Endev Energy Inc.
TSX : ENE

Endev Energy Inc.

August 14, 2006 07:00 ET

Endev Energy Inc. Announces 2006 Second Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Aug. 14, 2006) -

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

(All amounts are in Canadian dollars unless stated otherwise)

Endev Energy Inc. (TSX:ENE) is pleased to announce financial and operating results for the six months ending June, 2006.

Highlights of the second quarter of 2006 include:

- Increased light oil production;

- Tied-in 27 shallow gas wells;

- 100 percent success on the drilling of 19 gross (15.6 net) wells.



Three months ended Six months ended
June 30 June 30 June 30 June 30
HIGHLIGHTS 2006 2005 % change 2006 2005 % change
------------------------------------------------------------------------
Financial
($thousands, except
per share amounts)
Gross revenue 13,790 15,724 (12) 30,009 32,371 (7)
Funds from
operations 7,456 10,426 (28) 16,247 19,382 (16)
Basic per share 0.08 0.12 (33) 0.18 0.22 (18)
Diluted per share 0.08 0.12 (33) 0.18 0.22 (18)
Net income 2,474 2,497 (1) 3,588 3,220 11
Basic per share 0.03 0.03 - 0.04 0.04 -
Diluted per share 0.03 0.03 - 0.04 0.04 -
Capital
expenditures, net 11,965 8,420 42 29,228 12,034 143
Net debt 40,851 24,665 66 40,851 24,665 66

Operations
Daily production
Crude oil (bbl) 687 568 21 614 605 1
Natural gas liquids
(bbl) 61 131 (53) 80 139 (42)
Natural gas (mcf) 16,843 18,907 (11) 17,336 19,816 (13)
Total production
(boe @ 6:1) 3,555 3,850 (8) 3,583 4,047 (11)
Average sales price
Crude oil ($/bbl) 67.59 56.58 19 63.91 53.66 19
Natural gas liquids
($/bbl) 64.44 38.63 67 55.21 38.02 45
Natural gas ($/mcf) 6.02 7.16 (16) 7.05 7.12 (1)
Netback per boe
(6:1) ($)
Petroleum and
natural gas revenues 42.63 44.88 (5) 46.27 44.20 5
Royalties, net of
ARTC 5.77 6.06 (5) 7.94 7.63 4
Operating expenses 9.06 5.23 73 8.56 6.19 38
Transportation 0.90 0.89 1 0.96 0.90 7
Operating netback 26.90 32.70 (18) 28.81 29.48 (2)


Endev had an active second quarter, which included tying-in 27 Majorville shallow gas wells and drilling 19 gross (15.6 net) wells. Most of the wells were tied-in late in the quarter and did not materially impact production. We also experienced some scheduled third party plant turnarounds and as a result, production for the second quarter was 3,555 boe per day, essentially flat with that of the first quarter of 3,612 boe per day. Production began to increase late in the quarter, with June production averaging 3,700 boe per day. At the end of the second quarter, we had 49 wells awaiting tie-in. Since the end of the quarter, we have drilled an additional 40 wells. In light of the significant number of new wells yet to be drilled and tied-in within the next few months, we are confident production volumes will increase throughout the remainder of 2006.

Cretaceous - Mannville Program Success

Much of the New Ventures exploration program in the quarter focused on acquiring seismic and surface access for locations to be drilled in the second half of the year. We added to the Company's 3-D seismic for the Mannville program at Majorville, where 3.2 km2 were shot and 72 km2 were purchased, and at Provost, where 7.7 km2 were shot. Endev participated in 3 gross (0.8 net) non-operated wells during the second quarter at Drumheller and Elmworth, which resulted in 3 gas wells.

We experienced two months of sustained oil production from the Company's first quarter light oil find at Majorville in May and June and production averaging 250 boe per day of 34 degree light oil. Further work has confirmed five to six follow up locations and drilling will commence in August. The Company has been considering several alternatives to optimize production from the pool, including the installation of a pipeline and battery. Endev will incorporate the results of the follow up wells in its choice of options. Provost is also a focus area for our oil exploration program and well locations have been selected, with two initial wells spudding in August.

Endev's Mannville gas program included plans to tie-in three gas wells drilled in the first quarter. Surface access restrictions delayed the tie-in and start of production for two of these wells until early in the fourth quarter. The third gas well went on production at the end of April. The Company has confirmed four to five follow up Mannville gas well locations, with drilling scheduled to begin this month. The Company is pleased with its overall success in the Mannville program to date. Endev's opportunity inventory of Mannville drilling locations is growing and would support several years of drilling at current rates.

Shallow Gas Development

During the quarter, we tied-in 27 gross shallow gas wells and drilled 16 additional wells at Majorville. We have since drilled 28 shallow wells and expect to drill an additional 10 shallow gas wells at Majorville before year end. We also fraced and tested two Belly River Coal Bed Methane ("CBM") wells, one of which was tied-in and is flowing gas at rates comparable to a lower rate shallow gas well. While we are pleased that our initial tests of the Belly River CBM potential are encouraging, we do not plan to do any further work this year given current natural gas prices and industry conditions.

Admiral, Saskatchewan, where we are about to drill wells to earn an interest in farm-in lands, is a prospective area for natural gas. Endev has a number of proposed well locations in this area and will begin drilling up to 16 initial wells in August. The Company has the option to earn a 50 percent interest in 115 sections (75,000 acres) of land, which includes rights in all zones with the primary focus on exploring for an aerially extensive shallow gas play. This area offers the potential to be a core shallow gas area similar in size and prospectivity to that at Majorville. Apart from the Admiral and Majorville shallow wells mentioned above, the Company will place all other shallow gas locations in the opportunity inventory, which could be drilled once costs and commodity prices support improved economics.

Industry Conditions

As I mentioned in my first quarter message we have been concerned with the rapidly rising costs in all aspects of operations, from the cost to acquire mineral and surface rights to the costs for drilling, completions, pipelining and other field services. This has been compounded by the softening of natural gas prices. While the gap between natural gas and crude oil relative pricing is likely to close over the winter months and natural gas prices should improve, we expect continued price volatility. Given this environment, the pressures on exploration and production economics have grown significantly, especially as they relate to shallow gas operations. We think a reduction in shallow gas drilling is warranted in the current cost and pricing environment.

