Cruiser Oil & Gas Ltd.
TSX VENTURE : COG

Cruiser Oil & Gas Ltd.

November 29, 2006 18:45 ET

Cruiser Announces Results for Three and Nine Months Ended September 30, 2006

CALGARY, ALBERTA--(CCNMatthews - Nov. 29, 2006) - Cruiser Oil & Gas Ltd. (TSX VENTURE:COG) ("Cruiser" or the "Company") is pleased to announce its financial and operating results for the three and nine months ended September 30, 2006 with comparatives for 2005.



-------------------------------------------------
Three months ended Nine months ended
September 30 September 30
-------------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS ($)
Petroleum and natural gas
sales 234,304 196,902 705,838 520,390
Funds from (used in)
operations 6,158 (35,975) 63,531 (83,218)
(Loss) for the period (131,456) (269,914) (154,135) (428,135)
Net capital expenditures 1,278,022 2,315,803 4,185,538 2,840,219
OPERATIONAL HIGHLIGHTS ($)
Daily production - boe/d
(6:1) 63 39 57 43
Price - $/boe 40.52 55.14 45.65 44.82
Operating Netback - $/boe 26.25 37.77 29.51 30.00
-----------------------------------------------


OPERATIONS UPDATE:

The Company's current working interest production is estimated to be 81 boe/day with approximately 165 boe/day waiting to be tied in or put back on production.

Development on the Company's non-operated Herronton property has resulted in the successful drilling, completion and testing of two gas wells. Both gas wells have been tied-in and are currently on production.

Gas production from the Blackstone 11-13 gas well was recently reduced due to its inability to produce against the pipeline back pressure. The operator is continuing to work on rectifying the situation.

The Ansell 12-13 well has been tied in and began producing from all commingled zones in early October.

The Blackstone 12-25 well is currently awaiting tie-in. The operator is continuing to explore tie-in alternatives.

Cruiser is nearing completion of the re-activation of the oil pipeline for its Swan Hills 15-26 horizontal well. Once the reactivation of the pipeline is complete, the Company will be producing and evaluating the well for high volume lift applications.

In the Willesden Green area, the Company is reviewing the results of its first well in order to assist it with planning future development.

Cruiser is evaluating additional prospects for the continued growth of the Company.

BOEs are derived by converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil (6 Mcf: 1 bbl). BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Douglas L. Meiklejohn, President & Chief Executive Officer

MANAGEMENT'S DISCUSSION AND ANALYSIS

This MD&A is dated as of November 29, 2006.

This Management's Discussion and Analysis ("MD&A") of financial results and related data is reported in Canadian dollars and has been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"), and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2005.

Information contained herein includes estimates and assumptions which management is required to make concerning future events, and may constitute forward-looking statements under applicable securities laws. Forward-looking statements include plans, expectations, estimates, forecasts and other comments that are not statements of fact. Although Cruiser Oil & Gas Ltd. ("Cruiser" or "the Company") views such expectations as reasonable, no assurance can be given that such expectations will be realized. Such forward-looking statements are subject to risks and uncertainties and may be based on assumptions that may cause actual results to differ materially from those implied herein, and therefore are expressly qualified in their entirety by this cautionary statement.

This MD&A presents and discusses results on a BOE (barrels of oil or equivalent) basis. This presentation may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 mcf: 1 bbl (barrel) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All BOE conversions in this report are derived by converting natural gas to oil in the ratio of nine thousand cubic feet of natural gas to one barrel of oil.

Cruiser Oil & Gas Ltd. changed its name from Hoodoo Hydrocarbons Ltd. in July 2005. Cruiser re-commenced trading on the TSX Venture Exchange on July 28, 2005.

THIRD QUARTER 2006 RESULTS

During the third quarter, the Company focused on the drilling of the Willesden Green 06-35 well and the Swan Hills 15-26 workover.

Production for the third quarter of 2006 averaged 63 boe/day as compared to 39 boe/day in the comparative third quarter of 2005. The increase in the comparative 2006 and 2005 periods is from the Blackstone 11-13 well. The average price for oil and natural gas liquids was $58.32 per barrel and the average price for gas was $5.58 per mcf during the third quarter of 2006. The average royalty rate for the quarter ended September 30, 2006 was 1%, which is a decrease from the comparative quarter in 2005 of 8%. The decrease is attributable to a gas royalty holiday on the Blackstone 11-13 well, all of which was recorded in the third quarter of 2006. Operating costs were $79,280, or $13.71 per boe, compared to $46,647, or $13.06 per boe, in the comparative quarter in 2005.

