Cruiser Oil & Gas Ltd.
TSX VENTURE : COG

Cruiser Oil & Gas Ltd.

August 29, 2005 09:02 ET

Cruiser Announces Second Quarter Results

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



Three months ended Six months ended
June 30 June 30
2005 2004 2005 2004
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Financial Highlights ($)

Petroleum and
natural gas sales 151,111 - 323,488 -

Funds from
operations (114,996) (19,117) (47,243) (52,168)

Loss for the period (157,345) (35,233) (158,221) (82,790)

Net capital
expenditures 532,376 - 524,416 -

Weighted
average basic
shares 18,709,093 5,028,333 15,840,414 5,028,333

Common shares
- end of period 50,439,862 5,028,333 50,439,862 5,028,333

Operational
Highlights

Daily
production
boe/d (6:1) 38 - 44 -

Prices - Oil - $/bbl $ 49.45 - $ 50.45 -
- Gas - $/mcf $ 6.66 - $ 6.21 -

Operating
Netback - $/boe 29.12 - 26.54 -


REPORT TO SHAREHOLDERS

Cruiser is pleased to report the progress made during the first half of 2005 in the restructuring and recapitalization of the Company.

ACCOMPLISHMENTS:

- Production averaged 38 boepd for the quarter as compared to zero at the same time last year.

- Closed $3.75 million financing with Longbow Capital Inc.

- Repaid $999,544 to bridge loans holders as a result of the Terra Rica Resources Ltd. acquisition in December 2004.

- Entered into a Master Participation Agreement with Tango Energy Inc. pursuant to which the parties have agreed to participate in a joint venture re-entry and drilling program of multi-zone gas and oil prospects.

OPERATIONS UPDATE:

During the second quarter of 2005, the Company entered into a multi-well farm-in with Tango Energy Inc. ("Tango") on up to seven (7) separate re-entry and new drill prospects for multi-zone gas and oil targets west of the fifth meridian (Master Participation Agreement dated June 3, 2005)

The Company has committed $8.85 million under the Participation Agreement to prospects at Ansell, Karr, Hanlan, Blackstone(2), Deanne and Coleman, $ 7.75 million of which is projected to be spent before year end. Tango is obligated to participate at the same level as Cruiser in each of the committed operations. In addition, Cruiser has the right to participate in any or all of the new prospects generated by Tango up to December 31, 2006.

Two of the committed operations commenced in the second quarter, and are still underway.

Cruiser is currently evaluating additional prospects, and planning the activities for the operated component of its 2005 capital program.

CORPORATE UPDATE

The Company added Mr. Ray G. Smith, Mr. J.G. (Jeff) Lawson and Mr. Jay B. Simmons to its Board of Directors, and would like to express its appreciation for the able assistance of its outgoing directors Mr. Dale B. Shudra and Mr. Ken D. MacRitchie.

Cruiser closed its previously reported financing with Acumen Capital Finance Partners Limited for total gross proceeds of $10.0 million on August 24, 2005. In addition, as of August 15, 2005, Mr. John Aylward joined the Company as Vice President, Exploration.

After its recent restructuring and recapitalization, addition of new board members, commencement of trading, and new financing, the Company is excited and confident about its opportunities for growth and future development.



Douglas L. Meiklejohn, Kurt D.Miles
Chief Executive Officer President and Chief Operating Officer

August 29, 2005


MANAGEMENT'S DISCUSSION AND ANALYSIS

This MD&A is dated as of August 26, 2005.

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 unaudited consolidated financial statements for the three and six months ended June 30, 2005 and the audited consolidated financial statements for the year ended December 31, 2004.

The Company's auditors have not reviewed nor have they audited the June 30, 2005 interim consolidated financial statements.

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 assumption 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 six 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.



Three months ended Six months ended
June 30 June 30
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2005 2004 2005 2004
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Financial Results ($)

Petroleum and
natural gas sales 151,111 - 323,488 -

Funds from
operations (114,996) (19,117) (47,243) (52,168)

Loss for the period (157,345) (35,233) (158,221) (82,790)

Net capital
expenditures
(dispositions) 532,376 - 524,416 -

Weighted
average shares
outstanding
- basic 18,709,093 5,028,333 15,840,414 5,028,333

Common shares
outstanding - end
of period 50,439,862 5,028,333 50,439,862 5,028,333
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SUMMARY OF QUARTERLY RESULTS

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2005
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Q2 Q1
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Revenue
Total $ 151,111 172,377
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Loss before extraordinary items
Total $ (157,345) (876)
Per Share $ (0.01) (0.00)
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Net income (loss)
Total $ (157,345) (876)
Per Share $ (0.01) (0.00)
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2004
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Q4 Q3 Q2 Q1
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Revenue
Total $ - - - -
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Loss before extraordinary
items
Total $ (98,148) (111,899) (35,233) (47,557)
Per Share $ (0.02) (0.02) (0.01) (0.01)
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Net income (loss)
Total $ 77,159 341,454 (35,233) (47,557)
Per Share $ 0.01 0.06 (0.01) (0.01)
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2003
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Q4 Q3
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Revenue
Total $ 8,837 13,391
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Loss before extraordinary items
Total $ (59,281) (47,941)
Per Share $ (0.01) (0.01)
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Net income (loss)
Total $ (59,281) (47,941)
Per Share $ (0.01) (0.01)
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PETROLEUM AND NATURAL GAS SALES