Changes to Plans

Endev's recent Mannville drilling success and large prospect inventory puts us in the enviable position of being able to choose between shallow gas drilling and deeper Mannville oil and gas drilling within the Company's current core areas. While the Mannville program has more associated risk than the shallow gas program, it also offers a greater production and reserve potential and significantly more robust economics. These factors, combined with the success of our Mannville program to date, supported our decision to reallocate funds from shallow gas drilling to the Mannville program in the first half of the year. We plan to continue that trend in the second half of the year and add additional funds into the Mannville program. As a result of these changes, we have increased our capital budget from $50 million to $60 million, and by year end approximately 40 percent will have been spent in the Mannville program, together with other deeper wells that, in total, form the New Ventures budget.

Outlook

Our asset base provides us the ability to shift our spending and program emphasis today, with the option to pursue the considerable shallow gas opportunities in inventory at some future date. Endev today has a sufficient inventory of both shallow gas and Mannville drilling opportunities to sustain several years of drilling without including the new opportunities we may add with success at Provost and Admiral. The Mannville/New Ventures program will continue to be a growing contributor to the Company's future plans and profitability. We expect to drill a total of 75 shallow gas wells and 35 - 40 New Venture wells this year. Production is expected to rise throughout the balance of the year, resulting in an average yearly production rate of 3,900 boe per day and an exit rate between 4,200 and 4,600 boe per day. We have not included potential production additions from the Mannville gas wells to be drilled in the second half of the year or from wells at Provost or Admiral in these volumes. In all cases, we do expect these wells to add reserves, but production is not expected to make an impact until early next year. We believe our new approach to the 2006 program is more flexible, incorporates better overall profitability and is more responsive to the challenges facing the Company and the industry. We are excited by the strides we are making in the New Ventures work and we look forward to continuing that success in the new areas of Provost and Admiral.



On behalf of the Board of Directors,


Cameron MacGillivray
President and CEO
August 14, 2006


MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's Discussion and Analysis (MD&A), as provided by the management of Endev Energy Inc. (Endev or the Company), of Endev's operating and financial results for the three and six months ended June 30, 2006 compared with the corresponding periods in the prior year is based on currently available information. This commentary should be read in conjunction with the 2005 annual report, the 2005 MD&A and the audited consolidated financial statements for the years ended December 31, 2005 and 2004 contained therein and the unaudited interim consolidated financial statements for the three and six months ended June 30, 2006. This commentary is based on information available to August 11, 2006.

The Company's audited consolidated financial statements, current annual information form and other documents are filed on SEDAR at www.sedar.com and on the Company's website at www.endevenergy.com.


NON-GAAP MEASUREMENTS

The financial data presented has been prepared in accordance with Canadian generally accepted accounting principles (GAAP) except for the terms funds from operations and netback. Funds from operations has been presented for information purposes only and should not be considered an alternative to, or more meaningful than cash flow from operating activities as determined in accordance with GAAP. The determination of Endev's funds from operations may not be comparable to the same reported by other companies. The reconciliation of net income and funds from operations can be found in the statements of cash flows in the financial statements. The Company calculates funds from operations as funds from operations prior to the change in non-cash working capital related to operating activities. Funds from operations per share was calculated using the same weighted average shares outstanding used in calculating net income per share. Netback equals total revenue less royalties, operating expenses and transportation expenses.


BASIS OF BARREL OF OIL EQUIVALENT

For the purposes of calculating unit costs, natural gas has been converted to a barrel of oil equivalent (boe) using 6,000 cubic feet equal to one barrel (6:1), unless otherwise stated. The boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method and does not represent a value equivalency; therefore boe may be misleading if used in isolation. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.


DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the President and Chief Executive Officer and the Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure.

As at June 30, 2006, Endev's management, including the President and Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of the effectiveness of Endev's disclosure controls and procedures as defined under Multilateral Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings. Based on that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as of June 30, 2006.



RESULTS OF OPERATIONS

Production

Endev's daily production rates were as follows:

Three months ended Six months ended
June 30 June 30
Daily production 2006 2005 % change 2006 2005 % change
------------------------------------------------------------------------
Crude oil (bbl/d) 687 568 21 614 605 1
Natural gas liquids
(bbl/d) 61 131 (53) 80 139 (42)
Natural gas (mcf/d) 16,843 18,907 (11) 17,336 19,816 (13)
Total production
(boe/d) 3,555 3,850 (8) 3,583 4,047 (11)
------------------------------------------------------------------------
------------------------------------------------------------------------


Second quarter production in 2006 declined by eight percent from the second quarter in 2005 and by two percent from the first quarter of 2006. Natural gas accounted for 79 percent of the Company's production in the second quarter of 2006 compared to 82 percent in 2005. Crude oil production for the second quarter increased 21 percent to 687 bbl/d, compared to 568 bbl/d for the same period in 2005 and 541 bbl/d in the first quarter of 2006. The increase in oil production is the result of the Majorville Mannville oil producing consistently in May and June at approximately 250 bbl/d partially offset by natural decline in production in other areas. Natural gas production decreased 11 percent to 16,843 mcf/d compared to 18,907 mcf/d for the same period in 2005 and 17,834 mcf/d in the first quarter of 2006 due to the natural decline from existing wells partially offset by new wells being drilled and placed on production. At June 30, 2006, 49 gas wells were awaiting tie-in. These will be tied-in in July and August and will add to the third quarter production.

Production decreased 11 percent to 3,583 boe/d for the six months ended June 30, 2006 compared to 4,047 boe/d for the same period in 2005. Crude oil and natural gas liquids (NGLs) production for the six months ended June 30, 2006 decreased 7 percent to 694 bbl/d, compared to 744 bbl/d for the same period in 2005. The decrease was due to expected production declines in oil and NGL's offset by new oil production at Majorville. Natural gas production decreased 13 percent to 17,336 mcf/d compared to 19,816 mcf/d for the same period in 2005. The decrease in natural gas production was the result of flush production in the first half of 2005 that was associated with a very large drilling program in the Majorville area in the latter part of 2004.

Commodity Markets

Natural Gas

Natural gas prices continued to decrease over the second quarter in spite of the strength of world crude prices. Nymex natural gas prices (US) were down from the first quarter of 2006 and down in comparison with the second quarter of 2005. This weakness was largely due to the warm winter experienced in North America this year and the large amount of supply left in inventory at the end of the winter. During the second quarter, Nymex prices averaged $6.82/mcf, down $2.26 US/mcf or 25 percent from the prior quarter. Year-over-year Nymex gas prices were virtually unchanged. The AECO spot daily gas index in Alberta decreased $1.54/mcf or 20 percent from the prior quarter to $6.01/mcf. Year-over-year, AECO decreased $1.34/mcf or18 percent. Alberta spot prices at AECO underperformed Nymex on a year-over-year basis due to the continued appreciation of the Canadian dollar from an average of $.81 in the second quarter of 2005 to an average of $.89 in the second quarter of this year.

