Caribou Resources Corp.
TSX VENTURE : CBU

Caribou Resources Corp.

November 16, 2005 09:00 ET

Caribou Resources Corp. Announces Third Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Nov. 16, 2005) - Caribou Resources Corp. (TSX VENTURE:CBU) ("Caribou") is pleased to report continued growth in the operational and financial aspects of its business for the reporting period ended September 30, 2005:

Highlights

- Sales volumes increased 289% over the same nine month period in 2004 to 1,437 boe/day, while revenues from oil and natural gas increased 365% to $21.9 million in the nine months ended September 30, 2005.

- A 723% increase in funds flow from operations over the nine months to September 2004, reflects the growth in production and very strong commodity prices.

- Despite a higher cost environment, corporate operating costs were reduced by 21% compared to the prior quarter.

- Operating netbacks per boe improved by 42% over 2004 through the addition of new light oil production and strong oil and gas prices.

- Caribou, as operator, carried out an $18.0 million capital program during the first nine months of 2005, with an average working interest of approximately 80% in its two core areas of Central and Northern Alberta. A $13.5 million strategic asset acquisition in the Steen River section of our northern core area was negotiated in September.

- During Q3, the Company incurred approximately $2 million of expenditures of a planned summer/fall program of up to $10 million. An unsuccessful exploratory test in the Peace River Arch was followed by success in our Central Alberta core area, which has led to further development in the fourth quarter.

- In July, the Company negotiated a $10 million development bridge facility. This loan was repaid during the quarter.

- The Company concluded a Coal Bed Methane (CBM) sale and farm out agreement in July with Mahalo Energy Ltd., whose sole focus is to develop natural gas from coal. The deal resulted in Caribou receiving a cash payment of $2.75 million and the Company being carried on a five well work commitment to be completed before year-end. Mahalo has advised that they have licensed five wells in the area for drilling prior to the end of 2005. $1.75 million of the proceeds were applied to reduce the development bridge facility.

- Also in July, additional strategic lands were acquired in the Larne area of Northern Alberta, offsetting lands drilled during our successful 04/05 winter drilling program.

- In September, the Company announced a $13.5 million acquisition which included wells producing approximately 250 boepd (predominantly gas) and a 20% interest in a pipeline and other gathering systems. Caribou also became 80% owner and operator of a 35mmcf/d gas plant in Steen River. In addition to gaining control of strategic facilities, this transaction includes a considerable investment in undeveloped land and consolidates the Company's landholdings in a core area and expands our drilling prospect inventory. The full impact of this transaction will become evident in Q4.

- On September 8, 2005 the Company closed an $18 million equity financing. The proceeds were used initially to repay the remaining $8.5 million bridge facility, with the balance to be applied towards the capital expenditure program for the remainder of the year.

- In October, the Company concluded a $13.5 million bridge finance facility expiring June 30, 2006.

- Caribou has expanded its winter 05/06 capital program. The Company now intends to spend up to $25 million and has two rigs under contract.



% change
- nine
months
ended
September
30,
Three months ended Nine months ended 2004 to
September 30 September 30 September
2005 2004 2005 2004 30, 2005
------------------------------------------------------------------------
Financial
($000's,
except
shares and
per share
amounts)
Oil and
natural gas
revenues 8,618 1,926 21,894 4,889 348
Funds flow
from
operations
(1) 4,329 597 10,382 1,262 723
Per share
- basic (1) 0.15 0.05 0.36 0.18 100
Net loss (363) (112) (2,569) (544) 373
Per share
- basic (0.01) (0.01) (0.09) (0.08) 15
Per share
- diluted (0.01) (0.01) (0.09) (0.08) 15
Total assets 110,341 81,430 110,341 81,430 36
Bank debt 5,506 13,165 5,506 13,165 (58)
Shareholders'
equity 68,536 47,125 68,536 47,125 45
Common shares
outstanding 34,811,424 24,009,211 34,811,424 24,009,211 45
Weighted
average
- basic 29,817,509 12,419,886 28,715,911 6,972,671 312
Weighted
average
- diluted 30,122,052 12,419,886 28,799,539 7,002,510 311
------------------------------------------------------------------------

Operating
(boe - 6:1
basis)

Undeveloped
land - net
acres 201,956 103,282 201,956 103,282 96

Sales volumes
Natural gas
(mcf/day) 4,672 1,902 4,332 1,407 208
Crude oil
and NGL's
(bbls/day) 700 152 715 135 430
Total oil
equivalent
(boe/day) 1,479 469 1,437 370 289

Product
prices ($)
Natural gas
per mcf 9.47 6.29 8.12 6.70 21
Crude oil
and NGL's
per bbl 70.37 55.19 62.90 50.51 25
Operating
expense
per boe
($) (2) 11.42 9.30 13.17 10.79 22
Netback per
boe ($) 40.49 26.27 33.35 23.50 42
------------------------------------------------------------------------
------------------------------------------------------------------------

(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. 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) Includes charges of $2.59 for transportation, gas gathering and
processing.


Message to our Shareholders

During the first nine months of 2005, Caribou Resources Corp. has established a highly prospective, focused asset base with average working interests (WI) of over 60% and operatorship of over 85% of our production. This is a significant accomplishment when compared with average WI of approximately 26% and virtually no operated production during the same nine month period of 2004. Caribou saw continued improvement in its financial and operating metrics during the third quarter of 2005, as summarized in our Highlights. During the quarter, we were also successful in closing an $18.0 million financing and announced a strategic acquisition which has contributed significant undeveloped land, increased ownership in facilities and infrastructure and expanded our drilling inventory.

Approximately $2.0 million of expenditures, of a planned summer/fall capital program of up to $10.0 million, were made during the third quarter. During August, approximately $620,000 was incurred on the first prospect on the Peace River Arch, which as previously announced, was drilled and abandoned. Approximately $700,000 was spent on the acquisition of lands in our core area of Larne, directly offsetting our successful 04/05 winter program lands which the Company will drill as part of this winter's program. Despite surface access and landowner delays at Redwater, two vertical wells delineating a new pool discovery made at the end of 2004 were successfully drilled. The first well was placed on production in September and the second well is anticipated to be tied in by yearend. A horizontal re-entry and a new horizontal well drilled into the original Basal Quartz oil pool were also successful and placed on production at the end of the September. Subsequent to the quarter, two additional horizontal wells have been drilled with tie-ins anticipated before yearend. With the rig it has under contract, Caribou intends to drill two more horizontals and one potential high impact Leduc prospect in Central Alberta before year end.