General and administrative expenses for the third quarter of 2006 were $136,772 as compared to $174,620 in the same period in 2005. The decrease is largely a result of legal fees that were billed during the third quarter of 2005 in regards to the debt settlements and recommencement of Cruiser trading on the TSX Venture Exchange.

Interest expense has increased to $25,108 for the third quarter of 2006, as compared to $16,700 in the same quarter of 2005. The interest expense for 2006 relates mainly to the unspent flow-through expenditures. For the comparative 2005 period, the flow-through proceeds were not raised until the third quarter of 2005 and the majority of the debt was paid during the earlier portion of 2005.

Depletion, depreciation and accretion for the third quarter of 2006 was $160,471 ($27.75 per boe) as compared to the third quarter of 2005 of $45,676 ($12.79 per boe). The increased amount is a result of the increased production in 2006 plus the increased cost of capital expenditures.

The loss for the third quarter of 2006 was $131,456 as compared to a loss of $269,914 during the same period in 2005.




FINANCIAL HIGHLIGHTS

-------------------------------------------------
Three months ended Nine months ended
September 30 September 30
---------------------------------------------------------------------------
$ 2006 2005 2006 2005
---------------------------------------------------------------------------
Petroleum and natural gas
sales 234,304 196,902 705,838 520,390
Funds from (used in)
operations 6,158 (35,975) 63,531 (83,218)
(Loss) for the period (131,456) (269,914) (154,135) (428,135)
Net capital expenditures 1,278,022 2,315,803 4,185,538 2,840,219
Weighted average shares
outstanding - basic 80,964,862 54,518,983 80,919,532 31,579,422
Common shares
outstanding
- end of period 80,964,862 80,589,862 80,964,862 80,589,862
-------------------------------------------------


SUMMARY OF QUARTERLY RESULTS

-------------------------------------------------
2006
-------------------------------------------------
$ September 30 June 30 March 31
---------------------------------------------------------------------------
Net petroleum and natural
gas revenue 234,304 270,529 201,005
Net income (loss) (131,456) 95,410 (118,089)
Net income (loss) per share (0.00) 0.00 (0.00)
Net capital expenditures 1,278,022 442,443 2,205,046

-------------------------------------------------
2005
-------------------------------------------------
$ December 31 September 30 June 30 March 31
---------------------------------------------------------------------------
Net petroleum and natural
gas revenue 199,621 196,902 151,111 172,377
Net income (loss) (293,680) (269,914) (157,345) (876)
Net income (loss) per share (0.01) (0.00) (0.01) (0.00)
Net capital expenditures 3,321,679 2,309,153 532,276 (7,960)
-------------------------------------------------
2004
-------------------------------------------------
$ December 31
---------------------------------------------------------------------------
Net petroleum and natural
gas revenue -
Net income (loss) 77,159
Net income (loss) per share 0.01
Net capital expenditures 1,610,997


NINE MONTHS ENDED SEPTEMBER 30 RESULTS

PETROLEUM AND NATURAL GAS SALES

Oil and gas revenues were $705,838 for the nine months ended September 30, 2006 as compared to $520,390 revenue in the comparative period of 2005. For the nine months ended September 30, 2006, prices for the Company's production averaged $59.87 per barrel of oil and liquids and $6.55 per mcf of natural gas as compared to $56.57 per barrel of oil and liquids and $6.82 per mcf of natural gas for the same period in 2005. The increased revenues were a result of primarily increased production.



-----------------------------------------------
Three months ended Nine months ended
September 30 September 30
-----------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------------
Petroleum and natural gas
sales ($) 234,304 196,902 705,838 520,390
$/BOE 40.52 55.14 45.65 44.82
---------------------------------------------------------------------------


PRODUCTION

For the nine months ended September 30, 2006, production of natural gas averaged 235 mcf/day and oil and NGL averaged 16 bbls/day for a total of 57 boe/day, as compared to an average of 163 mcf/day of natural gas and 15 bbls/day of oil and NGL for a total of 42 boe/day for the same period in 2005.



-----------------------------------------------
Three months ended Nine months ended
September 30 September 30
-----------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------------
Natural gas (mcf/d) 286 143 235 163
Crude oil and NGLs (bbls/d) 15 15 16 15
Total (boe/d) 63 39 57 43
Percentage natural gas (%) 76 62 68 64
---------------------------------------------------------------------------

ROYALTIES

-----------------------------------------------
Three months ended Nine months ended
September 30 September 30
-----------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------------
Net royalties ($) 3,200 15,381 75,675 49,597
Net royalties as a % of revenue 1 8 11 10
$/BOE 0.55 4.31 4.89 4.27
---------------------------------------------------------------------------


The reduction in the third quarter of 2006 was a result of the Blackstone 11-13 well being granted royalty holiday status and the previous royalty expense was credited during the quarter.

