properties are generally deducted from capitalized costs without recognition of gain or loss except where such disposal constitutes a significant portion of the Company's reserves.

Under the full cost accounting method, a ceiling test is performed at least annually to ensure that the net capitalized costs do not exceed the undiscounted future net revenues from proved plus probable reserves, plus the cost of unproved properties. Any excess capitalized costs will be written off as an expense and charged to earnings; however, future depletion and depreciation expense would be reduced.

The Company retains McDaniel & Associates Consultants Ltd., an independent petroleum engineering firm, to evaluate the Company's proved plus probable oil and gas reserves. The estimation of reserves is subjective. Forecasts are based on engineering data, future prices, expected future rates of production and the timing of capital expenditures, all of which are subject to uncertainties and interpretations. Reserve estimates will be revised upward or downward based on the results of future drilling, testing and production levels.

The Company recognizes a liability for the future retirement obligations associated with its oil and natural gas properties. The retirement obligation is initially measured at fair value, which is the discounted future value of the liability. This fair value is capitalized as part of the cost of the related asset and amortized to expense over its useful life. The liability accretes until the date of expected settlement of the retirement obligation. Factors that can affect this estimate include the number of wells drilled, well depths and area-specific environmental legislation.

Changes in accounting policies and practices

Details outlining Caribou's accounting policies are contained in the notes to the financial statements. There were no changes in the Company's accounting policies and practices in 2006, compared to the previous year.

Disclosure controls and procedures

The Vice Chairman & CEO and Vice President & CFO evaluated the effectiveness of the Company's disclosure controls and procedures as at the financial year ended December 31, 2006. Based on that evaluation, the Vice Chairman & CEO and Vice President & CFO concluded that the design and operation of these disclosure controls and procedures were effective as at December 31, 2006 to provide reasonable assurance that material information relating to the Company would be made known to them by others within the entity.

Outstanding share data

The Company's authorized share capital consists of an unlimited number of common shares without nominal or par value and an unlimited number of preferred shares issued in series. There were 38,529,540 common shares outstanding at December 31, 2006, and the same amount of common shares outstanding as at the date of this report. As at December 31, 2006 there were 109,973 share purchase warrants outstanding.

The Company's stock option plan provides for granting of options to directors, employees and consultants. At December 31, 2006 a total of 2,742,500 options were outstanding.



Selected annual data

12 months 12 months 12 months
ended ended ended
December 31, December 31, December 31,
($000's, except per share amounts) 2006 2005 2004
----------------------------------------------------------------------------
Oil and natural gas revenues 25,738 32,484 9,569
Net gain (loss) (60,266) (1,293) (2,253)
Per share - basic & diluted (1.63) (0.04) (0.19)
Total assets 69,332 119,683 85,879
Total long-term liabilities 4,902 14,042 14,206
----------------------------------------------------------------------------


Summary of quarterly operating and financial results
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2006
-----------------------------------------------
Full Year Fourth Third Second First
---------------------------------------------------------------------------
Operating
Natural gas (mcf/day) 5,647 4,572 5,009 7,323 5,704
Price ($/mcf) 6.53 7.14 5.90 5.93 7.40
Oil and NGL's (bbls/day) 515 463 582 514 499
Price ($/bbl) 65.24 55.83 70.83 69.15 63.45
Barrels of oil equivalent
(per day) 1,456 1,225 1,417 1,735 1,450

Financial ($000's, except per
share amounts)
---------------------------------------------------------------------------
Oil and natural gas revenues 25,738 5,384 6,512 7,190 6,652
Royalties, net of ARTC (2,155) (909) (484) (322) (440)
Interest and other revenue 7 7 - - -
---------------------------------------------------------------------------
Net revenues 23,590 4,482 6,028 6,868 6,212
---------------------------------------------------------------------------
Operating expenses 11,091 3,625 3,214 2,695 1,557
Transportation 754 163 194 215 182
General and administrative 3,173 740 600 1,185 648
Stock-based compensation 689 246 27 186 230
Depletion and depreciation 22,561 7,754 5,307 5,394 4,106
Interest 3,072 1,086 775 771 440
Writedown of goodwill 2,607 2,607 - - -
Writedown of petroleum and
natural gas properties 52,393 52,393 - - -
Accretion 403 104 102 100 97
---------------------------------------------------------------------------
Total expenses 96,743 68,718 10,219 10,546 7,260
---------------------------------------------------------------------------
Income (loss) before income
taxes (73,153) (64,236) (4,191) (3,678) (1,048)
Capital taxes (40) (41) - 19 (18)
Future income taxes 12,928 9,933 291 2,413 291
---------------------------------------------------------------------------
Net income (loss) for the
period (60,265) (54,344) (3,900) (1,246) (775)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Income (loss) per share
(basic and diluted) (1.63) (1.41) (0.10) (0.03) (0.02)
---------------------------------------------------------------------------
Funds flow ($000's) 5,459 (1,173) 1,245 2,020 3,367
---------------------------------------------------------------------------
Funds flow per share (basic) 0.15 (0.03) 0.03 0.06 0.10
---------------------------------------------------------------------------
Netbacks ($/boe)
---------------------------------------------------------------------------
Oil and natural gas revenues 48.43 47.76 49.95 45.54 50.97
Royalties, net of ARTC 4.05 8.06 3.71 2.04 8.29
Operating expenses 22.29 33.59 26.14 18.44 8.40
---------------------------------------------------------------------------
Operating netback 22.09 6.11 20.10 25.06 34.28
General and administrative 5.97 6.57 4.60 7.50 4.97
Interest 5.78 9.63 5.94 4.88 3.37
Capital taxes (0.08) (0.37) - (0.12) 0.14
---------------------------------------------------------------------------
Cash netback 10.42 (9.72) 9.56 12.80 25.80
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total assets ($000's) 69,332 69,332 139,590 144,433 138,511
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Summary of quarterly operating and financial results
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2005
-----------------------------------------------
Full Year Fourth Third Second First
---------------------------------------------------------------------------
Operating
Natural gas (mcf/day) 4,846 6,391 4,672 4,814 3,569
Price ($/mcf) 9.28 11.36 9.47 7.18 7.23
Oil and NGL's (bbls/day) 698 638 700 671 778
Price ($/bbl) 63.04 63.44 70.37 61.51 57.90
Barrels of oil equivalent
(per day) 1,506 1,703 1,479 1,473 1,373

