Cyries Energy Inc.
TSX : CYS

Cyries Energy Inc.

November 09, 2006 09:10 ET

Cyries Energy Inc. Announces Third Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Nov. 9, 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 September 30, 2006.



Financial Highlights
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Three Three Nine Nine
months months months months
ended ended ended ended
(000s, except as September September % September September %
indicated) 30, 2006 30, 2005 Change 30, 2006 30, 2005 Change
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Petroleum and
natural gas
sales 32,351 31,140 4 101,589 53,995 88

Net earnings 1,230 6,101 (80) 9,370 9,150 2
Per share basic 0.03 0.16 (81) 0.24 0.31 (23)
Per share diluted 0.03 0.15 (80) 0.21 0.27 (22)

Funds generated from
operations 15,711 17,650 (11) 51,680 30,003 72
Per share basic 0.38 0.47 (19) 1.30 1.00 30
Per share diluted 0.35 0.42 (17) 1.18 0.88 34

Capital expenditures 33,336 24,009 39 107,402 64,329 67
Acquisitions (net) 3,609 124,985 (97) 8,438 124,670 (93)

Bank debt and working
capital deficiency 114,765 56,238 104 114,765 56,238 104

Weighted average
shares
outstanding
Basic 40,987 37,285 10 39,846 29,936 33
Diluted 44,942 41,594 8 43,848 33,965 29

Average Sales Price
Oil $/bbl 75.17 69.10 9 71.52 64.13 12
Natural gas $/mcf 6.06 9.92 (39) 6.84 8.96 (24)
NGL $/bbl 59.04 59.79 (1) 60.38 51.08 18
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Total $/boe 44.42 61.26 (27) 46.97 55.48 (15)

Average
Daily
Production
Oil bbl 1,358 989 37 1,268 639 98
Natural gas mcf 36,378 25,816 41 37,336 16,512 126
NGL bbl 496 233 113 432 174 148
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Total boe/d 7,917 5,525 43 7,922 3,565 122

Production
expenses $/boe 8.27 7.85 5 7.97 7.38 8

Operating
netback $/boe 24.53 37.77 (33) 26.05 33.82 (23)

Undeveloped
land
gross acres 341,030 199,598 71 341,030 199,598 71
net acres 236,654 139,409 70 236,654 139,409 70
Farm-in
acreage net acres - 37,564 (100) - 37,564 (100)
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To Our Shareholders:

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

Production increased in the third quarter by 43 percent to 7,917 boe per day compared to 5,525 boe per day in the prior year. Production per share increased 33 percent compared with the same period in 2005.

As a result of closing the Dual Exploration acquisition in December, Cyries will gain an additional 1,000 boe per day. The combined entity also has over 2,000 boe per day behind pipe; as a result, Cyries expects to reach a production level of over 11,500 boe per day in the first quarter of 2007.

The exploration program had notable success at Gold Creek in the third quarter.

Cyries drilled a successful gas well, which is expected to commence production at over 3mmcf per day.

Cyries continued to develop a prolific light oil pool, announced in the second quarter. We have drilled an additional 2 wells into the pool during the quarter and will drill a third well in the fourth quarter. We expect to have an optimization plan finalized with the EUB within the next 3 months.

On October 4, Cyries announced the acquisition of Dual Exploration Inc. The acquisition is expected to close around December 1, it will add about 1,000 boe per day of production, and consolidate Cyries' working interests in several properties; in particular, the acquisition of Dual will allow Cyries to increase its interest to 100% in their wells in the Gold Creek oil pool.

Subsequent to the end of the quarter Cyries announced a successful $31.6 million equity issue at $12.50 per share. Proceeds of the issue will ultimately be used to expand the 2007 capital program to $160 million. Initially the proceeds will reduce debt. Proforma net debt of Cyries at September 30 including the proceeds of the equity issue would be in the range of $85 million against a credit facility of $130 million.

Operations Update

Cyries drilled 13 gross (10.7 net) wells during the quarter with an 87% success rate. In the first nine months of 2006 Cyries drilled 46 gross wells (36.6 net) with a 92 percent success rate. We expect to drill up to an additional 15-20 wells during the last quarter of 2006.

The two oil wells drilled at Gold Creek extended the pool boundaries of the previously announced discovery. We now have 6 wells into the pool, which is subject to maximum rate limitation restrictions. We hope to have these production restrictions removed within the next several months, allowing Cyries to increase output from the pool to about 2,000 boe per day of light oil. We will also conduct further drilling to extend the pool boundaries. The acquisition of Dual Exploration provides Cyries with 100% working interest in these wells.

Cyries increased its undeveloped land position during the quarter. We spent a total of $4.1 million on land and increased the net acreage position to 236,654 acres. The acquisition of Dual Exploration also will add a further 164,499 net acres of undeveloped land providing the company with a total undeveloped land position of approximately 401,153 net acres.

Financial Performance

Increased production volumes largely offset a 39 percent decrease in Cyries' average gas price received during the third quarter. As a result cash flow only declined 11 per cent compared to the same period of 2005.

