Caribou Resources Corp.
TSX VENTURE : CBU

Caribou Resources Corp.

May 30, 2006 17:32 ET

Caribou Resources Corp. Q1 2006 Financial and Operating Results

CALGARY, ALBERTA--(CCNMatthews - May 30, 2006) - Caribou Resources Corp. ("Caribou") (TSX VENTURE:CBU) is pleased to report its operational and financial results for the three months ended March 31, 2006:

Highlights

- At the time of writing this report, Caribou's average production is in the range of 1,900 to 2,000 boe/d, with a further two wells which are now tied in, remaining to be placed on production in Northern Alberta, as well as one well at Redwater in Central Alberta. As discussed in the Company's April 4, 2006 press release, January production was approximately 1,700 boe/d. Approximately 300 boe/d of production was shut-in throughout the months of February and March in order to perform two dual zone completions and a two week gas plant turnaround at Bistcho. Base production was restored to 1,700 boe/d by mid-April 2006.

- Q1 2006 was the most active quarter in the Company's history with approximately $25 million of capital being expended, including $4 million on land and seismic. Since January 20, 2006, Caribou has executed the following winter drilling program:

-- Drilled eleven wells (74% W.I.); cased and completed eight wells; two wells to be completed in winter 2006/2007.

-- Carried out two significant dual completions of existing wells. As indicated in our April 4, 2006 press release, these operations, combined with the Bistcho plant turnaround, required the shut-in of approximately 300 boe/d for February and March. Production was restored to the 1,700 boe/d level in mid-April.

-- Followed up a new light oil discovery at Steen in our Northern area with the drilling of a significant oil well, which can be accessed on a year round basis. We intend to follow-up on this discovery during the summer/fall of 2006 with up to six infill wells.

-- Acquired 8,960 acres of undeveloped land, offsetting successful drilling, and saw land values in our core areas increase significantly higher than the Company's entry position into its lands.

-- Shot and processed three separate 3D seismic programs (total 22 km2) in Central Alberta which have been interpreted and are being incorporated into our summer/fall program.

-- Successfully recompleted an existing Redwater core area well (70% W.I.) in an upper Ellerslie sand, with resulting initial gross production tests of over 200 boe/d and 350 mcf/d gas. Caribou estimates an initial on-production rate of approximately 90 boe/d (net). The well is now expected to be tied-in in June as a result of access issues. Downspacing of the oil play (one section) and evaluations of waterflood feasibility is underway.

- Despite an increasing cost environment, Caribou's operating, transportation, and processing costs for Q1 2006 were reduced from Q4 2005, reflecting the results of increased ownership in facilities.

- Strong netbacks of $34.28 reflect the Company's strategy to maintain a portfolio of light oil/natural gas production and a balanced prospect inventory.

- During the balance of 2006, Caribou intends to drill up to a total of twelve locations (75% oil targets) in our Northern and Central Alberta areas. A more detailed review of our drilling plans for the remainder of the year can be found in the operations section.



Three months ended March 31
2006 2005 % change
------------------------------------------------------------------------
Financial ($000's, except shares
and per share amounts)
Oil and natural gas revenues 6,652 6,376 4
Funds flow from operations (1) 3,367 2,667 26
Per share - basic (1) 0.10 0.09 11
Net loss (775) (1,236) (37)
Per share - basic (0.02) (0.04) (50)
Per share - diluted (0.02) (0.04) (50)
Total assets 138,511 98,003 41
Bank debt 15,562 14,443 8
Short-term bridge facility 13,500 - n/a
Shareholders' equity 66,053 51,803 28
Common shares outstanding 34,849,924 28,167,165 24
Weighted average - basic 34,849,924 28,141,721 24
Weighted average - diluted 34,923,780 28,141,721 24
------------------------------------------------------------------------

Operating (boe - 6:1 basis)

Sales volumes
Natural gas (mcf/day) 5,704 3,569 60
Crude oil and NGL's (bbls/day) 499 778 (36)
Total oil equivalent (boe/day) (2) 1,450 1,373 6
Product prices ($)
Natural gas per mcf 7.40 7.23 2
Crude oil and NGL's per bbl 63.45 57.90 10
Operating expense per boe ($) (3) 13.32 14.31 (7)
Netback per boe ($) 34.28 28.05 22
------------------------------------------------------------------------
------------------------------------------------------------------------

(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) As discussed in the Company's April 4, 2006 press release, January
production was approximately 1,700 boe/d. Approximately 300 boe/d of
production was shut-in throughout the months of February and March
in order to perform two dual zone completions and a two week gas
plant turnaround at Bistcho. Base production was restored to 1,700
boe/d by mid-April 2006. Corporate production at May 17 is in the
range of 1,900 to 2,000 boe/d.

(3) Includes charges for transportation, gas gathering and processing.
See MD&A for details.


