Tanganyika Oil Company Ltd.
TSX VENTURE : TYK

Tanganyika Oil Company Ltd.

August 14, 2007 02:30 ET

Tanganyika Announces Second Quarter 2007 Results

CALGARY, ALBERTA--(Marketwire - Aug. 14, 2007) - Tanganyika Oil Company Ltd. (the "Company") (TSX VENTURE:TYK)(OMX:TYKS) today announces interim operating and financial results for the second quarter ended June 30, 2007. Unless otherwise stated, all figures contained in this report are in United Stated Dollars.

Three and Six Months Ended June 30, 2007 and June 30, 2006



Three Three Six Six
months months months months Year
ended ended ended ended ended
Financial June 30, June 30, June 30, June 30, Dec. 31,
Highlights 2007 2006 2007 2006 2006
-----------------------------------------------------------
Revenue 10,096,022 7,478,589 17,614,316 14,785,671 32,789,955
Net profit
(loss) (3,605,374) (4,208,032) (6,915,971) (3,675,623) (8,200,450)
Per share (basic) (0.064) (0.091) (0.123) (0.081) (0.172)
Per share
(diluted) (0.064) (0.091) (0.123) (0.081) (0.172)
Cash Flow from
Operations (1) 3,100,443 (2,196,231) 5,745,066 (213,657) 5,240,850
Per share (basic) 0.055 (0.047) 0.103 (0.005) 0.110
Per share
(diluted) 0.055 (0.047) 0.102 (0.005) 0.109
Total Assets 238,792,822 137,934,795 238,792,822 137,934,795 231,531,927
Working Capital,
including cash 61,163,592 64,619,814 61,163,592 64,619,814 95,672,786
Working Capital,
excluding cash 22,242,415 37,186,007 22,242,415 37,186,007 1,007,295
Weighted Average
shares outst-
anding (basic) 56,317,754 46,194,769 56,047,956 45,293,211 47,702,202
Weighted Average
shares
outstanding
(diluted) 56,707,530 46,862,021 56,397,497 45,830,308 48,076,905

Operational
Highlights
Average daily prod-
uction - Company
net (bbl/d)
Syria - Oudeh 1,067 846 1,083 880 890
Syria - Tishrine-
Sheikh Mansour 496 - 311 - 290
-------------------------------------------------------------------------
Total Syria 1,563 846 1,394 880 1,180

Egypt 709 736 742 747 742
-------------------------------------------------------------------------
Total Company 2,272 1,582 2,136 1,627 1,922
-------------------------------------------------------------------------
Average sales price
($/bbl)
Syria
Oudeh 46.75 56.83 41.52 51.42 47.46
Tishrine 40.98 0.00 39.86 - 36.29
Egypt 50.26 48.68 45.07 44.78 44.99
Operational costs
($/bbl)
Syria (2) 10.27 10.26 9.67 7.31 8.30
Egypt 3.64 4.97 3.39 3.70 4.00

(1) Cash flow from operations is a non-GAAP measure that represents cash
generated from operating activities before changes in non-cash working
capital.
(2) Gross field production cost, before deduction of operating expenses
related to base crude production, divided by gross field production.


NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

The accompanying unaudited interim financial statements of the Company have been prepared by and are the responsibility of the Company's management.

The Company's independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity's auditor.

PRESIDENT'S MESSAGE

Tanganyika's activities focused on two vital areas during the second quarter of 2007; increasing oil production and further delineating the Syrian oil fields. Compared to the same quarter in 2006, Syrian gross production increased by over 14%. The pace of production growth is expected to increase during the second half of 2007 with additional rig and steam capacity. The appraisal drilling program continues to extend the Syrian field boundaries.

During the second quarter of 2007, Company gross production averaged 10,665 bbl/d (Company net: 2,272 bbl/d), an increase of 14.0% compared to average Company gross production of 9,354 bbl/d (Company net: 1,582 bbl/d) during the second quarter of 2006. Syrian gross production during the second quarter averaged 9,266 bbl/d (Company net: 1,563 bbl/d), increasing 14.7% compared to average gross production of 8,079 bbl/d (Company net: 846 bbl/d) during the second quarter of 2006.

During the second quarter, efforts continued to be focused on addressing issues constraining oil production growth in Syria. Tishrine production continued to be constrained during the second quarter of 2007 by insufficient access to workover rigs to perform completions and routine well maintenance. Of the three workover rigs that were expected to be available to the Company in May of 2007, only one was successfully mobilized during the second quarter. Mobilization of the two additional workover rigs was delayed due to logistical issues. The two additional rigs are now being commissioned to commence workover activity. The Company will continue to take advantage of the workover rigs made available by the Syrian Petroleum Company ("SPC"). Additional workover rig capacity will be aimed at alleviating the estimated 3,500 -- 4,000 bbl/d of gross production that continued to be shut-in at the end of the second quarter and to complete newly drilled wells at Oudeh and Tishrine in a timely manner.

The thermal (steam) EOR pilot continued with very positive results during the second quarter of 2007 at Tishrine, utilizing vacuum insulated tubing to increase production from older wells not equipped for conventional steam injection. Results were positive on two previously completed wells with average oil production rates increasing from 50 to 80 bbls/ (cold production) to between 150 and 390 bbls/d during the first production cycle. The Oudeh steam pilot recommenced during July, utilizing diesel to temporarily fuel a steam generator. Engineering is underway for a planned natural gas sweetening plant which is planned to be operational during the first quarter of 2008. The gas plant will remove the corrosive hydrogen sulfide and allow the return to natural gas for use as the primary fuel.

Four of the eight new steam generators have been delivered and are currently being shipped from China to Syria. The generators are expected to be operational by the end of August 2007, bringing the total steam generator count to six and a steam injection capacity of approximately 9,600 barrels of cold water equivalent per day. The additional steam generators are expected to positively impact Oudeh production where higher viscosity oil has been encountered on recently drilled development wells on the western flank of the field.

Progress has been made with the Tishrine field facilities upgrades. The major areas of focus include electrical power reliability upgrades, addition of heat and insulation to the gathering and processing facilities and water processing and disposal.

The drilling effort continued during the second quarter of 2007 as the Company continued to invest in the evaluation and development of its assets in both Syria and Egypt. A total of 14 wells were drilled during the quarter: seven in the Tishrine field, six in the Oudeh field and one in Egypt. The drilling effort is balanced between in-field developmental drilling and strategic appraisal wells to further define the hydrocarbon potential of the Syrian fields. Additionally, a deep water disposal well was drilled in the Tishrine field aimed at disposing of produced water in reservoirs deeper than the productive reservoirs. The water injection well has been completed and is expected to positively contribute to third quarter Tishrine production capacity. The pace of Syrian drilling is expected to increase during the second half of 2007 when it is anticipated three third party drilling rigs will be added to the existing three rigs currently drilling in Syria.

Tanganyika remains focused on executing the 2007 capital program concentrated on the following areas:

- Increasing production by mobilizing additional workover rigs for well completions and workovers

- Acceleration of drilling in Syria, increasing the rig count to six

- Expansion of the steam injection programs in Syria

- Modification and expansion of facilities in Syria including oil, gas and water handling and electric power reliability

- Continue the appraisal and development of the Egyptian fields

Signed "Gary S. Guidry"

President and CEO

August 10, 2007

MANAGEMENT'S DISCUSSION AND ANALYSIS

(Amounts in United States Dollars unless otherwise indicated)

Three and Six months ended June 30, 2007 and June 30, 2006

Management's discussion and analysis ("MD&A") of Tanganyika Oil Company Ltd.'s (the "Company" or "Tanganyika") financial condition and results of operations should be read in conjunction with the consolidated financial statements for the six months ended June 30, 2007 and June 30, 2006 and the audited consolidated financial statements for the period ended December 31, 2006 and related notes therein prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). The effective date of this MD&A is August 8, 2007.