Crude Oil

West Texas Intermediate (WTI) increased markedly from the prior quarter to a record level of $70.70 US/bbl for the second quarter of 2006. This was an increase of $7.22 US/bbl or 11 percent from the first quarter. Year-over-year, WTI increased by $17.53 US/bbl or 33 percent. Edmonton par averaged $78.54/bbl in the quarter, up $9.58/bbl from the prior quarter and up $12.78/bbl or 19 percent from a year ago. Strong demand lead to a larger price increase in Western Canada light sweet prices relative to WTI in a quarter-over-quarter comparison. However, the long term strengthening of the Canadian dollar lead to weaker results in the year-over-year comparison.



Average Prices Received

Endev realized the following commodity prices:

Three months ended Six months ended
Average sales prices June 30 June 30
realized 2006 2005 % change 2006 2005 % change
------------------------------------------------------------------------
Crude oil ($/bbl) 67.59 56.58 19 63.91 53.66 19
Natural gas liquids
($/bbl) 64.44 38.63 67 55.21 38.02 45
Natural gas ($/mcf) 6.02 7.16 (16) 7.05 7.12 (1)
Weighted Average
($/boe) (6:1) 42.63 44.88 (5) 46.27 44.20 5
------------------------------------------------------------------------

The Company currently does not have any commodity price risk contracts
in place.

Operating Netbacks

Endev realized the following operating netbacks from oil and gas
operations:

Three months ended Six months ended
Netback per boe June 30 June 30
(6:1) ($) 2006 2005 % change 2006 2005 % change
------------------------------------------------------------------------
Petroleum and natural
gas revenues 42.63 44.88 (5) 46.27 44.20 5
Royalties, net of ARTC 5.77 6.06 (5) 7.94 7.63 4
Operating expenses 9.06 5.23 73 8.56 6.19 38
Transportation 0.90 0.89 1 0.96 0.90 6
------------------------------------------------------------------------
Operating netback 26.90 32.70 (18) 28.81 29.48 (2)
------------------------------------------------------------------------
------------------------------------------------------------------------

Production Revenue

Endev realized the following gross revenues:

Three months ended Six months ended
June 30 June 30
($000s) 2006 2005 % change 2006 2005 % change
------------------------------------------------------------------------
Crude oil 4,223 2,926 44 7,103 5,874 21
Natural gas liquids 356 460 (22) 798 957 (17)
Natural gas 9,210 12,327 (25) 22,107 25,529 (13)
Sulphur - 11 (100) 1 11 (92)
------------------------------------------------------------------------
Total 13,789 15,724 (12) 30,009 32,371 (7)
------------------------------------------------------------------------
------------------------------------------------------------------------


For the second quarter, gross revenues decreased 12 percent to $13.8 million from $15.7 million for the same period in 2005 due to the decline in production and average commodity prices received. Production revenue in the second quarter of 2006 declined 15 percent from $16.2 million in the first quarter of 2006 due to a 25 percent decrease in the price of natural gas. The average price received for natural gas has decreased from $10.97 per mcf in the fourth quarter of 2005 to $6.02 per mcf in the second quarter of 2006. Crude oil revenue for the second quarter increased 44 percent compared to the same period in 2005. The average price received for crude oil was $67.59 per bbl in the second quarter of 2006 compared to $56.58 in 2005. Crude oil revenue accounts for 30 percent of Endev's production revenue in the second quarter of 2006 compared to 19 percent in the same period in 2005. The increase is due to the relative change in the price of oil and gas and the increase in oil production.

For the first six months, gross revenues decreased 7 percent to $30.0 million from $32.4 million for the same period in 2005 due to the decrease in natural gas production volume partially offset by marginally higher average prices per boe. Natural gas production revenues decreased 13 percent to $22.1 million while oil production revenue increased by 21 percent to $7.1 million in the first six months of 2006.



Three months ended Six months ended
June 30 June 30
Royalties 2006 2005 % change 2006 2005 % change
------------------------------------------------------------------------
Royalties ($000s) 1,868 2,124 (12) 5,148 5,587 (8)
Average royalty
rate (%) 14 14 - 17 17 -
$/boe 5.77 6.06 (5) 7.94 7.63 4
------------------------------------------------------------------------


Royalties, net of the Alberta Royalty Tax Credit (ARTC), were $1.9 million in the second quarter of 2006 and $2.1 million in the second quarter of 2005, and averaged $5.77 per boe or 14 percent of revenue compared to $6.06 per boe or 14 percent of revenue for the same period in 2005.

Royalties, net of the Alberta Royalty Tax Credit (ARTC), were $5.1 million in the first six months of 2006 and $5.6 million in 2005, and averaged $7.94 per boe or 17 percent of revenue compared to $ 7.63 per boe or 17 percent of revenue for the same period in 2005. In both years the second quarter royalty rates were reduced from the first quarter as a result of annual adjustments to crown gas cost allowance rates.



Expenses

Three months ended Six months ended
June 30 June 30
($000s) 2006 2005 % change 2006 2005 % change
------------------------------------------------------------------------
Operating 2,931 1,833 60 5,550 4,533 22
Transportation 291 314 (7) 622 663 (6)
General and
administrative 611 615 - 1,299 1,400 (7)
Interest 497 318 56 854 665 28

Three months ended Six months ended
June 30 June 30
Expenses per boe $ 2006 2005 % change 2006 2005 % change
------------------------------------------------------------------------
Operating 9.06 5.23 73 8.56 6.19 38
Transportation 0.90 0.89 1 0.96 0.90 6
General and
administrative 1.89 1.75 8 2.00 1.91 5
Interest 1.53 0.91 68 1.32 0.91 45


Operating

During the second quarter of 2006, operating expenses increased 60 percent to $2.9 million compared to $1.8 million in the same period for 2005. On a per unit basis, operating costs increased to $9.06 per producing boe during the quarter compared to $5.23 per producing boe in the same period for 2005. The increase in operating costs on a per unit basis over the second quarter of 2005 is the result of a significant increase in field operating costs, additional annual repairs and maintenance being done and producing less gas from more wells in 2006, as the fixed operating costs are not dependent on the reduced volumes.