Message to Shareholders

The focus and commitment that has established the significant opportunity base was carried into the first quarter of 2006. We are beginning to realize the results of our efforts and the potential in our asset base. Since commencing the most active operational quarter in our Company's history on January 20, 2006, Caribou has executed the following program:

- Drilled eleven wells (74% W.I.); cased and completed eight wells, with two wells to be completed in winter 2006/2007, and completed two significant dual completions of existing wells.

- Followed up a new light oil discovery in our Northern area which will have year-round access. We intend to follow-up on this discovery during the fall of 2006 with up to six infill wells.

- Was successful in adding 8,960 new acres of undeveloped land, offsetting successful drilling, and saw land values in our core areas increase significantly higher than the Company's entry position into its lands.

- Shot and processed three separate 3D seismic programs (total 22 km2) in Central Alberta which been interpreted for incorporation into our summer/fall program.

- Successfully recompleted an existing Redwater core area well (70% W.I.) in an upper Ellerslie sand, with resulting initial gross production tests of over 200 boe/d and 350 mcf/d gas. Caribou expects an initial on-production rate of approximately 90 boe/d (net). The well is expected to be tied-in in June. Downspacing of the oil play (one section) and evaluations of waterflood feasibility is underway.

- Caribou has a drilling rig secured under contract until April 2007, and is expecting to commence operations in July 2006.

- During the balance of 2006, we will carry forward into Central Alberta, the strong operational momentum from our Northern Alberta Q1 program. Caribou intends to drill up to a total of twelve locations (75% oil targets) during the summer/fall in Central and Northern Alberta.

Despite the challenges that face our industry, the outlook for the Company is extremely promising.



On behalf of the Board of Directors,


Christina M. Fehr, BA, MSc Ross G. Robertson, P.Eng
Vice Chairman and CEO President and COO
May 17, 2006


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 three month period ended March 31, 2006, as well as the audited financial statements and MD&A for the years ended December 31, 2005 and 2004 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.

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 oil and natural gas in Northern and Central Alberta. The following discussion and analysis is dated May 17, 2006, and is management's assessment of Caribou's three months ended March 31, 2006 ("Q1") operating and financial results, compared to the corresponding periods for 2005.

Operations

Since commencing the winter program on January 20th 2006, Caribou has participated in the drilling of eleven wells (74% WI), completed two significant dual completions (100% WI), tied in eight wells, constructed 26 km of pipeline, shot 22 km 2 of 3D seismic, and acquired 8,960 acres of 100% WI Crown lands offsetting successful production projects.

In the Larne/Tate area, seven wells were drilled and cased (66% WI) targeting the Slave Point/Sulphur Point formations. The Company and its joint venture partner performed six completions. Two wells (50% WI) in the Tate area had initial Sulphur Point test rates of 6 mmcf/d and 2.3 mmcf/d respectively. One of the wells was placed on production at the end of April, and is currently producing approximately 1.4 mmcf/d (gross). The second well is tied in and is expected to be placed on production before June 1, 2006. A third well drilled in this area (12.5% WI) at the end of the drilling program tested 2 mmcf/d from the Sulphur Point and will be tied in next winter. Caribou was successful in acquiring 100% WI in eight additional sections (5,120 net acres) of Crown lands adjacent to the successful drilling program for follow-up drilling next winter. Caribou also has an initial Slave Point test of 1 mmcf/d from a fourth well (100% WI) at Larne, a new step out discovery from the main pool where the Company has a significant adjoining high working interest land position. This new discovery well was drilled at the end of the drilling program and will be tied in next winter. A fifth well (100% WI), is believed to be in the main Slave Point pool. Perforation and stimulation operations will be carried out next winter on that well and two other wells (52.5% WI) which pending results, will also be tied in early next winter.

At Cameron Hills, the Company completed the tie-in to its northern gas gathering system of two previously drilled wells (100% WI). The wells were placed on stream in early April at a combined rate of over 500 mcf/d.

At Steen River, two significant dual recompletions of existing wells (100% WI) were completed in April. One of the wells was dually completed to allow for gas production from the Slave Point and Sulphur Point formations, the second for gas from the Sulphur Point and oil from the Keg River formations. As stated in our April 4, 2006 press release, these operations were complex and required the shut-in of existing production in conjunction with the Bistcho plant turnaround of approximately 300 boe/d for February, March, and part of April. The wells were brought back on production in mid-April. The dual zone Slave Point/Sulphur Point gas well is producing at approximately 1.0 mmcf/d and appears to be improving, and the Sulphur Point/Keg River well is producing at approximately 425 mcf/d and 43 boe/d.