Cyries maintained good cost performance during the quarter. Production expenses increased from $7.85 per boe in 2005 to $8.27 in 2006. Fifty-five cents of production expenses during the quarter however were attributable to plant turn-around costs which will not be repeated in the fourth quarter. Overhead costs, royalties and transportation expenses were either reduced or comparable to the previous year.

Cyries' balance sheet remained strong and will improve further with the Dual acquisition, which was financed on a share exchange basis. In addition Cyries has received over $30.2 million in proceeds as a result of the financing which closed earlier today.

As a result of the financing Cyries announced subsequent to the end of the quarter that the capital expenditure program for 2007 would be expanded from a projected $130 million to $160 million.

Outlook

The next two quarters should result in strong production volume growth for Cyries. With the Dual Exploration acquisition combined with the results from recent drilling we have increased our production guidance for both 2006 exit volumes as well as 2007 volumes. We now expect the company to attain 11,500 boe per day of production in the first quarter of 2007, almost 40 per cent growth compared to 2006 production.

The cost base of the company has remained stable. The balance sheet is strong and capable of financing an expanded 2007 capital program.

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 nine month periods ended September 30, 2006 and the audited financial statements for the year ended December 31, 2005. This MD&A is dated as of November 8, 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. 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. A calculation of operating netback is included in the MD&A. Working capital deficiency is defined as current assets less current liabilities, excluding any debt presented as a current liability. Funds generated from operations is expressed before changes in non-cash operating working capital and asset retirement expenditures. The Company considers funds generated from operations a key measure as it is used to analyze operations, performance, leverage and liquidity.

The following table reconciles funds generated from operations to cash flow from operating activities, the most directly comparable GAAP measure:



Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
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Cash flow from
operating activities 17,351 18,967 50,560 32,352
Net changes in non-cash
operating working
capital (1,640) (1,317) 976 (2,349)
Asset retirement
expenditures - - 144 -
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Funds generated from
operations 15,711 17,650 51,680 30,003
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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

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Three months ended Nine months ended
($000s, except September 30, September 30, September 30, September 30,
per share data) 2006 2005 2006 2005
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Net earnings 1,230 6,101 9,370 9,150
Net earnings per
share basic 0.03 0.16 0.24 0.31
Net earnings per
share diluted 0.03 0.15 0.21 0.27

Funds generated from
operations 15,711 17,650 51,680 30,003
Funds generated
per share basic 0.38 0.47 1.30 1.00
Funds generated
per share diluted 0.35 0.42 1.18 0.88

Total assets 437,508 326,177 437,508 326,177
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For the three months ended September 30, 2006 both net earnings and cash flow decreased compared with the comparative period. Cash flow decreased by $1,939 or 11 percent as the quarterly average sales price decreased by 27 percent and was only partially offset by an increase in average production of 43 percent. Earnings decreased by $4,871 or 80 percent as the impact of higher production and lower income taxes was negated by the lower average sales price. In comparison with the three months ended September 30, 2005, expenses increased for stock compensation, interest, general and administrative, interest and depletion, depreciation and accretion reflecting the increased size and complexity of Cyries.

For the nine months ended September 30, 2006 net earnings increased two percent while cash flow increased 72 percent over the prior period. The increase in cash flow is a result of 122 percent growth in oil and natural gas production over the prior period. The impact of the increased production was offset by a decrease in average sales price of 15 percent. Earnings did not increase significantly over the prior year despite the impact of increased production volumes and reduced income tax expense. Earnings were negatively impacted by a decrease in average sales price and increases to DD&A, stock compensation and interest expense.




DETAILED FINANCIAL ANALYSIS

Petroleum and natural gas production

Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
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Oil (bbls/d) 1,358 989 1,268 639
Natural gas (mcf/d) 36,378 25,816 37,336 16,512
Natural gas liquids
(bbls/d) 496 233 432 174
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Total (boe/d) 7,917 5,525 7,922 3,565
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Production for the three and nine month periods ending September 30, 2006 increased significantly from the comparative period. The increase resulted from a combination of acquisition and drilling activity in the past year. Natural gas production in the three and nine months ended September 30, 2006 increased to 36,378 mcf/d and 37,336 mcf/d, compared to 25,816 mcf/d and 16,512 mcf/d for the respective three and nine month periods ended September 30, 2005. Oil and liquids production in the three months ended September 30, 2006 increased to 1,854 boe/d compared to 1,222 boe/d in the third quarter of 2005. In the nine months ended September 30, 2006, oil and liquids production increased 109 percent to 1,700 boe/d.