During the first six months of 2006 operating expenses increased 22 percent to $5.6 million compared to $4.5 million in the same period for 2005. On a per unit basis, operating costs increased to $8.56 per producing boe during the first half of 2006 compared to $6.19 per producing boe in the same period for 2005. The Company continues to pursue operating efficiencies to offset the rising field service costs. As additional gas is processed through Company owned facilities at Majorville, we anticipate that unit operating costs will decline marginally.

Transportation

Transportation costs averaged $0.90 per boe in the first quarter of 2006 compared to $0.89 per boe in the second quarter of 2005 and $0.96 per boe in the first half of 2006 compared to $0.90 per boe in the first half of 2005.

General and Administrative

General and administrative costs were $0.6 million in the second quarter of 2006 and 2005. On a barrel of oil equivalent basis, general and administrative costs increased to $1.89 per boe from $1.75 per boe.

General and administrative costs decreased to $1.3 million in the first half of 2006 compared to $1.4 million for the same period in 2005. On a barrel of oil equivalent basis, general and administrative costs increased to $2.00 per boe from $1.91 per boe.

The Company capitalizes the salaries and associated direct costs of professional staff directly associated with the Company's exploration and development activities. The Company capitalized $0.3 million of general and administrative costs in the second quarter of 2006 and $0.2 million in the second quarter of 2005. On a year to date basis, $0.5 million of general and administrative costs were capitalized in the first half of 2006 and $0.4 million in 2005.

Interest and Financing Charges

Interest and financing charges for the second quarter of 2006 were $0.5 million or $1.53 per producing boe compared to $0.3 million or $0.91 per producing boe for the comparable period in 2005.

Interest and financing charges for the first six months of 2006 were $0.9 million or $1.32 per producing boe compared to $0.7 million or $0.91per producing boe for the comparable period in 2005. The increase in interest and financing charges is the result of higher average debt and higher interest rates.

Stock-Based Compensation

Stock-based compensation costs were $0.3 million in the second quarter of 2006 and 2005. Stock-based compensation costs were $1.0 million for the first six months of 2006 compared to $0.7 million in 2005. As at June 30, 2006, the Company has $1.3 million of unamortized stock-based compensation costs that will be charged to income over the remaining vesting period of the options outstanding.

Income and Capital Taxes

During the second quarter of 2006, the Canadian Federal Government eliminated the Federal Large Corporations Tax (LCT), effective January 1, 2006. Endev pays the Saskatchewan Capital Tax and Resource Surcharge, which is based on Saskatchewan oil and gas revenues and the Manitoba Capital Tax. The Company has no provision for current income taxes in the first half of 2006 and does not expect to have a current income tax liability for the remainder of 2006, as the Company has sufficient tax pools to offset income in the year.

Current capital taxes were $105 thousand for the first half of 2006 compared to $61 thousand in 2005.

Future income tax liabilities arise due to the difference between the tax basis of assets and their respective accounting carrying cost. During the second quarter of 2006, the Canadian Federal Government and certain provincial governments enacted reductions to their corporate income tax rates, resulting in a reduction of future income tax liabilities of approximately $2.8 million. For the three months ended June 30, the provision for future taxes after the effect of the rate reduction was a reduction of $1.8 million in 2006 and a charge of $0.9 million in 2005. On a year to date basis there is a future income tax reduction of $1.5 million in 2006 and a charge of $1.1 million in 2005.

Depletion and Depreciation

Depletion is calculated using the unit-of-production method based on total estimated proved reserves. Depletion and depreciation expense for the second quarter was $6.4 million or $19.86 per boe, compared to $6.6 million or $18.83 per boe for the same period in 2005.

Depletion expense for the first half of 2006 was $13.0 million or $20.09 per boe compared to $14.2 million or $19.34 per boe in 2005.

Asset Retirement Obligation Accretion

The provision for accretion of asset retirement costs for the second quarter was $0.2 million in 2006 and 2005 and $0.3 million year to date in both years.



Net Income and Funds from Operations

Three months ended Six months ended
($thousands, except June 30 June 30
per share amounts) 2006 2005 % change 2006 2005 % change
------------------------------------------------------------------------
Net income 2,474 2,497 (1) 3,588 3,220 11
Basic per share 0.03 0.03 - 0.04 0.04 -
Diluted per share 0.03 0.03 - 0.04 0.04 -

Funds from
operations 7,456 10,426 (28) 16,247 19,382 (16)
Basic per share 0.08 0.12 (33) 0.18 0.22 (18)
Diluted per share 0.08 0.12 (33) 0.18 0.22 (18)


The Company realized net income of $2.5 million for the second quarter, with earnings of $0.03 per share on a basic and diluted basis in both 2006 and 2005. Income before taxes decreased significantly in the second quarter of 2006 from the second quarter of 2005 due to the increase in operating costs and interest and the decrease in production revenue. The future income tax reduction offset the operating factors resulting in relatively no change in net income in the second quarter of 2006 versus 2005. Funds from operations in the second quarter decreased to $7.5 million in 2006 from $10.4 million for the same period in 2005 due to the non-tax factors discussed above. On a per share basis funds from operations in the second quarter was $0.08 per basic share in 2006 and $0.12 in 2005.

Net income increased 11 percent in the second half of 2006 from 2005 while funds from operations declined 16 percent in the same period.



SUMMARY OF QUARTERLY FINANCIAL INFORMATION

June 30 March 31 Dec. 31 Sept. 30
($000s, except per share amounts) 2006 2006 2005 2005
------------------------------------------------------------------------
Total daily production (boe/d) 3,555 3,612 3,651 3,376
Gross revenue 13,790 16,219 21,523 17,644
Funds from operations 7,456 8,791 13,634 11,231
Basic per share 0.08 0.10 0.15 0.13
Diluted per share 0.08 0.10 0.15 0.12
Net income 2,474 1,114 5,131 3,693
Basic per share 0.03 0.01 0.06 0.04
Diluted per share 0.03 0.01 0.06 0.04
Capital expenditures, net 11,965 17,263 17,993 10,398
Net debt 40,851 36,496 28,190 23,832
------------------------------------------------------------------------


June 30 March 31 Dec. 31 Sept. 30
($000s, except per share amounts) 2005 2005 2004 2004
------------------------------------------------------------------------
Total daily production (boe/d) 3,850 4,245 4,518 3,018
Gross revenue 15,724 16,647 17,616 11,224
Funds from operations 10,426 8,956 10,210 5,697
Basic per share 0.12 0.10 0.12 0.07
Diluted per share 0.12 0.10 0.12 0.06
Net income (loss) 2,497 723 305 (140)
Basic per share 0.03 0.01 - -
Diluted per share 0.03 0.01 - -
Capital expenditures, net 8,420 3,614 7,677 15,285
Net debt 24,665 26,780 32,234 35,218
------------------------------------------------------------------------