Additional information relating to the Company is available on SEDAR at www.sedar.com and on the Company's web-site at www.tanganyikaoil.com.

Overview

Tanganyika is a Canadian-based company whose common shares are traded on the TSX Venture Exchange under the symbol "TYK". Effective February 14, 2007, the Company's Swedish Depository Receipts commenced trading on the Stockholmsb÷rsen (Stockholm Stock Exchange) under the symbol "TYKS". Additional information about the Company and its business activities, including the Company's Annual Information Form ("AIF"), is available on SEDAR at www.sedar.com or on the Company's website at www.tanganyikaoil.com.

The Company is an international oil and gas exploration and development company based in Canada with interests in exploration and development properties in Syria and Egypt.

Company Reserves

DeGolyer and MacNaughton Canada Limited have independently evaluated the proved and probable crude oil reserves attributable to Tanganyika's participating interests in its Syrian and Egyptian properties. The following table shows the estimated share of Tanganyika's crude oil reserves in its properties using constant prices and costs. The complete Statement of Reserves Data and Other Oil and Gas Information can be found on SEDAR and on the Company's website.



--------------------------------------------------------------------------
Heavy Oil (millions of barrels) based on constant prices
--------------------------------------------------------------------------
Dec 31, 2006 Dec 31, 2005
-------------------------------------------------------------
Gross Net Gross Net
-------------------------------------------------------------
Proved Proved Proved Proved Proved Proved Proved Proved
plus plus plus plus
prob- prob- prob- prob-
able able able able
--------------------------------------------------------------------------
Syria 170 767.6 87.7 415.9 35.6 103.3 15.9 41.2
--------------------------------------------------------------------------
Egypt 5.2 11 2.7 5.6 1.5 2.0 0.7 0.8
--------------------------------------------------------------------------
Total 175.2 778.6 90.4 421.5 37.1 105.3 16.6 42.0
--------------------------------------------------------------------------


Syria

Oudeh Block

The Company acquired its interest in the Oudeh Block ("Oudeh") in 2003 pursuant to a Contract for Development and Production of Petroleum with the Government of Syria (the 'Government"). The objective of the contract, which has a term of 20 years with a provision for a five year extension, is to increase oil recovery and crude oil production within the block by applying enhanced oil recovery ("EOR") techniques. The Company began EOR through the use of thermal (steam) technology during 2006.

The Company has an interest in all incremental production above the base crude oil production ("BCP") level from wells in existence at the time the contract was signed. The BCP level declines at a rate of five percent per annum calculated on a monthly basis. A table of Oudeh BCP levels for 2007 and 2008 is below. Under the terms of the contract, the Syrian Petroleum Company ("SPC") is responsible for reimbursing the Company for all operating costs attributable to the BCP.

After deduction of the BCP, a royalty of 12.5 percent is deducted and submitted to the Government. The remaining production is then shareable among the Company and SPC as follows:

- 30 percent of the shareable crude oil production from the block is designated as profit oil and is split among the Company and SPC. The profit oil is split 30 percent to the Company and 70 percent to SPC.

- Up to 70 percent of the shareable crude oil production is available as cost oil to the Company to recover exploration, development and operating costs (other than operating costs associated with the BCP that have been recovered directly from SPC). To the extent that these costs exceed the proceeds from the sale of cost oil in any quarter, the excess can be carried forward into subsequent quarters.

- If the costs are less than the proceeds of the cost oil, the excess proceeds are split between the Company and SPC in the same manner as profit oil.

All Syrian taxes are the responsibility of SPC from its share of profit and excess cost oil.

Tishrine-Sheikh Mansour Fields

The Company acquired its interest in the Tishrine-Sheikh Mansour Fields ("Tishrine") in November 2004 pursuant to a Contract for Development and Production of Petroleum with the Government. The contract was ratified in February 2005 and the Company assumed operations on the fields in September 2005. The objective of the contract, which has a term of 20 years with a provision for a five year extension, is to apply EOR techniques to increase crude oil production and recoverability. The Company began EOR through the use of thermal (steam) technology during 2006.

The Company has an interest in all incremental production above the BCP level from wells in existence at the time the contract was signed. The BCP level declines at a rate of five percent per annum calculated on a monthly basis. A table of Tishrine BCP levels for 2007 and 2008 is below. Under the terms of the contract, SPC is responsible for reimbursing the Company for all operating costs attributable to the BCP.

After deduction of the BCP, a royalty of 12.5 percent is deducted and submitted to the Government. The remaining production is then shareable among the Company and SPC as follows:

- 52 percent of the shareable crude oil production from the block is designated as profit oil and is split among the Company and SPC. The profit oil is split 30 percent to the Company and 70 percent to SPC.

- Up to 48 percent of the remaining crude oil production is available as cost oil to the Company to recover exploration, development and operating costs (other than operating costs associated with the BCP that have been recovered directly from SPC). To the extent that these costs exceed the proceeds from the sale of cost oil in any quarter, the excess can be carried forward into subsequent quarters.

- If the costs are less than the proceeds of the cost oil, the excess proceeds are split between the Company and SPC in the same manner as profit oil.

All Syrian taxes are the responsibility of SPC from its share of profit and excess cost oil.

Base Crude Production



--------------------------------------------------------------------------
(bbl/d) 2007 2008
--------------------------------------------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
--------------------------------------------------------------------------
Oudeh 915 884 873 862 870 841 830 820
--------------------------------------------------------------------------
Tishrine-Sheikh Mansour 6,074 5,933 5,795 5,723 5,778 5,643 5,513 5,444
--------------------------------------------------------------------------


Egypt

The Company acquired its interest in the West Gharib Block, Egypt in 1998 pursuant to a Concession Agreement for Petroleum Exploration and Exploitation (the "Concession Agreement"). The original exploration term of the Concession Agreement was three years with extensions available if commercial production was not attained. The exploration term was subsequently extended to 2006. The Concession Agreement provided that a field was eligible for a development lease once commercial production was attained and upon approval by the government. Once a field was granted a development lease, the term of the agreement for that field became 20 years with a five year extension option. There are seven development fields within the West Gharib Block: Hana, Hoshia, West Hoshia, Fadl, South Rahmi, Arta and North Hoshia. The Hana field was converted to a development lease in 1999, the Hoshia and Fadl fields were converted to development leases during 2005 and the development leases for the other fields were granted in 2006. Development leases for two additional fields, East Hoshia and East Arta, are pending approval of the government. The exploration term under the Concession Agreement terminated in 2006 and all remaining exploration land reverted back to the government. All fields with development leases, either granted or pending, remain under the Concession Agreement.

Taking into consideration previous farmout agreements, the Company currently holds a 70 percent participating interest in the Hana field and a 45 percent participating interest in all other fields within the block. Gross production from the block is divided among the Company, its partners and the Egyptian General Petroleum Company ("EGPC") as follows:

- 70 percent of the crude oil and natural gas production from the block is designated as profit oil and is split among the Company, its partners and EGPC. The percentage available to the Company and its partners is on a declining scale starting at 30 percent and reducing to 15 percent as gross average daily production increases to 100,000 barrels per day.

- Up to 30 percent of the remaining crude oil and natural gas production is available as cost oil to the Company and its partners to recover exploration, development and operating costs. To the extent that these costs exceed the proceeds from the sale of cost oil in any quarter, the excess can be carried forward into subsequent quarters.

- If the costs are less than the proceeds of the cost oil, the excess proceeds are split between the Company, its partners and EGPC in the same manner as profit oil.

All Egyptian royalties and taxes are the responsibility of EGPC from its share of profit and excess cost oil.