On July 28, 2005 Caribou entered in to an agreement with Mahalo Energy Ltd. on the development of its prospective CBM lands of approximately 17 net sections in the Wizard Lake area of Central Alberta. Mahalo has licensed and intends to drill the five Horseshoe Canyon commitment test wells by year end, with Caribou being carried as to approximately 23% WI to a tie-in election point. Caribou has the option to participate as to its retained interest in the future development of the Horseshoe Canyon resource or to elect to take an override on any Horseshoe Canyon production. Caribou has retained all other conventional hydrocarbon rights on the Wizard Lake lands.

In September, the Company was successful in negotiating a $13.5 million strategic transaction in its northern core area. The full benefit of the acquisition will be evident in the fourth quarter. The acquisition adds approximately 250 boe/d of average production (94% natural gas), resulted in Caribou consolidating its WI interests in existing lands from 50% up to 100% and added contiguous undeveloped lands which increases our corporate undeveloped land base to over 200,000 net acres. The acquisition has provided access to extensive seismic which has already resulted in the expansion of the Company's drilling prospects inventory. The acquisition provides 100% WI in extensive gas gathering lines and a 20% WI in a 10" and 12" 50 km. northern line. Also included in the transaction is an 80% WI and operatorship of a 35 million cubic feet per day gas plant built in 1999. With the additional ownership and control of undeveloped lands, strategic facilities and infrastructure, Caribou has the potential to significantly grow its production and increase its profitability in its northern core area.

Caribou is extremely well positioned to aggressively pursue the drilling of its extensive undeveloped land base and has increased its 05/06 winter capital expenditures program from $12.0 to $25.0 million. Despite an extremely competitive operating environment, the Company has the majority of its drilling locations surveyed, has two rigs under contract and other required services organized. We are well on our way to having the logistics for the program finalized. The planned program will include up to 16 Slave Point/Sulphur Point locations, two shallow gas wells and up to three Keg River oil wells.

It is a very exciting time for our Company.



On behalf of the Board of Directors,



Christina M. Fehr, BA, MSc Ross G. Robertson, P.Eng
Vice Chairman and CEO President and COO
November 15, 2005


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 unaudited interim financial statements for the nine month period ended September 30, 2005, as well as the audited consolidated financial statements and MD&A for the years ended December 31, 2004 and 2003 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 cash 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 cash 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 cash flow per share, whereby cash 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.

Forward looking statements

Statements throughout this interim 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 interim report.

The Company

Caribou Resources Corp. ("Caribou" or the "Company") is a full cycle exploration and development company primarily focused on exploring for natural gas in Northern Alberta, and oil and natural gas in Central Alberta. The following discussion and analysis is dated November 15, 2005, and is management's assessment of Caribou's three and nine months ended September 30, 2005 ("Q3") operating and financial results, compared to the corresponding periods for 2004.

Comparability to prior periods

The variances in comparable financial and operating results for 2004 may appear disproportionate as a result of the acquisitions detailed below and reflect the transition from a small private company to an emerging growth company. On December 17, 2003, the Company entered into an agreement with New Earth Exploration Ltd. ("New Earth"), whereby the Company acquired 51% of the issued and outstanding shares of New Earth. On December 31, 2003, the Company acquired another 12.5% of New Earth, through purchasing flow-through shares from New Earth. On May 14, 2004, Caribou acquired 100% of the issued and outstanding shares of Rainmaker Ventures Ltd. ("Rainmaker") and on May 20, 2004, Caribou acquired the remaining 36.5% of the outstanding common shares of New Earth. On September 30, 2004, Caribou acquired 100% of the issued and outstanding shares of Shaker Resources Inc. ("Shaker"). On January 1, 2005, Caribou, Rainmaker, New Earth and Shaker were amalgamated into one company, Caribou Resources Corp.

Operations

Approximately $2.0 million of expenditures, of a planned summer/fall capital program of up to $10.0 million, were made during the third quarter. During August, approximately $620,000 was incurred on the first prospect on the Peace River Arch, which as previously announced, was drilled and abandoned. Approximately $700,000 was spent on the acquisition of lands in our core area of Larne, directly offsetting our successful 04/05 winter program lands which the Company will drill as part of this winter's program. Despite surface access and landowner delays at Redwater, two vertical wells delineating a new pool discovery made at the end of 2004 were successfully drilled. The first well was placed on production in September and the second well is anticipated to be tied in by year-end. A horizontal re-entry and a new horizontal well drilled into the original Basal Quartz oil pool were also successful and placed on production at the end of the September. Subsequent to the quarter, two additional horizontal wells have been drilled with tie-ins anticipated before yearend. With the rig it has under contract, Caribou intends to drill two more horizontals and one potential high impact Leduc prospect in Central Alberta before year end.



Net loss and funds flow
Three months Nine months
ended September 30 ended September 30
$ 2005 2004 2005 2004
------------------------------------------------------------------------
Net loss (363,242) (111,881) (2,569,394) (543,638)
Per share (0.01) (0.01) (0.09) (0.08)
Funds flow from
operations 4,329,349 596,608 10,381,975 1,261,928
Per share 0.15 0.05 0.36 0.18
------------------------------------------------------------------------
------------------------------------------------------------------------


The Company has recorded a loss for the nine months ended September 30, 2005, despite greatly increased funds flow from operations. Although success has been achieved through the year to date in lowering both general and administrative costs and operating costs on a per boe basis, higher depletion costs, have resulted in a loss for 2005.