SELECTED ANNUAL INFORMATION

($000s, except per share amounts) 2005 2004 2003
------------------------------------------------------------------------
Gross revenue 71,538 52,349 39,837
Net income 12,044 926 6,090
Basic per share 0.14 0.01 0.08
Diluted per share 0.14 0.01 0.08
Total assets 158,693 140,893 131,834
Total long term liabilities 68,581 64,285 57,448
------------------------------------------------------------------------


CAPITAL EXPENDITURES

The following table outlines Endev's capital expenditures:

Three months Six months
ended ended
June 30 June 30
($000s) 2006 2005 2006 2005
------------------------------------------------------------------------
Acquisitions - - - 1,419
Dispositions - - - -
------------------------------------------------------------------------
- 1,419
------------------------------------------------------------------------
Land and seismic 1,377 723 2,654 864
Drilling and completions 6,760 6,255 17,745 7,978
Tie-ins and facilities 3,780 1,412 8,659 1,709
Other 48 30 170 64
------------------------------------------------------------------------
Net property 11,965 8,420 29,228 10,615
------------------------------------------------------------------------
Total net capital expenditures 11,965 8,420 29,228 12,034
------------------------------------------------------------------------
------------------------------------------------------------------------


During the three months ended June 30, 2006, the Company incurred capital expenditures of $12.0 million. During the period, the Company spent $6.8 million on drilling and completions while drilling 19 gross (15.6 net) wells and completing wells that were drilled in prior periods. The Company also spent $3.8 million for tie-ins and facilities.



SECOND QUARTER 2006 DRILLING RESULTS

Gross Net
Gas Oil Dry Total Gas Oil Dry Total
------------------------------------------------------------------------
Majorville 16 - - 16 14.8 - - 14.8
Drumheller 2 - - 2 0.6 - - 0.6
Other 1 - - 1 0.2 - - 0.2
------------------------------------------------------------------------
Total 19 - - 19 15.6 - - 15.6
------------------------------------------------------------------------
------------------------------------------------------------------------


YEAR-TO-DATE 2006 DRILLING RESULTS

Gross Net
Gas Oil Dry Total Gas Oil Dry Total
------------------------------------------------------------------------
Majorville 28 2 - 30 24.0 2.0 - 26.0
Drumheller 3 - - 3 0.8 - - 0.8
Harper 5 - - 5 0.8 - - 0.8
Other 1 - - 1 0.2 - - 0.2
------------------------------------------------------------------------
Total 37 2 - 39 25.8 2.0 - 27.8
------------------------------------------------------------------------
------------------------------------------------------------------------


LAND SUMMARY

As at June 30, 2006 Developed Undeveloped Total
(acres) Gross Net Gross Net Gross Net
------------------------------------------------------------------------
Alberta 179,286 113,130 132,263 82,646 311,549 195,776
British Columbia 316 43 316 43 632 86
Manitoba 439 170 - - 439 170
Saskatchewan 3,425 1,746 1,687 1,113 5,112 2,859
------------------------------------------------------------------------
Total 183,466 115,089 134,266 83,802 317,732 198,891
------------------------------------------------------------------------
------------------------------------------------------------------------


During the first half of 2006 Endev acquired 33,600 gross acres (32,500 net) of land at Alberta and Saskatchewan Crown land sales.

LIQUIDITY AND CAPITAL RESOURCES

During the second quarter, Endev increased its revolving credit facility with the National Bank of Canada to $55 million and also has an acquisition/development facility of $10 million. At June 30, 2006, the Company had approximately $34.7 million outstanding on its revolving credit facility and a working capital deficiency of $6.1 million for total net debt of approximately $40.8 million.

Total net capital expenditures of $12.0 million for the three months ended June 30, 2006 were funded from operations and an increase in debt. It is anticipated that future capital expenditures and operations will be funded with cash flow from operations and additional debt as required.

SHARE INFORMATION

The Company had 88,687,557 shares and 5,822,500 options to purchase shares outstanding as at June 30, 2006 and at August 11, 2006 had 88,902,557 shares and 5,330,500 options to purchase shares outstanding.

The Company issued a total of 307,500 shares pursuant to the exercise of stock options during the three months ended June 30, 2006.



Three months ended June 30 Six months ended June 30
(000s) 2006 2005 2006 2005
------------------------------------------------------------------------
Shares outstanding
- Basic 88,687 88,059 88,687 88,059
- Diluted 94,510 92,536 94,510 92,536
Weighted average
shares outstanding
- Basic 88,468 87,974 88,414 87,914
- Diluted 89,662 89,456 89,803 89,369


BUSINESS RISKS

The oil and gas exploration and development sector has inherent risks that begin with the exploration process, which is capital intensive and may or may not encounter economic reserves of crude oil or natural gas, in addition to unforeseen production declines and as a consequence reduced reserves. Increasingly, readily available technology helps to mitigate the risk. Endev employs the most appropriate technology in all areas of its business. The intrinsic business and financial risks within the industry include volatility of commodity prices, fluctuation in supplier costs, inflation, changes in exchange rates, the cost of capital and other macro economic factors. The recent volatility in commodity prices and the rise in service costs may require Endev to re-evaluate its capital spending and activity plans in the future. Endev focuses on managing costs within its control and pursuing geographic areas and geologic targets that result in manageable capital risk. By focusing on core areas, Endev reduces risk by utilizing its experience in the area and reducing the administrative and logistical costs of its field activity. In order to minimize the risks to the community and to its field staff and suppliers, Endev demands the highest standards of safety on its leases. A more detailed discussion of the business risks the Company is subject to is found in our current annual information form filed on SEDAR at www.sedar.com.

CONTRACTUAL OBLIGATIONS

The Company has committed to a lease for office premises terminating on March 31, 2012. The estimated obligation at June 30, 2006, including operating costs at current levels, is $3.0 million for approximately 13,600 square feet of office space.