Financial ($000's, except
per share amounts)
---------------------------------------------------------------------------
Oil and natural gas revenues 32,484 10,590 8,618 6,900 6,376
Royalties, net of ARTC (5,470) (1,831) (1,554) (941) (1,144)
Interest and other revenue - - - - -
---------------------------------------------------------------------------
Net revenues 27,014 8,759 7,064 5,959 5,232
---------------------------------------------------------------------------
Operating expenses 5,712 1,809 1,201 1,386 1,316
Transportation 1,688 424 353 459 452
General and administrative 2,362 469 619 593 681
Stock-based compensation 878 298 302 141 137
Depletion and depreciation 17,405 4,417 4,424 4,511 4,053
Interest 1,132 367 538 123 104
Writedown of goodwill - - - - -
Writedown of petroleum and
natural gas properties - - - - -
Accretion 287 93 67 65 62
---------------------------------------------------------------------------
Total expenses 29,464 7,877 7,504 7,278 6,805
---------------------------------------------------------------------------
Income (loss) before income
taxes (2,450) 882 (440) (1,319) (1,573)
Capital taxes (97) (49) (22) (14) (12)
Future income taxes 1,254 443 100 362 349
---------------------------------------------------------------------------
Net income (loss) for the
period (1,293) 1,276 (362) (971) (1,236)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Income (loss) per share
(basic and diluted) (0.04) 0.04 (0.01) (0.03) (0.04)
---------------------------------------------------------------------------
Funds flow ($000's) 16,024 5,642 4,329 3,386 2,667
---------------------------------------------------------------------------
Funds flow per share (basic) 0.53 0.16 0.15 0.12 0.09
---------------------------------------------------------------------------
Netbacks ($/boe)
---------------------------------------------------------------------------
Oil and natural gas revenues 59.09 67.59 63.34 51.48 51.62
Royalties, net of ARTC 9.95 15.04 11.42 7.02 9.26
Operating expenses 13.46 10.89 11.42 13.77 14.31
---------------------------------------------------------------------------
Operating netback 35.68 41.66 40.49 30.69 28.05
General and administrative 4.30 2.99 4.55 4.42 5.52
Interest 2.06 2.34 3.96 0.92 0.83
Capital taxes 0.18 0.31 0.16 0.10 0.11
---------------------------------------------------------------------------
Cash netback 29.15 36.02 31.82 25.25 21.59
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total assets ($000's) 119,683 119,683 110,341 94,180 98,003
---------------------------------------------------------------------------
---------------------------------------------------------------------------



Caribou Resources Corp.

Balance Sheets

As at December 31, 2006 and December 31, 2005


2006 2005
----------------------------------------------------------------------------
ASSETS
Current assets
Accounts receivable $ 4,613,091 $ 12,499,328
Prepaid expenses 182,907 810,548
----------------------------------------------------------------------------
4,795,998 13,309,876
Property, plant and equipment (note 3) 64,536,166 103,765,670
Goodwill - 2,607,407
----------------------------------------------------------------------------
$ 69,332,164 $ 119,682,953
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness (note 4) $ 10,828,923 $ 10,545,177
Short-term bridge facility (note 4) 14,500,000 13,500,000
Accounts payable and accrued liabilities 22,530,781 11,422,696
----------------------------------------------------------------------------
47,859,704 35,467,873

Asset retirement obligations (note 5) 4,902,087 4,459,585
Future income taxes (note 6) - 9,581,922
----------------------------------------------------------------------------
52,761,791 49,509,380
----------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Share capital (note 7) 77,187,692 71,214,584
Warrants (note 7c) 208,767 1,111,527
Contributed surplus (note 8) 3,010,905 1,418,328
Deficit (63,836,991) (3,570,866)
----------------------------------------------------------------------------
16,570,373 70,173,573
----------------------------------------------------------------------------
$ 69,332,164 $ 119,682,953
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Going concern (note 1). Commitments (note 11).
See accompanying notes to Financial Statements


Approved by the Board of Directors:


(signed) (signed)
Christina M. Fehr Stephen J.A. Fagan
Director Director



Caribou Resources Corp.

