Cyries Energy Inc.
TSX : CYS

Cyries Energy Inc.

August 15, 2006 09:38 ET

Cyries Energy Inc. Announces Second Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Aug. 15, 2006) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Cyries Energy Inc. ("Cyries") (TSX:CYS) is pleased to announce its financial and operating results for the three months and six months ended June 30, 2006.



Financial Highlights
------------------------------------------------------------------------
Three Three Six Six
months months months months
ended ended ended ended
(000s, except as June 30, June 30, % June 30, June 30, %
indicated) 2006 2005 Change 2006 2005 Change
------------------------------------------------------------------------
Petroleum and natural
gas sales 34,027 12,787 166% 69,239 22,855 203%

Net earnings 5,891 1,822 223% 8,140 3,049 167%
Per share basic 0.15 0.07 114% 0.21 0.12 75%
Per share diluted 0.14 0.06 133% 0.19 0.10 90%

Funds generated from
operations 18,337 6,857 167% 35,970 12,353 191%
Per share basic 0.47 0.26 81% 0.92 0.51 80%
Per share diluted 0.42 0.22 91% 0.83 0.45 84%

Capital expenditures 20,067 14,132 42% 74,066 40,151 84%
Acquisitions (net) 79 16 394% 4,829 (146) 3408%

Bank debt and working
capital deficiency 116,074 18,322 534% 116,074 18,322 534%

Weighted average shares
outstanding
Basic 39,268 26,659 47% 39,266 26,201 50%
Diluted 43,246 30,544 42% 43,274 30,055 44%

Average Sales Price
Oil $/bbl 74.37 60.01 24% 69.45 58.72 18%
Natural gas $/mcf 6.49 8.14 (20%) 7.22 7.88 (8%)
NGL $/bbl 64.83 48.85 33% 61.19 43.91 39%
------------------------------------------------------------------------
Total $/boe 45.76 50.77 (10%) 48.27 49.16 (2%)

Average Daily Production
Oil bbl 1,263 474 166% 1,222 461 165%
Natural gas mcf 38,798 13,011 198% 37,823 11,782 221%
NGL bbl 442 125 254% 399 144 177%
------------------------------------------------------------------------
Total boe/d 8,172 2,768 195% 7,925 2,569 208%

Production expenses
$/boe 7.59 6.97 9% 7.81 6.86 14%

Operating netback
$/boe 26.01 30.80 (16%) 26.84 29.51 (9%)

Undeveloped land
gross acres 283,110 97,480 190% 283,110 97,480 190%
net acres 215,336 71,108 203% 215,336 71,108 203%
Farm-in acreage
net acres 26,800 38,524 (30%) 26,800 38,524 (30%)

------------------------------------------------------------------------


To Our Shareholders

Cyries Energy Inc. is pleased to report to shareholders the financial and operating results for the three months ended June 30, 2006

Production increased in the second quarter by 195 percent to 8,172 boe per day compared to 2,768 boe per day in the prior year. Production per share increased 109 percent compared with the same period in 2005. Second quarter average production also represents a six percent increase compared with the first quarter of 2006.

Cyries has increased production every quarter since the inception of the company. Current production capability is over 9,000 boe per day.

During the second quarter, Cyries drilled 5.0 (2.9 net) wells with a 100 percent success rate. In the second quarter drilling activity is limited by spring break up in Northern Alberta. Drilling activity will increase in the third quarter and we expect to drill up to eighteen wells.

In July, Cyries completed the issue of flow through common shares for net proceeds of approximately $22 million. As a result of this financing, the company announced the acceleration of a portion of the capital budget to the third quarter of 2006 and an increase in the expected exit production guidance from 10,000 boe per day to 10,500 boe per day.

Operations Update

Cyries drilled two significant wells in the Deep Basin area in the second quarter and brought on production a significant discovery from the first quarter drilling program.

At Gold Creek Cyries brought on production from a new pool gas discovery at rates of over 4 million cubic feet per day. The Company has additional land in the area and expects to drill a number of follow-up locations during the remainder of 2006.

At Gold Creek Cyries also drilled a prolific oil well which was an extension of an existing pool. The well will be brought on during the third quarter, subject to maximum rate limitation restrictions. Cyries is planning to drill up to three additional wells and expects to have an optimization plan, removing the production limitations, finalized with the EUB in the next 6 to 9 months.

In the Knopcik area a new pool oil discovery was drilled which will also have several follow up locations.

Cyries also increased its undeveloped land position during the second quarter. We spent a total of $0.7 million on land and increased the undeveloped net acreage position to 215,336 acres. During the first six months of 2006 Cyries spent $4.8 million on land purchasing 46,597 net undeveloped acres.

Financial Performance

Funds generated in the quarter increased to $18.3 million or $0.47 per share, a 165 percent increase from $6.9 million or $0.26 per share in the second quarter of 2005. Growth from funds generated from operations from the prior year is a result of our steady increase in production while maintaining a low cost structure. Net earnings increased to $5.9 million or $0.15 per share from $1.8 million and $0.07 in the second quarter of 2005. The increase in earnings is largely due to the benefits recorded in the second quarter from the changes in the Federal and Alberta income tax rates and a reduction in the taxes payable resulting from the finalization of an income tax audit.

Operating costs declined during the second quarter to $7.59 per boe compared to $8.06 per boe in the first quarter. The reductions were achieved despite additional costs in the quarter due to plant turn around charges.

Subsequent to the end of the second quarter Cyries completed an equity issue for net proceeds of $22 million. These proceeds reduced debt to approximately $94 million to start the third quarter. The strength in the balance sheet will allow Cyries to maintain an aggressive capital program for the remainder of 2006. We expect to spend an additional $50 million during the last half of the year for a total capital budget in 2006 of approximately $130 million.

Outlook

Despite lower natural gas prices in the second quarter, Cyries' low cost structure and strong balance sheet has enabled the company to grow production for the seventh consecutive quarter and fund an aggressive capital program.

Third quarter production will be affected by turnarounds at three Deep Basin facilities in addition to a transportation interruption on a major pipeline system. Production volumes were down approximately 800 boe per day for the month of July.

Based on recent drilling success and acceleration of the drilling program following the recent equity issue, we have increased our production guidance to exit 2006 at a rate of 10,500 boe per day.