CHANGES IN ACCOUNTING POLICIES

The Company did not adopt any new accounting policies during the period.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

Significant accounting policies used by Endev Energy Inc. are disclosed in note 2 to the December 31, 2005 audited consolidated financial statements. Certain accounting policies require that management make appropriate decisions with respect to the formulation of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in these judgments and estimates may have a material impact on the Company's financial results and condition. The following discusses such accounting policies and is included in Management's Discussion and Analysis to aid the reader in assessing the critical accounting policies and practices of the Company and the likelihood of materially different results being reported. Endev's management reviews its estimates regularly. The emergence of new information and changed circumstances may result in actual results or changes to estimated amounts, that differ materially from current estimates.

The following assessment of significant accounting policies is not meant to be exhaustive. The Company might realize different results from the application of new accounting standards promulgated, from time to time, by various rule-making bodies.

Oil and Gas Reserves

Under NI 51-101, "Proved" reserves are those reserves that can be estimated with a high degree of certainty to be recoverable (it is likely that the actual remaining quantities recovered will exceed the estimated Proved reserves). In accordance with this definition, the level of certainty targeted by the reporting company should result in at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated reserves. In the case of "Probable" reserves, which are less certain to be recovered than Proved reserves, NI 51-101 states that it must be equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated Proved plus Probable reserves. With respect to the consideration of certainty, in order to report reserves as Proved plus Probable, the reporting company must believe that there is at least a 50 percent probability that quantities actually recovered will equal or exceed the sum of the estimated Proved plus Probable reserves.

Oil and gas reserves estimates are made using all available geological and reservoir data as well as historical production data. Estimates are reviewed and revised as appropriate. Revisions occur as a result of changes in prices, costs, fiscal regimes, reservoir performance or a change in the Company's plans. The reserve estimates are also used in determining the Company's borrowing base for its credit facilities and may impact the same upon revisions or changes to the reserves estimates. The effect of changes in reserves on the financial results and position of the Company is described under the heading "Full Cost Accounting for Oil and Gas Activities".

Full Cost Accounting for Oil and Gas Activities

Depletion Expense

The Company uses the full cost method of accounting for exploration and development activities. In accordance with this method of accounting, all costs associated with exploration and development are capitalized whether successful or not. The aggregate of net capitalized costs and estimated future development costs less estimated salvage values is amortized using the unit-of-production method based on estimated proved oil and gas reserves.

An increase in estimated proved oil and gas reserves would result in a corresponding reduction in depletion expense. A decrease in estimated future development costs would result in a corresponding reduction in depletion expense.

Withheld Costs

Certain costs related to unproved properties may be excluded from costs subject to depletion until proved reserves have been determined or their value is impaired. These properties are reviewed quarterly and any impairment is transferred to the costs being depleted or, if the properties are located in a cost centre where there is no reserve base, the impairment is charged directly to income.

Ceiling Test

The Company is required to review the carrying value of all property, plant and equipment, including the carrying value of oil and gas assets, for potential impairment. Impairment is indicated if the carrying value of the long-lived asset or oil and gas cost centre is not recoverable from the future undiscounted cash flows from proved reserves. If impairment is indicated, the amount by which the carrying value exceeds the estimated fair value of the long-lived asset, based on proved plus probable reserves discounted at the Company's risk free rate, is charged to earnings.

The ceiling test is based on estimates of reserves, production rate, petroleum and natural gas prices, future prices and costs and other relevant assumptions. By their nature, these estimates are subject to measurement uncertainty and the impact on the financial statements could be material.

Asset Retirement Obligations

The Company is required to provide for future removal and site restoration costs. The Company must estimate these costs, using an estimate of future timing, discount and inflation rates, in accordance with existing laws, contracts or other policies. These estimated costs are charged to income and the appropriate liability account over the expected service life of the asset. When future removal and site restoration costs cannot be reasonably determined, a contingent liability may exist. Contingent liabilities are charged to earnings when management is able to determine the amount and the likelihood of the future obligation.

Income Tax Accounting

The determination of the Company's income and other tax liabilities requires interpretation of complex laws and regulations often involving multiple jurisdictions. All tax filings are subject to audit and potential reassessment after the lapse of considerable time. Accordingly, the actual income tax liability may differ significantly from that estimated and recorded by management.

Goodwill

The process of accounting for the purchase of a company results in recognizing the fair value of the acquired company's assets on the balance sheet of the acquiring company. Any excess of the purchase price over fair value is recorded as goodwill. Since goodwill results from the culmination of a process that is inherently imprecise the determination of goodwill is also imprecise. In accordance with the issuance of CICA section 3062, "Goodwill and Other Intangible Assets" goodwill is not amortized but assessed periodically for impairment. The process of assessing goodwill for impairment necessarily requires Endev to determine the fair value of its assets and liabilities. Such a process involves considerable judgment.

Legal, Environmental Remediation and Other Contingent Matters

The Company is required to both determine whether a loss is probable based on judgment and interpretation of laws and regulations and determine that the loss can reasonably be estimated. When the loss is determined it is charged to earnings. The Company's management must continually monitor known and potential contingent matters and make appropriate provisions by charges to earnings when warranted by circumstance.

FORWARD-LOOKING STATEMENTS

Certain information regarding Endev Energy Inc. set forth in this entire document, including management's assessment of the Company's future plans and operations contains forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Company's and management's control including, but not limited to, the impact of general economic conditions, industry conditions, fluctuation of commodity prices, fluctuation of foreign exchange rates, imperfection of reserve estimates, environmental risks, industry competition, availability of qualified personnel and management, stock market volatility, and timely and cost-effective access to sufficient capital from internal and external sources. Endev's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated to occur or transpire from the forward-looking statements will provide what, if any, benefits to Endev Energy Inc.



ENDEV ENERGY INC.
Consolidated Balance Sheets

($000s) June 30, 2006 December 31, 2005
------------------------------------------------------------------------
(Unaudited)
ASSETS
Current
Accounts receivable $ 8,492 $ 11,292
Prepaid expenses and deposits 603 145
------------------------------------------------------------------------
9,095 11,437
Property, plant and equipment (note 2) 155,607 139,456
Goodwill 7,800 7,800
------------------------------------------------------------------------
$ 172,502 $ 158,693
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness (note 4) $ 34,743 $ 26,965
Accounts payable and accrued
liabilities 15,203 12,662
------------------------------------------------------------------------
49,946 39,627
Asset retirement obligations (note 3) 7,938 7,866
Future income taxes (note 5) 19,629 21,088
------------------------------------------------------------------------
77,513 68,581
------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Share capital (note 6) 68,054 67,727
Contributed surplus (note 6) 2,747 1,785
Retained earnings 24,188 20,600
------------------------------------------------------------------------
94,989 90,112
------------------------------------------------------------------------
$ 172,502 $ 158,693
------------------------------------------------------------------------
------------------------------------------------------------------------
Commitments (note 8)

The accompanying notes are integral to these consolidated financial
statements.