Caribou also drilled and cased two wells (100% WI) in the Steen area. The Company has completed and is currently in the process of placing on production one of the wells, a step out well to a significant long reserve life Keg River oil producer. The Company believes, that based on its 3D seismic interpretation over the structure, this step out well confirms the presence of an exciting new light oil development project with up to six infill locations (100% WI) on 40 acre spacing. The well swab tested at an initial production test rate of over 150 bopd. Caribou expects the well to commence production on May 17 at 100 boe/d. Within five miles on a similar geological structure where the Company currently has approximately 20% WI, existing Keg River producing oil wells have recovered between 600,000 and 750,000 bbls and are still producing at rates between 70 and 225 boe/d (gross) since commencing year-round production at initial rates of 200 - 400 boe/d in the late 1990's. Because the lands are located in an area that is geographically more elevated than surrounding muskeg areas, it will allow for year round access after construction of a three mile stretch of all weather road. The development area is located three miles from an existing year round access road and the Company anticipates commencing construction of the road by early July to enable drilling of the Keg River structure by late summer/early fall. In addition, the Company is currently pursuing the down spacing of the development area.

Caribou was successful in completing a seven mile pipeline at Steen West at the end of April that has to date allowed the tie-in of two wells (100% WI) at the beginning of May that are currently producing 770 mcf/d. The second well drilled and cased at Steen will be completed next winter as a potential Slave Point gas well which can be tied in to the newly constructed pipeline. In addition there is an existing completed Slave Point gas well which will also be tied in next winter to the pipeline. It has production tested at initial rates as high as 800 mcf/d. The Company has also identified additional drilling locations on its 100% WI lands for next winter along the route of the pipeline. An additional 3,840 acres of 100% WI lands offsetting successful operations performed this winter in the area were also acquired in the first quarter.

At Indian Cabins (100% WI) the Company drilled and completed one well which was unsuccessful.

In Central Alberta, Caribou shot three separate 3D seismic programs which have been processed and interpreted for application to our summer/fall program at Redwater (7.5 km2), Wizard Lake (6.7 km2) and Westlock (7.8 km2). In the Wizard Lake area, Caribou's 3D seismic interpretation efforts will result in the summer/fall drilling of a potential high impact Leduc oil target (70% WI) and up to three high graded Ellerslie gas locations (70% WI). In addition the Company plans to twin an older mechanically junked well drilled by a previous operator which had tested over 1.0 mmcf/d of gas from a bypassed interval.

At Redwater, the Company continued with surface approval and pipeline construction planning associated with the tie-in of an Ellerslie well (70% WI). The Company had previously recompleted and hydraulically fractured an upper Ellerslie interval which had initial gross production test rates of over 200 boe/d of light oil and 350 mcf/d. Caribou estimates an initial on-production rate of approximately 90 boe/d (net). The Company expects to have the pipeline (2.5 km) completed by mid-June. A second well (100% WI), and third well (70%) have been identified for recompletion and fracture stimulation in the Ellerslie. This work will be carried out just before the pipelining to facilitate timely tie-in of the other wells given successful results. Caribou is investigating down spacing of the Ellerslie in the vicinity of the development (one section) and anticipates potential drilling of up to six infill wells. Caribou will be proceeding imminently with two of the locations which are not contingent on the downspacing. The wells will be drilled to also penetrate the deeper Basal Quartz section to allow evaluation and delineation of a Basal Quartz oil pool underlying the upper Ellerslie sand. Caribou is also assessing waterflood feasibility of the Ellerslie interval. The Company has high working interest lands (50%-100%) offsetting this play. In the Redwater main Basal Quartz Pool Area, Caribou intends to drill up to two horizontal re-entries of existing horizontal wells to add additional horizontal legs. In addition Caribou is planning to drill an overlying Ellerslie interval to evaluate future horizontal development opportunities in the Middle Ellerslie Pool. In addition to horizontal well development drilling assessment, Caribou is also examining waterflood feasibility of the Middle Ellerslie Sand and plans to drill up to three vertical wells targeting Middle Ellerslie and Detrital Sands. These wells will assist in delineating the size of the new oil pools. Caribou has one drilling rig under contract to April 2007 and will use two rigs to carry out its exciting summer/fall program in Central and Northern Alberta.



Net loss and funds flow

Three months ended March 31
$ 2006 2005
------------------------------------------------------------------------
Net loss (775,399) (1,235,726)
Per share - basic (0.02) (0.04)
Per share - diluted (0.02) (0.04)
Funds flow from operations 3,367,288 2,666,902
Per share - basic 0.10 0.09
Per share - diluted 0.10 0.09
------------------------------------------------------------------------
------------------------------------------------------------------------

The Company has recorded a loss for the three months ended March 31,
2006. Although netbacks have increased, higher depletion, interest and
stock-based compensation costs have contributed to a loss in 2006,
albeit 37% less than in Q1 2005.

Higher production levels and marginally higher natural gas prices in the
first quarter of 2006, compared to the same period in 2005, have
resulted in a 26% increase in funds flow over Q1 2005. The increase in
funds flow per share was 11% since there was a 24% increase in the
number of shares outstanding.