Conference Call

A conference call is scheduled to review the financial and operating results for Cyries Energy Inc.'s second quarter ended June 30, 2006 on Tuesday, August 15, 2006 at 9:00 am (mt), 11:00 am (et). The conference call can be accessed by dialing in 15 minutes prior to the scheduled start at 1-877-888-4605 or 1-416-695-6120. A live webcast will also be provided on: www.cyries.com. A playback recording of the conference call will be available for 7 days and can be accessed by calling 1-888-509-0081 or 1-416-695-5275 (password 629627).



On behalf of the Board of Directors,

Donald F. Archibald
Chairman and Chief Executive Officer


MANAGEMENT'S DISCUSSION AND ANALYSIS

This management's discussion and analysis ("MD&A") should be read in conjunction with the unaudited interim consolidated financial statements of Cyries Energy Inc. ("Cyries" or the "Company") for the three and six month periods ended June 30, 2006 and the audited financial statements for the year ended December 31, 2005. This MD&A is dated as of August 14, 2006.

Cyries was incorporated under the Business Corporations Act (Alberta) on May 20, 2004 and commenced operations July 2, 2004. Cyries is a Calgary based oil and natural gas exploration and development company operating primarily in northwestern Alberta and northeastern British Columbia. The Company is traded on the Toronto Stock Exchange under the symbol CYS.

Units of measure - Per barrel of oil equivalent ("boe") amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil ("6:1"). All values are presented in thousands, other than boe and per share amounts.

Non-GAAP Measurements - Cyries evaluates performance based on net income, operating netback and funds generated from operations. Funds generated from operations, which is expressed before changes in non-cash working capital and asset retirement expenditures, is used by the Company to analyze operations, performance, leverage and liquidity. Operating netback is a benchmark used in the oil and gas industry to measure the contribution of oil and natural gas sales following the deduction of royalties, production expenses and transportation costs. Working capital deficiency is defined as current assets less current liabilities, excluding any debt presented as a current liability. Funds generated from operations, operating netback and working capital deficiency do not have a standard meaning prescribed by Canadian Generally Accepted Accounting Principles ("GAAP") and therefore may not be comparable to other companies.

Forward-looking statements - This MD&A contains forward-looking statements. Forward-looking statements are based on current expectations that involve a number of risks and uncertainties that could cause actual events or results to differ materially from those reflected in the MD&A. Forward-looking statements are based on the estimates and opinions of Cyries' management at the time the statements were made. The reader should be aware that historical results are not necessarily indicative of future performance.



HIGHLIGHTS

------------------------------------------------------------------------
------------------------------------------------------------------------
Three months Six months
ended ended
June 30, June 30, June 30, June 30,
($000s, except per share data) 2006 2005 2006 2005
------------------------------------------------------------------------

Total revenues 34,027 12,787 69,239 22,855

Net income 5,891 1,822 8,140 3,049
Net income per share - basic 0.15 0.07 0.21 0.12
Net income per share - diluted 0.14 0.06 0.19 0.10

Funds generated from operations 18,337 6,857 35,970 12,353
Funds generated per share - basic 0.47 0.26 0.92 0.47
Funds generated per share - diluted 0.42 0.22 0.83 0.41

Total assets 413,143 100,490 413,143 100,490
Bank debt 104,794 10,909 104,794 10,909
Working capital deficiency 11,280 7,413 11,280 7,413
------------------------------------------------------------------------
------------------------------------------------------------------------


The second quarter of 2006 was highlighted by higher crude oil and natural gas production than the comparative periods which more than offset a decrease in average commodity prices. The second quarter of 2006 included a future income tax recovery of $3,050 from the Federal and Alberta income tax rate decreases and a recovery of $958 of current tax and $251 of interest expense following the completion of an income tax audit. Before tax adjustments, earnings decreased 15 percent to $1,543 for the quarter ended June 30, 2006 from $1,822 in the comparable period in 2005 mainly due to a decrease in natural gas prices and an increase in depletion, depreciation and accretion. Together, the income tax adjustments resulted in an increase to net income of $4,259 or $0.11 per share. Net income per share increased 114 percent to $0.15 per share compared with $0.07 in the second quarter of 2005 while funds generated per share increased 81 percent to $0.47 per share.

Capital expenditures were $20,146 in the three months ended June 30, 2006. Drilling is limited in the second quarter as spring break-up restricts access to many of the Company's prospects in Northern Alberta. Cyries drilled 5.0 (2.9 net) natural gas wells in the second quarter with a 100 percent success rate. Capital expenditures for the quarter also include the costs associated with facilities and infrastructure to tie-in wells drilled in the first quarter. Average production increased to 8,172 boe/d from 2,768 boe/d in the comparative period in 2005. Compared to the first quarter of 2006 average production increased six percent from 7,675 boe/d.



DETAILED FINANCIAL ANALYSIS

Petroleum and natural gas production

Three months Six months
ended ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
------------------------------------------------------------------------
Oil (bbls/d) 1,263 474 1,222 461
Natural gas (mcf/d) 38,798 13,011 37,823 11,782
Natural gas liquids (bbls/d) 442 125 399 144
------------------------------------------------------------------------
Total (boe/d) 8,172 2,768 7,925 2,569
------------------------------------------------------------------------
------------------------------------------------------------------------


Production for the three and six month periods ending June 30, 2006 increased significantly from the comparative period. The increase resulted from a combination of acquisition and drilling activity in the last half of 2005 and first two quarters of 2006. Natural gas production in the three and six months ended June 30, 2006 increased to 38,798 mcf/d and 37,823 mcf/d, compared to 13,011 mcf/d and 11,782 mcf/d for the respective three and six month periods ended June 30, 2005. Oil and liquids production in the three months ended June 30, 2006 increased to 1,705 boe/d compared to 599/d boe/d in the second quarter of 2005. In the six months ended June 30, 2006, oil and liquids production increased 168 percent to 1,621 boe/d.