Operational Update

Syria - Oudeh

Average gross field production during the second quarter of 2007 was 2,440 bbls/d (Company net: 1,067 bbls/d). Ten wells were drilled or spudded during the first half of 2007. After drilling field delineation wells at OD 153, OD 155 and OD 158 the drilling focus has been shifted to areas to expand the commercial thermal pilots. The areas for thermal expansion are near OD 146 where steam results were positive and near OD 149 where cold production rates have been steady at 120 bbls/d.

All of the new wells on the western flank of the Oudeh field have confirmed higher viscosity than observed in the eastern areas of the field. This higher oil viscosity is limiting the cold production rates and it is anticipated that these wells will be highly responsive to thermal stimulation. The Company has taken delivery of the first four (of eight total) new generators in Shanghai and the units are currently being shipped from China to Syria. Arrival and installation of the units is expected by the end of August. For the remainder of 2007, Oudeh drilling will focus on production growth in areas where the thermal EOR pilots have had success. Additional drilling rigs and steam generators that are expected to be mobilized during the third quarter should lead to accelerated production growth.

An update of the three key appraisal wells at Oudeh includes:

- OD-155H was drilled to appraise the Shiranish oil potential in the southwest area of the Oudeh field. Production results during the second quarter from this well are excellent with a stabilized average cold production rate of 150 bbls/d. This success will add new reserves and provide another area for additional drilling and production growth during 2007.

- OD-153 was drilled as a deep test targeting the Butmah and Kurrachine Dolomite formations. Petrophysical analysis of OD-153 indicates hydrocarbon pay in the Shiranish, Butmah and Kurrachine Dolomite formations. Production testing for hydrocarbons of the Kurrachine Dolomite has been hampered by zone isolation problems due to poor cement around casing. Remedial options are being considered.

- OD-158H was drilled in May to appraise the Shiranish reservoir in the northwest area of the Oudeh field. Well log results from the vertical pilot bore hole indicate the thickest Shiranish B reservoir interval drilled in the Oudeh field with 112 metres of net oil pay. The horizontal well encountered fractures that are connected to a fresh water aquifer system. Plans are currently in place for remedial cementing of the fractures during the third quarter.

Syria - Tishrine

Average gross field production during the second quarter of 2007 was 6,826 bbls/d (Company net: 496 bbls/d). Sixteen wells were drilled during the first half of 2007, including one water disposal well. Drilling activity has increased at the Tishrine West field as a result of two drilling rigs working for most of the first half of 2007. Nine wells were completed as oil producers, one as a gas well and one as a water disposal well. Three of these wells have produced only water although well log analysis indicates oil pay in the Chilou formation. Another well T-236H that finished drilling at the end of June is waiting for completion. T-234 was drilled as a step-out appraisal well in May and is currently undergoing production testing in the Shiranish formation. The well is located in the southwest area of the Tishrine block two kilometers from the Tishrine West field area. Petrophysical results indicate net oil pay in the Shiranish 92m, Jaddala 206m, Chilou B 40m and Chilou A 21m. Drilling new wells and establishing commercial oil production from these reservoirs around the T-234 well will occur later in 2007.

Tishrine production continued to be constrained during the second quarter of 2007 by insufficient access to workover rigs to perform completions and routine well maintenance. Of the three workover rigs that were expected to be available to the Company in May of 2007, only one was mobilized during the second quarter. Mobilization of the two additional workover rigs was delayed due to logistical issues at the Jordanian border. The two additional rigs are now in Syria and are being commissioned to commence workover activity. The Company will continue to take advantage of the workover rigs made available by the Syrian Petroleum Company ("SPC").

Oil production capacity in Tishrine was further constrained during the second quarter of 2007 by water handling capacity. The Company is currently upgrading the water handling system by drilling additional water disposal wells, constructing water handling infrastructure and increasing the water pumping capacity. There are currently four water injection wells in Tishrine injecting water into the Jaddala formation. A fifth water injection well is currently being drilled aiming to inject water into the deeper Soukhne and Ghouna formations. By injecting water into these deeper zones the Company hopes to eliminate injected water being recirculated into the oil producing reservoirs.

The reliability of electrical power supply to Tishrine improved during the second quarter of 2007 with considerable progress made in upgrading the electric infrastructure in the field. It is anticipated that the Tishrine electrical system upgrade will be completed during the fall of 2007.

Syria - Thermal Operations

The steam pilot at Tishrine continued during the second quarter of 2007. The Oudeh steam pilot recommenced during July, utilizing diesel to fire the steam generator. The Oudeh pilot had been temporarily postponed due to hydrogen sulfide in the gas supply. Engineering for a gas sweetening plant to be installed at Oudeh has been awarded with the anticipation of a construction and installation tender process to commence in August.

Four of the eight new steam generators have been delivered and are currently being shipped from China to Syria. The generators are expected to be operational by the end of August 2007, bringing the total steam generator count to six.

At Tishrine, the Company has successfully used vacuum insulated tubing to deliver high quality steam in two conventionally completed wells drilled by SPC a number of years ago. Results were positive on both wells with average oil production rates increasing from 50 to 80 bbl/s (cold production) to between 150 and 390 bbls/d during the first production cycle. The use of vacuum insulated tubing allows cyclic steam stimulation of pre-existing wells in both fields. Additional quantities of vacuum insulated tubing are being sourced with deliveries expected in the third quarter concurrent with the arrival of the additional steam generators.

Egypt

Average gross field production during the first half of 2007 was 2,815 bbls/d (Company net: 742 bbls/d). Development drilling continued during the first half of the year with three wells drilled in the West Gharib block. Oil field development permits have been submitted for approval for the East Hoshia and East Arta Fields.

North Africa

During the second quarter of 2006, the Company acquired a 50 percent interest in a private entity which holds certain rights associated with the development of oil and gas properties located in North Africa in exchange for 372,954 common shares having a deemed value of $3.5 million. As part of the acquisition, the Company agreed to fund 100 percent of the private entity's work program obligations to a maximum of $2 million. The Company has an option to acquire the remaining 50 percent interest in the private entity within 60 days after the date a development lease is issued in respect of the oil and gas properties for a purchase price of common shares of the Company having a deemed value of $6 million. It is anticipated that a decision will be reached by the Government regarding the potential issuance of a development lease during the second half of 2007.



Selected Quarterly Information

Three Months Ended (1)
30-Jun 31-Mar 31-Dec 30-Sep 30-Jun 31-Mar 31-Dec 30-Sep
2007 2007 2006 2006 2006 2006 2005 2005
--------------------------------------------------------------------------
Total
revenues
($ 000) 10,096 7,518 7,442 10,562 7,479 7,307 5,852 7,558
Earnings
(loss)
($ 000) (3,605) (3,311) (410) (4,115) (4,208) 532 (2,615) 3,526
Per share
basic
$/share (0.064) (0.059) (0.008) (0.084) (0.091) 0.012 (0.059) 0.083
Per share
diluted
$/share (0.064) (0.059) (0.008) (0.084) (0.091) 0.012 (0.059) 0.080
Cash flow
from
operations
(2) ($ 000) 3,100 2,645 7,447 (1,993) (2,196) 1,983 (1,071) 5,029
Per share
basic
$/share 0.055 0.047 0.146 (0.040) (0.048) 0.045 (0.024) 0.118
Per share
diluted
$/share 0.055 0.047 0.146 (0.040) (0.048) 0.044 (0.024) 0.115
Company
total net
production
(bbl/d) 2,272 1,999 2,250 2,184 1,583 1,670 1,522 1,382
Company
total net
production
(bbl) 206,710 179,932 207,000 201,000 144,000 150,000 140,000 169,000

(1) Except for September 2005 which is for the four months ended

(2) Cash generated from operating activities before changes in non-cash
working capital


The 2007 second quarter total revenues increased from the first quarter due to a 14% increase in Company net production and increased world oil prices. Oudeh and Tishrine oil prices continued to be impacted during the second quarter of 2007 by the ongoing process of re-negotiating the pricing formula under the Syrian marketing agreement. The Company and SPC agreed that the prior Oudeh marketing formula would be used in the interim and that SPC would withhold 20 percent from Oudeh revenues and 30 percent from Tishrine revenues until the new pricing formula was finalized by a third party evaluator. The Company believes the oil revenues would have been higher if the new marketing contracts had been in place in the later part of 2006 and the first half of 2007. The Company is unable to estimate any such potential adjustment at this time.