Oil and natural gas revenues

Three months ended March 31
$ 2006 2005
------------------------------------------------------------------------
Oil and liquids 2,851,068 4,052,267
Per barrel 63.45 57.90
Natural gas 3,800,824 2,323,786
Per mcf 7.40 7.23
------------------------------------------------------------------------
------------------------------------------------------------------------

Through slightly higher prices for both oil and natural gas, combined
with greater total production volumes over the same quarter in 2005,
revenues increased 4%. The 36% reduction in the production of oil and
liquids was more than offset by the increased revenue attributed to the
60% increase in natural gas volumes. Since Q1 2005, the product mix as
determined by revenues has changed from 64:36 (oil and liquids to
natural gas) to 39:61.

Royalties

Three months ended March 31
$ (except %) 2006 2005
------------------------------------------------------------------------
Royalties, net of ARTC 440,224 1,143,691
Per boe 3.37 9.26
% of revenue 6.6% 17.9%
------------------------------------------------------------------------
------------------------------------------------------------------------

Royalties decreased substantially in 2006 due mainly to the application
of increased gas cost allowances associated with strategic asset
acquisitions completed in the fall of 2005.

Operating, transportation, gathering and processing

Three months ended March 31
$ 2006 2005
------------------------------------------------------------------------
Operating 1,466,541 1,316,152
Per boe 11.24 10.65
Transportation 182,129 119,852
Per boe 1.39 0.97
Gas gathering and processing 89,596 331,816
Per boe 0.69 2.69
------------------------------------------------------------------------
Total operating, transportation,
gathering and processing 1,738,266 1,767,820
Per boe 13.32 14.31
------------------------------------------------------------------------

Operating costs increased both in total and on a per boe basis due to
the higher level of production and increased field costs, while
transportation costs, particularly at Bistcho, increased substantially.
However, these increases were more than offset by the reductions in gas
gathering and processing charges following both the assumption of
operatorship at Larne in June 2005, and the infrastructure acquisitions
undertaken in the fall of 2005.

Netbacks

Three months ended March 31
$/boe 2006 2005
------------------------------------------------------------------------
Revenue 50.97 51.62
Royalty, net of ARTC 3.37 9.26
Operating, transportation,
gathering and processing expenses 13.32 14.31
------------------------------------------------------------------------
Operating netback 34.28 28.05
------------------------------------------------------------------------
General and administrative 4.97 5.52
Interest 3.37 0.83
Taxes 0.14 0.11
------------------------------------------------------------------------
Cash netback 25.80 21.59
------------------------------------------------------------------------
------------------------------------------------------------------------

A 22% improvement in the field netbacks was achieved despite a nominal
decrease in revenues per boe. This was achieved principally through much
lower effective royalty rates, as explained above, but also through
reduced operating costs.

Cash netbacks thus improved by 19% despite higher interest expenses.

General and administrative ("G&A")

Three months ended March 31
$ 2006 2005
------------------------------------------------------------------------
General and administrative 647,935 681,628
Per boe 4.97 5.52
------------------------------------------------------------------------
------------------------------------------------------------------------

G&A in 2006 decreased slightly, by 5%, compared to 2005. During the
quarter, Caribou capitalized approximately $278,000 (2005 - nil) 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.

However, G&A costs per boe have decreased 10%, compared to 2005,
reflecting higher production levels.

Stock-based compensation

Three months ended March 31
$ 2006 2005
------------------------------------------------------------------------
Stock-based compensation 229,966 137,335
Per boe 1.76 1.11
------------------------------------------------------------------------
------------------------------------------------------------------------

Total stock-based compensation in 2006 increased from 2005, reflecting
the stock options issued to the increased complement of full-time staff
and consultants required for the growth of the Company.

Interest and other financing charges

Three months ended March 31
$ 2006 2005
------------------------------------------------------------------------
Interest and other financing charges 439,669 103,082
Per boe 3.37 0.83
------------------------------------------------------------------------
------------------------------------------------------------------------

The increased loan carrying costs reflect both the higher levels of
principal and subordinated debt now carried by the Company, as well as
higher interest rates.

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

Three months ended March 31
$ 2006 2005
------------------------------------------------------------------------
Depletion and depreciation 4,106,472 4,052,816
Per boe 31.47 32.80
Accretion 97,491 62,138
Per boe 0.75 0.50
------------------------------------------------------------------------
------------------------------------------------------------------------

DD&A marginally increased in the quarter ended March 31, 2006, compared
to the same period in 2005, mainly due to increased capital spending.
On a per boe basis, DD&A decreased by 4%, reflecting increased
production in the first quarter of 2006, compared to 2005.

Taxes

Three months ended March 31
$ 2006 2005
------------------------------------------------------------------------
Capital taxes 18,510 13,037
Future income tax expense (recovery) (291,242) (349,661)
------------------------------------------------------------------------
------------------------------------------------------------------------


For the quarter ended March 31, 2006, the Company incurred capital taxes, namely the Federal Large Corporations Tax (LCT). The LCT increased in the quarter corresponding with the increase in the Company's taxable capital base.