Revenue
Three months Six months
ended ended
June 30, June 30, June 30, June 30,
($000s) 2006 2005 2006 2005
------------------------------------------------------------------------
Revenue
Oil 8,548 2,588 15,359 4,898
Natural gas 22,870 9,643 49,457 16,811
Natural gas liquids 2,609 556 4,423 1,146
------------------------------------------------------------------------
Total 34,027 12,787 69,239 22,855

Average sales price
Oil ($/bbl) 74.37 60.01 69.45 58.72
Natural gas liquids ($/bbl) 64.83 48.85 61.19 43.91
------------------------------------------------------------------------
Average liquids price 71.90 57.68 67.43 55.19
Natural gas ($/mcf) 6.49 8.14 7.22 7.88
------------------------------------------------------------------------
Total per boe ($/boe) 45.76 50.77 48.27 49.16

Benchmark pricing
Edmonton par - light oil ($/bbl)
78.89 66.42 74.20 64.23
AECO-C Spot ($/mcf) 6.02 7.45 6.75 7.15
------------------------------------------------------------------------
------------------------------------------------------------------------


In the three months ended June 30, 2006, revenues increased 166 percent to $34,027 from $12,787 in the comparative period in 2005. The increase in revenue was a result of the 195 percent increase in production volumes partially offset by a ten percent decrease in the average sales price. In the six month period ended June 30, 2006, revenues increased 203 percent to $69,239 from $22,855 in the comparative period in 2005. The increase in revenue was due to a 208 percent increase in production volumes partially offset by a two percent decrease in the average sales price. The decrease in the average sales price realized by Cyries is consistent with the decrease in benchmark natural gas prices. The average sales price for natural gas is at a premium to the AECO-C spot price due to the high energy content of the company's natural gas production. All the Company's production is sold on the spot market. Therefore, both the historical prices received and future prices expected fluctuate with the prevailing market prices of crude oil and natural gas.

The table below summarizes the impact of both production volumes and natural gas and oil prices on revenue for the three and six month periods ended June 30, 2006:



------------------------------------------------------------------------
------------------------------------------------------------------------
Three months ended Six months ended
($000s) June 30, 2006 June 30, 2006
------------------------------------------------------------------------
Natural Gas Sales Variance
Volume increase 19,110 37,155
Price decrease (5,882) (4,508)
------------------------------------------------------------------------
Net gas sales change 13,228 32,647
------------------------------------------------------------------------
Crude Oil and NGLs Sales Variance
Volume increase 5,808 10,146
Price increase 2,204 3,591
------------------------------------------------------------------------
Net crude oil and NGLs sales change 8,012 13,737
------------------------------------------------------------------------
Combined sales change 21,240 46,384
------------------------------------------------------------------------
------------------------------------------------------------------------


Royalties

Oil and natural gas royalties, net of the Alberta Royalty Tax Credit ("ARTC"), totaled $7,943 and $17,354 for the second quarter and first half of 2006, respectively, compared to $2,882 and $5,230 for the comparative periods in 2005. The increase is due to the increase in petroleum and natural gas sales. Royalties as a percentage of revenue increased slightly to 24 percent for the quarter ended June 30, 2006 and 25 percent for the six months ended June 30, 2006 from 23 percent for both comparative periods in 2005. ARTC was $125 for the three months ended June 30, 2006 (2005 - $125) and $338 for the six months ended June 30, 2006 (2005 - $324).



Operating Netback and Production Expense

------------------------------------------------------------------------
------------------------------------------------------------------------
Three months Six months
ended ended
June 30, June 30, June 30, June 30,
($000s) 2006 2005 2006 2005
------------------------------------------------------------------------
Revenue 34,027 12,787 69,239 22,855
Royalty income 19 19 64 28
------------------------------------------------------------------------
34,046 12,806 69,303 22,883
Royalties (7,943) (2,882) (17,354) (5,230)
Production expense (net) (5,644) (1,755) (11,209) (3,192)
Transportation expense (1,118) (411) (2,240) (740)
------------------------------------------------------------------------
Operating netback 19,341 7,758 38,500 13,721
Operating netback per boe 26.01 30.80 26.84 29.51
------------------------------------------------------------------------
------------------------------------------------------------------------

------------------------------------------------------------------------
------------------------------------------------------------------------
Three months Six months
ended ended
June 30, June 30, June 30, June 30,
($000s) 2006 2005 2006 2005
------------------------------------------------------------------------
Production expense gross 6,234 1,965 12,386 3,576
Overhead recoveries (396) (167) (805) (314)
Processing income (194) (43) (372) (69)
Production expense (net) 5,644 1,755 11,209 3,193
Production expense per boe (net) 7.59 6.97 7.81 6.86
------------------------------------------------------------------------
------------------------------------------------------------------------


The operating netback decreased to $26.01 per boe from $30.80 per boe for the quarter ended June 30, 2005 primarily due to a decrease in sales price. The operating netback decreased nine percent to $26.84 for the six months ended June 30, 2006 compared to the six months ended June 30, 2005. The decrease is due to higher operating costs, a decrease in sales price and an increase in royalties.

Net production expenses increased 222 percent in the three month period ended June 30, 2006 to $5,644 compared to $1,755 in the second quarter of 2005. Net production expenses for the six months ended June 30, 2006 increased 251 percent from $3,193 in the comparative period in 2005. The increase in production expense is due to the increased production and an increase in oil and natural gas production costs per boe. Production costs per boe increased nine percent to $7.59 from $6.97 in the three month period ended June 30, 2005. For the six months ended June 30, 2006, production costs per boe increased to $7.81, a 14 percent increase over the comparative period in 2005. The increase in operating costs per boe from the comparative period is due to higher operating costs in certain properties acquired in the third quarter of 2005 and a general upward trend in the cost of oil and gas services and supplies.

Transportation expense relates primarily to the cost of transporting natural gas on the main natural gas pipelines and a lesser amount for clean oil trucking charges. An increase in production volumes caused an increase in transportation costs to $1,118 for the three months ended June 30, 2006 from $411 for the comparative period in 2005. Transportation for the first half of 2006 increased to $2,240 from $740 for the first half of 2005. On per boe basis, transportation decreased eight percent to $1.50 and two percent to $1.56 for the respective three and six months ended June 30, 2006 when compared to the equivalent periods in 2005.



General and Administrative Expenses

Three months Six months
ended ended
June 30, June 30, June 30, June 30,
($000s) 2006 2005 2006 2005
------------------------------------------------------------------------
General and administrative expense
(gross) 1,400 929 2,768 1,765
Overhead recoveries (321) (152) (985) (526)
------------------------------------------------------------------------
General and administrative expense
(net) 1,079 777 1,783 1,239
General and administrative ($/boe) 1.45 3.08 1.24 2.66
------------------------------------------------------------------------
------------------------------------------------------------------------


General and administrative costs ("G&A") include costs incurred by the Company which are not directly associated with the exploration of oil and natural gas. G&A per boe decreased 53 percent to $1.45 in the second quarter of 2006 compared to $3.08 in the second quarter of 2005. On a per boe basis, G&A expenses decreased 53 percent to $1.24 per boe in the six months of 2006 from $2.66 per boe in 2005. G&A per boe has decreased due to increased production.

The Company does not capitalize corporate general and administrative expenses. General and administrative costs per boe are expected to average approximately $1.20 per boe for the remainder of 2006.