Oil and natural gas revenues

Three months Nine months
ended September 30 ended September 30
$ 2005 2004 2005 2004
------------------------------------------------------------------------
Oil and liquids 4,478,933 778,079 12,285,253 1,952,924
Per barrel 69.53 55.19 62.90 50.51
Natural gas 4,138,782 1,147,605 9,608,892 2,936,221
Per mcf 9.63 6.29 8.12 6.70
------------------------------------------------------------------------
------------------------------------------------------------------------


Gross revenues increased in the nine months to September 30, 2005, as compared to 2004, as a result of crude oil and natural gas liquids volumes increasing to 715 bbls/day, from 135 bbls/day in 2004, while natural gas sales volumes increased to 4,671 mcf/day, from 1,407 mcf/day. In addition, oil, natural gas liquids and natural gas prices have remained very strong so far during 2005. Caribou does not have any commodity price hedges in place.



Royalties

Three months Nine months
ended September 30 ended September 30
$ (except %) 2005 2004 2005 2004
------------------------------------------------------------------------
Royalties, net of ARTC 1,554,248 343,932 3,638,741 1,057,190
Per boe 11.42 7.74 9.27 9.48
% of revenue 18.0% 17.9% 16.6% 21.6%
------------------------------------------------------------------------
------------------------------------------------------------------------


Royalties increased in total due to the increase in revenue as described above, but decreased as a percentage of revenue due to the inclusion from October 2004 of oil as a greater proportion of total revenue; this oil bears a lower royalty rate.



Operating, transportation, gathering and processing

Three months Nine months
ended September 30 ended September 30
$ 2005 2004 2005 2004
------------------------------------------------------------------------
Operating 1,201,294 242,535 3,910,172 729,548
Per boe 8.83 5.62 9.96 6.53
Transportation 203,871 15,194 502,198 46,475
Per boe 1.50 0.35 1.28 0.42
Gas gathering and
processing 148,989 156,058 754,886 429,086
Per boe 1.09 3.62 1.92 3.84
------------------------------------------------------------------------
Total operating,
transportation,
gathering and
processing 1,554,154 413,787 5,167,255 1,205,109
Per boe 11.42 9.30 13.17 10.79
------------------------------------------------------------------------
------------------------------------------------------------------------


Total operating expenses increased in 2005 due to the increased production volumes. Moreover, on a per boe basis, costs have been higher in 2005 than in 2004 due to an overall increase in costs and services on an industry-wide basis. However, as 2005 progresses, the Company is now starting to see the results of cost reduction initiatives implemented earlier this year and late last year. Q3 operating, transportation, gathering and processing charges per boe are 18% lower than those recorded in Q1.



Netbacks
Three months Nine months
ended September 30 ended September 30
$/boe 2005 2004 2005 2004
------------------------------------------------------------------------
Revenue 63.34 43.31 55.79 43.77
Royalty, net of ARTC 11.42 7.74 9.27 9.48
Operating, transportation,
gathering and processing
expenses 11.42 9.30 13.17 10.79
------------------------------------------------------------------------
Operating netback 40.49 26.27 33.35 23.50
------------------------------------------------------------------------
General and administrative 4.55 14.86 4.83 12.48
Interest 3.96 1.79 1.95 3.91
Taxes 0.16 0.12 0.12 0.20
------------------------------------------------------------------------
Cash netback 31.82 9.50 26.45 6.91
------------------------------------------------------------------------
------------------------------------------------------------------------


Operating netbacks improved in 2005 when compared to 2004 due to increases in the price of oil and natural gas, and a reduction in royalty expenses per boe. This was partially offset by an increase in operating expenses per boe.



General and administrative

Three months Nine months
ended September 30 ended September 30
$ 2005 2004 2005 2004
------------------------------------------------------------------------
General and administrative 619,436 641,037 1,893,811 1,393,175
Per boe 4.55 14.86 4.83 12.48
------------------------------------------------------------------------
------------------------------------------------------------------------


Administration in 2005 increased from 2004, reflecting the changes from a start-up company to a fully operational oil and natural gas exploration and development company. The increase was due primarily to increased legal and accounting fees and costs associated with hiring full-time staff and consultants required for the growth of Caribou. Administration per boe has dropped significantly as production levels were considerably higher than in 2004.

During the third quarter, Caribou capitalized approximately $265,000 (2004 - nil) of general and administrative expenses directly related to exploration and development activities.



Stock-based compensation

Three months Nine months
ended September 30 ended September 30
$ 2005 2004 2005 2004
------------------------------------------------------------------------
Stock-based compensation 302,007 38,663 580,541 136,663
Per boe 2.22 0.90 1.48 1.22
------------------------------------------------------------------------
------------------------------------------------------------------------


Total stock-based compensation in 2005 increased significantly from 2004, reflecting the stock options issued to the full-time staff and consultants required for the growth of Caribou. The increase in Q3 reflects options issued to employees and directors in accordance with the Company's option plan and reflects the competitive environment for attracting and retaining staff.



Interest and other financing charges

Three months Nine months
ended September 30 ended September 30
$ 2005 2004 2005 2004
------------------------------------------------------------------------
Interest and other
financing charges 538,254 77,364 764,744 436,320
------------------------------------------------------------------------
------------------------------------------------------------------------


Interest expense arises as the Company draws on its bank facilities in order to complete its capital expenditure program. The 2004 charges include interest payable on Notes Payable which were repaid in Q4 2004. During Q3 2005, Caribou incurred a one time financing charge of $250,000 related to the development bridge financing.



Depletion, depreciation and accretion (DD&A)

Three months Nine months
ended September 30 ended September 30
$ 2005 2004 2005 2004
------------------------------------------------------------------------
Depletion and
depreciation 4,423,793 757,474 12,987,924 1,903,764
Accretion 66,718 12,372 194,186 32,057
Total 4,490,511 769,846 13,182,110 1,935,821
Per boe 33.00 17.84 33.59 17.34
------------------------------------------------------------------------
------------------------------------------------------------------------


DD&A increased in 2005, compared to 2004, due to the increased production levels. Generally, increased overall industry activity since 2003 has put pressure on capital costs resulting in higher DD&A rates. Specifically, higher charges are partially attributable to the impact of the acquisition of the Shaker assets.

In accordance with GAAP, the DD&A is calculated using only proven reserves determined in accordance with the recently adopted National Instrument 51-101. The calculation excludes 35% of the Company's reserves which are determined to be "probable". As Caribou continues to convert its probable reserves on the significant undeveloped land base to proven reserves, the DD&A rate is expected to decline, and this is evidenced by the reduction in rate from Q2 to Q3 of $1.18 per boe.