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 estimated that available tax pools to reduce future taxable income are approximately $84.4 million. The Company has a further $2.3 million CEE to incur to honor the commitments of the September 2005 flow-through share issue.

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.

Caribou has a credit facility of $15.5 million. At March 31, 2006 the amount drawn against this credit facility was $15.6 million.

A $13.5 million subordinated development bridge facility was obtained during the fourth quarter of 2005 from an independent Canadian lending company. This facility has a June 30, 2006 repayment date.



Capital expenditures

Three months ended March 31
$ 2006 2005
------------------------------------------------------------------------
Seismic and geological evaluation 612,983 65,406
Land acquisition and retention 4,008,866 119,524
Well drilling, completion and equipping 20,651,347 13,530,360
Office equipment 13,552 39,355
------------------------------------------------------------------------
Total 25,286,748 13,754,645
------------------------------------------------------------------------
------------------------------------------------------------------------


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 three months ended March 31, 2006, the Company's legal counsel invoiced $285 (2005 - $51,745) for legal work charged. The Company's Corporate Secretary is a partner in the legal firm. Included in accounts payable at March 31, 2006 is $nil (2005 - $51,745) 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 the notes to the financial statements. Caribou follows policies that are in accordance with Canadian generally accepted accounting principles.

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.

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 34,849,924 common shares outstanding at March 31, 2006, and the same amount of common shares outstanding as at the date of this report. As at March 31, 2006 there were 1,614,573 share purchase warrants outstanding.

The Company's stock option plan provides for granting of options to directors, employees and consultants. At March 31, 2006 a total of 3,257,500 options were outstanding.

Outlook

We will carry on in Central Alberta with the operational momentum established in the first quarter. During the summer/fall, Caribou intends to drill up to a total of twelve locations (75% oil targets) in Central Alberta and in the follow-up to the new light oil discovery at Steen in Northern Alberta. Caribou has a balance of light oil and natural gas production and prospects. Caribou will continue to monitor oil and gas prices and remain flexible in the execution of our program. The Company views current gas prices as reflecting the lower end of the trading range and anticipates that future gas prices next winter will be in the $10 per mcf range. We will continue to endeavour to improve on all facets of our business despite the increasing cost pressures and challenges facing our industry.



Summary of quarterly operating and financial results
------------------------------------------------------------------------
------------------------------------------------------------------------
2006 2005
------------------------------------------------------------------------
First Fourth Third Second First
------------------------------------------------------------------------
Operating
Natural gas (mcf/day) 5,704 6,391 4,672 4,814 3,569
Price ($/mcf) 7.40 11.36 9.47 7.18 7.23
Oil and NGL's (bbls/day) 499 638 700 671 778
Price ($/bbl) 63.45 63.44 70.37 61.51 57.90
Barrels of oil equivalent
(per day) 1,450 1,703 1,479 1,473 1,373

Financial ($000's, except
per share amounts)
------------------------------------------------------------------------
Oil and natural gas
revenues 6,652 10,590 8,618 6,900 6,376
Royalties, net of ARTC (440) (1,831) (1,554) (941) (1,144)
Interest and other revenue - - - - -
------------------------------------------------------------------------
Net revenues 6,212 8,759 7,064 5,959 5,232
------------------------------------------------------------------------
Operating expenses 1,467 1,809 1,201 1,386 1,316
Transportation, gathering
and processing (1) 272 424 353 459 452
General and administrative 648 469 619 593 681
Stock-based compensation 230 298 302 141 137
Depletion and depreciation 4,106 4,417 4,424 4,511 4,053
Interest 440 367 538 123 104
Accretion 97 93 67 65 62
------------------------------------------------------------------------
Total expenses 7,260 7,877 7,504 7,278 6,805
------------------------------------------------------------------------
Income (loss) before
income taxes and non-
controlling interest (1,048) 882 (440) (1,319) (1,573)
Capital taxes (18) (49) (22) (14) (12)
Future income taxes 291 443 100 362 349
------------------------------------------------------------------------
Net income (loss) for the
period, before non-
controlling interest (775) 1,276 (362) (971) (1,236)
Non-controlling interest - - - - -
------------------------------------------------------------------------
Net income (loss) for the
period (775) 1,276 (363) (971) (1,236)
------------------------------------------------------------------------
------------------------------------------------------------------------
Income (loss) per share
(basic and diluted) (0.02) 0.04 (0.01) (0.03) (0.04)
------------------------------------------------------------------------
Funds flow ($000's) 3,367 5,642 4,329 3,386 2,667
------------------------------------------------------------------------
Funds flow per share
(basic) 0.10 0.16 0.15 0.12 0.09
------------------------------------------------------------------------
Netbacks ($/boe)
------------------------------------------------------------------------
Oil and natural gas
revenues 50.97 67.59 63.34 51.48 51.62
Royalties, net of ARTC 3.37 11.68 11.42 7.02 9.26
Operating expenses 13.32 14.25 11.42 13.77 14.31
------------------------------------------------------------------------
Operating netback 34.28 41.66 40.49 30.69 28.05
General and administrative 4.97 2.99 4.55 4.42 5.52
Interest 3.37 2.34 3.96 0.92 0.83
Capital taxes 0.14 0.31 0.16 0.10 0.11
------------------------------------------------------------------------
Cash netback 25.80 36.02 31.82 25.25 21.59
------------------------------------------------------------------------
------------------------------------------------------------------------
Total assets ($000's) 138,511 119,683 110,341 94,180 98,003
------------------------------------------------------------------------
------------------------------------------------------------------------