Depreciation, Depletion and Accretion

Depletion, depreciation and accretion ("DD&A") increased to $13,403 and $25,388 in the respective three and six month periods ended June 30, 2006 compared to $3,227 and $5,990 in the comparative periods in 2005. The increase is due to higher average production in 2006 and an increase in DD&A per boe. DD&A expense per boe for the first half of 2006 increased to $17.70 from $12.88 for the comparative period in 2005 as a result of the costs associated with both acquisitions and drilling in the last half of 2005 and the first two quarters of 2006. In determining the Company's depletion and depreciation, $18,720 (2005 - $7,503) of costs related to unproven properties and $13,711 (2005 - $3,661) of estimated salvage value was excluded from the costs subject to depletion. Future development costs required to complete wells for which proved reserves have been assigned of $6,657 (2005 - $3,475) were added to the Company's net book value in the depletion calculation.

Stock Based Compensation

During the second quarter of 2006, stock-based compensation expense related to the outstanding stock options and Class B performance shares increased to $817 from $250 for the quarter ended June 30, 2005. Stock-based compensation expense for the first six months of 2006 was $2,569 compared to $952 for the comparative period in 2005. The increase in stock compensation expense is due to the expense associated with the stock options issued subsequent to June 30, 2005. At June 30, 2006 there were 3,072 stock options outstanding compared to 1,127 at June 30, 2005.

Income Taxes

For the quarter ended June 30, 2006 the Company recorded a future income tax recovery of $1,774 (2005 - expense of $1,558) and current income tax recovery of $1,004 (2005 - expense of $30). In the six month period ended June 30, 2006 the future income tax recovery was $127 (2005 - expense of $2,362) and the current income tax recovery was $843 (2005 - expense of $39). In the second quarter of 2006 the company recognized recoveries for future income tax of $3,050 and current income tax of $89 as result of substantially enacted reductions in the Alberta and Federal corporate income tax rates for the current and future years.

In the fourth quarter of 2005 the Company recorded current income taxes of $1,798 and interest expense of $607 for the estimated impact of an income tax audit. In August 2006 the audit has been substantially completed resulting in a reduction to current income tax expense of $958 and interest expense of $251 in the second quarter of 2006.

At June 30, 2006 the Company estimates that tax pools of $196.8 million are available for deduction against future taxable income. No qualifying CEE or CDE expenditures related to the July 2006 flow-through share issue had been incurred as of June 30, 2006.



($ million) 2006
------------------------------------------------------------------------
Canadian oil and gas property expense 48.0
Canadian development expense 67.6
Canadian exploration expense 14.4
Undepreciated capital costs 61.4
Share issue costs 5.4
------------------------------------------------------------------------
Total 196.8
------------------------------------------------------------------------
------------------------------------------------------------------------

Capital Expenditures

Three months Six months
ended ended
------------------------------------------------------------------------
June 30, June 30, June 30, June 30,
($000s) 2006 2005 2006 2005
------------------------------------------------------------------------
Land acquisitions 701 3,134 4,821 4,620
Property acquisitions (net) 79 16 4,829 (146)
Geological and geophysical 2,119 769 2,828 1,493
Drilling and completions 10,438 8,694 44,071 27,363
Equipment and facilities 6,766 1,513 22,266 6,650
Other 43 22 80 25
------------------------------------------------------------------------
Total capital expenditures 20,146 14,148 78,895 40,005
------------------------------------------------------------------------
------------------------------------------------------------------------


In the second quarter, Cyries' drilled 5.0 gross natural gas wells (2.9 net) with a 100 percent success rate. In the first half of 2006, the Company drilled 33.0 gross wells (25.9 net) with a 94 percent success rate. Of the total wells drilled, 28.0 (22.3 net) were natural gas wells and 2.0 (2.0 net) were oil wells. Facility expenditures for the period relate primarily to the costs associated with connecting successful wells to existing infrastructure and costs related to a gas plant.

The Company expects to spend approximately $130,000 in 2006 of which $50,000 will be incurred in the second half of the year drilling an additional 35 to 40 gross wells. Fluctuations in crude oil and natural gas prices will have a large impact on the Company's capital program. The Company will monitor the capital program with the current price outlook and adjust it accordingly.



Three months ended Six months ended
------------------------------------------------------------------------
June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005
------------------------------------------------------------------------
Gross Net Gross Net Gross Net Gross Net
wells wells wells wells wells wells wells wells
------------------------------------------------------------------------
Gas 5.0 2.9 5.0 2.7 28.0 22.3 17.0 13.2
Oil - - - - 2.0 2.0 2.0 1.2
Dry - - 1.0 1.0 3.0 1.6 1.0 1.0
------------------------------------------------------------------------
Total 5.0 2.9 6.0 3.7 33.0 25.9 20.0 15.4
------------------------------------------------------------------------
Success (%) 100% 73% 94% 94%
------------------------------------------------------------------------
------------------------------------------------------------------------


Share Capital

------------------------------------------------------------------------
(000s)
------------------------------------------------------------------------
Weighted average common shares outstanding for the six months ended
June 30, 2006

Basic 39,266
Diluted 43,274

Outstanding Securities at August 14, 2006
Common shares 41,100
Warrants 3,964
Performance shares 599
Stock options 3,227
------------------------------------------------------------------------
Total outstanding securities at August 14, 2006 48,890
------------------------------------------------------------------------
------------------------------------------------------------------------


During the six month period ended June 30, 2006, the company issued 1,415 stock options to employees and directors. The options vest over four years and are exercisable into common shares at an average price of $13.36. At June 30, 2006 the Company had 3,072 options outstanding with an average exercise price of $11.67.

On July 6, 2006, the Company issued 1,225 flow-through common shares ("CEE Flow-Through Shares) at a price of $13.10 per share for proceeds of $16,047. In addition to the CEE Flow-Through Share issuance, certain directors, officers and employees of the Company together with certain other persons or companies have purchased 602 flow-through shares ("CDE Flow-Through Shares") at a price of $11.60 for proceeds of $6,983. The purchasers of the CEE Flow-Through Shares will be entitled to renunciation of Canadian exploration expenses from the Company, whereas purchasers of the CDE Flow-Through Shares will be entitled to renunciation of Canadian development expenses from the Company. Proceeds from the offerings will accelerate portions of the Company's 2006 capital budget.

Liquidity and Capital Resources

At June 30, 2006 the Company had bank debt of $104,794 and a working capital deficiency of $11,280. In the second quarter, the Company's bank lines were increased to $120 million following the completion of the bank's semi-annual review. The Company's bank line is subject to semi-annual review with the next review occurring in the fall of 2006.