Revenue

Three months ended Nine months ended
(000's) September 30, September 30, September 30, September 30,
2006 2005 2006 2005
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Revenue
Oil 9,389 6,288 24,747 11,186
Natural gas 20,268 23,569 69,725 40,379
Natural gas liquids 2,694 1,283 7,117 2,430
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Total 32,351 31,140 101,589 53,995
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Average sales price
Oil ($/bbl) 75.17 69.10 71.52 64.13
Natural gas
liquids ($/bbl) 59.04 59.79 60.38 51.08
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Average liquids
price 70.85 66.77 68.69 61.14
Natural gas ($/mcf) 6.06 9.92 6.84 8.96
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Total per boe ($/boe) 44.42 61.26 46.97 55.48
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Benchmark pricing
Edmonton par -
light oil ($/bbl) 79.72 77.02 76.06 68.55
AECO-C Spot ($/mcf) 5.73 9.39 6.41 7.90
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In the three months ended September 30, 2006, revenues increased four percent to $32,351 from $31,140 in the comparative period in 2005. The increase in revenue was a result of the 43 percent increase in production volumes offset by a 27 percent decrease in the average sales price. In the nine month period ended September 30, 2006, revenues increased 88 percent to $101,589 from $53,995 in the comparative period in 2005. The increase in revenue was due to a 122 percent increase in production volumes partially offset by a 15 percent decrease in the average sales price. The decrease in the average sales price realized by Cyries resulted from a 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 nine month periods ended September 30, 2006:



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Three months ended Nine months ended
($000s) September 30, 2006 September 30, 2006
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Natural Gas Sales Variance
Volume increase 9,642 50,925
Price decrease (12,943) (21,579)
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Net gas sales change (3,301) 29,346
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Crude Oil and NGLs Sales Variance
Volume increase 3,910 14,836
Price increase 602 3,412
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Net crude oil and NGLs sales change 4,512 18,248
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Combined sales change 1,211 47,594
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Royalties

Oil and natural gas royalties, net of the Alberta Royalty Tax Credit ("ARTC"), totaled $7,384 and $24,739 for the third quarter and first nine months of 2006, respectively, compared to $7,125 and $12,355 for the comparative periods in 2005. The increase in both periods corresponds to the increase in petroleum and natural gas sales. Royalties as a percentage of revenue was consistent at 23 to 24 percent in each of the periods. ARTC was an expense of $121 for the three months ended September 30, 2006 compared with a recovery of $125 in the comparative period. ARTC for the nine months ended September 30, 2006 was $217 compared with $449 in 2005. The reduction in both comparative periods is due to a repayment of ARTC of $246 in the third quarter of 2006.



Operating Netback and Production Expense

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Three months ended Nine months ended
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($000s) September 30, September 30, September 30, September 30,
2006 2005 2006 2005
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Revenue 32,351 31,140 101,589 53,995
Royalty income 27 39 91 66
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32,378 31,179 101,680 54,061
Royalties (7,384) (7,125) (24,739) (12,355)
Production expense
(net) (6,024) (3,992) (17,231) (7,184)
Transportation expense (1,107) (862) (3,347) (1,602)
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Operating netback 17,863 19,200 56,363 32,920
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Operating netback
per boe 24.53 37.77 26.05 33.82
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Three months ended Nine months ended
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($000s) September 30, September 30, September 30, September 30,
2006 2005 2006 2005
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Production expense
gross 6,696 4,377 19,081 7,953
Overhead recoveries (406) (216) (1,212) (530)
Processing income (266) (169) (638) (239)
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Production expense
(net) 6,024 3,992 17,231 7,184
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Production expense
per boe (net) 8.27 7.85 7.97 7.38
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In comparison to the prior year, operating netback per boe decreased 35 percent to $24.53 for the quarter ended September 30, 2006 and 23 percent to $26.05 for the nine months ended September 30, 2006. The decrease in both periods was caused by a decrease in average sales price.

Net production expenses increased 51 percent in the three month period ended September 30, 2006 to $6,024 compared to $3,992 in the third quarter of 2005. Net production expenses for the nine months ended September 30, 2006 increased to $17,231 from $7,184 in the comparative period due to increased production and a slight increase in production expense per boe. The increase in production expense per boe is a result of plant turnarounds in the third quarter of 2006. Production costs per boe increased five percent to $8.27 from $7.85 in the three month period ended September 30, 2005. For the nine months ended September 30, 2006, production costs per boe increased to $7.97, an eight percent increase over the comparative period in 2005.

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 $1,107 for the three months ended September 30, 2006 from $862 for the comparative period in 2005. Transportation for the nine months ended September 30, 2006 increased to $3,347 from $1,602 for the comparative period in 2005. On per boe basis, transportation decreased 11 percent to $1.52 and six percent to $1.55 for the respective three and nine months ended September 30, 2006 when compared to the equivalent periods in 2005.



General and Administrative Expenses

Three months ended Nine months ended
($000s) September 30, September 30, September 30, September 30,
2006 2005 2006 2005
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General and
administrative
expense (gross) 1,316 914 4,083 2,679
Overhead recoveries (407) (266) (1,391) (792)
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General and
administrative
expense (net) 909 648 2,692 1,887
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General and
administrative ($/boe) 1.25 1.27 1.24 1.94
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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. In the third quarter of 2006 G&A per boe was consistent with the prior period as an increased net costs were offset by a corresponding increase in production volumes. For the nine month period ended September 30, 2006, G&A expenses per boe decreased 36 percent to $1.24 from $1.94 in 2005. G&A per boe has decreased as production volumes increased at a greater rate than net G&A costs.