Taxes

Three months Nine months
ended September 30 ended September 30
$ 2005 2004 2005 2004
------------------------------------------------------------------------
Future income tax recovery 99,927 159,080 811,282 505,126
------------------------------------------------------------------------
------------------------------------------------------------------------


The future income tax recovery reflects the 2004 reduction of the corporate tax rate of 1% by the Government of Alberta. Caribou paid no current income tax in 2005 or 2004. The nine month increase in the future income tax recovery reflects the increase in the loss recorded.

The Company has estimated that available tax deductions to reduce future taxable income exceed $64 million. In addition, the Company has capital losses of $6.9 million (2004 - $6.9 million) that can be carried forward indefinitely. No future tax benefit has been recognised with respect to the capital losses.

Liquidity and capital resources

In order to support Caribou's growth oriented business plan, the Company's strategy is to fund its aggressive capital expenditure program by issuing common and flow-through shares, by using available bank debt, and by reinvesting its cash flow.

During Q3, Caribou's credit facility was increased to $15,500,000 while its short-term $2,000,000 liquidity facility with the same chartered bank was retired September 30, 2005. At that date the amount drawn against the credit facility was $5,506,168. A $10,000,000 subordinated development bridge facility was obtained during the quarter from an independent Canadian lending company. This facility was fully repaid before September 30, 2005.

Current liabilities at September 30, 2005 reflect costs associated with the acquisition. A $13.5 million acquisition bridge finance facility was concluded subsequent to Q3 with an eight month term expiring June 30, 2006.



Capital expenditures

Three months Nine months
ended September 30 ended September 30
$ 2005 2004 2005 2004
------------------------------------------------------------------------
Seismic and geological
evaluation - 43,595 121,862 1,096,339
Land acquisition
and retention 691,554 4,259,951 1,155,283 4,367,094
Well drilling,
completion and
equipping 17,368,876 1,047,670 32,655,565 11,425,573
Dispositions (2,750,000) - (2,750,000) (801)
Office equipment 6,000 - 72,687 11,554
------------------------------------------------------------------------
Total 15,316,430 5,351,216 31,255,397 16,899,759
------------------------------------------------------------------------
------------------------------------------------------------------------


The Company spent $18.0 million in the nine months to September 30, 2005 on its exploration and development program and $13.5 million on an asset acquisition. This acquisition included 80% of a gas plant with 35 mmcf/day capacity, 20% of a significant pipeline, properties producing approximately 250 boe/d and extensive undeveloped land.

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 nine month period ended September 30, 2005, the Company's legal counsel invoiced $319,841 (2004 - $326,518) for legal work charged. The Company's Corporate Secretary is a partner in the legal firm. Included in accounts payable at September 30, 2005 is $112,063 (2004 - $273,750) 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.

Caribou has also put in place a business strategy to mitigate these risks. In its initial stage of operations, Caribou intends to concentrate on shallow, multi-zone areas. Potential areas must have available lands to allow expansion and access to infrastructure to allow successful wells to be placed on production in a timely manner.

Accounting policies

Caribou's accounting policies are stated in Note 2 to the annual audited financial statements. Caribou follows policies that are in accordance with Canadian generally accepted accounting principles.

Critical accounting estimates

Management is required to make judgments, assumptions and estimates in the application of generally accepted accounting principles that have a significant impact on the financial results of the Company.

New accounting policies

There have been no changes to the Company's accounting principles and practices in 2005, nor have there been any changes to the Company's critical accounting estimates.

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 34,811,424 common shares outstanding at September 30, 2005, and 34,815,424 common shares outstanding as at the date of this report. As at September 30, 2005 there were 189,787 share purchase warrants outstanding.

The Company's stock option plan provides for granting of options to directors, employees and consultants. At September 30, 2005 a total of 3,159,590 options were outstanding.

Outlook

In Central Alberta, the Company has three wells which it anticipates tying-in before year-end. It intends to drill three more wells.

In September, the Company was successful in negotiating a $13.5 million strategic transaction in its northern core area. With the additional ownership and control of undeveloped lands, strategic facilities and infrastructure, Caribou has the potential to significantly grow its production and increase its profitability in its northern core area. The acquisition adds approximately 250 boe/d of average production (94% natural gas), resulted in Caribou consolidating its WI interests in existing lands from 50% up to 100% and added contiguous undeveloped lands which increases our corporate undeveloped land base to over 200,000 net acres. The acquisition has provided access to extensive seismic which has already resulted in the expansion of the Company's drilling prospects inventory. The acquisition provides 100% WI in extensive gas gathering lines and a 20% WI in a 10" and 12" 50 km. northern line. Also included in the transaction is an 80% WI and operatorship of a 35 million cubic feet per day gas plant built in 1999.

Caribou is well positioned to aggressively pursue the drilling of its extensive undeveloped land base and has increased its 05/06 winter capital expenditures program from $12.0 to $25.0 million. Despite an extremely competitive operating environment, the Company has the majority of its drilling locations surveyed, has two rigs under contract and other required services organized. We are well on our way to having the logistics for the program finalized. The planned program will include up to 16 Slave Point/Sulphur Point locations, two shallow gas wells and up to three Keg River oil wells.