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

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

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


Caribou Resources Corp.
Balance Sheets

As at March 31, 2006 and December 31, 2005

(unaudited)

2006 2005
------------------------------------------------------------------------
ASSETS
Current assets
Prepaid expenses $ 754,145 $ 810,548
Accounts receivable 10,080,627 12,499,328
------------------------------------------------------------------------
10,834,772 13,309,876
Property, plant and equipment (note 2) 125,068,945 103,765,670
Goodwill 2,607,407 2,607,407
------------------------------------------------------------------------
$ 138,511,124 $ 119,682,953
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness (note 3) $ 15,562,436 $ 10,545,177
Short-term bridge facility (note 3) 13,500,000 13,500,000
Accounts payable and accrued liabilities 25,849,793 11,422,696
------------------------------------------------------------------------
54,912,229 35,467,873
Asset retirement obligations (note 4) 4,680,071 4,459,585

Future income taxes (note 5) 12,865,833 9,581,922
------------------------------------------------------------------------
72,458,133 49,509,380
------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Share capital (note 6) 67,639,432 71,214,584
Warrants (note 6c) 1,111,527 1,111,527
Contributed surplus (note 7) 1,648,294 1,418,328
Deficit (4,346,262) (3,570,866)
------------------------------------------------------------------------
66,052,991 70,173,573
------------------------------------------------------------------------
$ 138,511,124 $ 119,682,953
------------------------------------------------------------------------
------------------------------------------------------------------------

Commitments (note 10). Basis of Presentation (note 1).

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 three months ended March 31, 2006 and 2005

(unaudited)

2006 2005
------------------------------------------------------------------------
REVENUES
Oil and natural gas $ 6,651,892 $ 6,376,053
Interest and other revenue - 107
Less: Royalties, net of ARTC (440,224) (1,143,691)
------------------------------------------------------------------------
6,211,668 5,232,469
------------------------------------------------------------------------
EXPENSES
Operating 1,466,541 1,316,152
Transportation, gathering and processing 271,725 451,668
General and administrative 647,935 681,628
Stock-based compensation (note 6f) 229,966 137,335
Interest and other financing charges 439,669 103,082
Accretion (note 4) 97,491 62,138
Depletion and depreciation 4,106,472 4,052,816
------------------------------------------------------------------------
7,259,799 6,804,819
------------------------------------------------------------------------
(1,048,131) (1,572,350)
------------------------------------------------------------------------
Capital taxes (18,510) (13,037)
Future income tax recovery (note 5) 291,242 349,661
------------------------------------------------------------------------
272,732 336,624
------------------------------------------------------------------------

NET LOSS FOR THE PERIOD (775,399) (1,235,726)
Deficit, beginning of period (3,570,863) (2,277,922)
------------------------------------------------------------------------
Deficit, end of period $ (4,346,262) $ (3,513,648)
------------------------------------------------------------------------
------------------------------------------------------------------------

Net loss per share (note 6e)
Basic $ (0.02) $ (0.04)
Diluted $ (0.02) $ (0.04)
------------------------------------------------------------------------
------------------------------------------------------------------------
Weighted average common shares outstanding
Basic 34,849,924 28,141,721
Diluted 34,923,780 28,141,721
Outstanding shares 34,849,924 28,167,165
------------------------------------------------------------------------
------------------------------------------------------------------------

Basis of Presentation (note 1).

See accompanying notes to Financial Statements


Caribou Resources Corp.
Statements of Cash Flows

For the three months ended March 31, 2006 and 2005

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

OPERATING
Net loss for the period $ (775,399) $ (1,235,726)
Add (deduct) items not affecting cash:
Depletion and depreciation 4,106,472 4,052,816
Stock-based compensation 229,966 137,335
Accretion 97,491 62,138
Future income taxes (291,242) (349,661)
------------------------------------------------------------------------
Funds flow from operations 3,367,288 2,666,902
Change in non-cash working capital 17,575,191 939,823
------------------------------------------------------------------------
20,942,479 3,606,725
------------------------------------------------------------------------

FINANCING
Bank debt 5,017,259 5,237,047
Issue of common shares, net of costs - 63,709
------------------------------------------------------------------------
5,017,259 5,300,756
------------------------------------------------------------------------

INVESTING
Property, plant and equipment (25,286,748) (13,754,645)
Change in non-cash working capital (672,990) 4,847,164
------------------------------------------------------------------------
(25,959,738) (8,907,481)
------------------------------------------------------------------------
Decrease in cash - -
Cash, beginning of period - -
------------------------------------------------------------------------
Cash, end of period $ - $ -
------------------------------------------------------------------------
------------------------------------------------------------------------

Cash is defined as cash and cash equivalents

See accompanying notes to Financial Statements


Caribou Resources Corp.
Notes to the Financial Statements

For the three months ended March 31, 2006 and 2005

(unaudited)


Note 1: Basis of presentation

These interim financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles consistent with those used in preparation of the audited financial statements at December 31, 2005. Accordingly, these interim financial statements should be read in conjunction with the notes contained in the Company's audited December 31, 2005 financial statements.