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 $12,981 and $38,368 in the respective three and nine month periods ended September 30, 2006 compared to $7,967 and $13,957 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 three months ended September 30, 2006 increased to $17.82 from $15.67 for the comparative period in 2005 as a result of the costs associated with both acquisitions and drilling in the fourth quarter of 2005 and the first three quarters of 2006. In determining the Company's depletion and depreciation, $20,020 (2005 - $13,411) of costs related to unproven properties and $14,474 (2005 - $15,902) 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 $4,711 (2005 -$6,467) were added to the Company's net book value in the depletion calculation.

Stock Based Compensation

In the third quarter of 2006, stock-based compensation expense related to the outstanding stock options and Class B performance shares increased to $1,147 from $506 in the comparative period. Stock-based compensation expense for the first nine months of 2006 was $3,716 compared to $1,458 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 September 30, 2005. At September 30, 2006 there were 3,423 stock options outstanding compared to 1,328 at September 30, 2005.

Income Taxes

For the quarter ended September 30, 2006 the Company recorded a future income tax expense of $553 (2005 - expense of $3,076) and current income tax recovery of $5 (2005 - expense of $530). The reduction in both current and future tax expense in the quarter is a result of lower quarterly earnings than in the prior year.

In the nine month period ended September 30, 2006 the future income tax expense was $426 (2005 - expense of $5,438) and the current income tax recovery was $848 (2005 - expense of $569). In the nine month period ended September 2006 the company recognized recoveries for future income tax of $3,050 and current income tax of $89 as a result of reductions in the Alberta and Federal corporate income tax rates for the current and future years. In addition, a reduction to current income tax expense of $958 was recorded nine month period ended September 30, 2006 as an amount previously accrued for an income tax assessment was reduced upon completion of the audit.

At September 30, 2006 the Company estimates that tax pools of $217.1 million are available for deduction against future taxable income. No qualifying CEE or CDE expenditures related to the July 2006 flow-through share issue have been renounced as of September 30, 2006.



($ million) 2006
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Canadian oil and gas property expense 53.2
Canadian development expense 74.3
Canadian exploration expense 17.7
Undepreciated capital costs 66.2
Share issue costs 5.7
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Total 217.1
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Capital Expenditures

Three months ended Nine months ended
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September 30, September 30, September 30, September 30,
($000s) 2006 2005 2006 2005
---------------------------------------------------------------------------
Land acquisitions 3,994 2,658 8,815 7,447
Property acquisitions
(net) 3,609 (244) 8,438 (559)
Corporate acquisitions - 125,229 - 125,229
Geological and
geophysical 967 1,544 3,795 3,037
Drilling and
completions 19,970 16,388 64,041 43,752
Equipment and
facilities 8,371 3,388 30,637 10,039
Other 34 31 114 54
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Total capital
expenditures 36,945 148,994 115,840 188,999
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In the third quarter, Cyries' drilled 13.0 gross wells (10.7 net) with an 87 percent success rate. In the first nine months of 2006, the Company drilled 46.0 gross wells (36.6 net) with a 92 percent success rate. Of the total wells drilled, 32.0 (26.3 net) were natural gas wells and 9.0 (7.3 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 $145,000 in 2006 of which $30,000 will be incurred in the last quarter of the year drilling an additional 15 to 20 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 Nine months ended
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September 30, September 30, September 30, September 30,
2006 2005 2006 2005
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Gross Net Gross Net Gross Net Gross Net
wells wells wells wells wells wells wells wells
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Gas 4.0 4.0 9.0 5.9 32.0 26.3 23.0 16.4
Oil 7.0 5.3 4.0 0.8 9.0 7.3 6.0 2.0
Dry 2.0 1.4 5.0 3.8 5.0 3.0 9.0 7.5
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Total 13.0 10.7 18.0 10.5 46.0 36.6 38.0 25.9
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Success (%) 87% 64% 92% 71%
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Share Capital

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(000s)
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Weighted average common shares outstanding for the nine months ended
September 30, 2006

Basic 39,846
Diluted 43,848

Outstanding Securities at November 8, 2006
Common shares 41,119
Warrants 3,964
Performance shares 599
Stock options 3,426
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Total outstanding securities at November 8, 2006 49,108
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On July 6, 2006, the Company issued 1,827 flow-through common shares of which 1,225 flow-through common shares relate to Canadian exploration expenses ("CEE Flow-Through Shares") and 602 flow-through common shares relate to Canadian development expenditures ("CDE Flow-Through Shares"). The CEE Flow-Through Shares were issued at a price of $13.10 per share for proceeds of $16,048, while the CDE Flow-Through Shares were issued at a price of $11.60 amounting to proceeds of $6,988. 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.