Statements of Operations and Deficit

For the years ended December 31, 2006 and 2005


2006 2005
----------------------------------------------------------------------------
REVENUES
Oil and natural gas $ 25,738,198 $ 32,483,507
Interest and other revenue 6,914 1,225
Less: Royalties, net of ARTC (2,154,313) (5,469,282)
----------------------------------------------------------------------------
23,590,799 27,015,450
----------------------------------------------------------------------------
EXPENSES
Operating 11,090,773 6,672,512
Transportation 754,405 727,705
General and administrative 3,173,180 2,362,327
Stock-based compensation (note 7f) 689,816 878,328
Interest and other financing charges 3,071,366 1,131,608
Accretion (note 5) 402,530 287,088
Depletion and depreciation 22,561,172 17,405,394
Writedown of goodwill 2,607,407 -
Writedown of petroleum and natural gas
properties 52,393,262 -
----------------------------------------------------------------------------
96,743,911 29,464,962
----------------------------------------------------------------------------
(73,153,112) (2,449,512)
----------------------------------------------------------------------------
Capital taxes (41,290) (97,392)
Future income tax recovery (note 6) 12,928,277 1,253,962
----------------------------------------------------------------------------
12,886,987 1,156,570
----------------------------------------------------------------------------

NET LOSS FOR THE YEAR (60,266,125) (1,292,942)
Deficit, beginning of year (3,570,866) (2,277,924)
----------------------------------------------------------------------------
Deficit, end of year $ (63,836,991) $ (3,570,866)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net loss per share (note 7e)
Basic $ (1.63) ($0.04)
Diluted $ (1.63) ($0.04)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average common shares outstanding
Basic 36,926,639 30,254,873
Diluted 36,926,639 30,343,760
Outstanding shares 38,529,540 34,849,924
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Going Concern (note 1).
See accompanying notes to Financial Statements



Caribou Resources Corp.

Statements of Cash Flows

For the years ended December 31, 2006 and 2005


2006 2005
----------------------------------------------------------------------------
Cash provided by (used in):

OPERATING
Net loss for the year $ (60,266,125) $ (1,292,942)
Add (deduct) items not affecting cash:
Depletion and depreciation 22,561,172 17,405,394
Stock-based compensation 689,816 878,328
Accretion 402,530 287,088
Future income taxes (12,928,277) (1,253,962)
Writedown of goodwill 2,607,407 -
Writedown of petroleum and natural gas
properties 52,393,262 -
----------------------------------------------------------------------------
Funds flow from operations 5,459,785 16,023,906
Change in non-cash working capital 19,661,135 (5,525,970)
----------------------------------------------------------------------------
25,120,920 10,497,936
----------------------------------------------------------------------------

FINANCING
Bank debt 283,746 1,339,055
Proceeds from bridge financing 1,500,000 23,500,000
Repayment of bridge financing (500,000) (10,000,000)
Issue of common shares, net of costs 9,319,463 17,298,664
----------------------------------------------------------------------------
10,603,209 32,137,719
----------------------------------------------------------------------------

INVESTING
Property, plant and equipment, net of
dispositions (35,684,957) (41,425,522)
Change in non-cash working capital (39,172) (1,210,133)
----------------------------------------------------------------------------
(35,724,129) (42,635,655)
----------------------------------------------------------------------------
Decrease in cash - -
Cash, beginning of year - -
----------------------------------------------------------------------------
Cash, end of year $ - $ -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplementary disclosure
Cash interest paid $ 2,050,237 $ 788,210
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash is defined as cash and cash equivalents

See accompanying notes to Financial Statements


Caribou Resources Corp.

Notes to the Financial Statements

For the twelve months ended December 31, 2006 and 2005

Note 1: Going concern

These financial statements have been prepared using Canadian generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and settlement of liabilities in the normal course of business as they come due.

As at December 31, 2006, the Company had a working capital deficiency, excluding bank indebtedness and short-term bridge facility (see Note 4), of $17,734,783 and a deficit of $63,836,991. The working capital deficiency primarily consists of accounts payable and accrued liabilities incurred during the Company's capital expenditure programs.

On January 30, 2007, the Company obtained creditor protection under the Companies' Creditors Arrangement Act (Canada), ("CCAA") pursuant to an Order from the Alberta Court of Queen's Bench (the "Court"). CCAA protection stays creditors and others from enforcing claims against Caribou and affords Caribou the opportunity to restructure its financial affairs. The Court initially granted CCAA protection for a period of 30 days, expiring February 28, 2007, which was subsequently extended to May 3, 2007. While under CCAA protection, the Board of Directors maintains its usual role and management of Caribou remains responsible for the day-to-day operations of the Company, under the supervision of a Court-appointed monitor who is responsible for reviewing Caribou's ongoing operations, assisting with the development and filing of a Plan of Arrangement ("Plan"), liaising with creditors and other stakeholders and reporting to the Court. The Board of Directors and management are primarily responsible for formulating the Plan for restructuring Caribou's affairs.

This Plan will describe how Caribou proposes to restructure its affairs. The Plan requires approval by the Court and the requisite number and value of the affected stakeholders.

Although CCAA protection enables Caribou to continue with its day-to-day operations until its CCAA status changes, the implications for the Caribou shareholders are less clear. At the end of the restructuring process, realizable value left for shareholders will depend upon the terms of the Plan approved by the affected stakeholders. If the Plan is not approved, Caribou will likely be placed into receivership or bankruptcy.