The 2006 capital program is anticipated to be $130 million and will be funded through a combination of funds generated from operations, proceeds from the July 2006 flow-through share offering and bank debt. The growth in production has increased the Company's ability to fund the capital program with internally generated funds. Fluctuations in crude oil and natural gas prices will have a large impact on the Company's capital program and working capital position. The Company will monitor the capital program with the current price outlook and adjust it accordingly.

Commodity prices and production volumes have the largest impact on the ability for Cyries to generate adequate cash flow to meet all of its obligations. A prolonged decrease in commodity prices would negatively affect funds generated from operations and would also likely result in a reduction in the amount of bank loan available. If the capital expenditure program does not result in sufficient additional reserves and/or production it would likely have a negative impact on the Company's ability to carry out its planned capital program.



Quarterly Financial and Operational Information

Q2 Q1 Q4 Q3
2006 2006 2005 2005
------------------------------------------------------------------------

Average gas price ($/mcf) 6.49 8.02 12.14 9.92

Average liquids price ($/boe) 71.90 62.41 63.61 66.77

Average sales price ($/boe) 45.76 50.98 70.69 61.26

Average production (boe/d) 8,172 7,675 6,522 5,525

Petroleum and natural gas sales 34,027 35,212 42,419 31,140

Royalties 7,943 9,411 11,394 7,125

Operating expenses 5,644 5,564 4,804 3,992

General and administrative expenses 1,079 704 1,115 648

Funds generated from operations 18,337 17,632 20,861 17,650
Per share basic 0.47 0.45 0.53 0.47
Per share diluted 0.42 0.41 0.48 0.42

Net earnings 5,891 2,249 5,682 6,101
Per share basic 0.15 0.06 0.14 0.16
Per share diluted 0.14 0.05 0.13 0.15

Total assets 413,143 411,463 364,230 326,177
Bank debt and working capital
deficiency (excess) 116,074 114,338 73,220 56,238

------------------------------------------------------------------------
------------------------------------------------------------------------


Q2 Q1 Q4 Q3
2005 2005 2004 2004
------------------------------------------------------------------------

Average gas price ($/mcf) 8.14 7.56 7.19 6.85

Average liquids price ($/boe) 57.68 52.70 50.31 49.77

Average sales price ($/boe) 50.77 47.24 45.19 43.95

Average production (boe/d) 2,768 2,368 1,644 1,142

Petroleum and natural gas sales 12,787 10,069 6,834 4,518

Royalties 2,882 2,348 1,226 1,086

Operating expenses 1,755 1,438 1,075 688

General and administrative expenses 777 462 519 435

Funds generated from operations 6,857 5,496 3,783 2,167
Per share basic 0.26 0.21 0.16 0.09
Per share diluted 0.22 0.19 0.14 0.08

Net earnings 1,822 1,227 1,171 379
Per share basic 0.07 0.05 0.05 0.02
Per share diluted 0.06 0.04 0.04 0.01

Total assets 100,490 94,901 69,711 59,537
Bank debt and working capital
deficiency (excess) 18,322 10,654 9,313 (3,581)
------------------------------------------------------------------------
------------------------------------------------------------------------


Production

Production during the second quarter of 2006 increased six percent to 8,172 boe/d compared to 7,675 boe/d in the prior quarter. The production increase is primarily due to successful drilling in the Deep Basin/Peace River Arch area in first half of 2006.

Petroleum and Natural Gas Sales

Oil and natural gas revenues decreased three percent in the second quarter of 2006 compared to the first quarter 2006 as average oil and natural gas price decreased by ten percent while production volumes increased six percent.

Royalties

Royalties, net of ARTC, decreased 16 percent to $7,943 when compared to the first quarter of 2006 as oil and natural gas prices decreased in the quarter. As a percentage of sales, royalty rates decreased two percent in the second quarter of 2006 compared to the previous quarter primarily as a result of an increase in the gas cost allowance.

Operating Expenses

Operating expenses increased one percent compared to the first quarter of 2006 due to an increase in production volumes. On a per boe basis, operating expenses decreased to $7.59 compared to $8.06 per boe in the previous quarter as a result of operating efficiencies and increased volumes.

General and Administrative Expenses

Net G&A expense increased 53 percent to $1,079 from $704 in the first quarter of 2006. The increase in net G&A in the second quarter is due primarily to a decrease in capital overhead recoveries. G&A per boe was $1.45 in the second quarter of 2006 increasing from $1.02 per boe in the first quarter of 2006.

Net Earnings and Funds Generated from Operations

Net earnings for the second quarter of 2006 increased primarily due to income tax recoveries in the second quarter. The Company recorded an income tax recovery of $3,050 related to a decrease in the Federal and Alberta corporate income tax rates. In addition, the charge to income taxes and interest expense in the fourth quarter of 2005, relating to an income tax audit, was reduced by $1,209 as the expense originally estimated was reduced following the completion of the audit. Net earnings of $5,891 ($0.15 per basic share) in the second quarter of 2006 increased 162 percent from $2,249 recorded in the prior quarter as the impact of lower oil and gas prices was more than offset by increased production.

Funds generated from operations increased four percent in the second quarter of 2006 to $0.47 per share when compared to the previous quarter. A reduction of current income taxes and interest expense totaling $1,209 following the completion of an income tax audit offset a ten percent decrease in oil and natural gas prices.

Total Assets

Total assets increased one percent to $413,143 at the end of the second quarter of 2006 compared to the prior quarter. The increase is attributable to drilling and capital spending in the second quarter of 2006. The capital expenditures in the second quarter of 2006 included $701 of land acquisitions, $79 of net property acquisitions, $2,119 of geological and geophysical activities, $10,438 in drilling and completions and $6,766 in equipment and facilities.

Working Capital Deficiency

The bank and working capital deficiency has increased in the second quarter of 2006 as a result of funding the corporation's capital expenditure program. The Company anticipates being able to complete the remainder of its capital program through a combination of debt, working capital and cash flow.

Risks

The business of Cyries is subject to certain risks. Prior to making any investment decision regarding Cyries investors should carefully consider, among other things, the risks described under the heading "Risks and Uncertainties" set forth in Cyries Management's Discussion and Analysis (the "Annual MD&A") for the year ended December 31, 2005 and under the heading "Risk Factors" in the Annual Information Form of Cyries (the "AIF") for the year ended December 31, 2005. These risk factors are incorporated by reference herein.