On November 9, 2006, the Company expects to close bought deal short form prospectus offering of 2,530 Cyries common shares at a price of $12.50 per share for aggregate gross proceeds of $31,625. Proceeds of the offering will be used to fund the 2007 capital expenditure program of $160,000.

During the nine month period ended September 30, 2006, the company issued 1,785 stock options to employees and directors. The options vest over four years and are exercisable into common shares at an average price of $13.24. At September 30, 2006 the Company had 3,423 options outstanding with an average exercise price of $11.82.

Liquidity and Capital Resources

At September 30, 2006 the Company had bank debt of $90,350 and a working capital deficiency of $24,415. In the second quarter, the Company's bank lines were increased to $120,000. Subsequent to the end of the third quarter, the bank completed its fall review and the bank lines are expected to increase to $130,000.

The 2006 capital program is anticipated to be $145,000 and will be funded through a combination of funds generated from operations, proceeds from the July and November 2006 equity offerings and bank debt. The growth in production has increased the Company's ability to fund the capital program with internally generated funds.

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. The Company will monitor the capital program with the current price outlook and adjust it accordingly.

Acquisition of Dual Exploration

On October 4, 2006, the Company announced that it entered into an acquisition agreement to offer (the "Offer") to acquire all of the outstanding shares of Dual Exploration Inc. ("Dual") in exchange for 0.167 of a Cyries share for each Dual share outstanding. Cyries mailed the Offer on October 24, 2006 and the Offer will be open until November 29, 2006 contingent on certain conditions. Pending successful completion of the Offer and necessary approvals, the acquisition is expected to close in December 2006. Dual Exploration is an oil and natural gas exploration company with assets in located in primarily Western Canada. The proposed acquisition is expected to increase Cyries' production by approximately 1,000 boe per day.

Quarterly Financial and Operational Information



Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
2006 2006 2006 2005 2005 2005 2005 2004
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Average gas
price ($/mcf) 6.06 6.49 8.02 12.14 9.92 8.14 7.56 7.19
Average
liquids
price
($/boe) 70.85 71.90 62.41 63.61 66.77 57.68 52.70 50.31
Average
sales
price
($/boe) 44.42 45.76 50.98 70.69 61.26 50.77 47.24 45.19
Average
production
(boe/d) 7,917 8,172 7,675 6,522 5,525 2,768 2,368 1,644

Petroleum
and
natural gas
sales 32,351 34,027 35,212 42,419 31,140 12,787 10,069 6,834

Royalties 7,384 7,943 9,411 11,394 7,125 2,882 2,348 1,226

Operating
expenses 6,024 5,644 5,564 4,804 3,992 1,755 1,438 1,075
G&A expenses 909 1,079 704 1,115 648 777 462 519

Funds
generated
from
operations 15,711 18,337 17,632 20,861 17,650 6,857 5,496 3,783
Per share
basic 0.38 0.47 0.45 0.53 0.47 0.26 0.21 0.16
Per share
diluted 0.35 0.42 0.41 0.48 0.42 0.22 0.19 0.14

Net earnings 1,230 5,891 2,249 5,682 6,101 1,822 1,227 1,171
Per share
basic 0.03 0.15 0.06 0.14 0.16 0.07 0.05 0.05
Per share
diluted 0.03 0.14 0.05 0.13 0.15 0.06 0.04 0.04

Total
assets 437,508 413,143 411,463 364,230 326,177 100,490 94,901 69,711
Bank debt
and
working
capital
deficiency 114,765 116,074 114,338 73,220 56,238 18,322 10,654 9,313
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Production

Production during the third quarter of 2006 decreased three percent to 7,917 boe/d compared to 8,172 boe/d in the prior quarter. Third party operational issues and facility turnarounds in the Hotchkiss, Gold Creek, Knopcik and Boundary Lake areas accounted for a decrease in production of approximately 375 boe/d in the quarter. The Company utilized this opportunity to perform turnarounds on Cyries' operated facilities during the resulting downtime.

Petroleum and Natural Gas Sales

Oil and natural gas revenues decreased five percent in the third quarter of 2006 compared to the second quarter 2006 as both average sales prices and production volumes decreased by three percent.

Royalties

Royalties, net of ARTC, decreased seven percent to $7,384 when compared to the second quarter of 2006 as oil and natural gas prices and volumes decreased slightly in the quarter. As a percentage of sales, royalty rates in the third quarter were consistent with the second quarter.

Operating Expenses

Operating expenses increased seven percent from the second quarter despite a decrease in production volumes. The Company utilized the downtime associated with third party facility issues to perform maintenance on Cyries' facilities at Hotchkiss, Gold Creek and Boundary Lake. As a result, operating expenses per boe increased to $8.27 compared to $7.59 in the previous quarter.

General and Administrative Expenses

Net G&A expense decreased 16 percent to $909 from $1,079 in the second quarter of 2006. The decrease in net G&A in the third quarter is due primarily to an increase in capital overhead recoveries. G&A per boe decreased to $1.25 in the third quarter from $1.45 per boe in the second quarter.