Earnings have fluctuated from quarter to quarter as a result of oil price, exchange rate, operating cost fluctuations and increases in total expenses.

Results of Operations

The Company incurred a consolidated net loss during the second quarter of 2007 of $3,605,000 ($0.064 per share) compared to a consolidated net loss of $4,208,000 ($0.091 per share) for the three month period ended June 30, 2006. The Company had a consolidated net loss of $6,916,000 ($0.123 per share) for the six month period ending June 30, 2007 compared to a consolidated net loss of $3,676,000 ($0.081 per share) for the six month period ended June 30, 2006.

The loss for the quarter and six months ended June 30, 2007 reflects Tanganyika's early stage of appraising and developing its Syrian oil fields. Production levels have yet to reach a level sufficient to generate operating income. Continuing from 2006, the Company has added operating, technical and support staff as required for expanding the development and appraisal programs on the fields in Syria. The reserves potential identified by the work programs and capital deployed in Syria has been reflected in the significant growth in reserves recognized by the third party reserves evaluators. This is discussed in more detail in the Company's NI 51-101 reserves report as of December 31, 2006 that is filed on SEDAR (www.sedar.com).



Production
Three Three Six Six
months months months months Year
ending ending ending ending ending
June 30, June 30, June 30, June 30, December
2007 2006 2007 2006 31, 2006
--------------------------------------------------------------------------
Production:
Syria:Oudeh
Gross field production
(bbl) 222,030 197,029 447,809 402,874 812,000
Gross field production
(bbl/d) 2,440 2,165 2,474 2,226 2,225
Company net production
(bbl) (1) 97,068 76,950 196,017 159,240 325,000
Company net (bbl/day) 1,067 846 1,083 880 890
Syria:Tishrine-Sheikh
Mansour
Gross field production
(bbl) 621,199 538,191 1,168,669 1,068,345 2,373,000
Gross field production
(bbl/d) 6,826 5,914 6,457 5,902 6,501
Company net production
(bbl) (1) 45,160 - 56,326 - 106,000
Company net (bbl/day) 496 - 311 - 290
--------------------------------------------------------------------------
Syria Total
Total Company gross Syria
(bbl) 843,229 735,220 1,616,478 1,471,219 3,185,000
Total Company gross Syria
(bbl/d) 9,266 8,079 8,931 8,128 8,726
Total Company net Syria
(bbl) 142,228 76,950 252,343 159,240 431,000
Total Company net Syria
(bbl/d) 1,563 846 1,394 880 1,180
--------------------------------------------------------------------------
Egypt:
Gross field production
(bbl) 264,121 228,000 509,507 460,000 923,000
Gross field production
(bbl/d) 2,902 2,505 2,815 2,541 2,529
Company gross production
(bbl) 127,277 116,000 264,172 234,000 471,000
Company gross production
(bbl/d) 1,399 1,275 1,460 1,293 1,290
Company net production
(bbl) (2) 64,482 67,000 134,299 135,000 271,000
Company net (bbl/d) 709 736 742 746 742
--------------------------------------------------------------------------
Company Total:
Company gross production
(bbl) 970,506 851,220 1,880,650 1,705,219 3,656,000
Company gross production
(bbl/d) 10,665 9,354 10,390 9,421 10,016
Company total net (bbl) 206,710 143,950 386,642 294,240 702,000
Company total net (bbl/d) 2,272 1,582 2,136 1,626 1,922
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1) Company net share of Syria's Oudeh and Tishrine production represents
the Company's share of cost and profit oil after deduction of royalty
and base crude production (i.e. incremental production).

2) Company net share of Egypt production represents the Company's share of
cost and profit oil, net of partner's working interest in the fields.


Oil Sales
Three Three Six Six
months months months months Year
ending ending ending ending ending
June 30, June 30, June 30, June 30, December
2007 2006 2007 2006 31, 2006
--------------------------------------------------------------------------
Sales of oil ($):
Syria: Oudeh 4,537,519 4,373,000 8,137,797 8,175,000 15,423,000
Tishrine 1,850,585 - 2,245,215 - 3,847,000
Egypt 3,240,646 2,660,000 6,052,743 6,045,000 12,193,000
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Total 9,628,750 7,033,000 16,435,755 14,220,000 31,463,000
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Average oil sales price ($ per bbl):
--------------------------------------------------------------------------
Syria: Oudeh (1) 46.75 56.83 41.52 51.34 47.46
Syria: Tishrine (1) 40.98 - 39.86 - 36.29
Egypt(2) 50.26 48.68 45.07 44.78 44.99
--------------------------------------------------------------------------

1) Syria oil prices are net of holdback. See discussion below regarding
marketing contracts for Oudeh and Tishrine.

2) Egypt's total oil sales for the quarter ended June 30, 2006 included an
accrual adjustment of $606,000 relating to the prior quarter.


Second quarter of 2007 oil sales revenue was 37% higher compared to oil sales revenue during the second quarter of 2006. Sales revenue for the six months ended June 30, 2007 was 16% higher than the oil sales revenue during the first six months of 2006.

The oil price recognized for Oudeh production during the first half of 2007 averaged $41.52/bbl. Tishrine's average recognized oil price was $45.07/bbl during the first six months of 2007. These prices are based on a provisional pricing mechanism agreed upon between the Company and SPC. Provisional pricing will remain in place until a new pricing mechanism is finalized, taking into consideration the quality characteristics of the oil currently produced from Oudeh and Tishrine compared to the Syrian Heavy Export Blend at Tartous. The provisional pricing uses the existing pricing formula which is then subject to a 20 percent hold back for Oudeh sales and 30 percent for Tishrine sales. Oil samples have been forwarded to an independent third party laboratory who will conduct tests that will form the basis of the new pricing differential. Once the new marketing pricing agreements are finalized, the Company's share of revenues will be re-calculated using the new pricing formula and any difference owing to the Company will be refunded from the holdback.



Production Costs
Three Three Six Six
months months months months Year
ending ending ending ending ending
June 30, June 30, June 30, June 30, December
2007 2006 2007 2006 31, 2006
--------------------------------------------------------------------------
Production Costs
Syria
Gross production
costs (1) $ 8,655,942 $ 7,555,000 $15,628,574 $10,760,000 $26,451,000
Gross production
volumes (1) 843,229 736,000 1,616,478 1,471,000 3,185,000
Cost per bbl $ 10.27 $ 10.26 $ 9.67 $ 7.31 $ 8.30
--------------------------------------------------------------------------

1) Syria gross production costs and gross production volumes represent 100
percent costs and volumes before any deductions relating to the base
crude production.


Production costs for Syria for the three months ended June 30, 2007 averaged $10.27 per barrel as compared to $10.26 per barrel for the three months ended June 30, 2006. For the first six months of 2007 production costs averaged $9.67 as compared to $7.31 for the first six months of 2006. Average per barrel production costs are expected to improve during 2007 as oil production rates increase. Oil production growth during the first six months of 2007 was constrained by several factors including inefficiency of the electrical supply at Tishrine and insufficient access to workover rigs required to perform well services on existing wells and completion work on newly drilled wells.