As at March 31, 2006, the Company had a working capital deficiency, excluding bank indebtedness and short-term bridge facility (see Note 3), of $15,015,021 and a deficit of $4,346,262. The working capital deficiency primarily results from accounts payable and accrued liabilities incurred during the Company's winter drilling program. Management is proposing to repay this working capital deficiency through a combination of increased cash flow resulting from the Company's current drilling program, proceeds from potential asset sales and future bank financing and equity issues (see Note 11). The actual outcome of future events may differ from these plans. 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: Property, plant and equipment
March 31, December 31,
$ 2006 2005
------------------------------------------------------------------------
Oil and natural gas properties, plant and
equipment 151,237,215 125,841,020
Office equipment and computers 129,946 116,394
------------------------------------------------------------------------
151,367,161 125,957,414
Less accumulated depletion and depreciation (26,298,216) (22,191,744)
------------------------------------------------------------------------
125,068,945 103,765,670
------------------------------------------------------------------------
------------------------------------------------------------------------


Unproved oil and gas properties amounting to $23.6 million (2005 - $13.5 million) were excluded from the depletion and depreciation calculation. Future development costs on proved undeveloped reserves of $9.2 million (2005 - $4.0 million) are included in the depletion calculation. No ceiling test write-down was required as at March 31, 2006.

During the quarter, Caribou capitalized approximately $278,000 (2005 - nil) of general and administrative expenses directly related to exploration and development activities.



Note 3: Loans
March 31, December 31,
$ 2006 2005
------------------------------------------------------------------------
Bank indebtedness 15,562,436 10,545,177
Short-term bridge facility 13,500,000 13,500,000
------------------------------------------------------------------------
------------------------------------------------------------------------


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.

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 and the maturity date is June 30, 2006. The bridge facility is subordinated to the above revolving credit facility.



Note 4: Asset retirement obligations
March 31, December 31,
$ 2006 2005
------------------------------------------------------------------------
Balance - beginning of period 4,459,585 2,918,925
Liabilities incurred 122,995 1,253,572
Accretion 97,491 287,088
------------------------------------------------------------------------
4,680,071 4,459,585
Expenditures - -
------------------------------------------------------------------------
Balance - end of period 4,680,071 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 - $4.9 million) which will be incurred between 2006 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: Taxes

The difference between the expected income tax provision based on the
combined federal and provincial statutory tax rate of 35.62% (2005
-37.62%) and the amount actually provided for is as follows:


March 31, March 31,
$ 2006 2005
------------------------------------------------------------------------
Tax expense at 35.62% of net loss before taxes (373,344) (591,518)
Non-deductible crown payments 135,219 294,191
Alberta Royalty Tax Credit (28,941) (30,566)
Stock-based compensation 81,914 51,665
Resource allowance (125,462) (161,633)
Non-deductible expenditures 2,046 -
Other - 68,458
Rate reduction 17,326 19,742
------------------------------------------------------------------------
Future income tax expense (recovery) (291,242) (349,661)
------------------------------------------------------------------------
------------------------------------------------------------------------


Note 6: 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, 2005 34,849,924 $ 71,214,584
Tax effect on renunciation of flow-through
shares - (3,575,152)
------------------------------------------------------------------------
Balance, at March 31, 2006 34,849,924 $ 67,639,432
------------------------------------------------------------------------
------------------------------------------------------------------------


(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, 2005, 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 Balance,
December price value Expiry March 31,
31, 2005 ($) ($)Expired Issued Exercised Date 2006
------------------------------------------------------------------------

109,973 2.00 208,767 - - - February 109,973
28, 2008
1,504,600 3.00 902,760 - - - September 1,504,600
8, 2006
------------------------------------------------------------------------
1,614,573 1,111,527 - - - 1,614,573
------------------------------------------------------------------------
------------------------------------------------------------------------


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 $10.6 million (2005 - $11.2 million) of qualifying oil and natural gas Canadian Exploration Expenses ("CEE") between December 31, 2005 and January 1, 2007. Caribou has renounced 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:

Three months ended March 31

2006 2005
------------------------------------------------------------------------
Weighted average common shares outstanding
- basic 34,849,924 28,141,721
Weighted average common shares outstanding
- diluted 34,923,780 28,141,721
------------------------------------------------------------------------
Net loss per share:
Net loss for the period ($) (775,399) (1,235,726)
Basic ($/share) (0.02) (0.04)
Diluted ($/share) (0.02) (0.04)


During 2006, 3,112,100 (2005 - 2,282,578) stock options and warrants were not dilutive and were omitted from the weighted average diluted common shares outstanding calculation.