Summary of quarterly operating and financial results
------------------------------------------------------------------------
2005
---------------------------
Third Second First
------------------------------------------------------------------------
Operating
Natural gas (mcf/day) 4,672 4,814 3,569
Price ($/mcf) 9.47 7.18 7.23
Oil and NGL's (bbls/day) 700 671 778
Price ($/bbl) 70.37 61.51 57.90
Barrels of oil equivalent (per day) 1,479 1,473 1,373

Financial ($000's, except per share amounts)
------------------------------------------------------------------------
Oil and natural gas revenues 8,618 6,900 6,376
Royalties, net of ARTC (1,554) (941) (1,144)
Interest income - - -
------------------------------------------------------------------------
Net revenues 7,063 5,960 5,232
------------------------------------------------------------------------
Operating expenses 1,201 1,386 1,322
Transportation, gathering and processing (1) 353 459 446
General and administrative 619 593 682
Stock-based compensation 302 141 137
Depletion and depreciation 4,424 4,511 4,053
Interest 538 123 103
Accretion 67 65 62
------------------------------------------------------------------------
Total expenses 7,504 7,279 6,805
------------------------------------------------------------------------
Loss before income taxes and
non-controlling interest (441) (1,319) (1,573)
Capital taxes (22) (14) (13)
Future income taxes 100 362 350
------------------------------------------------------------------------
Net loss for the period,
before non-controlling interest (363) (971) (1,236)
Non-controlling interest - - -
------------------------------------------------------------------------
Net loss for the period (363) (972) (1,236)
------------------------------------------------------------------------
------------------------------------------------------------------------
Loss per share (basic and diluted) (0.01) (0.03) (0.04)
------------------------------------------------------------------------
Funds flow ($000's) 4,329 3,386 2,667
------------------------------------------------------------------------
Funds flow per share (basic) 0.15 0.12 0.09
------------------------------------------------------------------------
Netbacks ($/boe)
------------------------------------------------------------------------
Oil and natural gas revenues 63.34 51.48 51.62
Royalties, net of ARTC 11.42 7.02 9.26
Operating expenses 11.42 13.77 14.31
------------------------------------------------------------------------
Operating netback 40.49 30.69 28.05
General and administrative 4.55 4.42 5.52
Interest 3.96 0.92 0.83
Capital taxes 0.16 0.10 0.11
------------------------------------------------------------------------
Cash netback 31.82 25.25 21.59
------------------------------------------------------------------------
------------------------------------------------------------------------
Total assets ($000's) 110,341 94,180 98,003
------------------------------------------------------------------------
------------------------------------------------------------------------


2004
------------------------------------
Fourth Third Second First
------------------------------------------------------------------------
Operating
Natural gas (mcf/day) 4,032 1,902 2,069 746
Price ($/mcf) 6.39 6.29 7.22 6.33
Oil and NGL's (bbls/day) 449 152 124 146
Price ($/bbl) 55.03 55.19 48.58 47.27
Barrels of oil equivalent (per day) 1,120 469 468 270

Financial
($000's, except per share amounts)
------------------------------------------------------------------------
Oil and natural gas revenues 4,680 1,926 1,905 1,057
Royalties, net of ARTC (885) (344) (427) (286)
Interest income - 93 2 8
------------------------------------------------------------------------
Net revenues 3,795 1,675 1,480 779
------------------------------------------------------------------------
Operating expenses 1,476 414 512 280
Transportation, gathering and
processing (1) - - - -
General and administrative 888 641 408 343
Stock-based compensation 369 39 48 50
Depletion and depreciation 2,773 758 729 417
Interest 527 77 169 190
Accretion 23 12 12 8
------------------------------------------------------------------------
Total expenses 6,056 1,941 1,878 1,288
------------------------------------------------------------------------
Loss before income taxes
and non-controlling interest (2,261) (266) (398) (509)
Capital taxes (35) (5) (12) (5)
Future income taxes 587 159 169 177
------------------------------------------------------------------------
Net loss for the period,
before non-controlling interest (1,709) (112) (241) (337)
Non-controlling interest - - 101 45
------------------------------------------------------------------------
Net loss for the period (1,709) (112) (140) (292)
------------------------------------------------------------------------
------------------------------------------------------------------------
Loss per share (basic and diluted) (0.07) (0.01) (0.03) (0.10)
------------------------------------------------------------------------
Funds flow ($000's) 939 597 523 142
------------------------------------------------------------------------
Funds flow per share (basic) 0.04 0.05 0.09 0.05
------------------------------------------------------------------------
Netbacks ($/boe)
------------------------------------------------------------------------
Oil and natural gas revenues 45.02 43.31 44.70 42.99
Royalties, net of ARTC 8.58 7.74 10.02 11.63
Operating expenses 13.64 9.30 12.00 11.38
------------------------------------------------------------------------
Operating netback 22.80 26.27 22.68 19.98
General and administrative 8.62 14.86 9.58 13.96
Interest 5.11 (0.37) 3.97 7.41
Capital taxes 0.34 0.12 0.29 0.20
------------------------------------------------------------------------
Cash netback 8.73 11.66 8.84 (1.59)
------------------------------------------------------------------------
------------------------------------------------------------------------
Total assets ($000's) 85,879 81,430 32,271 30,416
------------------------------------------------------------------------
------------------------------------------------------------------------


2003
--------
Fourth
------------------------------------------------------------------------
Operating
Natural gas (mcf/day) 183
Price ($/mcf) 6.62
Oil and NGL's (bbls/day) 15
Price ($/bbl) 38.56
Barrels of oil equivalent (per day) 46

Financial ($000's, except per share amounts)
------------------------------------------------------------------------
Oil and natural gas revenues 166
Royalties, net of ARTC (34)
Interest income 6
------------------------------------------------------------------------
Net revenues 138
------------------------------------------------------------------------
Operating expenses 76
Transportation, gathering and processing (1) -
General and administrative 126
Stock-based compensation -
Depletion and depreciation 48
Interest 33
Accretion 1
------------------------------------------------------------------------
Total expenses 284
------------------------------------------------------------------------
Loss before income taxes and non-controlling
interest (146)
Capital taxes (1)
Future income taxes 98
------------------------------------------------------------------------
Net loss for the period,
before non-controlling interest (49)
Non-controlling interest 24
------------------------------------------------------------------------
Net loss for the period (25)
------------------------------------------------------------------------
------------------------------------------------------------------------
Loss per share (basic and diluted) (0.03)
------------------------------------------------------------------------
Funds flow ($000's) (70)
------------------------------------------------------------------------
Funds flow per share (basic) (0.08)
------------------------------------------------------------------------
Netbacks ($/boe)
------------------------------------------------------------------------
Oil and natural gas revenues 39.31
Royalties, net of ARTC 8.14
Operating expenses 18.55
------------------------------------------------------------------------
Operating netback 12.62
General and administrative 29.77
Interest 6.38
Capital taxes 0.24
------------------------------------------------------------------------
Cash netback (23.77)
------------------------------------------------------------------------
------------------------------------------------------------------------
Total assets ($000's) 23,136
------------------------------------------------------------------------
------------------------------------------------------------------------

(1) Prior to Q1 2005, transportation, gathering and processing charges
were included in operating expenses.