Several steps have been taken to date during 2007 to address ongoing issues constraining oil production growth in Syria. Electrical system upgrades are ongoing in the Tishrine field aimed at increasing the efficiency of the electricity supply. Three additional third party drilling rigs have been contracted and all are expected to be operational during August. The Company will continue to utilize the workover rigs made available to the Company by SPC. Additional workover rig capacity will be aimed at alleviating the estimated 3,500 - 4,000 bbl/d of gross production shut-in at the end of the second quarter and to complete newly drilled wells at Oudeh and Tishrine in a timely manner. Increasing deep water disposal capability with the completion of water injection well 235 in Tishrine is expected to positively impact oil production and reduce oil production costs per barrel. Steam injection has recommenced during July in the Oudeh field, utilizing diesel fuel to fire the steam generator. Steam injection is expected to positively impact production on all the high viscosity Oudeh wells.

Production costs for the three months ended June 30, 2007 for Egypt were $3.64 per barrel as compared to $4.97 per barrel for the three months ended June 30, 2006 and $3.39 per barrel for the six months ended June 30, 2007 compared $3.70 for the six months ended June 30, 2006.

Base Crude Production Recoverable Costs

Under the terms of the Syrian production sharing agreements for Oudeh and Tishrine, the Company is responsible for paying 100 percent of production costs and is entitled to reimbursement of the portion of costs attributable to BCP. In years prior to 2006, the Company did not reflect the potential BCP operating cost recoveries for Oudeh and Tishrine in its results of operations. The Company began recognizing BCP operating cost recoveries for Oudeh during the fourth quarter of 2006 when SPC approved the Oudeh BCP recovery allocation method. The Tishrine recoverable amounts had not been approved by SPC at December 31, 2006. The current year treatment of the BCP cost recoveries is explained in more detail below.

Oudeh BCP Recovery:

As of June 30, 2007, SPC has approved invoices from the Company totalling $7.0 million for Oudeh BCP recoveries. The Company has further accrued $3.4 million for Oudeh BCP recovery related to the fourth quarter of 2006 and first half of 2007



Oudeh
Six months
ending June
2004 2005 2006 30, 2007 Total
-----------------------------------------------------------
BCP cost recov-
ery invoiced
and
approved $ 2,064,000 $ 1,972,000 $ 2,929,000 - $ 6,965,000
BCP cost recov-
ery accrued - - 951,000 2,427,000 3,378,000
-----------------------------------------------------------
Total BCP cost
recovery $ 2,064,000 $ 1,972,000 $ 3,880,000 2,427,000 $10,343,000
BCP cost recov-
ery received (2,064,000) (1,972,000) (1,851,000) - (5,887,000)
------------------------------------------------------------------------
BCP cost recov-
ery outst-
anding $ - $ - $ 2,029,000 $ 2,427,000 $ 4,456,000
------------------------------------------------------------------------


Tishrine BCP Recovery:

During the first six months of 2007 the Company has invoiced the recovery amounts for 2005 and the first three quarters of 2006. SPC has agreed to the recovery amounts for 2005 and the first quarter 2006 totalling $869,000. It is expected that the Company will recover the remainder of 2006 in 2007 and will also begin invoicing 2007 recoverable costs.



Six months
ending June
2005 2006 30, 2007 Total
-----------------------------------------------
BCP cost recovery
invoiced and approved $ 506,000 $ 4,365,000 - $ 4,871,000
BCP cost recovery accrued - 1,632,000 4,965,000 6,597,000
-----------------------------------------------
Total BCP cost recovery $ 506,000 $ 5,997,000 4,965,000 $11,468,000
BCP cost recovery received - - - -
------------------------------------------------------------------------
BCP cost recovery
outstanding $ 506,000 $ 5,997,000 $ 4,965,000 $11,468,000
------------------------------------------------------------------------


Depletion

Depletion for the three month period ended June 30, 2007 was $5,207,000 compared to $1,426,000 for the three month period ended June 30, 2006. For the six months ended June 30, 2007 depletion for the period was $9,965,000 compared to $2,334,000 for the six months ended June 30, 2006. During the second quarter of 2007, depletion was approximately $5.42 per barrel for Syria and $2.40 per barrel for Egypt. The Company uses the full cost method of accounting for its oil and gas activities. In accordance with full cost accounting guidelines, all costs associated with exploration and development are capitalized on a country by country basis whether or not such activities were successful. The total capitalized costs and estimated future development costs are amortized using the unit of production method based on proved oil and gas reserves. Accordingly, revisions or changes to estimated proved reserves will impact the depletion expense.

Interest and Other Income

Interest income was $447,000 for the three months ended June 30, 2007 compared to $405,000 for the three month period ended June 30, 2006. For the six months ended June 30, 2007 interest income was $1,124,000 compared to $469,000 for the six months ended June 30, 2006. The overall increase is due to interest earned on surplus cash from a private placement in November 2006. The average cash balance during the first six months of 2007 was $66.3 million versus $29.9 million during the first six months of 2006. Proceeds from a November 2006 private placement resulted in the increased average cash balance.

General and Administration

General and administration costs for the three months ended June 30, 2007 were $2,837,000 compared to $3,041,000 for the three month period ended June 30, 2006. For the six months ended June 30, 2007 general and administration costs were $5,774,000 compared to $4,895,000 for the six months ended June 30, 2006.The increase in general and administration costs are mainly driven by additional personnel employed in Syria as the Company ramps up its Syrian development program. Tanganyika continues to recruit operational and administrative personnel for its Syrian operations. The Company currently employees 240 persons distributed among five offices in Canada, Syria and Egypt. Key drivers of this increased headcount are the anticipated increase in rig count and steam generation capacity.

Salaries and benefits for the three months ended June 30, 2007 were $1,445,000 compared to $1,109,000 the three months ended June 30, 2006. For the six months ended June 30, 2007, salaries and benefits was $2,893,000 compared to $ $1,750,000 for the six months ended June 30, 2006.The salaries and benefits increases over the prior periods are the result of the addition of staff for the Syria and Calgary offices.

Stock-based Compensation

The Company uses the fair value method of accounting for stock options granted to directors, officers and employees whereby the fair value of all stock options granted is recorded as a charge to operations. Stock based compensation for the three months ended June 30, 2007 was $1,478,000 and $454,000 for the three months ended June 30, 2006. For the six months ended June 30, 2007 stock based compensation was $2,479,000 compared to $861,000 for the six months ended June 30, 2006. The Company continues to utilize its stock option plan as a method of recruiting, retaining and motivating key personnel.



Oil and Gas Interests

June 30, 2007
----------------------------------------------
Accumulated
Cost depletion Net book value
----------------------------------------------
Syrian Arab Republic 138,618,226 20,430,331 118,187,895
----------------------------------------------------------------------
Arab Republic of Egypt 34,207,640 12,771,289 21,436,351
----------------------------------------------------------------------
Total 172,825,866 33,201,620 139,624,246
----------------------------------------------
----------------------------------------------

December 31, 2006
----------------------------------------------
Accumulated
Cost depletion Net book value
----------------------------------------------
Syrian Arab Republic 94,867,241 11,680,092 83,187,149
----------------------------------------------------------------------
Arab Republic of Egypt 32,114,384 11,556,587 20,557,797
----------------------------------------------------------------------
Total 126,981,625 23,236,679 103,744,946
----------------------------------------------
----------------------------------------------


Since December 31, 2006, Egypt's oil and gas assets have increased $2,093,000 as a result of development drilling. Syria's oil and gas assets have increased $43,751,000 as a result of development and appraisal drilling and investment in oil, water and gas handling facilities.

Liquidity and Capital Resources

At June 30, 2007 the Company had a cash balance of $38.9 million compared to $93.8 million at December 31, 2006. Non-cash working capital rose during the first half of 2007 as the Company invested in materials and advanced funds to key suppliers instrumental in oil field development and appraisal efforts.

Net cash flow from operating activities was $5.7 million for the period ended June 30, 2007 while $45.8 million was consumed in investing activities. During the first half of 2007 $5.8 million was received by the Company on the exercise of stock options. Tanganyika anticipates cash required for investing activities to exceed cash flow from operations during 2007 as the Company continues to develop and appraise its Syrian oil fields. The ability of the Company to generate sufficient operating cash flow to finance the development program is dependant upon increased rates of oil production.