Due to the acquisition of Terra Rica Resources Ltd. at the end of 2004, there were oil and gas revenues of $151,111 in the second quarter of 2005 for a total of $323,488 for the six months ended June 30, 2005 as compared to no revenue in the first half of 2004. For the three months ended June 30, 2005, prices for the Company's production averaged $49.45 per barrel of oil and liquids and $6.66 per mcf of natural gas.



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2005 2004 2005 2004
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Petroleum and Natural
Gas Sales ($) 151,111 - 323,488 -
$/BOE 43.54 - 40.23 -
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PRODUCTION

For the three months ended June 30, 2005, production of natural gas averaged 146 mcf/day and oil averaged 13 bbls/day for a total of 38 boe/day, as compared to no production for the same period in 2004. The first quarter of 2005 included an adjustment from an operator of one of Terra Rica's properties. This adjustment increased the first quarter production from 40 boe/day to 50 boe/day.



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Production 2005 2004 2005 2004
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Natural gas (mcf/d) 146 - 173 -
Crude oil and NGLs
(bbls/d) 13 - 16 -
Total (boe/d) 38 - 44 -
Percentage natural gas (%) 63 - 66 -
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ROYALTIES


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2005 2004 2005 2004
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Net Royalties ($) 13,086 - 34,216 -
Net royalties as a %
of revenue 9 - 11 -
$/BOE 3.77 - 4.26 -
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OPERATING EXPENSES

During the quarter ended June 30, 2005, the Company incurred operating expenses of $36,963 as compared to the same period in 2004 of $7,704.



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2005 2004 2005 2004
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Operating expenses ($) 36,963 7,705 75,865 15,699
$/BOE 10.65 - 9.44 -
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GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased to $122,512 for the three months ended June 30, 2005 from $11,413 for the comparative period in 2004. The increase was a result of Cruiser now having revenue, incurring capital expenditures and running a Company that has raised equity and has a positive working capital.



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2005 2004 2005 2004
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General and
administrative expense 122,512 11,413 157,399 34,801
$/BOE 35.30 - 19.58 -
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INTEREST EXPENSE

Interest expense for the three months ended June 30, 2005 increased to $93,050 from $15,607 for the comparative period in 2004 due to additional debt acquired to purchase Terra Rica and enter into a capital program.



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2005 2004 2005 2004
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Interest expense ($) 93,050 15,607 118,181 31,272
$/BOE 26.81 - 14.70 -
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DEPLETION AND DEPRECIATION

During the second quarter of 2005, there was an increase of depletion, depreciation and accretion to $90,769 as compared to only depreciation expense on office equipment of $76 during the second quarter of 2004 due to the production from the Terra Rica properties in 2005.



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2005 2004 2005 2004
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Depletion and
depreciation ($) 90,769 76 138,031 153
$/BOE 26.16 - 17.17 -
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ASSET RETIREMENT OBLIGATIONS

The obligation at the end June 30, 2005 is estimated to be $156,130 based on the total undiscounted obligation of $338,800 adjusted for a discount rate of 8% and inflation of 2% over an average reserve life of 9.2 years. Accretion of $2,814 for the three months ended June 30, 2005 ($432 for the same period of 2004) was also recorded.



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2005 2004 2005 2004
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Accretion expense ($) 2,814 432 5,586 865
$/BOE 0.81 - 0.69 -
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FUNDS FROM OPERATIONS

For the three months ending June 30, 2005 there were funds used in operations of $114,996 as compared to $19,117 used during the same period of 2004.



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2005 2004 2005 2004
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Funds from
operations ($) (114,996) (19,117) (47,243) (52,168)
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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 three months ended June 30, 2005 was $157,345 compared to a net loss of $35,233 over the same period in 2004. The increase in net income was due to the addition of production from the acquisition of Terra Rica, depletion expense and increased associated general and administrative costs.



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2005 2004 2005 2004
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Net Loss ($) (157,345) (35,233) (158,221) (82,790)
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CAPITAL EXPENDITURES

During the three months ended June 30, 2005, the Company incurred $532,376 in capital expenditures. The Company participated in the re-entry of two wells under the Master Participation Agreement dated June 3, 2005 between the Company and Tango Energy Inc. (the "Participation Agreement"). There were no capital expenditures during the comparative 2004 period.