Signed on behalf of the Board:

John F. Driscoll, Director William D. Robertson, F.C.A., Director


ENDEV ENERGY INC.
Consolidated Statements of Operations and Retained Earnings
($000s)(Unaudited)

Three months ended Six months ended
June 30 June 30 June 30 June 30
2006 2005 2006 2005
------------------------------------------------------------------------

REVENUES
Petroleum and natural gas $ 13,790 $ 15,724 $ 30,009 $ 32,371
Royalties (net of Alberta
Royalty Tax Credit) (1,868) (2,124) (5,148) (5,587)
------------------------------------------------------------------------
11,922 13,600 24,861 26,784
------------------------------------------------------------------------

EXPENSES
Operating 2,931 1,833 5,550 4,533
Transportation 291 314 622 663
General and administrative 611 615 1,299 1,400
Stock-based compensation 289 327 969 699
Interest 497 318 854 665
Depletion and depreciation 6,426 6,599 13,028 14,164
Accretion of asset retirement
obligations 155 155 305 305
------------------------------------------------------------------------
11,200 10,161 22,627 22,429
------------------------------------------------------------------------
Income before taxes 722 3,439 2,234 4,355
------------------------------------------------------------------------

TAXES
Current 50 21 105 61
Future income (reduction)
(note 5) (1,802) 921 (1,459) 1,074
------------------------------------------------------------------------
(1,752) 942 (1,354) 1,135
------------------------------------------------------------------------

NET INCOME 2,474 2,497 3,588 3,220
Retained earnings , beginning
of period 21,714 9,279 20,600 8,556
------------------------------------------------------------------------
Retained earnings, end of
period $ 24,188 $ 11,776 $ 24,188 $ 11,776
------------------------------------------------------------------------
------------------------------------------------------------------------

NET INCOME PER SHARE (note 6)
Basic $ 0.03 $ 0.03 $ 0.04 $ 0.04
Diluted $ 0.03 $ 0.03 $ 0.04 $ 0.04
------------------------------------------------------------------------
------------------------------------------------------------------------
The accompanying notes are integral to these consolidated financial
statements.


ENDEV ENERGY INC.
Consolidated Statements Of Cash Flows
($000s)(Unaudited)

Three months ended Six months ended
June 30 June 30 June 30 June 30
2006 2005 2006 2005
------------------------------------------------------------------------

Cash provided by (used in)
OPERATIONS
Net income $ 2,474 $ 2,497 $ 3,588 $ 3,220
Depletion and depreciation 6,426 6,599 13,028 14,164
Accretion of asset
retirement obligations 155 155 305 305
Future income taxes
(reduction) (1,802) 921 (1,459) 1,074
Actual abandonment costs (86) (73) (184) (80)
Stock-based compensation 289 327 969 699
------------------------------------------------------------------------
Funds from operations 7,456 10,426 16,247 19,382
Changes in non-cash working
capital (note 7) 261 (4,464) 81 (3,532)
------------------------------------------------------------------------
7,717 5,962 16,328 15,850
------------------------------------------------------------------------

FINANCING
Issue of common shares, net
of issue costs 154 109 320 221
Bank indebtedness 4,918 (3,094) 7,778 (6,147)
------------------------------------------------------------------------
5,072 (2,985) 8,098 (5,926)
------------------------------------------------------------------------

INVESTING
Property, plant and
equipment additions (11,965) (8,420) (29,228) (10,615)
Acquisitions - - - (1,419)
Changes in non-cash working
capital (note 7) (824) 5,443 4,802 2,110
------------------------------------------------------------------------
(12,789) (2,977) (24,426) (9,924)
------------------------------------------------------------------------
Change in cash - - - -
Cash, beginning of period - - - -
------------------------------------------------------------------------
Cash, end of period $ - $ - $ - $ -
------------------------------------------------------------------------

Interest paid $ 497 $ 318 $ 854 $ 665

Taxes paid $ 96 $ 67 $ 130 $ 135
------------------------------------------------------------------------
The accompanying notes are integral to these consolidated financial
statements.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2006
(Unaudited)
(all tabular amounts in $000s, except share and per share amounts)


1. BASIS OF PRESENTATION

Endev Energy Inc. (the "Company") is a Calgary-based company involved in the exploration, development and production of petroleum and natural gas in Alberta, Saskatchewan and Manitoba. These interim consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles. The interim consolidated financial statements have been prepared following the same accounting policies and methods of computation as the financial statements for the year ended December 31, 2005. The financial statements should be read in conjunction with the financial statements and notes thereto in the Company's annual report for the year ended December 31, 2005.



2. PROPERTY, PLANT AND EQUIPMENT

June 30, 2006 December 31,2005
------------------------------------------------------------------------
Oil and gas properties $ 238,150 $ 209,141
Other assets 522 352
------------------------------------------------------------------------
238,672 209,493
Accumulated depletion and depreciation (83,065) (70,037)
------------------------------------------------------------------------
Net book value $ 155,607 $ 139,456
------------------------------------------------------------------------
------------------------------------------------------------------------


During the period ended June 30, 2006, the Company capitalized $0.5 million (2005 - $0.4 million), of general and administrative expenses related to exploration and development activities. As at June 30, 2006, the depletion calculation excluded unproved properties of $6.3 million (2005 - $9.3 million) and included future development costs of proved reserves of $12.5 million (2005 - $1.9 million).

3. ASSET RETIREMENT OBLIGATIONS

The Company's asset retirement obligations result from net ownership interests in petroleum and natural gas assets including well sites, gathering systems and processing facilities. As at June 30, 2006, the Company estimates the total undiscounted amount of cash flows required to settle its asset retirement obligations is approximately $26.3 million which will be incurred from 2006 to 2030. The majority of the costs will be incurred between 2012 and 2030. A credit-adjusted risk-free rate of eight percent was used to calculate the fair value of the asset retirement obligations.