The actual outcome of future events may differ from these plans. In particular, there can be no assurance that the Company will be able to successfully access debt financing objectives. These financial statements have been prepared on the basis that the Company will continue to realize its assets and discharge its obligations in the ordinary course of business and do not reflect adjustments that would be necessary if the going concern assumption was not valid. Such adjustments, if necessary, may be material.

Note 2: Significant accounting policies

The financial statements have been prepared in accordance with accounting principles generally accepted in Canada. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actual results may differ from these estimates.



(a) Joint operations
A portion of the Company's oil and gas activities are conducted jointly
with others and accordingly, these financial statements reflect only
the Company's proportionate interest in such activities.

(b) Measurement uncertainty
The preparation of the financial statements under Canadian GAAP
requires management to make estimates and assumptions for many
financial statement items based on their estimates and judgment. The
amounts recorded for depletion and depreciation of property and
equipment, stock-based compensation, and the provision for asset
retirement obligations are based on estimates. The ceiling test is
based on estimates of oil and natural gas reserves, production rates,
oil and gas prices, future costs and other relevant assumptions. The
calculation of future income tax is based on assumptions, which are
subject to uncertainty as to timing and which tax rates temporary
differences are expected to reverse. By their nature, these estimates
are subject to measurement uncertainty and the effect on the financial
statements of changes in such estimates in future periods could be
significant.

(c) Property, plant and equipment ("PP&E")
The Company follows the full-cost method of accounting for exploration
and development expenditures. All costs of exploring, developing and
acquiring petroleum and natural gas properties, including asset
retirement costs, and administration costs directly related to
exploration and development, are capitalized and accumulated in one
cost centre as all operations are in Canada. Maintenance and repairs
are charged against income, and renewals and enhancements which extend
the economic life of the PP&E are capitalized. Gains and losses are not
recognized upon disposition of petroleum and natural gas properties
unless such a disposition would alter the rate of depletion by 20
percent or more.

(d) Depletion and depreciation
Depletion of petroleum and natural gas properties and depreciation of
production equipment are calculated on the unit-of-production basis
which is based on:
(i) total estimated proved reserves calculated in accordance with
National Instrument 51-101;
(ii) total capitalized costs plus estimated future development costs
of proved undeveloped reserves including future estimated asset
retirement costs, less unimpaired unproved property costs and the
estimated net realizable value of production equipment and
facilities after the proved reserves are fully produced; and
(iii) relative volumes of petroleum and natural gas reserves and
production before royalties, converted at the energy equivalent
conversion ratio of six thousand cubic feet of natural gas to one
barrel of oil.

(e) Impairment
The Company places a limit on the aggregate carrying value of PP&E.
Impairment is recognized if the carrying amount of the PP&E exceeds the
sum of the undiscounted cash flows expected to result from the
Company's proved reserves. Cash flows are calculated based on
management's best estimates of future prices, adjusted for the
Company's contract prices and quality differentials. Upon recognition
of impairment, the Company would then measure the amount of impairment
by comparing the carrying amounts of the PP&E to the fair value of PP&E
which is the estimated net present value of future cash flows from
proved plus probable reserves. The risk free interest rate is used to
arrive at the net present value of future cash flows. Any excess
carrying value above the net present value of the Company's future cash
flows would be recorded as a permanent impairment.

(f) Asset retirement obligations
The Company recognizes the fair value of its asset retirement
obligations ("ARO") in the period in which they are incurred and when a
reasonable estimate of fair value can be made. The fair value of the
estimated ARO is recorded as a long-term liability, with a
corresponding increase in the carrying amount of the related asset. The
capitalized amount is depleted on a unit-of-production basis over the
life of the reserves. The liability amount is increased each reporting
period due to the passage of time and the amount of accretion is
charged to earnings in the period. Revisions to the estimated timing of
cash flows or to the original estimated undiscounted cost would also
result in an increase or decrease to the ARO. Actual costs incurred
upon settlement of the ARO are charged against the ARO to the extent of
the liability recorded. Any difference between the actual costs
incurred upon settlement of the ARO and the recorded liability is
recognized as a gain or loss in the Company's earnings in the period in
which the settlement occurs.

(g) Revenue recognition
Revenues from sales of petroleum and natural gas are recorded when
title passes from the Company to external parties.

(h) Income taxes
The Company follows the liability method of accounting for income taxes.
Under this method, the Company records future income taxes for the
effect of any differences between the accounting and the income tax
basis of an asset or liability using income tax rates substantively
enacted at the Balance Sheet date. The effect of a change in income tax
rates on the future income tax assets and liabilities is recognized in
income in the period of the change.

(i) Stock-based compensation plan
The Company's Option Plan provides for granting of stock options to
directors, officers, employees and consultants. The Company uses the
fair value method for valuing stock option grants. Compensation costs
attributed to share options granted are measured at fair value at the
grant date and expensed over the expected exercise time-frame with a
corresponding increase to contributed surplus. Upon exercise of the
stock options, consideration paid by the option holder together with
the amount previously recognized in contributed surplus is recorded as
an increase to share capital.