OPERATING EXPENSES

During the nine months ended September 30, 2006, the Company incurred operating expenses of $173,858 as compared to $122,512 for the same period in 2005.



-----------------------------------------------
Three months ended Nine months ended
September 30 September 30
-----------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------------
Operating expenses ($) 79,280 46,647 173,858 122,512
$/BOE 13.71 13.06 11.24 10.55
---------------------------------------------------------------------------


GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased to $427,999 for the nine months ended September 30, 2006 from $332,019 for the comparative period in 2005. The increase was a result of Cruiser's increased capital program and related revenues.



-----------------------------------------------
Three months ended Nine months ended
September 30 September 30
-----------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------------
General and administrative
expense ($) 136,772 174,620 427,999 332,019
$/BOE 23.65 48.90 27.68 28.59
---------------------------------------------------------------------------


INTEREST INCOME AND EXPENSE

Interest expense for the nine months ended September 30, 2006 decreased to $53,542 from $134,881 for the comparative period in 2005. At the end of 2004, the Company had loan obligations of $1.2 million, all of which was paid out during 2005. In addition, equity issues during 2005 increased the cash balances and interest was earned on these balances. The majority of the interest expense for 2006 relates to the interest accrued on the unspent flow-through expenditures. This interest accrues on a monthly basis and must be paid prior to the end of February 2007.



-----------------------------------------------
Three months ended Nine months ended
September 30 September 30
-----------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------------
Interest expense ($) 25,108 16,700 53,542 134,881
Interest income ($) 14,131 18,313 74,184 18,313
Net interest expense ($/BOE) 4.34 (0.45) (1.34) 9.91
---------------------------------------------------------------------------

DEPLETION AND DEPRECIATION

Depletion and depreciation for the nine months ended September 30, 2006 was
$445,160 compared to $180,893 for the same period in 2005.


-----------------------------------------------
Three months ended Nine months ended
September 30 September 30
-----------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------------
Depletion and depreciation
($) 156,954 42,862 445,160 180,893
$/BOE 27.14 12.00 28.79 15.58
---------------------------------------------------------------------------


ASSET RETIREMENT OBLIGATIONS

The obligation at the end of September 30, 2006 is estimated to be $215,550 based on the total undiscounted obligation of $505,900 adjusted for a discount rate of 8% and inflation of 2% over an average reserve life of 11 years. Accretion of $10,301 for the nine months ($8,400 for the same period of 2005) was recorded.



-----------------------------------------------
Three months ended Nine months ended
September 30 September 30
-----------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------------
Accretion expense ($) 3,517 2,814 10,301 8,400
$/BOE 0.61 0.79 0.67 0.72
---------------------------------------------------------------------------


FUNDS FROM OPERATIONS

For the nine months ended September 30, 2006, there were funds from operations of $63,531 as compared to funds used in operations of $83,128 during the same period of 2005.



-----------------------------------------------
Three months ended Nine months ended
September 30 September 30
-----------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------------
Funds from (used in)
operations ($) 6,158 (35,975) 63,531 (83,218)
---------------------------------------------------------------------------


Funds from operations is a non-GAAP measure that represents funds generated from operating activities before changes in non-cash working capital. This is considered a key measure as it demonstrates the Company's ability to generate the funds necessary to fund future growth through capital investment. Funds from operations may not be comparable to similar measures used by other companies.

NET LOSS

The net loss for the nine months ended September 30, 2006 was $154,135 compared to a net loss of $428,135 over the same period in 2005. The decrease in net loss was due the adjustment to future tax recoveries as a result of a reduction in the corporate income tax rate.



-----------------------------------------------
Three months ended Nine months ended
September 30 September 30
-----------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------------
Net (loss) income ($) (131,456) (269,914) (154,135) (428,135)
---------------------------------------------------------------------------


CAPITAL EXPENDITURES

During the nine months ended September 30, 2006, the Company incurred $4,185,538 in net capital expenditures as compared to $2,840,219 over the same period in 2005. The Company participated in four operations under the Master Participation Agreement between the Company and a joint venture partner. In addition, the workover of the Swan Hills 15-26 well and the drilling and completion of the Willesden Green 06-35 well commenced during the period.