Cyries' Annual MD&A and AIF can be located at www.sedar.com or www.cyries.com. To the extent investors do not have access to the internet, copies of the Annual MD&A can be obtained on request without charge by contacting Cyries at (403) 262-9609 at 3200, 500 - 4th Avenue S.W., Calgary, Alberta T2P 2V6.





Cyries Energy Inc.
Consolidated Balance Sheets

------------------------------------------------------------------------
------------------------------------------------------------------------
As at As at
June 30, December 31,
(unaudited, $000) 2006 2005
------------------------------------------------------------------------

Assets
Current assets
Accounts receivable 22,266 28,948
Deposits and prepaid expenses 2,703 1,835
------------------------------------------------------------------------
24,969 30,783

Property and equipment, net (note 3) 319,740 265,013

Goodwill 68,434 68,434
-----------------------------------------------------------------------

413,143 364,230
------------------------------------------------------------------------

Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities 34,950 53,343
Income taxes payable 1,299 3,411
Revolving demand loan (note 5) 104,794 47,249
------------------------------------------------------------------------
141,043 104,003

Future income tax liability 33,793 33,158
Asset retirement obligations (note 9) 13,659 12,440
------------------------------------------------------------------------
Total liabilities 188,495 149,601
------------------------------------------------------------------------

Shareholders' Equity
Share capital (note 6) 195,072 195,734
Contributed surplus (note 7) 5,053 2,512
Retained earnings 24,523 16,383
------------------------------------------------------------------------
224,648 214,629
------------------------------------------------------------------------

413,143 364,230
------------------------------------------------------------------------
------------------------------------------------------------------------
See accompanying notes


On behalf of the Board:

"Donald F. Archibald" "Douglas A. Dafoe"

Donald F. Archibald Douglas A. Dafoe
Chairman, CEO & Director Director


Cyries Energy Inc.
Consolidated Statements of Earnings and Retained Earnings

------------------------------------------------------------------------
------------------------------------------------------------------------
Three months Six months
ended ended
(unaudited, $000, except per share June 30, June 30, June 30, June 30,
amounts) 2006 2005 2006 2005
------------------------------------------------------------------------

Revenue
Petroleum and natural gas sales 34,027 12,787 69,239 22,855
Royalties (net of Alberta Royalty
Tax Credit) (7,943) (2,882) (17,354) (5,230)
------------------------------------------------------------------------
26,084 9,905 51,885 17,625
Other income 25 20 76 53
------------------------------------------------------------------------
26,109 9,925 51,961 17,678
------------------------------------------------------------------------

Expenses
Production 5,644 1,755 11,209 3,192
Transportation 1,118 411 2,240 740
General and administrative 1,079 777 1,783 1,239
Interest (note 4) 935 95 1,602 115
Stock compensation 817 250 2,569 952
Depletion, depreciation and
accretion 13,403 3,227 25,388 5,990
------------------------------------------------------------------------
22,996 6,515 44,791 12,228
------------------------------------------------------------------------

Earnings before taxes 3,113 3,410 7,170 5,450

Taxes (note 4)
Current income taxes (recovery) (1,004) 30 (843) 39
Future income taxes (recovery) (1,774) 1,558 (127) 2,362
------------------------------------------------------------------------
(2,778) 1,588 (970) 2,401

Net earnings 5,891 1,822 8,140 3,049

Retained earnings, beginning of
period 18,632 2,778 16,383 1,551
Retained earnings, end of period 24,523 4,600 24,523 4,600
------------------------------------------------------------------------
------------------------------------------------------------------------

Net Earnings Per Share (note 8)
Basic 0.15 0.07 0.21 0.12
Diluted 0.14 0.06 0.19 0.10
------------------------------------------------------------------------
------------------------------------------------------------------------
Weighted Average Common Shares
Outstanding (note 8)
Basic 39,268 26,659 39,266 26,201
Diluted 43,246 30,544 43,274 30,055
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes

Cyries Energy Inc.
Consolidated Statements of Cash Flows
------------------------------------------------------------------------
------------------------------------------------------------------------
Three months Six months
ended ended
June 30, June 30, June 30, June 30,
(unaudited, $000) 2006 2005 2006 2005
------------------------------------------------------------------------
Operating Activities
Net earnings 5,891 1,822 8,140 3,049
Items not affecting cash
Depletion, depreciation and
accretion 13,403 3,227 25,388 5,990
Future income taxes (recovery) (1,774) 1,558 (127) 2,362
Stock compensation 817 250 2,569 952
------------------------------------------------------------------------
Funds generated from operations,
before non cash working capital
changes 18,337 6,857 35,970 12,353
Asset retirement expenditures - - (144) -
Net changes in non-cash operating
working capital (note 10) (1,650) 1,839 (2,617) 1,033
------------------------------------------------------------------------
16,687 8,696 33,209 13,386
------------------------------------------------------------------------
Financing Activities
Issue of common shares - - - 20,008
Issue of common shares on exercise
of options 65 28 65 33
Issue of common shares on exercise
of warrants 6 - 6 -
Share issue costs - (1) - (995)
Increase/ (decrease) in bank debt 27,247 10,909 57,545 7,817
------------------------------------------------------------------------
27,318 10,936 57,616 26,863
------------------------------------------------------------------------

Investing Activities
Additions to property and equipment (20,146) (14,148) (78,902) (40,189)
Plan of arrangement - (404) - (404)
Disposition of property and
equipment - - 151 184
Net changes in non-cash operating
working capital (note 10) (23,859) (5,543) (12,074) 160
------------------------------------------------------------------------
(44,005) (20,095) (90,825) (40,249)
------------------------------------------------------------------------
Change in cash - (463) - -
Cash, beginning of period - 463 - -
------------------------------------------------------------------------
Cash, end of period - - - -
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes



1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Cyries Energy Inc. ("Cyries") was incorporated under the Business Corporations Act (Alberta) on May 20, 2004 and commenced operations July 2, 2004. Cyries is engaged in the exploration, development and production of crude oil and natural gas in the province of Alberta. The Company is traded on the Toronto Stock Exchange under the symbol CYS.

These interim consolidated financial statements have been prepared by management in accordance with Canadian Generally Accepted Accounting Principles (GAAP), using the same accounting policies as those set out in note 2 to the consolidated financial statements for the year ended December 31, 2005. The disclosures in these interim consolidated financial statements are incremental to those included in the annual consolidated financial statements and certain disclosures which are required to be included in the notes to the annual consolidated financial statements have been condensed or omitted. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2005.