(j) Per share information
Per share information is calculated on the basis of weighted average
number of common shares outstanding during the fiscal year. Diluted per
share information reflects the potential dilution that could occur if
securities or other contracts to issue common shares were exercised or
converted to common shares. Diluted per share information is calculated
using the treasury stock method that assumes any proceeds received by
the Company upon the exercise of in-the-money stock options would be
used to buy back common shares at the average market price for the
period.

(k) Flow-through shares
The resource expenditure deductions for income tax purposes related to
exploratory activities funded by flow-through share arrangements are
renounced to investors in accordance with tax legislation. A future tax
liability is recognized upon the renunciation of the tax pools and
share capital is reduced by the estimated costs of the renounced tax
deductions.

Note 3: Property, plant and equipment


December 31, December 31,
$ 2006 2005
----------------------------------------------------------------------------
Oil and natural gas properties, plant
and equipment 161,547,692 125,841,020
Office equipment and computers 134,651 116,394
----------------------------------------------------------------------------
161,682,343 125,957,414
Less accumulated depletion and depreciation (97,146,177) (22,191,744)
----------------------------------------------------------------------------
64,536,166 103,765,670
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Unproved oil and gas properties amounting to $9.7 million (2005 - $25.6 million) were excluded from the depletion and depreciation calculation. Future development costs on proved undeveloped reserves of $6.1 million (2005 - $9.2 million) are included in the depletion calculation.

Using the 5% net present value of proved and probable reserves from the independent December 31, 2006 reserve report, the Company recorded a ceiling test impairment of $52.4 million for the year ended 2006.

During the year, Caribou capitalized approximately $1.3 million (2005 - $705,000) of general and administrative expenses directly related to exploration and development activities.



Oil prices per Gas prices per
Expected future commodity prices ($Cdn) barrel GJ
----------------------------------------------------------------------------
2007 62.50 6.85
2008 61.20 7.05
2009 59.80 7.40
2010 58.40 7.50
2011 56.80 7.70
Thereafter 58.00 - 69.30 7.90 - 9.50
----------------------------------------------------------------------------


Note 4: Loans


December 31, December 31,
$ 2006 2005
----------------------------------------------------------------------------
Bank indebtedness 10,828,923 10,545,177
Short-term bridge facility 14,500,000 13,500,000
----------------------------------------------------------------------------


The Company has a revolving credit facility in the amount of $13 million with a Canadian chartered bank, bearing interest at prime plus 0.25% per annum. The facility is secured by a $35 million demand debenture with a first floating charge (with a right to fix) over all the present and future property acquisitions.

The short-term development bridge facility was obtained during the fourth quarter of 2005 from an independent Canadian lending company. The effective interest rate is at bank prime plus three percent with a maturity date being December 31, 2006. The bridge facility is subordinated to the above revolving credit facility. As at December 31, 2006, the Company was in breach of the bridge facility covenants.

In January 2007, the Company closed the $13 million revolving credit facility, and simultaneously increased the short-term development bridge facility to $28 million. The short-term development bridge facility is a demand loan and bears interest at bank prime plus three percent, maturing March 30, 2007, and is secured by a $35 million demand debenture with a first fixed charge over all the present and future property acquisitions. Subsequent to March 30, 2007, the maturity date of the bridge facility was extended pending the outcome of the CCAA process. For the duration of the CCAA process, this facility bears default interest at an additional 5%.



Note 5: Asset retirement obligations


December 31, December 31,
$ 2006 2005
----------------------------------------------------------------------------
Balance, beginning of year 4,459,585 2,918,925
Liabilities incurred 39,972 1,253,572
Accretion 402,530 287,088
----------------------------------------------------------------------------
Balance, end of year 4,902,087 4,459,585
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The Company's asset retirement obligations result from net ownerships in petroleum and natural gas assets including well sites, gathering systems and processing facilities. The Company estimates the total undiscounted amount of cash flows required to settle its asset retirement obligations is $7.3 million, (2005 - $7.1 million) which will be incurred between 2007 and 2019. The majority of the costs will be incurred between 2010 and 2016. An inflation rate of 2% was used to inflate the costs, and a credit-adjusted risk-free rate of 8.5% was used to calculate the fair value of the asset retirement obligations.



Note 6: Taxes

The difference between the expected income tax provision based on the
combined federal and provincial statutory tax rate of 34.49%
(2005 - 37.62%) and the amount actually provided for is as follows:


Year ended December 31,
$ 2006 2005
----------------------------------------------------------------------------
Tax expense (recovery) at 34.49% of net loss
before taxes (25,230,508) (921,506)
Non-deductible crown payments 298,856 1,337,884
Alberta Royalty Tax Credit (60,357) (122,265)
Stock-based compensation 237,918 330,427
Resource allowance (293,908) (1,337,899)
Non-deductible expenditures 29,569 5,220
Writedown of goodwill 798,751 -
Writedown of future tax asset 9,477,243 -
Other 165,301 -
Rate reduction 1,648,858 (545,823)
----------------------------------------------------------------------------
Future income tax (recovery) (12,928,277) (1,253,962)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Future income tax liability is comprised of the following temporary
differences:


December 31, December 31,
$ 2006 2005
----------------------------------------------------------------------------
Net book value of property, plant and
equipment in excess of tax basis (6,947,363) 12,262,938
Asset retirement obligations (1,501,702) (1,499,312)
Writedown of future tax asset 9,477,243 -
Share issue costs (1,028,178) (1,181,704)
----------------------------------------------------------------------------
- 9,581,922
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Note 7: Share capital

(a) Authorized

Unlimited number of common shares without nominal or par value and an
unlimited number of preferred shares issued in series.