A reconciliation of the asset retirement obligations is provided below:



June 30, 2006 December 31, 2005
------------------------------------------------------------------------
Balance, beginning of period $ 7,866 $ 7,517
Accretion expense 305 612
Revisions to estimates (351) -
Obligations incurred 302 436
Actual abandonment cost (184) (699)
------------------------------------------------------------------------
Balance, end of period $ 7,938 $ 7,866
------------------------------------------------------------------------
------------------------------------------------------------------------


4. BANK INDEBTEDNESS

As at June 30, 2006, the Company has a revolving demand credit facility with a maximum availability of $55.0 million and an acquisition/development facility for $10.0 million. The interest rate at June 30, 2006 was prime plus 0.25 percent (6.25 percent) and subject to quarterly adjustment from time to time based on certain debt to cash flow ratios. The limit of the credit facility is subject to adjustments from time to time to reflect changes in Endev's asset base. There are no principal repayments required on the loan. The credit facility is secured by a $75.0 million fixed and floating charge over all the assets of the Company.

5. INCOME TAXES

During the second quarter of 2006 the Canadian Federal Government and certain provincial governments enacted reductions to their corporate income tax rates, resulting in a reduction of future income tax liabilities of approximately $2.8 million.

6. SHARE CAPITAL

The authorized share capital of the Company consists of an unlimited number of common shares without nominal or par value.



Issued and outstanding Common shares Amount
------------------------------------------------------------------------
Balance, December 31, 2004 87,802,554 $ 67,425
Options exercised 256,669 221
Contributed surplus associated with options
exercised - 81
------------------------------------------------------------------------
Balance, December 31, 2005 88,059,223 $ 67,727
Options exercised 628,334 320
Contributed surplus associated with options
exercised - 7
------------------------------------------------------------------------
Balance, June 30, 2006 88,687,557 $ 68,054
------------------------------------------------------------------------
------------------------------------------------------------------------


The weighted average number of shares outstanding is as follows:

Three months ended June 30 Six months ended June 30
2006 2005 2006 2005
------------------------------------------------------------------------
Basic 88,467,914 87,974,387 88,414,043 87,913,946
Diluted 89,662,214 89,456,389 89,803,349 89,369,238
------------------------------------------------------------------------


The Company has a stock option plan where the Company may grant options to its directors, officers, employees and consultants, for up to 10 percent of the issued common stock. The exercise price of each stock option equals the average market price of the Company's stock for the five trading days prior to the date of the grant. The following table summarizes information about the stock option transactions for the period.



June 30, 2006 December 31, 2005
------------------------------------------------------------------------
Weighted Weighted
Number of Average Number of Average
Options Exercise Price Options Exercise Price
------------------------------------------------------------------------
Stock options
outstanding,
beginning of period 4,991,500 $ 1.08 3,771,500 $ 0.89
Granted 1,466,000 1.77 1,870,000 1.50
Exercised (628,334) 0.51 (256,669) 0.86
Cancelled or expired (6,666) 0.90 (393,331) 1.45
------------------------------------------------------------------------
Stock options
outstanding, end of
period 5,822,500 $ 1.31 4,991,500 $ 1.08
------------------------------------------------------------------------
------------------------------------------------------------------------
Exercisable, end of
period 3,075,170 $ 1.15 3,001,503 $ 0.90
------------------------------------------------------------------------
------------------------------------------------------------------------


Options Outstanding Options Exercisable
------------------------------------------------------------------------
Weighted
Weighted Remaining Weighted
Range of Average Contractual Average
Exercise Number Exercise Life Number Exercise
Prices Outstanding Price (years) Exercisable Price
------------------------------------------------------------------------
$0.50-$0.90 1,111,500 $0.62 1.5 1,016,502 $0.59
$1.05-$1.32 2,155,000 1.16 5.7 1,096,668 1.14
$1.51-$2.10 2,556,000 1.75 4.4 962,000 1.74
------------------------------------------------------------------------
5,822,500 $1.31 4.3 3,075,170 $1.15
------------------------------------------------------------------------
------------------------------------------------------------------------


All options granted vest as to one third upon date of grant and one third on each of the first two anniversaries and expire five years after the grant date, except for 1,000,000 options granted on December 17, 2004 which expire ten years after the grant, 500,000 of which vest on the stock reaching certain target prices.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with weighted average assumptions and resulting values for grants as follows:



Assumptions June 30, 2006 December 31, 2005
------------------------------------------------------------------------
Risk free interest rate (%) 5.46 4.10
Expected life (years) 5 5
Expected volatility (%) 43 57
Weighted average fair value of each
option granted ($) 0.81 0.79
Dividend yield (%) - -


CONTRIBUTED SURPLUS

June 30, 2006 December 31, 2005
------------------------------------------------------------------------
Balance, beginning of period $ 1,785 $ 627
Stock-based compensation expense 969 1,239
Options exercised (7) (81)
------------------------------------------------------------------------
Balance, end of period $ 2,747 $ 1,785
------------------------------------------------------------------------
------------------------------------------------------------------------


7. SUPPLEMENTAL CASH FLOW INFORMATION

Changes in non-cash working capital

Three months Six months
ended June 30 ended June 30
2006 2005 2006 2005
------------------------------------------------------------------------
Accounts receivable $ 688 $ (749)$ 2,800 $ (2,961)
Prepaid expenses and deposits (300) 75 (458) 111
Accounts payable and accrued
liabilities (951) 1,653 2,541 1,428
------------------------------------------------------------------------
Change in non-cash working capital $ (563) $ 979 $ 4,883 $ (1,422)
------------------------------------------------------------------------
------------------------------------------------------------------------
Relating to:
Operating activities $ 261 $ (4,464)$ 81 $ (3,532)
Investing activities $ (824) $ 5,443 $ 4,802 $ 2,110
------------------------------------------------------------------------
------------------------------------------------------------------------


8. COMMITMENTS

The Company is committed to a lease agreement for office premises to March 31, 2012. The minimum rentals payable including estimated operating costs are summarized in the following table:



2006 $ 121
2007 470
2008 551
2009 556
2010 562
2011 569
2012 144
------------------------------------------------------------------------
Total $ 2,973
------------------------------------------------------------------------
------------------------------------------------------------------------


Endev Energy Inc. is a Canadian oil and gas exploration and production company based in Calgary, Alberta. The Company's common shares are listed on the Toronto Stock Exchange under the trading symbol ENE.

The Toronto Stock Exchange has neither approved nor disapproved of the contents of this release.

Contact Information

  • Endev Energy Inc.
    Cameron MacGillivray
    President and CEO
    (403) 750-2600 or 1-888-750-2677
    or
    Endev Energy Inc.
    Scott Bonli, C.A.
    Vice President, Finance and CFO
    (403) 750-2600 or 1-888-750-2677
    Email: info@endevenergy.com