Tanganyika has historically relied on private placements as a primary source of funds for acquisition, exploration and development. During 2006, 10.3 million shares were issued with gross proceeds of approximately $134.5 million. As production increases in Egypt and Syria, cash flow from operations will increasingly provide the required capital for exploration and development expenditures. Cash generated from the Egyptian operations continues to fund the Company's development activities in Egypt. However, due to potential impacts of price, production rates, pace of development, and the costs of materials and services the Company may not generate sufficient cash flow from operations to entirely fund the entire Syrian and Egyptian appraisal and development programs out of operating cash flow and existing cash on hand. Accordingly, the Company may in the future consider issuances of equity securities, debt or the divestiture of assets, to assist with financing its exploration and development activities.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Outstanding Share Data

As at August 8, 2007 the Company had 56,710,696 common shares outstanding and 2,467,750 stock options outstanding under its stock-based compensation plan.

Related Party Transactions

The Company has entered into transactions with related parties, which were measured at the exchange amounts. Significant related party transactions were as follows:

a) During the six months ended June 30, 2007, the Company paid $95,299 (June 30, 2006 - $157,000) to Namdo Management Services Ltd., a private corporation owned by Lukas H. Lundin, a director of the Company, pursuant to a services agreement.

b) During the six months ended June 30, 2007, the Company received $89,902 (2006 - $104,739) from Pearl Exploration and Production Ltd. ("Pearl") for administrative and other services. The Company and Pearl had certain officers in common during the first half of 2007 and continue to have directors in common.

Critical Accounting Estimates

The preparation of financial statements in conformity with Canadian GAAP requires management to make judgments, assumptions and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses for the period reported. The significant accounting policies used by the Company are disclosed in the Notes to the Consolidated Financial Statements. Management believes that the most critical accounting policies that may have an impact on the Company's financial results relate to the accounting for its oil and gas interests. Amounts recorded for depletion and the impairment test are based on estimates of proved reserves, production rates, oil prices, future costs and other relevant assumptions. Actual results could differ materially from such estimates.

Proved Oil and Gas Reserves

Under National Instrument 51-101("NI 51-101") detailed rules have been developed to provide uniform reserves recognition criteria within the oil and gas industry in Canada. However, the process of estimating oil and gas reserves is inherently judgmental. Technical reserves estimates are made using available geological and reservoir data as well as production performance data. As new data becomes available, reserves estimates may change. Reserves estimates are also impacted by economic conditions, primarily commodity prices. As economic conditions change, production may be added or may become uneconomical and no longer qualify for reserves recognition.

Depletion

The Company uses the full cost method of accounting for its oil and gas activities. In accordance with the full cost accounting guideline, all costs associated with exploration and development are capitalized on a country by country basis whether or not such activities were successful. The total capitalized costs and estimated future development costs are amortized using the unit-of-production method based on proved oil and gas reserves. Accordingly, revisions or changes to estimated proved reserves will impact the depletion expenses.

Impairment of Oil and Gas Interests

The Company's capitalized oil and gas interests are subject to impairment tests on a country by country basis. Impairment is indicated if the undiscounted estimated future cash flows from proved reserves at oil and gas prices in effect at the balance sheet date plus the cost of unproved properties less any impairment is less than the carrying value of the oil and gas interests. The impairment test requires management to make assumptions regarding cash flows into the distant future and is based on estimates of proved reserves.

New Accounting Pronouncements and Changes in Accounting Policies

Effective January 1, 2007 the Company adopted the Canadian Institute of Chartered Accountants Handbook Section 1530 "Comprehensive income", Section 3251 "Equity", Section 3865 "Hedges" and Section 3855 "Financial instruments -- recognition and measurement". As required by the new standards, prior periods have not been restated, except to reclassify the foreign currency translation balance as described under "comprehensive income". The adoption of these Handbook sections had no impact on opening retained earnings or accumulated other comprehensive income.

Comprehensive income

This standard introduces a new "Statement of comprehensive income" and establishes accumulated other comprehensive income as a separate component of shareholders' equity. Comprehensive income is defined as the change in equity from transactions and other events from non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Other comprehensive income comprises revenues, expenses, gains and losses that, in accordance with GAAP, are recognized in comprehensive income but excluded from net income. Amounts included in accumulated other comprehensive income are reclassified to net income when realized. Upon adoption of Section 1530, cumulative translation adjustments relating to self-sustaining foreign operations were reclassified to accumulated other comprehensive income and comparative amounts have been restated.

Equity

The equity section establishes standards for the presentation of equity and changes in equity during the reporting period.

Hedges

This section prescribes new hedge accounting standards. Hedge accounting continues to be optional. At the inception of the hedge, the Company must formally document the designation of the hedge, the risk management objectives, the hedging relationships between the hedged items and the hedging instruments and the methods for testing the hedge's effectiveness. The Company assesses at inception and throughout its term whether the hedging instruments are highly effective in offsetting changes in fair values or cash flows of hedged items.

Financial instruments

The accounting standard on financial instruments establishes the recognition and measurement criteria for financial assets, liabilities and derivatives. All financial instruments are required to be measured at fair value on initial recognition while measurement in subsequent periods depends on its classification as "held-for-trading", "available-for-sale", "held-to-maturity", "loans and receivables" or "other financial liabilities" as defined by the standard.

Financial instruments "held-for-trading" are measured at fair value with changes to fair value recognized in net income, "available-for-sale" are measured at fair value with changes to fair value recognized in other comprehensive income and "held-to-maturity" , "loans and receivables" and "other financial liabilities" are measured at amortised cost using the effective interest rate method of amortization.

Cash and cash equivalents are classified as "held-for-trading" and are measured at carrying value, which approximates fair value due to their short term nature. Accounts receivable and other current assets are classified as "loans and receivables". Accounts payable and accrued liabilities, corporate income taxes payable, crude oil sales prepayment facility, long term debt and other long term liabilities are classified as "other liabilities".

Risks and Uncertainties

The Company is exposed to a number of risks and uncertainties inherent in exploring for, developing and producing crude oil and natural gas. These risks and uncertainties are disclosed in detail in the Company's December 31, 2006 Annual Report and Annual Information Form.

Internal Controls over Financial Reporting

Multilateral Instrument 52-109 defines internal controls over financial reporting as "a process designed by, or under the supervision of the issuer's chief executive officers and chief financial officers or persons performing similar functions, and effected by the issuer's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP and includes those policies and procedures that:

a) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with the issuer's GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material effect on the annual financial statements or interim financial statements."

The Company has, under the supervision of its chief financial officer, designed a process for internal control over financial reporting, which process has been effected by the Company's board of directors and management. The process was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Company's GAAP and incorporates policies and procedures as described above.

During the first half of 2007, there have been no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to have materially affected, the Company's internal control over financial reporting.

Outlook

The work completed in 2006 provided an exciting preview of the future prospects for the Company. The investment Tanganyika made in acquiring and processing 3D seismic on both Oudeh and Tishrine, conducting successful cyclical steam pilots and its ongoing appraisal and development drilling led to the increased oil reserve figures as reported as of December 31, 2006.

With an increased investment in drilling rigs, workover rigs and steam generation capacity, 2007 activities are focused on increasing production rates from proved developed reserves, converting existing undeveloped proved and probable reserves into production and continuing to appraise and better define the hydrocarbon potential of both Oudeh and Tishrine. Ongoing facilities investments will aim to stabilize the electricity supply, improve the quality of the gas fuel supply, improve water handling and injection and decrease the susceptibility of production to cold winter surface temperatures. Ongoing recruiting efforts will be focused on attracting experienced international heavy oil personnel to the Company.