(b) Common shares issued and outstanding


Number
of shares Amount
----------------------------------------------------------------------------
Balance, at December 31, 2003 67,419,841 5,689,358
Consolidate shares on a 1 for 25 basis (70,723,053) -
Write off of deficit against share capital - (2,276,240)
Shares issued to repay notes 584,460 1,553,604
Escrow shares cancelled (1,577) -
Share for share exchanges on acquisitions 14,944,302 30,579,678
Shares issued for cash 15,904,379 24,842,815
2004 share issue expenses - (1,666,399)
Tax effect of share issue expenses - 599,904
Tax effect of flowthrough shares - (5,359,183)
Contributed surplus transfer for options - 163,606
----------------------------------------------------------------------------
Balance, at December 31, 2004 28,128,352 54,127,143
Shares issued for cash upon exercise of
warrants 42,813 251,982
Issued pursuant to private placement of
flow-through shares 3,486,559 10,634,005
Issued pursuant to private placement of units 3,009,200 6,469,778
Exercise of stock options 183,000 441,141
Share issue expenses, net of tax - (709,465)
----------------------------------------------------------------------------
Balance, December 31, 2005 34,849,924 $ 71,214,584
Issued pursuant to private placement of
flow-through shares 3,679,616 10,000,002
Tax effect on renunciation of flow-through
shares (September 2005 issue) - (3,575,152)
Share issue expenses, net of tax - (451,742)
----------------------------------------------------------------------------
Balance, December 31, 2006 38,529,540 $ 77,187,692
----------------------------------------------------------------------------
----------------------------------------------------------------------------


On January 22, 2004, the Company applied deficit against share capital which was approved by the shareholders at the annual general and special meeting of the shareholders.

(c) Warrants

On February 28, 2003, the Company issued 152,786 share purchase warrants. Each warrant is exercisable into one common share at an exercise price of $1.75 per share until February 28, 2005, $2.00 per share until February 28, 2006, $2.50 per share until February 28, 2007, and $3.00 per share until February 28, 2008. As at December 31, 2006, 38,813 of these warrants had been exercised at $1.75 per share, and another 4,000 warrants at $2.00 per share, leaving a balance of 109,973 warrants outstanding.

On September 8, 2005, the Company issued 3,009,200 units in connection with a private placement. Each unit was issued for $2.45 and consisted of one common share and one-half of one common share purchase warrant with each full warrant entitling the holder thereof to acquire an additional common share at an exercise price of $3.00 at any time prior to September 8, 2006.



Balance, Exercise Fair Expired Balance,
December price value (see Expiry December
31, 2005 ($) ($) Note 8) Issued Exercised Date 31, 2006
----------------------------------------------------------------------------
February
109,973 2.50 208,767 - - - 28, 2008 109,973
September
1,504,600 3.00 - 1,504,600 - - 8, 2006 -
----------------------------------------------------------------------------
1,614,573 208,767 1,504,600 - - 109,973
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The fair value of the above warrants was calculated using the Black-Scholes option pricing model with the following assumptions: dividend yield - nil; expected volatility - 77%; risk-free interest rate - 3.5%; weighted average expected life - 1.26 years; and weighted average estimated value of underlying shares - $2.47. Each warrant entitles the holder to one common share of the Company.

(d) Flow-through shares

Under the terms of the Company's flow-through share agreements, the Company has committed to incur approximately $6.25 million (2005 - $11.2 million) of qualifying oil and natural gas Canadian Exploration Expenses ("CEE") between June 8, 2006 and December 31, 2007. Of this amount approximately $5.7 million is still to be incurred. Caribou will renounce the income tax benefits of these expenditures to the flow-through shareholders.



(e) Per share amounts

The following table summarizes the basis for the determination of basic and
diluted per share amounts:

Year ended December 31,
2006 2005
----------------------------------------------------------------------------
Weighted average common shares outstanding
- basic 36,926,639 30,254,873
Weighted average common shares outstanding
- diluted 36,926,639 30,343,760
----------------------------------------------------------------------------

Net loss per share:
Net loss for the period ($) (60,266,125) (1,292,942)
Basic ($/share) (1.63) (0.04)
Diluted ($/share) (1.63) (0.04)


(f) Stock-based compensation

The Company has a stock option plan that is described below. Compensation costs attributable to share options granted to employees or directors are measured at fair value at the grant date and expensed over the expected vesting time frame with a corresponding increase to contributed surplus. The fair value of each option granted is estimated on the date of grant using the Black-Scholes options pricing model with the following weighted average assumptions:



Year ended December 31,
2006 2005
----------------------------------------------------------------------------
Fair value of options granted ($/option) 1.02 0.76
Expected life of options (years) 3.5 3.5
Expected volatility (%) 85 75
Risk free rate of return (%) 3.5 3.5
Expected dividend yield (%) Nil Nil
----------------------------------------------------------------------------


(g) Stock options

The Company's stock option plan provides for granting of options to directors, employees and consultants to a maximum of ten percent of the total issued and outstanding common shares of the Company. These options have a term of five years to expiry and vest 30% as of the date of grant, 20% on each of the first two anniversary dates and 15% on the third and fourth anniversary dates. The Company has reserved common shares for issuance under the stock option plan in the amount of the stock options outstanding from time to time. The following tables summarize the information about options to purchase common shares as at December 31, 2006 and 2005.