Caribou Resources Corp.
Balance Sheets
As at September 30, 2005 and December 31, 2004

(unaudited)


2005 2004
------------------------------------------------------------------------
ASSETS
Current assets
Prepaid expenses $ 789,792 $ 132,744
Accounts receivable 9,183,166 4,646,571
------------------------------------------------------------------------
9,972,958 4,779,315
Property, plant and equipment (note 2) 97,760,356 78,491,971
Goodwill 2,607,407 2,607,407
------------------------------------------------------------------------
$ 110,340,721 $ 85,878,693
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness (note 3) $ 5,506,168 $ 9,206,122
Accounts payable and accrued
liabilities 22,144,362 9,628,238
------------------------------------------------------------------------
27,650,530 18,834,360

Asset retirement obligations (note 4) 4,114,023 2,918,925
Future income taxes 10,040,052 11,287,366
------------------------------------------------------------------------
41,804,605 33,040,651
------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Share capital (note 5) 72,250,810 54,511,969
Contributed surplus (note 6) 1,132,624 603,997
Deficit (4,847,318) (2,277,924)
------------------------------------------------------------------------
68,536,116 52,838,042
------------------------------------------------------------------------
$ 110,340,721 $ 85,878,693
------------------------------------------------------------------------
------------------------------------------------------------------------

Contingencies and commitments (notes 9 and 10)

See accompanying notes to Financial Statements



Approved by the Board of Directors:


(signed) (signed)
Christina M. Fehr Gerald D. Sutton
Director Director


Caribou Resources Corp.
Statements of Operations and Deficit
For the periods ended September 30, 2005
(unaudited)

Three months Nine months
ended September 30 ended September 30
2005 2004 2005 2004
------------------------------------------------------------------------
REVENUES
Oil and
natural gas $ 8,617,715 $ 1,925,684 $ 21,894,145 $ 4,889,145
Interest and
other revenue - 92,985 1,225 102,772
Less: Royalties,
net of ARTC (1,554,248) (387,214) (3,638,741) (1,177,561)
------------------------------------------------------------------------
7,063,467 1,674,737 18,256,629 3,934,727
------------------------------------------------------------------------
EXPENSES
Operating 1,201,295 242,535 3,910,172 729,548
Transportation,
gathering and
processing 352,859 171,252 1,257,083 475,561
General and
administrative 619,436 641,037 1,893,811 1,393,175
Stock-based
compensation
(note 5e) 302,007 38,663 580,541 136,663
Interest and other
financing charges 538,254 77,364 764,744 436,320
Accretion (note 4) 66,718 12,372 194,186 32,057
Depletion and
depreciation 4,423,793 757,474 12,987,924 1,903,764
------------------------------------------------------------------------
7,504,362 1,940,697 21,588,461 5,107,088
------------------------------------------------------------------------
(440,895) (265,960) (3,331,832) (1,172,361)
------------------------------------------------------------------------
Capital taxes (22,274) (5,001) (48,844) (22,364)
Future income
tax recovery 99,927 159,080 811,282 505,126
------------------------------------------------------------------------
77,653 154,079 762,438 482,762
------------------------------------------------------------------------
Non-controlling
interest - - - 145,961
------------------------------------------------------------------------

NET LOSS FOR
THE PERIOD (363,242) (111,881) (2,569,394) (543,638)
Deficit,
beginning of
period as
previously stated (4,484,076) (456,689) (2,277,924) (3,542,013)
Application of
deficit against
contributed
surplus - - - -
Application of
deficit against
share capital - - - 3,505,386
Retroactive
application of
changes in
accounting policy - - - 11,695
------------------------------------------------------------------------
Deficit,
end of period $ (4,847,318) $ (568,570)$ (4,847,318) $ (568,570)
------------------------------------------------------------------------
------------------------------------------------------------------------

Net loss per
share (note 5d)
Basic $ (0.01) $ (0.01)$ (0.09) $ (0.08)
Diluted $ (0.01) $ (0.01)$ (0.09) $ (0.08)
Weighted average
common shares
outstanding
Basic 29,817,509 12,419,886 28,715,911 6,972,671
Diluted 30,122,052 12,419,886 28,799,539 7,002,510
Outstanding
shares 34,811,424 24,009,211 34,811,424 24,009,211
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to Financial Statements


Caribou Resources Corp.
Statements of Cash Flows
For the periods ended September 30, 2005
(unaudited)


Three months Nine months
ended September 30 ended September 30
2005 2004 2005 2004
------------------------------------------------------------------------
Cash provided by
(used in):

OPERATING
Net loss for the
period $ (363,242) $ (111,881)$ (2,569,394) $ (543,638)
Add (deduct)
items not
affecting cash:
Depletion and
depreciation 4,423,793 757,474 12,987,924 1,903,764
Non-controlling
interest - - - (145,961)
Stock-based
compensation 302,007 38,663 580,541 136,663
Interest accretion - 59,060 - 239,082
Accretion 66,718 12,372 194,186 32,057
Interest accrued
on notes payable - - - 145,087
Future income taxes (99,927) (159,080) (811,282) (505,126)
------------------------------------------------------------------------
Funds flow from
operations 4,329,349 596,608 10,381,975 1,261,928
Change in non-cash
working capital 4,784,465 (1,158,961) 8,145,204 (2,372,585)
------------------------------------------------------------------------
9,113,814 (562,353) 18,527,179 (1,110,657)


FINANCING
Bank debt (10,371,248) (404,613) (3,699,954) 4,437,425
Proceeds from
bridge financing 10,000,000 - 10,000,000 -
Repayment of
bridge financing (10,000,000) - (10,000,000) -
Repayment of
notes payable - - - (4,724,327)
Issue of common
shares,
net of costs 17,131,836 9,191,182 17,250,895 14,993,086
------------------------------------------------------------------------
6,760,588 8,786,569 13,550,941 14,706,184
------------------------------------------------------------------------