2. CORPORATE ACQUISITIONS

a) Devlan Exploration Inc.

On July 1, 2005 Cyries acquired all of the outstanding common shares of Devlan Exploration Ltd. ("Devlan") pursuant to a Plan of Arrangement. Devlan shareholders received 0.25 Cyries common shares for each Devlan common share outstanding, for a total of 8,558 Cyries shares. The business combination was accounted for using the purchase method. As part of the Arrangement, Devlan transferred certain oil and natural gas properties and $4,500 of debt to a new company, Dual Exploration Inc. ("Dual"), the shares of which were distributed to shareholders of Devlan on the basis of 0.5 of a Dual share for each Devlan share outstanding.

The acquisition was funded by the issuance of common shares. The trading price ascribed to the common shares of $9.52 per share is based on the trading prices of Cyries common shares on the five days following and five days prior to the announcement of the Arrangement.



------------------------------------------------------------------------

Amount
------------------------------------------------------------------------
Consideration:
Common shares $ 81,469
Transaction costs 372
------------------------------------------------------------------------
81,841
Allocated to:
Current assets 9,602
Current liabilities (12,680)
Bank debt (19,208)
------------------------------------------------------------------------
(22,286)

Property, plant and equipment 70,512
Goodwill 49,745
Asset retirement obligations (3,560)
Future income taxes (12,570)
------------------------------------------------------------------------
$ 81,841
------------------------------------------------------------------------
------------------------------------------------------------------------


b) 1181608 Alberta ULC

Pursuant to a share purchase agreement, Cyries acquired all of the outstanding common shares of 1181608 Alberta ULC, a private oil and natural gas exploration and production company, for cash consideration of $57,000. The acquisition closed on August 12, 2005.



------------------------------------------------------------------------
------------------------------------------------------------------------
Amount
------------------------------------------------------------------------
Consideration:
Cash $ 57,000
Transaction costs 93
------------------------------------------------------------------------
57,093

Property, plant and equipment 54,717
Goodwill 18,689
Asset retirement obligations (1,249)
Future income taxes (15,064)
------------------------------------------------------------------------
$ 57,093
------------------------------------------------------------------------
------------------------------------------------------------------------

The results of operations of both companies are reflected in Cyries'
earnings from the respective closing dates.

3. PROPERTY, PLANT AND EQUIPMENT

------------------------------------------------------------------------

June 30, 2006 December 31, 2005
------------------------------------------------------------------------
Petroleum and natural gas property and
equipment $ 376,616 $ 297,046
Other 185 105
------------------------------------------------------------------------
376,801 297,151
Accumulated depletion and depreciation (57,061) (32,138)
------------------------------------------------------------------------
Net book value $ 319,740 $ 265,013
------------------------------------------------------------------------
------------------------------------------------------------------------


In determining the Company's depletion and depreciation, $18,720 of costs related to unproved properties (2005 -$7,503) and $13,711 of estimated salvage value (2005 - $3,661) was excluded from the costs subject to depletion. Future development costs required to complete wells for which proved reserves have been assigned of $6,657 (2005 - $3,475) were added to the Company's net book value for purposes of the depletion calculation. The Company does not capitalize corporate general and administrative expenses.

4. INCOME TAXES

During the three month period ended June 30, 2006, the Federal and Alberta taxation authorities substantially enacted reductions in income tax rates for the current and future years. The expected benefit of these rate changes was recorded in the current period as a future income tax recovery of $3,050 and a current tax recovery of $89.

In the fourth quarter of 2005 the Company recorded current income taxes of $1,798 and interest expense of $607 for the estimated impact of an income tax audit. In August 2006 the audit was finalized resulting in a reduction to current income tax expense of $958 and interest expense of $251 in the second quarter of 2006.

5. REVOLVING DEMAND LOAN

The Company has a demand revolving operating credit facility provided by a Canadian chartered bank. On April 7, 2006, the borrowing capacity of the credit facility was increased to $120 million from $73 million. The credit facility provides that borrowing may be made by way of direct advances or bankers' acceptances. Direct advances bear interest at the bank's prime lending rate plus a variable rate and bankers' acceptances bear interest at the applicable bankers' acceptances rate plus a variable rate stamping fee. The variable rate charged by the bank is dependent upon the Company's debt to trailing cash flow ratio. In the second quarter of 2006, the average interest rate on outstanding borrowings, including stamping fees, was 5.15 percent (June 2005 - 3.59 percent). The credit facility is subject to periodic review and is secured by a $250 million demand fixed and floating charge debenture over all of the Company's assets.



6. SHARE CAPITAL

Authorized

At June 30, 2006, the Company had authorized an unlimited number of
common shares, an unlimited number of preferred shares, 3,988 warrants
and 605 Class B performance shares.

Issued

The Company had the following shares outstanding at June 30, 2006:

------------------------------------------------------------------------
Number of
Common Shares Shares Amount
------------------------------------------------------------------------
Common shares December 31, 2005 39,265 $ 194,300
Exercise of stock options 5 94
Exercise of warrants 4 8
Tax effect of flow-through share issuance - (762)
------------------------------------------------------------------------
Common shares June 30, 2006 39,274 $ 193,640
------------------------------------------------------------------------
------------------------------------------------------------------------

------------------------------------------------------------------------
Number of
Warrants Warrants Amount
------------------------------------------------------------------------
Balance - December 31, 2005 3,968 $ 1,428
Exercise of warrants (4) (2)
------------------------------------------------------------------------
Balance - June 30, 2006 3,964 $ 1,426
------------------------------------------------------------------------
------------------------------------------------------------------------

------------------------------------------------------------------------
Number of
Performance
Performance Shares Shares Amount
------------------------------------------------------------------------
Balance - December 31, 2005 and June 30, 2006 599 $ 6
------------------------------------------------------------------------
------------------------------------------------------------------------


On March 2, 2005, Devlan issued flow-through shares and committed to spend $2,250 before December 31, 2005 on expenditures qualifying as Canadian exploration expenditures. Flow-through expenditures on Canadian exploration expenses were renounced to subscribers of the flow-through common shares in February 2006 effective December 31, 2005. The total flow-through commitment was met in 2005 and there is no outstanding obligation remaining in 2006. The related income tax impact was recorded in the first quarter of 2006.

Share capital includes common shares of $193,640, warrants of $1,426 and performance shares of $6 for a total of $195,072.

7. STOCK BASED COMPENSATION

The Company accounts for its stock based compensation plan (the "Plan") using the fair value method. Under this method, a compensation cost is charged over the vesting period for stock options and Class B performance shares with a corresponding increase to contributed surplus.