2006 2005
------------------------------------------------

Weighted Weighted
average average
Number of exercise Number of exercise
options price options price
----------------------------------------------------------------------------
($/share) ($/share)
Balance, beginning of year 2,937,500 2.18 2,092,791 2.12
Granted 487,500 2.01 1,612,500 2.23
Terminated (682,500) 2.15 (584,791) 2.11
Exercised for cash - - (183,000) 2.06
----------------------------------------------------------------------------
Balance, end of year 2,742,500 2.16 2,937,500 2.18
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exercisable, end of year 1,335,360 2.15 1,183,600 2.17
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Outstanding options Exercisable options
------------------------------------------------------------

Weighted
average Weighted
remaining Number of average
Number of options contractual options exercise
Exercise price outstanding life exercisable price
----------------------------------------------------------------------------
($/share) (years) ($/share)
1.80 50,000 3.09 15,000 1.80
1.95 120,000 4.23 36,000 1.95
2.00 20,000 3.43 6,000 2.00
2.02 35,000 4.27 10,500 2.02
2.03 320,000 4.10 96,000 2.03
2.04 5,000 4.58 1,500 2.04
2.05 740,000 2.86 518,000 2.05
2.10 120,000 3.31 36,000 2.10
2.12 7,500 4.62 2,250 2.12
2.20 35,000 3.84 10,500 2.20
2.25 541,300 2.46 358,910 2.25
2.31 28,700 1.85 28,700 2.31
2.33 680,000 3.71 204,000 2.33
2.50 40,000 3.21 12,000 2.50
----------------------------------------------------------------------------
2.16 2,742,500 3.26 1,335,360 2.15
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Note 8: Contributed surplus
December 31, December 31,
$ 2006 2005
----------------------------------------------------------------------------

Opening balance 1,418,328 603,997
Expiration of 1,504,600 warrants
(see Note 7c) 902,761 -
Stock-based compensation 689,816 878,328
Exercise of stock options - (63,997)
----------------------------------------------------------------------------
3,010,905 1,418,328
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Note 9: Related party transactions

The following transactions with related parties were done on a fair value basis defined as the amounts that would be agreed upon in an arm's length transaction between knowledgeable, willing parties, who are under no compulsion to act.

During the year ended December 31, 2006, the Company's legal counsel invoiced $244,038 (2005 - $398,311) for legal work charged. The Company's former Corporate Secretary is a partner in the legal firm. Included in accounts payable at December 31, 2006 is $82,431 (2005 - $65,227) due to the Company's legal counsel.

Note 10: Financial instruments

The Company's financial instruments recognized in the balance sheet consist of accounts receivable, accounts payable and accrued liabilities, bank indebtedness, and short-term bridge facility.

The estimated fair values of the financial instruments have been determined based on the Company's assessment of available market information and appropriate valuation methodologies; however, these estimates may not be necessarily indicative of the amounts that could be realized or settled in a current market transaction.

The carrying value of the Company's financial instruments approximate their fair market value due to their demand nature or relatively short periods to maturity. A substantial portion of the Company's accounts receivable are with customers and joint venture partners in the oil and natural gas industry and are subject to normal industry credit risks. The Company's bank indebtedness and short-term bridge facility are subject to floating interest rates.

Note 11: Commitments

Under the terms of the Company's flow-through share agreements, the Company has committed to incur approximately $6.25 million (2005 - $10.6 million) of qualifying oil and natural gas Canadian Exploration Expenses ("CEE") between June 8, 2006 and December 31, 2007. Of this amount approximately $5.7 million is still to be incurred.

At December 31, 2006 the Company has 15 months remaining on the lease of the office premises at $11.50 per square foot plus costs, or approximately $21,000 per month.

In conjunction with the CCAA process (see Note 1), the Company has committed to the payment of retention bonuses. The retention bonuses will be paid in the following installments: (i) a sum representing 5% of the employees' salary if s/he continues to be actively employed with the Company up to and as of March 31, 2007; and (ii) a sum representing 20% of the employees' salary if s/he continues to be actively employed with the Company up to and as of July 31, 2007 or upon implementation of a court-approved Plan of Arrangement under the CCAA proceedings, whichever occurs first.



In November 2006, the Company entered into the following hedging contracts:

Product Volume Period Contract Price
----------------------------------------------------------------------------
Natural gas 1,200 GJ/day Nov 1/06-Oct 31/07 Fixed $7.14/GJ AECO
Natural gas 1,280 GJ/day Jan 1/07-Dec 31/07 Fixed $7.70/GJ AECO
Costless $7.00/GJ to
Natural gas 1,758 GJ/day Jan 1/08-Dec 31/08 collar $9.60/GJ AECO
Costless $7.00/GJ to
Natural gas 1,192 GJ/day Jan 1/09-Dec 31/09 collar $8.35/GJ AECO
Oil 123 bbls/day Jan 1/07-Dec 31/07 Fixed US$64.50/bbl WTI
Oil 123 bbls/day Jan 1/07-Dec 31/07 Fixed US$64.80/bbl WTI
Costless US$65.00/bbl to
Oil 81 bbls/day Jan 1/08-Dec 31/08 collar US$70.50/bbl WTI
Costless US$65.00/bbl to
Oil 81 bbls/day Jan 1/08-Dec 31/08 collar US$71.46/bbl WTI
Costless US$65.00/bbl to
Oil 58 bbls/day Jan 1/09-Dec 31/09 collar US$70.35/bbl WTI
Costless US$65.00/bbl to
Oil 58 bbls/day Jan 1/09-Dec 31/09 collar US$71.46/bbl WTI
----------------------------------------------------------------------------