INVESTING
Cash acquired on
purchase of
Rainmaker
Ventures Ltd. - - - 1,709,926
Cash used to
purchase
Shaker
Resources Inc. - (2,500,000) - (2,500,000)
Property,
plant and
equipment (15,316,430) (5,351,216) (31,255,397)(16,899,759)
Change in
non-cash
working capital (557,972) (373,000) (822,723) -
------------------------------------------------------------------------
(15,874,402) (8,224,216) (32,078,120)(17,689,833)
------------------------------------------------------------------------

Decrease in cash - - - (4,094,306)
Cash, beginning
of period - - - 4,094,306
------------------------------------------------------------------------
Cash, end of period $ - $ - $ - $ -
------------------------------------------------------------------------
------------------------------------------------------------------------

Supplementary
disclosure
Cash interest paid $ 538,254 $ 18,304 $ 764,744 $ 52,151
Cash taxes paid $ - $ - $ - $ -
------------------------------------------------------------------------
------------------------------------------------------------------------


Cash is defined as cash and cash equivalents

See accompanying notes to Financial Statements


Caribou Resources Corp.
Notes to the Financial Statements
For the nine months ended September 30, 2005 and 2004
(unaudited)


Note 1 : Basis of presentation

Caribou Resources Corp. ("the Company") is a public company listed on the TSX Venture Exchange, and is in the business of exploration, development and production of crude oil, natural gas and natural gas liquids. The Company changed its name from Niaski Environmental Inc. to Rimron Resources Inc. and consolidated its shares on a one for three basis on November 20, 2002. On January 22, 2004, the Company changed its name to Caribou Resources Corp. and consolidated its shares on a one for 25 basis. All share balances have been adjusted to reflect the consolidation, including those used in the calculation of basic and diluted earnings per share.

The unaudited interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"), and follow the same accounting policies and methods of computation as the annual audited financial statements for the year ended December 31, 2004. These notes are incremental to, and should be read in conjunction with, the annual audited financial statements and notes thereto for the year ended December 31, 2004.



Note 2: Property, plant and equipment

September 30, December 31,
$ 2005 2004
------------------------------------------------------------------------
Oil and natural gas properties,
plant and equipment 115,425,021 83,241,401

Office equipment and computers 109,608 36,920
------------------------------------------------------------------------
115,534,629 83,278,321

Less accumulated depletion and depreciation (17,774,273) (4,786,350)
------------------------------------------------------------------------
97,760,356 78,491,971
------------------------------------------------------------------------
------------------------------------------------------------------------


Unproved oil and gas properties amounting to $21.4 million (2004 - $5.0 million) were excluded from the depletion and depreciation calculation. Future development costs on proved undeveloped reserves of $2.8 million (2004 - $6.0 million) are included in the depletion calculation. No ceiling test write-down was required as at September 30, 2005.

During the third quarter, Caribou capitalized approximately $265,000 (2004 - nil) of general and administrative expenses directly related to exploration and development activities. For the nine months ended September 30, 2005, a total of $616,000 has been capitalized.



Note 3: Bank indebtedness

September 30, December 31,
$ 2005 2004
------------------------------------------------------------------------
Bank indebtedness 5,506,168 9,206,122
------------------------------------------------------------------------
------------------------------------------------------------------------


The Company has a revolving credit facility in the amount of $15,500,000 with a Canadian chartered bank as well as a $1,000,000 USD swap facility, bearing interest at prime plus 0.25% per annum. The facilities are secured by a $35,000,000 demand debenture with a first floating charge (with a right to fix) over all the present and future property acquisitions. See also Note 11.



Note 4: Asset retirement obligations

September 30, December 31,
$ 2005 2004
------------------------------------------------------------------------
Balance - beginning of period 2,918,925 356,296
Liabilities incurred 1,000,912 1,413,459
Revision to estimate - 1,144,315
Accretion 194,186 54,855
------------------------------------------------------------------------
4,114,023 2,968,925

Expenditures - 50,000
------------------------------------------------------------------------
Balance - end of period 4,114,023 2,918,925
------------------------------------------------------------------------
------------------------------------------------------------------------


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 $6.6 million, (2004 - $2.7 million) which will be incurred between 2005 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 5: 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, 2004 28,128,352 $ 54,511,969
Shares issued for cash upon exercise
of warrants 38,813 67,922
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 7,372,538
Exercise of stock options 148,500 357,088
Share issue expenses - (692,712)
------------------------------------------------------------------------
Balance, at September 30, 2005 34,811,424 $ 72,250,810
------------------------------------------------------------------------
------------------------------------------------------------------------


(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 September 30, 2005, 38,813 of these warrants had been exercised at $1.75 per share, leaving a balance of 113,973 warrants outstanding.

On May 18, 2004, the Company issued 75,814 share purchase warrants to replace warrants retired upon the acquisition of Rainmaker Ventures Ltd. on May 14, 2004. Each warrant was exercisable into one common share at an exercise price of $2.31 per share until May 12, 2005, on which date they expired.

On September 8, 2005, the Company issued 3,009,200 units in connection with the $18 million 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.



(d) Per share amounts

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

Nine months ended September 30
-------------------------------
2005 2004
------------------------------------------------------------------------
Weighted average common shares
outstanding - basic 28,715,911 6,972,671
Weighted average common shares
outstanding - diluted 28,799,539 7,002,510
------------------------------------------------------------------------

Net loss per share:

Net loss for the period ($) (2,569,394) (543,638)
Basic ($/share) (0.09) (0.08)
Diluted ($/share) (0.09) (0.08)

During 2005, 743,605 (2004 - 41,853) stock options and warrants were not
dilutive and were omitted from the weighted average diluted common
shares outstanding calculation.


(e) 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 to general administrative expenses 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:



Nine months ended September 30 2005 2004
------------------------------------------------------------------------
Fair value of options granted ($/option) 0.66 0.57
Expected life of options (years) 3.5 5
Expected volatility (%) 77 59
Risk free rate of return (%) 3.5 3
Expected dividend yield (%) Nil Nil
------------------------------------------------------------------------
------------------------------------------------------------------------


(f) 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 also granted options to acquire 93,140 common shares to the former option holders of Rainmaker Ventures Ltd. These options are fully vested and have an expiry date of November 4, 2008. 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 September 30, 2005 and 2004.