-----------------------------------------------
Three months ended Nine months ended
September 30 September 30
-----------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------------
Capital expenditures,
net ($) 1,278,022 2,315,803 4,185,538 2,840,219
---------------------------------------------------------------------------


LIQUIDITY AND CAPITAL RESOURCES

The Cavendish Debenture was settled on August 1, 2006 for a total cash payment of $300,000. This payment was comprised of the principal amount of $250,000 and accrued interest of $50,000.

The Company commenced the year 2006 with a working capital of $4,547,901. As at September 30, 2006, the Company's working capital has been reduced to $705,665.

The Company has no off-balance sheet arrangements.

Financial instruments consist of those shown on the Balance Sheet.

SHARE CAPITAL

On August 24, 2005, pursuant to the private placement, 20,000,000 flow-through shares were issued. The Company has expended approximately $6,933,900 against the $7,000,000 of flow-through proceeds, and has until December 31, 2006 to spend the remaining $66,100 of flow-through proceeds.

At the beginning of 2006, the Company had 80,589,862 issued and outstanding shares. During the first quarter of 2006, 375,000 shares were issued upon the exercise of the same number of options increasing the issued and outstanding shares as at September 30, 2006 to 80,946,862. During October 2006, 750,000 options were exercised resulting in cash proceeds of $75,000. This increased the total shares outstanding as of the date of this MD&A to 81,696,862.

Options

At the beginning of 2006 there were 6,645,000 options outstanding. In February 2006, a total of 375,000 options were exercised and 1,025,000 options were cancelled during the nine months ended September 30, 2006. This reduces the total options outstanding as at September 30, 2006 to 5,245,000 outstanding. In October 2006, 750,000 options were exercised resulting in a total of 4,495,000 options outstanding as of the date of this MD&A.

Warrants

There were 400,000 warrants, exercisable at $0.30, outstanding at the commencement of 2006. These warrants expired, unexercised on September 8, 2006. There are no additional warrants outstanding.

RELATED PARTY TRANSACTIONS

The Company had the following related party transactions:

1. During the three and nine months ended September 30, 2006, the Company was charged $60,000 and $180,000 (2005 - $60,000 and $120,000) in management fees by officers and directors of the Company.

2. During the three and nine months ended September 30, 2006, the Company was charged $21,830 and $40,689 (2005 - $10,548) for administrative fees by a corporation controlled by an officer of the Company. Included in accounts payable at September 30, 2006 is $3,260.

3. During the three and nine months ended September 30, 2006, the Company was charged $nil (three and nine months ended September 30, 2005 - $128,099) by a law firm in which a director of the Company is a partner. These costs were included in general and administrative costs and share issue costs.

All related party transactions are in the normal course of operations and have been measured at the exchange amount that is the amount of consideration established and agreed to by the related parties under terms similar to those negotiated with third parties.

OUTLOOK FOR 2006

The Company's current working interest production is estimated to be 81 boe/day with approximately 165 boe/day waiting to be tied in or put back on production.

Development on the Company's non-operated Herronton property has resulted in the successful drilling, completion and testing of two gas wells. Both gas wells have been tied-in and are currently on production.

Gas production from the Blackstone 11-13 gas well was recently reduced due to its inability to produce against the pipeline back pressure. The operator is continuing to work on rectifying the situation.

The Ansell 12-13 well has been tied in and began producing from all commingled zones in early October.

The Blackstone 12-25 well is currently awaiting tie-in. The operator is continuing to explore tie-in alternatives.

Cruiser is nearing completion of the re-activation of the oil pipeline for its Swan Hills 15-26 horizontal well. Once the reactivation of the pipeline is complete, the Company will be producing and evaluating the well for high volume lift applications.

In the Willesden Green area, the Company is reviewing the results of its first well in order to assist it with planning future development.

Cruiser is evaluating additional prospects for the continued growth of the Company.

BUSINESS RISKS AND UNCERTAINTIES

The Company is exposed to several operational risks inherent in exploring, developing, producing and marketing crude oil and natural gas. These inherent risks include: economic risk of finding and producing reserves at a reasonable cost; financial risk of marketing reserves at an acceptable price given current market conditions; cost of capital risk associated with securing the needed capital to carry out the Company's operations; risk of environmental impact and credit risk of non-payment for sales contracts and joint venture partners.

The Company maintains a comprehensive insurance program to reduce risk to an acceptable level and to protect it against significant losses. The Company's risk in regards to financial instruments is detailed in note 16 to the December 31, 2005 audited consolidated financial statements.

ADDITIONAL INFORMATION

Additional information relating to the Company can also be found on SEDAR at www.sedar.com

Contact Information