Note 12: Subsequent events

In January 2007, the Company closed the $13 million revolving credit facility, and simultaneously increased the short-term development bridge facility to $28 million. The short-term development bridge facility is a demand loan and bears interest at bank prime plus three percent, maturing March 30, 2007, and is secured by a $35 million demand debenture with a first fixed charge over all the present and future property acquisitions. Subsequent to March 30, 2007, the maturity date of the bridge facility was extended pending the outcome of the CCAA process. For the duration of the CCAA process, this facility bears default interest at an additional 5%.

On January 30, 2007, the Company obtained creditor protection under the Companies' Creditors Arrangement Act (Canada), ("CCAA"), and has obtained such protection pursuant to an Order from the Alberta Court of Queen's Bench (the "Court"). CCAA protection stays creditors and others from enforcing claims against Caribou and affords Caribou the opportunity to restructure its affairs. The Court initially granted CCAA protection for a period of 30 days, expiring February 28, 2007, which was subsequently extended to May 3, 2007. While under CCAA protection, the Board of Directors maintains its usual role and management of Caribou remains responsible for the day-to-day operations of the Company, under the supervision of a Court-appointed monitor who will be responsible for reviewing Caribou's ongoing operations, assisting with the development and filing of a Plan of Arrangement ("Plan"), liaising with creditors and other stakeholders and reporting to the Court. The Board of Directors and management will also be primarily responsible for formulating the Plan for restructuring Caribou's affairs.

This Plan will describe how Caribou proposes to restructure its affairs. The Plan requires approval by the Court and the requisite number and value of the affected stakeholders.

Although CCAA protection enables Caribou to continue with its day-to-day operations until its CCAA status changes, the implications for the Caribou shareholders are less clear. At the end of the restructuring process, the value of what is left for shareholders will depend upon the terms of the Plan approved by the affected stakeholders. If the affected stakeholders do not approve the Plan in the manner contemplated by law, Caribou will likely be placed into receivership or bankruptcy.

Note 13 : Comparative information

Certain information provided for the previous period has been restated to conform to the current period presentation.



Caribou Resources Corp.

Corporate Information

Directors Officers
Stephen J.A. Fagan, MBA, Chairman Christina M. Fehr, BA, MSc
Calgary, Alberta Vice Chairman and CEO

Christina M. Fehr, BA, MSc Ross G. Robertson, P.Eng
Calgary, Alberta President and COO

Gordon A. Robertson, P.Geol (2) Giles Twogood, CA (SA)
Calgary, Alberta Vice President and CFO

Ross G. Robertson, P.Eng (1) Douglas Patterson, P.Land
Calgary, Alberta Vice President, Land

Donald J. Rowden, CA (1) (2) Corporate Office
Bend, Oregon 1545, 101 - 6th Avenue S.W.
Calgary, Alberta T2P 3P4
Gerald D. Sutton (1) (2) Phone: (403) 269-5218
Oakville, Ontario Fax: (403) 269-5221
Website: www.cariboures.com
(1) Member of the Audit Committee Contact: Christina M. Fehr
Email: cmfehr@cariboures.com
(2) Member of the Compensation
Committee

Registrar and transfer agent Stock Exchange Listing
Valiant Trust Company TSX Venture Exchange
Calgary, Alberta Symbol: CBU

Auditors Legal Counsel
PricewaterhouseCoopers LLP Blake, Cassels & Graydon LLP
Calgary, Alberta

Banker Evaluation Engineers
Brookfield Bridge Lending Fund Inc. McDaniel & Associates Consultants Ltd.
Canadian Imperial Bank of Commerce


Certain information regarding Caribou in this news release including management's assessment of future plans and operations, production estimates, drilling inventory and wells to be drilled, timing of drilling and tie in of wells, productive capacity of new wells, capital expenditures and the timing thereof, may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence Caribou's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward looking statements and, accordingly no assurance can be given that any events anticipated by the forward looking statements will transpire or occur, or, if any of them do so, what benefits Caribou will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhausted. Furthermore, the forward looking statements contained in this news release are made as at the date of this news release and Caribou does not undertake any obligation to update publicly or to revise any of the included forward looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Natural gas reserves and volumes are converted to barrels of oil equivalent (boe) on the basis of six thousand cubic feet (mcf) per one barrel (bbl) of oil. Boes may be misleading, particularly if used in isolation. The 6:1 boe conversion ratio is based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Caribou Resources Corp.
    Christina M. Fehr
    Vice Chairman and CEO
    (403) 539-4322
    or
    Caribou Resources Corp.
    Ross G. Robertson, P.Eng
    President and COO
    (403) 539-4316