2005 2004
----------------------------------------------

Weighted Weighted
average average
Number of exercise Number of exercise
options price options price
------------------------------------------------------------------------
($/share) ($/share)
Balance, beginning
of period 2,092,791 2.12 - -
Granted 1,407,500 2.24 784,592 2.26
Terminated (192,201) 2.15 - -
Exercised for cash (148,500) 2.06 - -
------------------------------------------------------------------------
Balance, end of period 3,159,590 2.17 784,592 2.26
------------------------------------------------------------------------
------------------------------------------------------------------------
Exercisable, end
of period 1,147,190 2.18 235,379 2.26
------------------------------------------------------------------------
------------------------------------------------------------------------


Outstanding options Exercisable options
-----------------------------------------------------------
Weighted
average Weighted Weighted
Number remaining average Number average
Exercise of options contractual exercise of options exercise
price outstanding life price exercisable price
------------------------------------------------------------------------
($/share) (years) ($/share) ($/share)
1.80 70,000 4.34 1.80 21,000 1.80
2.00 10,000 4.34 2.00 3,000 2.00
2.05 1,297,000 4.11 2.05 430,500 2.05
2.10 270,000 4.56 2.10 85,500 2.10
2.20 17,500 4.44 2.20 5,250 2.20
2.25 541,300 3.92 2.25 260,650 2.25
2.31 78,790 3.10 2.31 78,790 2.31
2.33 835,000 4.96 2.33 250,500 2.33
2.50 40,000 4.46 2.50 12,000 2.50
------------------------------------------------------------------------
2.17 3,159,590 4.59 2.17 1,147,190 2.18
------------------------------------------------------------------------
------------------------------------------------------------------------


Note 6 : Contributed surplus
September 30, December 31,
$ 2005 2004
------------------------------------------------------------------------


Opening balance 603,997 1,229,146

Application of deficit against
contributed surplus - (1,229,146)

Acquisition of Rainmaker Ventures Ltd. - 56,676

Acquisition of Shaker Resources Inc. - 205,372

Stock-based compensation 580,541 505,555

Exercise of stock options (51,915) (163,606)
------------------------------------------------------------------------

1,132,624 603,997
------------------------------------------------------------------------
------------------------------------------------------------------------

The application of deficit against contributed surplus was approved by
the shareholders at the annual general and special meeting of the
shareholders on January 22, 2004.


Note 7 : 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 nine month period ended September 30, 2005, the Company's legal counsel invoiced $319,841 (2004 - $326,518) for legal work charged. The Company's Corporate Secretary is a partner in the legal firm. Included in accounts payable at September 30, 2005 is $112,063 (2004 - $273,750) due to the Company's legal counsel.

Note 8 : Financial instruments

The Company's financial instruments recognized in the balance sheet consist of accounts receivable, accounts payable and accrued liabilities, and bank debt.

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 debt is subject to floating interest rates.

Note 9 : Contingencies

Following a $5 million action taken by the Company against an operator of certain of the Company's petroleum and natural gas properties, an action has been brought against the Company seeking amounts totalling approximately $1,609,790 plus interest. Management is of the opinion that it is unlikely that the operator will be successful in recovering any of these amounts, as they are contrary to the terms of an operating agreement between the two parties. The Company has accrued $133,799 in its accounts payable, as a provision for any legal obligations that may result from this claim.

Note 10 : Commitments

Under the terms of the Company's flow-through share agreements, the Company has committed to incur approximately $10.6 million (2004 - $10.0 million) of qualifying oil and natural gas Canadian Exploration Expenses ("CEE") between September 8, 2005 and January 1, 2007. Caribou has renounced the income tax benefits of these expenditures to the flow-through shareholders. As at September 30, 2005 none of this commitment had been spent. All prior year commitments have been honoured in full.

At September 30, 2005 the Company had three years remaining on the lease of the office premises at approximately $20,000 per month.

Note 11 : Subsequent events

On October 31, 2005 the Company drew $13,500,000 against a subordinated bridge facility provided by a third party. This facility has an eight month term expiring June 30, 2006.

Caution to the Reader

Certain information regarding the Company contained herein may constitute forward-looking statements under applicable securities laws. Such statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking statements. The risks, uncertainties and other factors that could influence actual results are described in the Company's annual reports to the shareholders and other documents filed with regulatory authorities.



Caribou Resources Corp.
Corporate Information

Directors Officers
Gordon Robertson, P.Geol Christina M. Fehr, BA, MSc
Calgary, Alberta Vice Chairman and CEO

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

Ross G. Robertson, P.Eng Giles Twogood, CA (SA)
Calgary, Alberta Vice President and CFO

Gerald D. Sutton, Chairman Douglas Patterson, P.Land
Oakville, Ontario Vice President, Land


Donald J. Rowden, CA Donald Leitch, P.Eng
Bend, Oregon Vice President, Operations

Registrar and transfer agent Daniel P.E. Fournier, LLB
Valiant Trust Company Corporate Secretary
Calgary, Alberta
Corporate Office
Auditors 1545, 101 - 6th Avenue S.W.
PricewaterhouseCoopers LLP Calgary, Alberta T2P 3P4
Calgary, Alberta Phone: (403) 269-5218
Fax: (403) 269-5221
Evaluation Engineers Website: www.cariboures.com
McDaniel & Associates Consultants Ltd. Contact: Christina M. Fehr
Email: cmfehr@cariboures.com
Banker
Canadian Imperial Bank of Commerce Stock Exchange Listing
TSX Venture Exchange
Legal Counsel Symbol: CBU
Blake, Cassels & Graydon LLP
Gowling Lafleur Henderson LLP


Contact Information

  • Caribou Resources Corp.
    Christina M. Fehr
    Vice Chairman & CEO
    (403) 539-4322
    or
    Caribou Resources Corp.
    Ross Robertson
    President & COO
    (403) 539-4316
    or
    Caribou Resources Corp.
    Suite 1545, 101- 6th Ave SW
    Calgary, Alberta T2P 3P4
    Website: www.cariboures.com