Stock option activity related to the Plan was as follows:

------------------------------------------------------------------------
Weighted
Number of Average
Options Price ($)
------------------------------------------------------------------------
Balance - December 31, 2005 1,672 10.25
Granted 1,415 13.36
Exercised (5) 13.01
Cancelled (10) 13.42
------------------------------------------------------------------------
Closing balance 3,072 11.67
------------------------------------------------------------------------
------------------------------------------------------------------------


The Plan is for the benefit of employees, officers and directors. Stock options granted under the Plan vest over a four year period with 20 percent of the options vesting immediately upon grant and a further 20 percent vesting upon each anniversary date. The options expire, if unexercised, five years from the date of the initial grant.



The following table provides additional information on the stock options
outstanding as at June 30, 2006:

------------------------------------------------------------------------
Weighted Weighted
Average Average
Range of Exercise Number of Exercise Contractual Options
Prices ($/ share) Options Price Life Exercisable
------------------------------------------------------------------------
5.21 - 6.50 450 $ 5.41 3.2 174
10.40 - 13.42 2,239 12.40 4.4 579
14.51 - 16.60 383 14.71 4.4 76
------------------------------------------------------------------------
5.21 - 16.60 3,072 $ 11.67 4.2 829
------------------------------------------------------------------------
------------------------------------------------------------------------


The fair value of each stock option granted for the six months ended June 30, 2006 was estimated on the date of grant using the Black-Scholes model. The weighted average fair value of the stock options granted in the period was $5.34 per share, using an average risk-free interest rate of 3.15 percent, average volatility of 40 percent and an expected life of 4.5 years. The Company has not re-priced any stock options.

For the six month period ended June 30, 2006, $2,500 of expense related to the stock options and $69 of expense related to the performance shares is included in stock compensation expense.



The following table reconciles the Company's contributed surplus:

------------------------------------------------------------------------
June 30, 2006 June 30, 2005
------------------------------------------------------------------------
Contributed surplus, beginning of period $ 2,512 $ 365
Stock based compensation expense 2,579 952
Exercise of stock options (28) (15)
Cancellation of stock options (10) -
------------------------------------------------------------------------
Carrying amount, end of period $ 5,053 $ 1,302
------------------------------------------------------------------------
------------------------------------------------------------------------

8. PER SHARE AMOUNTS

The following table details the components of diluted common shares
outstanding:

------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30, June 30, June 30,
Weighted average common shares 2006 2005 2006 2005
------------------------------------------------------------------------
Basic 39,268 26,659 39,266 26,201
Warrants 3,456 3,373 3,482 3,346
Performance shares 522 512 526 508
Diluted 43,246 30,544 43,274 30,055
------------------------------------------------------------------------
------------------------------------------------------------------------


The calculation of diluted common shares for the three and six months ended June 30, 2006 excludes 3,072 (2005 -1,127) of stock options that are anti-dilutive.

9. ASSET RETIREMENT OBLIGATIONS

The total future asset retirement obligations were estimated by management based on the Company's net ownership interest in all wells and facilities, estimated costs to reclaim and abandon the wells and facilities and the estimated timing of the costs to be incurred in future periods. The Company has estimated the net present value of its asset retirement obligations to be $13,659 as at June 30, 2006 (2005 - $3,001) based on a total future liability of $34,514 (2005 - $7,243). Asset retirement expenditures are expected to be made over the next 25 years. The Company used a credit adjusted risk free rate of seven percent and an inflation rate of two percent (2005 - 1.5%) to calculate the present value of the asset retirement obligations. The following table reconciles the Company's total asset retirement obligations.



------------------------------------------------------------------------

June 30, 2006 June 30, 2005
------------------------------------------------------------------------
Balance, beginning of period $ 12,440 $ 2,519
Increase in liabilities 813 381
Liabilities settled (144) -
Acquisitions 85 -
Accretion 465 101
------------------------------------------------------------------------
Carrying amount, end of period $ 13,659 $ 3,001
------------------------------------------------------------------------
------------------------------------------------------------------------

10. SUPPLEMENTAL CASH FLOW INFORMATION

Three months ended Six months ended
Changes in non-cash June 30, June 30, June 30, June 30,
working capital 2006 2005 2006 2005
------------------------------------------------------------------------
Accounts receivable $ 6,169 $ 3,884 $ 6,682 $ 2,113
Prepaid expenses and deposits (802) (14) (868) (3)
Accounts payable and
accrued liabilities (30,876) (7,574) (20,505) (917)
------------------------------------------------------------------------
Net change in non-cash
working capital $(25,509) $ (3,704) $(14,691) $ 1,193
Investing activities (23,859) (5,543) (12,074) 160
------------------------------------------------------------------------
Operating activities $ (1,650) $ 1,839 $ (2,617) $ 1,033
------------------------------------------------------------------------
------------------------------------------------------------------------

The Company made the following cash outlays in respect of interest
expense and current income taxes:

Three months ended Six months ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
------------------------------------------------------------------------
Interest $ 1,184 $ 65 $ 1,729 $ 85
Income taxes $ 1,044 $ - $ 1,282 $ -
------------------------------------------------------------------------
------------------------------------------------------------------------


11. SUBSEQUENT EVENT

On July 6, 2006, the Company issued 1,225 flow-through common shares ("CEE Flow-Through Shares) at a price of $13.10 per share for proceeds of $16,047. In addition to the CEE Flow-Through Share issuance, certain directors, officers and employees of the Company together with certain other persons or companies have purchased 602 flow-through shares ("CDE Flow-Through Shares") at a price of $11.60 for proceeds of $6,983. The purchasers of the CEE Flow-Through Shares will be entitled to renunciation of Canadian exploration expenses from the Company, whereas purchasers of the CDE Flow-Through Shares will be entitled to renunciation of Canadian development expenses from the Company. Proceeds from the offerings will fund ongoing exploration and development activities.

Cyries Energy Inc. is a publicly traded Canadian energy company involved in the exploration, development and production of natural gas and crude oil in western Canada. Its common shares trade on the TSX under the symbol "CYS".

This news release shall not constitute an offer to sell or the solicitation of any offer to buy securities in any jurisdiction. The Cyries Energy Inc. common shares have not been nor will be registered under the United States Securities Act of 1933, and they may not be offered or sold in the United States absent registration or an exemption from registration.









The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Cyries Energy Inc.
    Donald F. Archibald
    Chairman & C.E.O.
    (403) 262-9609
    (403) 262-0055 (FAX)