Net Earnings and Funds Generated from Operations

Net earnings of $1,230 ($0.03 per basic share) in the third quarter of 2006 decreased from $5,891 ($0.15 per basic share) as the second quarter. Second quarter net earnings included $4,348 of one-time income tax adjustments.

Funds generated from operations decreased 14 percent in the third quarter of 2006 to $0.38 per share. The reduction of funds generated from operations is a result of lower production volumes, lower average sales prices and an increase in current tax expense from the second quarter.

Total Assets

Total assets increased six percent to $437,508 at the end of the third quarter of 2006 compared to the prior quarter. The increase is attributable to drilling and capital spending in the third quarter of 2006. The capital expenditures in the third quarter of 2006 included $3,994 of land acquisitions, $3,609 of net property acquisitions, $967 of geological and geophysical activities, $19,970 in drilling and completions, $8,371 in equipment and facilities and $34 in other.

Working Capital Deficiency

The bank and working capital deficiency has decreased slightly in the third quarter of 2006 as the Company's cash flow and proceeds of the July equity issue were in excess of capital spending in the quarter. The Company anticipates being able to complete the remainder of its capital program through a combination of debt, proceeds of the November equity issue, 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 and AIF 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 September 30, As at December 31,
(unaudited, $000) 2006 2005
---------------------------------------------------------------------------

Assets
Current assets
Accounts receivable 21,430 28,948
Deposits, prepaid expenses and other 2,831 1,835
---------------------------------------------------------------------------
24,261 30,783

Property and equipment, net (note 4) 344,813 265,013

Goodwill 68,434 68,434
---------------------------------------------------------------------------
437,508 364,230
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities 48,342 53,343
Income taxes payable 334 3,411
Revolving demand loan (note 6) 90,350 47,249
---------------------------------------------------------------------------
139,026 104,003

Future income tax liability 34,097 33,158
Asset retirement obligations (note 10) 14,767 12,440
---------------------------------------------------------------------------
Total liabilities 187,890 149,601
---------------------------------------------------------------------------

Shareholders' Equity
Share capital (note 7) 217,712 195,734
Contributed surplus (note 8) 6,153 2,512
Retained earnings 25,753 16,383
---------------------------------------------------------------------------
249,618 214,629
---------------------------------------------------------------------------
437,508 364,230
---------------------------------------------------------------------------

See accompanying notes

On behalf of the Board:

Donald F. Archibald Frederic C. Coles
Chairman, CEO & Director Director


Cyries Energy Inc.
Consolidated Statements of Earnings and Retained Earnings

---------------------------------------------------------------------------
---------------------------------------------------------------------------
Three months ended Nine months ended
($000s, except September 30, September 30, September 30, September 30,
per share amounts) 2006 2005 2006 2005
---------------------------------------------------------------------------
Revenue
Petroleum and
natural gas sales 32,351 31,140 101,589 53,995
Royalties (net of
Alberta Royalty
Tax Credit) (7,384) (7,125) (24,739) (12,355)
---------------------------------------------------------------------------
24,967 24,015 76,850 41,640
Other income 241 47 317 100
---------------------------------------------------------------------------
25,208 24,062 77,167 41,740
---------------------------------------------------------------------------
Expenses
Production 6,024 3,992 17,231 7,184
Transportation 1,107 862 3,347 1,602
General and
administrative 909 648 2,692 1,887
Interest (note 6) 1,262 380 2,865 495
Stock compensation 1,147 506 3,716 1,458
Depletion,
depreciation and
accretion 12,981 7,967 38,368 13,957
---------------------------------------------------------------------------
23,430 14,355 68,219 26,583
---------------------------------------------------------------------------

Earnings before taxes 1,778 9,707 8,948 15,157

Taxes (note 5)
Current income taxes
(recovery) (5) 530 (848) 569
Future income taxes 553 3,076 426 5,438
---------------------------------------------------------------------------
548 3,606 (422) 6,007

Net earnings 1,230 6,101 9,370 9,150

Retained earnings,
beginning of period 24,523 4,600 16,383 1,551
Retained earnings,
end of period 25,753 10,701 25,753 10,701
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Net Earnings Per Share
(note 9)
Basic 0.03 0.16 0.24 0.31
Diluted 0.03 0.15 0.21 0.27
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Weighted Average Common
Shares Outstanding
(note 9)
Basic 40,987 37,285 39,846 29,936
Diluted 44,942 41,594 43,848 33,965
---------------------------------------------------------------------------
---------------------------------------------------------------------------
See accompanying notes


Cyries Energy Inc.
Consolidated Statements of Cash Flows
---------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
(unaudited, $000) 2006 2005 2006 2005
---------------------------------------------------------------------------