Forward Looking Statements

This MD&A may contain forward-looking statements and information. Forward-looking statements are statements that are not historical fact and are generally identified by words such as believes, anticipates, expects, estimates or similar words suggesting future outcomes. By their nature, forward-looking statements and information involve assumptions, inherent risks and uncertainties, many of which are difficult to predict, and are usually beyond the control of management, that could cause actual results to be materially different from those expressed by these forward-looking statements and information. Risks and uncertainties include, but are not limited to, risk with respect to general economic conditions, regulations and taxes, civil unrest, corporate restructuring and related costs, capital and operating expenses, pricing and availability of financing and currency exchange rate fluctuations. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements.

Non-GAAP Measures

Certain measures in this MD&A do not have any standardized meaning as prescribed Canadian GAAP such as Cash Flow from Operations and Cash Flows and therefore are considered non-GAAP measures. These measures may not be comparable to similar measures presented by other issuers. These measures have been described and presented in this MD&A in order to provide shareholders and potential investors with additional information regarding the Company's liquidity and its ability to generate funds to finance its operations. Management's use of these measures has been disclosed further in this MD&A as these measures are discussed and presented.



KEY DATA
Three Three Six Six Year
months months months months ended
ended ended ended ended December
June 30, June 30, June 30, June 30, 31,
2007 2006 2007 2006 2006
--------------------------------------------------------------------------
Return on equity, % (1) -1.78% -4.34% -3.43% -3.81% -6.04%
Return on capital
employed, % (2) -1.83% -4.34% -3.48% -3.77% -6.42%
Debt/equity ratio, % (3) 0% 0% 0% 0% 0%
Equity ratio, % (4) 85% 89% 85% 89% 87%
Share of risk capital, % (5) 85% 89% 85% 89% 87%
Yield, % (6) 0% 0% 0% 0% 0%

(1) Return on equity is defined as the Company's net results divided by
average shareholders' equity (the average over the financial period).
(2) Return on capital employed is defined as the Company's profit before
tax and minority interest plus interest expense plus/less exchange
differences on financial loans divided by the total average capital
employed (the average balance sheet total less non interest-bearing
liabilities).
(3) Debt/equity ratio is defined as the Company's interest-bearing
liabilities in relation to shareholders' equity.
(4) Equity ratio is defined as the Company's shareholders' equity,
including minority interest, in relation to balance sheet total.
(5) Share of risk capital is defined as the sum of the Company's
shareholders' equity and deferred taxes, including minority interest,
in relation to balance sheet total.
(6) Yield is defined as dividend in relation to quoted share price at the
end of the financial period. Since the Company has no interest bearing
debt, the interest coverage ratio and operating cash flow/interest
ratio have not been included as they are not meaningful.


DATA PER SHARE
Three Three Six Six
months months months months Year
ended ended ended ended ended
June 30, June 30, June 30, June 30, December
2007 2006 2007 2006 31, 2006
--------------------------------------------------------------------------
Shareholders' equity,
USD (1) 3.59 2.48 3.59 2.48 3.61
Operating cash flow,
USD (2) 0.07 (0.02) 0.15 0.06 0.34
Cash flow from
operations (3) 0.06 (0.05) 0.10 - 0.11
Earnings (4) (0.064) (0.091) (0.123) (0.081) (0.172)
Earnings (fully
diluted) (5) (0.064) (0.091) (0.123) (0.081) (0.172)
Dividend - - - - -
Quoted price at the end
of the financial period 22.00 11.05 22.00 11.05 19.96
P/E-ratio (6) (343.7) (121.3) (178.3) (136.2) (116.1)
Number of shares
at financial
period end 56,434,196 49,197,696 56,434,196 49,197,696 55,632,696
Weighted average
number of shares
for the financial
period (7) 56,317,754 46,194,769 56,047,956 45,293,211 47,702,202
Weighted average
number of shares
for the financial
period (fully
diluted) (5,7) 56,707,530 46,862,021 56,397,497 45,830,308 48,076,905

(1) Shareholders' equity per share defined as the Company's equity divided
by the number of shares at period end.
(2) Operating cash flow per share defined as the Company's operating
income less production costs and less current taxes divided by the
weighted average number of shares for the financial period.
(3) Cash flow from operations per share defined as cash flow from
operations in accordance with the consolidated summarized cash flow
statements divided by the weighted average number of shares for the
financial period.
(4) Earnings per share defined as the Company's net results divided by the
weighted average number of shares for the financial period.
(5) Earnings per share defined as the Company's net results divided by the
weighted average number of shares for the financial period after
considering the dilution effect of outstanding options and warrants.
(6) P/E-ratio defined as quoted price at the end of the period divided by
earnings per share.
(7) Weighted average number of shares for the financial period is defined
as the number of shares at the beginning of the financial period with
new issue of shares weighted for the proportion of the period they are
in issue.


Tanganyika Oil Company Ltd.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(expressed in U.S. dollars)

June 30, December 31,
2007 2006
----------- -----------
ASSETS $ $
Current assets
Cash and cash equivalents 38,921,177 93,765,491
Restricted cash (Note 2) 900,000 900,000
Advances to contractor's 24,521,754 5,879,418
Accounts receivable and other assets 32,202,886 25,128,845
Prepaid expenses 1,052,329 490,399
----------- -----------
97,598,146 126,164,153

Oil and gas interests (note 4) 139,624,246 103,744,946
Property, plant and equipment 1,570,430 1,622,828
----------- -----------
238,792,822 231,531,927
----------- -----------
----------- -----------

LIABILITIES
Current liabilities
Accounts payable and other accrued liabilities 36,434,554 30,491,367
----------- -----------
36,434,554 30,491,367

SHAREHOLDERS' EQUITY

Share capital (Note 5) 235,628,379 228,236,373
Contributed surplus (Note 6) 7,043,316 6,201,643
Accumulated comprehensive loss (Note 3) (175,745) (175,745)
Deficit (40,137,682) (33,221,711)
----------- -----------
202,358,268 201,040,560
----------- -----------
238,792,822 231,531,927
----------- -----------
----------- -----------


Approved by the Directors:

(signed) "William A. Rand" (signed) "Keith Hill"
-------------------------- ---------------------
Director Director


Tanganyika Oil Company Ltd.
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
(expressed in U.S. dollars)

Share Contributed Comprehensive
Capital Surplus Deficit loss Total
--------------------------------------------------------------------------

As at
January
1,
2006 $ 89,905,794 $ 5,782,777 $(25,021,261) $ (175,745) $ 70,491,565
Issue of
shares 54,576,115 - - - 54,576,115
Stock-
based
compens-
ation 331,354 529,674 - - 861,028
Profit for
the period - - (3,675,623) - (3,675,623)
------------------------------------------------------------------
As at
June 30,
2006 144,813,263 6,312,451 (28,696,884) (175,745) 122,253,085
------------------------------------------------------------------

Issue of
shares 82,668,442 - - - 82,668,442
Stock-
based
compens-
ation 754,668 (110,808) - - 643,860
Loss for
the period - - (4,524,827) - (4,524,827)
------------------------------------------------------------------
As at
December
31,
2006 228,236,373 6,201,643 (33,221,711) (175,745) 201,040,560
------------------------------------------------------------------

Issue of
shares 5,754,845 - - - 5,754,845
Stock-
based
compens-
ation 1,637,161 841,673 - - 2,478,834
Loss for
the period - - (6,915,971) - (6,915,971)
------------------------------------------------------------------
As at
June 30,
2007 $235,628,379 $ 7,043,316 $(40,137,682) $ (175,745) $202,358,268
------------------------------------------------------------------


Tanganyika Oil Company Ltd.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
(expressed in U.S. dollars)

Three Three Six Six Year
months months months months ended
ended ended ended ended December
June 30, June 30, June 30, June 30, 31,
2007 2006 2007 2006 2006
----------- ----------- ----------- ----------- -----------