(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:



Three months ended March 31 2006 2005
------------------------------------------------------------------------
Fair value of options granted ($/option) 1.03 0.63
Expected life of options (years) 3.5 3.5
Expected volatility (%) 85 69
Risk free rate of return (%) 3.5 3.6
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 March 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 period 2,937,500 2.17 2,092,791 2.12
Granted 320,000 2.03 230,000 2.06
Terminated - - (1,051) 2.25
Exercised for cash - - - -
------------------------------------------------------------------------
Balance, end of period 3,257,500 2.17 2,321,740 2.18
------------------------------------------------------------------------
------------------------------------------------------------------------
Exercisable, end of period 1,327,200 2.16 1,183,600 2.17
------------------------------------------------------------------------
------------------------------------------------------------------------


Outstanding options Exercisable options
-------------------------------------------------------------
Weighted
average Weighted Weighted
Number of remaining average Number of average
Exercise options contractual exercise options exercise
price outstanding life price exercisable price
------------------------------------------------------------------------
($/share) (years) ($/share) ($/share)

1.80 50,000 3.84 1.80 15,000 1.80
2.00 30,000 4.10 2.00 9,000 2.00
2.03 320,000 4.85 2.03 96,000 2.03
2.05 1,020,000 3.64 2.05 490,000 2.05
2.06 100,000 4.12 2.06 30,000 2.06
2.10 120,000 4.10 2.10 36,000 2.10
2.20 127,500 4.52 2.20 38,250 2.20
2.25 541,300 3.22 2.25 308,250 2.25
2.31 28,700 2.60 2.31 28,700 2.31
2.33 880,000 4.46 2.33 264,000 2.33
2.50 40,000 3.96 2.50 12,000 2.50
------------------------------------------------------------------------
2.17 3,257,500 3.98 2.17 1,327,200 2.16
------------------------------------------------------------------------
------------------------------------------------------------------------


Note 7: Contributed surplus

March 31, December 31,
$ 2006 2005
------------------------------------------------------------------------

Opening balance 1,418,328 603,997
Stock-based compensation 229,966 878,328
Exercise of stock options - (63,997)
------------------------------------------------------------------------
1,648,294 1,418,328
------------------------------------------------------------------------
------------------------------------------------------------------------


Note 8: 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 three months ended March 31, 2006, the Company's legal counsel invoiced $285 (2005 - $51,745) for legal work charged. The Company's Corporate Secretary is a partner in the legal firm. Included in accounts payable at March 31, 2006 is $nil (2005 - $51,745) due to the Company's legal counsel.

Note 9: Financial instruments

The Company's financial instruments recognized in the balance sheet consist of prepaid expenses, 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 10: Commitments

Under the terms of the Company's flow-through share agreements, the Company has committed to incur approximately $10.6 million (2005 - $11.2 million) of qualifying oil and natural gas Canadian Exploration Expenses ("CEE") between December 31, 2005 and January 1, 2007. Of this amount approximately $2.3 million is still to be incurred.

At March 31, 2006 the Company has 24 months remaining on the lease of the office premises at approximately $21,000 per month.

Note 11: Subsequent events

In May 2006, the Company entered into a bought deal private placement financing with a syndicate of underwriters. The offering will consist of 1,630,435 common shares at a price of $2.30 per common share, and 2,049,181 common shares issued on a flow-through basis at a price of $3.05 per flow-through share, for total gross proceeds of $10,000,000. Closing of the offering is expected to occur on June 6, 2006.

Note 12: 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 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) Donald Leitch, P.Eng
Bend, Oregon Vice President, Operations

Gerald D. Sutton, Chairman (1) (2) Daniel P.E. Fournier, LLB
Oakville, Ontario Corporate Secretary

(1) Member of the Audit Committee
(2) Member of the Compensation Corporate Office
Committee 1545, 101 - 6th Avenue S.W.
Calgary, Alberta T2P 3P4
Registrar and transfer agent Phone: (403) 269-5218
Valiant Trust Company Fax: (403) 269-5221
Calgary, Alberta Website: www.cariboures.com
Contact: Christina M. Fehr
Auditors Email: cmfehr@cariboures.com
PricewaterhouseCoopers LLP
Calgary, Alberta Stock Exchange Listing
TSX Venture Exchange
Evaluation Engineers Symbol: CBU
McDaniel & Associates Consultants
Ltd. Legal Counsel
Blake, Cassels & Graydon LLP
Banker Gowling Lafleur Henderson LLP
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. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

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.


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
    Website: www.cariboures.com