Operating Activities

Net earnings 1,230 6,101 9,370 9,150
Items not
affecting cash
Depletion,
depreciation and
accretion 12,981 7,967 38,368 13,957
Future income taxes 553 3,076 426 5,438
Gain on investment (200) - (200) -
Stock compensation 1,147 506 3,716 1,458
---------------------------------------------------------------------------
Funds generated
from operations 15,711 17,650 51,680 30,003
Asset retirement
expenditures - - (144) -
Net changes in
non-cash operating
working capital
(note 11) 1,640 1,317 (976) 2,349
---------------------------------------------------------------------------
17,351 18,967 50,560 32,352
---------------------------------------------------------------------------

Financing Activities
Issue of common shares 23,036 50,005 23,036 70,014
Issue of common shares
on exercise of options 107 - 172 32
Issue of common shares
on exercise of warrants - 33 6 33
Share issue costs (800) (2,490) (800) (3,485)
Increase/(decrease)
in bank debt (14,444) 5,328 43,101 13,145
---------------------------------------------------------------------------
7,899 52,876 65,515 79,739
---------------------------------------------------------------------------

Investing Activities
Additions to property
and equipment (37,661) (24,140) (116,563) (64,328)
Plan of arrangement - (57,062) - (57,466)
Disposition of property
and equipment 716 374 867 558
Net changes in non-cash
investing working
capital (note 11) 11,695 8,985 (379) 9,145
---------------------------------------------------------------------------
(25,250) (71,843) (116,075) (112,091)
---------------------------------------------------------------------------

Change in cash - - - -
Cash, beginning of
period - - - -
---------------------------------------------------------------------------
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. The business combination was accounted for using the purchase method.



--------------------------------------------------------
--------------------------------------------------------
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. DEPOSITS, PREPAID EXPENSES AND OTHER



----------------------------------------------------------------------
September 30, 2006 December 31, 2005
----------------------------------------------------------------------
Deposits $ 197 $ 227
Prepaid expenses 2,434 1,608
Other 200 -
----------------------------------------------------------------------
$ 2,831 $ 1,835
----------------------------------------------------------------------
----------------------------------------------------------------------


4. PROPERTY, PLANT AND EQUIPMENT

----------------------------------------------------------------------
September 30, 2006 December 31, 2005
----------------------------------------------------------------------
Petroleum and natural gas
property and equipment $ 414,381 $ 297,046
Other 219 105
----------------------------------------------------------------------
414,600 297,151
Accumulated depletion and depreciation (69,787) (32,138)
----------------------------------------------------------------------
Net book value $ 344,813 $ 265,013
----------------------------------------------------------------------
----------------------------------------------------------------------


In determining the Company's depletion and depreciation, $20,020 of costs related to unproved properties (2005 - $13,411) and $14,474 of estimated salvage value (2005 - $15,902) was excluded from the costs subject to depletion. Future development costs required to complete wells for which proved reserves have been assigned of $4,711 (2005 - $6,467) 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.

5. INCOME TAXES

During the second quarter of 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 nine month 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 2006 the audit was finalized resulting in a reduction to current income tax expense of $958 and interest expense of $251 in the nine month period ended September 30, 2006.

6. 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 third quarter of 2006, the average interest rate on outstanding borrowings, including stamping fees, was 5.49 percent (September 2005 -- 3.69 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.

7. SHARE CAPITAL

Authorized

At September 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 September 30, 2006:

----------------------------------------------------------------------
Number of
Common Shares Shares Amount
----------------------------------------------------------------------
Common shares December 31, 2005 39,265 $ 194,300
Exercise of stock options 24 249
Exercise of warrants 4 8
Flow-through share issue 1,827 23,036
Share issue costs - (800)
Tax effect of share issue costs - 249
Tax effect of flow-through share issuance - (762)
Common shares September 30, 2006 41,120 $ 216,280
----------------------------------------------------------------------
----------------------------------------------------------------------


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


----------------------------------------------------------------------
Number of
Performance Shares Performance Shares Amount
Balance - December 31,2005
and September 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.

On July 6, 2006, the Company issued 1,827 flow-through common shares of which 1,225 flow-through common shares relate to Canadian exploration expenses ("CEE Flow-Through Shares") and 602 flow-through common shares relate to Canadian development expenditures ("CDE Flow-Through Shares"). The CEE Flow-Through Shares were issued at a price of $13.10 per share for proceeds of $16,048, while the CDE Flow-Through Share were issued at a price of $11.60 for proceeds of $6,988. 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.

Share capital includes common shares of $216,280, warrants of $1,426 and performance shares of $6 for a total of $217,712.

8. 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 1,785 13.24
Exercised (24) 7.30
Cancelled (10) 13.42
---------------------------------------------------------------------------
Closing balance 3,423 11.82
---------------------------------------------------------------------------
---------------------------------------------------------------------------


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 September 30, 2006:



---------------------------------------------------------------------------
Weighted Weighted
Number Average Average
Range of Exercise of Exercise Contractual Options
Prices ($/ share) Options Price Life Exercisable
---------------------------------------------------------------------------
5.21 - 6.50 431 $ 5.40 3.0 233
10.40 - 13.53 2,604 12.45 4.2 686
14.51 - 16.60 388 14.71 4.1 84
---------------------------------------------------------------------------
5.21 - 16.60 3,423 $ 11.82 4.0 1,003
---------------------------------------------------------------------------
---------------------------------------------------------------------------


The fair value of each stock option granted for the nine months ended September 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 $5.02 per share (2005 - $4.86), using an average risk-free interest rate of 3.18 percent (2005 - 2.80 percent), average volatility of 40 percent (2005 - 50 percent) and an expected life of 4.5 years (2005 - 4.5 years). The Company has not re-priced any stock options.