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2005 2004 2005 2004
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Capital expenditures,
net ($) 532,376 - 524,416 -
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LIQUIDITY AND CAPITAL RESOURCES

The Company commenced the year 2005 with a working capital deficit of $1,818,980, which included an operating loan of $128,986.

In April 2005, the Company entered an agreement (the "Longbow Agreement") pursuant to which Longbow and its assignees would acquire a minimum of 25,000,000 and a maximum of 37,500,000 common shares of the Company at a price of $0.10 per share, for minimum proceeds of $2,500,000 and maximum proceeds of $3,750,000. Certain of the outstanding share purchase warrants and options were cancelled as a condition of this agreement. This transaction resulted in a change of control of the Company and allowed it to meet the minimum listing requirements for a Tier 2 oil and gas issuer on the TSXV.

In April 2005, $2,000,000 was advanced as a debenture under the Longbow Agreement and was used to eliminate the loans from Powermax and PanWestern. The debenture had an interest rate of 5% per annum. The private placement closed in June 2005 for gross proceeds of $3,750,000 and the issuance of 37,500,000 common shares at a price of $0.10 per share. The debenture, plus interest in the amount of $13,151 was repaid. The balance of the funds were utilized for the joint venture participation agreement that Cruiser has committed to.

The Company continues to be in default on the Cavendish Loan and debenture. Pursuant to the terms of the Cavendish Loan the Company is required to make monthly principal repayments of $5,000 and semi-annual interest payments.

The Company has no off-balance sheet arrangements.

Financial instruments consist of those shown on the Balance Sheet.

SHARE CAPITAL

As at June 30, 2005 the Company's issued and outstanding shares were 50,439,862. On August 24, 2005, pursuant to the private placement, an additional 10,000,000 common shares and 20,000,000 flow-through shares were issued which increased the total outstanding to 80,439,862.

During June 2005, the 972,736 options were cancelled and new options totaling 5,743,986 were granted in July 2005 and August 2005. There are 550,000 warrants outstanding as of August 25, 2005.

RELATED PARTY TRANSACTIONS

During the three months ended June 30, 2005, two of the directors who are also officers of the Company were paid $30,000 each for consulting and administrative services.

OUTLOOK FOR 2005

SUBSEQUENT EVENTS

Subsequent to June 30, 2005, the Company re-commenced trading on the TSX Venture Exchange under its new name Cruiser Oil & Gas Ltd.

In August 2005, the Company completed a private placement in which 10,000,000 common shares and 20,000,000 flow-through shares were issued for total gross proceeds of $10,000,000. These funds will be utilized for commitments pursuant to the joint venture Participation Agreement and for further capital requirements.

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 environment 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, 2004 audited consolidated financial statements.

Changes in Accounting Policies

The Canadian Institute of Chartered Accountants (CICA) has issued a number of accounting pronouncements, some of which may impact the Company's reported results and financial position in future periods.

Comprehensive Income/Financial Instruments/Hedges

The CICA issued new standards in early 2005 for Comprehensive Income (CICA 1530), Financial Instruments (CICA 3855) and Hedges (CICA 3865), which will be effective for the reporting year-end 2007. The new standards will bring Canadian rules in line with current rules in the US. The standards will introduce the concept of "Comprehensive Income" to Canadian GAAP and will require that an enterprise (a) classify items of comprehensive income by their nature in a financial statement and (b) display the accumulated balance of comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. Derivative contracts will be carried on the balance sheet at their mark-to-market value, with the change in value flowing to either net income or comprehensive income. Gains and losses on instruments that are identified as hedges will flow initially to comprehensive income and be brought into net income at the time the underlying hedged item is settled. It is expected that this standard will be effective for Cruiser's 2007 reporting. Any instruments that do not qualify for hedge accounting will be marked-to-market with the adjustment (tax effected) flowing through the income statement.

Cruiser does not currently have any hedges in place that carry into 2006 so there would not any impact based on the current position.

ADDITIONAL INFORMATION

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

Cruiser Oil & Gas Ltd. is a public junior oil and gas company engaged in the exploration, exploitation, acquisition and production of petroleum and natural gas in Western Canada. Cruiser is focused on re-entry and new drilling of multi-zone gas and oil prospects west of the fifth meridian.

Cruiser Oil & Gas Ltd. trades on the TSX Venture exchange under the symbol COG.

Cautionary Statements

The information in this news release includes certain information and statements about management's view of future events, expectations, plans and prospects that constitute forward looking statements. These statements are based upon assumptions that are subject to significant risks and uncertainties. Because of these risks and uncertainties and as a result of a variety of factors, the actual results, expectations, achievements or performance may differ materially from those anticipated and indicated by these forward looking statements. Although the Company believes that the expectations reflected in forward-looking statements are reasonable, it can give no assurances that the expectations of any forward looking statements will prove to be correct. The Company disclaims any intention and assumes no obligation to update or revise any forward looking statements to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such forward looking statements or otherwise.

The TSX Venture Exchange has neither approved nor disapproved the contents of this press release.

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