For the nine month period ended September 30, 2006, $3,613 of expense related to the stock options and $103 of expense related to the performance shares is included in stock compensation expense.



The following table reconciles the Company's contributed surplus:

---------------------------------------------------------------------------
Nine months ended Nine months ended
September 30, 2006 September 30, 2005
---------------------------------------------------------------------------
Contributed surplus
- December 31, 2005 $ 2,512 $ 365
Stock based compensation expense 3,726 1,458
Exercise of stock options (75) (15)
Cancellation of unvested stock options (10) -
---------------------------------------------------------------------------
Carrying amount, end of period $ 6,153 $ 1,808
---------------------------------------------------------------------------
---------------------------------------------------------------------------


9. PER SHARE AMOUNTS

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

---------------------------------------------------------------------------
Weighted Three months ended Nine months ended
average September 30, September 30, September 30, September 30,
common shares 2006 2005 2006 2005
---------------------------------------------------------------------------
Basic 40,987 37,285 39,846 29,936
Warrants 3,436 3,528 3,468 3,413
Performance shares 519 538 524 521
Options - 243 - 95
Diluted 44,942 41,594 43,838 33,965
---------------------------------------------------------------------------
---------------------------------------------------------------------------


The calculation of diluted common shares for the three and nine months ended September 30, 2006 excludes 3,423 (2005 -- 1,232) of stock options that are anti-dilutive.

10. 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 $14,767 as at September 30, 2006 (2005 -- $8,183) based on a total future liability of $36,526 (2005 --$20,907). Asset retirement expenditures are expected to be made over the next 25 years with the majority of costs to be incurred by 2020. 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.



---------------------------------------------------------------------------
September 30, 2006 September 30, 2005
---------------------------------------------------------------------------
Balance, beginning of period $ 12,440 $ 2,519
Increase in liabilities 1,521 624
Liabilities settled (144) -
Acquisitions 85 4,809
Accretion 719 231
Revisions 146 -
---------------------------------------------------------------------------
Carrying amount, end of period $ 14,767 $ 8,183
---------------------------------------------------------------------------
---------------------------------------------------------------------------


11. SUPPLEMENTAL CASH FLOW INFORMATION

Changes in Three months ended Nine months ended
non-cash September 30, September 30, September 30, September 30,
working capital 2006 2005 2006 2005
---------------------------------------------------------------------------
Accounts receivable $ 836 $ (7,586) $ 7,518 $ (5,473)
Prepaid expenses
and deposits 72 (322) (795) (325)
Accounts payable and
accrued liabilities 12,427 18,210 (8,078) 17,292
---------------------------------------------------------------------------
Net change in
non-cash
working capital $ 13,335 $ 10,302 $ (1,355) $ 11,494
Investing
activities 11,695 8,985 (379) 9,145
---------------------------------------------------------------------------
Operating
activities $ 1,640 $ 1,317 $ (976) $ 2,349
---------------------------------------------------------------------------
---------------------------------------------------------------------------


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

Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
---------------------------------------------------------------------------
Interest $ 1,267 $ 328 $ 2,996 $ 412
Income taxes $ 961 $ - $ 2,243 $ -
---------------------------------------------------------------------------
---------------------------------------------------------------------------


12. SUBSEQUENT EVENTS

On October 4, 2006, Cyries Energy Inc. ("Cyries") announced that it entered into an acquisition agreement to offer (the "Offer") to acquire all of the outstanding shares of Dual Exploration Inc. ("Dual") in exchange for 0.167 of a Cyries share for each Dual share outstanding. Cyries mailed the Offer on October 24, 2006 and the Offer will be open until November 29, 2006 contingent on certain conditions. Pending successful completion of the Offer and necessary approvals, the acquisition is expected to close in December 2006.

On October 20, 2006, the Company announced that it entered into an agreement with a syndicate of underwriters to issue, by way of a short form prospectus, 2,200 common shares at a price of $12.50 per share for total proceeds of $27,500. In addition, Cyries has provided the underwriters with an over-allotment option to purchase up to an additional 330,000 common shares at a price of $12.50 per share, for a period of 30 days from closing.

CONFERENCE CALL

A conference call is scheduled for Thursday, November 9, 2006

at 9:00 a.m. (mt) / 11:00 a.m. (et)

Dial in 15 minutes prior @ 1-877-888-7019 or 1-416-695-9757.

(Playback recording for 7 days, dial 1-888-509-0081 or 1-416-695-5275; password 634989)

A live webcast will be provided on: www.cyries.com

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)
    Website: www.cyries.com