Revenue
Sale of oil 9,628,750 7,032,557 16,435,755 14,219,500 31,463,001
Interest income 446,540 405,029 1,124,391 469,210 1,235,520
Other income 20,732 41,003 54,170 96,961 91,434
----------- ----------- ----------- ----------- -----------

10,096,022 7,478,589 17,614,316 14,785,671 32,789,955
----------- ----------- ----------- ----------- -----------

Expenses
Production
costs 5,564,915 8,133,340 7,861,272 11,625,241 15,317,423
Depletion 5,206,557 1,426,449 9,964,941 2,334,275 11,318,350
General and
administration 2,836,549 3,041,229 5,774,199 4,895,363 12,230,284
Stock-based
compensation
(note 7) 1,478,236 454,180 2,478,834 861,027 1,504,888
Interest and
bank charges (41,848) 44,647 (5,184) 97,386 69,515
Depreciation 21,024 131,172 217,262 266,664 618,062
Foreign exchange
gain (1,364,037) (1,544,396) (1,761,037) (1,618,662) (68,117)
----------- ----------- ----------- ----------- -----------
13,701,396 11,686,621 24,530,287 18,461,294 40,990,405
----------- ----------- ----------- ----------- -----------

Profit (loss)
for the period (3,605,374) (4,208,032) (6,915,971) (3,675,623) (8,200,450)

Deficit -
beginning of
period (36,532,308)(24,488,852)(33,221,711)(25,021,261)(25,021,261)
----------- ----------- ----------- ----------- -----------

Deficit - end
of period (40,137,682)(28,696,884)(40,137,682)(28,696,884)(33,221,711)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------

Other
comprehensive
income - - - - -
----------- ----------- ----------- ----------- -----------
Comprehensive
loss for the
period (3,605,374) (4,208,032) (6,915,971) (3,675,623) (8,200,450)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------

Profit (loss)
per share
Basic (0.064) (0.091) (0.123) (0.081) (0.172)
Diluted (0.064) (0.091) (0.123) (0.081) (0.172)

Weighted average
number of
shares
outstanding
Basic 56,317,754 46,194,769 56,047,956 45,293,211 47,702,202
Diluted 56,707,530 46,862,021 56,397,497 45,830,308 48,076,905


Tanganyika Oil Company Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOW S
(Unaudited)
(expressed in U.S. dollars)

Three Three Six Six Year
months months months months ended
ended ended ended ended December
June 30, June 30, June 30, June 30, 31,
2007 2006 2007 2006 2006
----------- ----------- ----------- ----------- -----------
Cash flows from
operating
activities
Profit (loss)
for the
period (3,605,374) (4,208,032) (6,915,971) (3,675,623) (8,200,450)
Items not
affecting
cash
Stock-based
compensation 1,478,236 454,180 2,478,834 861,027 1,504,888
Depreciation 21,024 131,172 217,262 266,664 618,062
Depletion 5,206,557 1,426,449 9,964,941 2,334,275 11,318,350
----------- ----------- ----------- ----------- -----------

3,100,443 (2,196,231) 5,745,066 (213,657) 5,240,850
----------- ----------- ----------- ----------- -----------
Changes in non-
cash operating
working capital
Changes in non-
cash working
capital related
to operations (1,571,923) (109,390) (3,460,754) (540,188) (6,891,651)
----------- ----------- ----------- ----------- -----------

1,528,520 (2,305,621) 2,284,312 (753,845) (1,650,801)
----------- ----------- ----------- ----------- -----------
Cash flows from
investing
activities
Investment in
oil and gas
interests (24,402,772)(18,219,093)(45,844,241)(30,641,936)(72,469,193)
Investment in
property,
plant and
equipment (68,082) (181,802) (164,864) (424,156) (1,164,312)
Pledge for
bank guarantee
issued - 3,627,398 - 7,149,398 15,826,382
Changes in non-
cash working
capital
related to
investing
activities (9,976,686) (1,611,881)(16,874,366) (3,468,552) 2,817,303
----------- ----------- ----------- ----------- -----------

(34,447,540)(16,385,378)(62,883,471)(27,385,246)(54,989,820)
----------- ----------- ----------- ----------- -----------
Cash flows from
financing
activities
Issuance of
common
shares 2,643,150 54,256,501 5,754,845 54,576,116 133,727,620
----------- ----------- ----------- ----------- -----------

2,643,150 54,256,501 5,754,845 54,576,116 133,727,620
----------- ----------- ----------- ----------- -----------

Increase (dec-
rease) in
cash (30,275,870) 35,565,502 (54,844,314) 26,437,025 77,086,999

Cash - beginning
of period 69,197,047 7,550,015 93,765,491 16,678,492 16,678,492
----------- ----------- ----------- ----------- -----------

Cash - end of
period 38,921,177 43,115,517 38,921,177 43,115,517 93,765,491
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------

Supplementary
information
Interest
paid $ Nil $ Nil $ Nil $ Nil $ Nil
Taxes paid $ Nil $ Nil $ Nil $ Nil $ Nil


Tanganyika Oil Company Ltd.

Notes to the Consolidated Financial Statements

For the Three months ended June 30, 2007 and June 30, 2006 (Unaudited) (in US Dollars)

1. Basis of Presentation

The interim consolidated financial statements for Tanganyika Oil Company Ltd. (collectively with its subsidiaries, the "Company") have been prepared in accordance with accounting principles generally accepted in Canada, using the same accounting policies and methods of computation as set out in note 3 to the audited consolidated financial statements in the Company's Annual Report for the period ended December 31, 2006. The disclosures provided herein are incremental to those included with the audited consolidated financial statements. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the period ended December 31, 2006.

2. Restricted Cash

The Company has provided cash security for certain letters of guarantee and credit issued to third parties. At June 30, 2007, restricted cash represents a pledged amount of $900,000 against the issuance of a letter of guarantee in favour of the Syrian Petroleum Company (SPC) in connection with the production sharing agreements. The Company has performed its obligations in relation to the outstanding letter of guarantee.

3. Changes in Accounting Policy

On January 1, 2007, the Company adopted three new accounting standards that were issued by the Canadian Institute of Chartered Accountants: Handbook Section 1530, Comprehensive Income, Handbook Section 3861, Financial Instruments -- Presentation and Disclosure and Handbook Section 3855, Financial Instruments -- Recognition and Measurement. These standards have been applied prospectively; accordingly, comparative amounts for prior periods have not been restated.

(a) Comprehensive income

Section 1530 introduces comprehensive income, which consists of net income and other comprehensive income. Other comprehensive income represents changes in shareholders' equity during a period arising from transactions and other events and circumstances from non-owner sources and includes unrealized gains and losses on financial assets classified as available-for-sale. The components of comprehensive income are disclosed in the interim consolidated statement of shareholders' equity.

(b) Financial instruments - presentation and disclosure; recognition and measurement

Section 3861 establishes standards for the presentation and disclosure of financial instruments. Section 3855 establishes standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. It requires that financial assets and financial liabilities, including derivatives, be measured at fair value on initial recognition and recorded on the balance sheet. Measurement in subsequent period depends on whether the financial instrument has been classified as held-for-trading, available-for-sale, held-to- maturity, loans and receivables or other financial liabilities.

Financial assets and liabilities held-for-trading are measured at fair value with changes in those fair values recognized in net income. Financial assets and financial liabilities considered held-to-maturity, loans and receivables, and other financial liabilities are measured at amortized cost using the effective interest method of amortization. Available-for-sale financial assets are measured at fair value with unrealized gains and losses recognized in other comprehensive income. Investments in equity instruments classified as available-for-sale that do not have a quoted market price in an active market are measured at cost.

Derivative instruments, including embedded derivatives, are recorded on the balance sheet at fair value. Changes in the fair values of derivative instruments are recognized in net income with the exception of derivatives designated as effective cash flow hedges. The Company has no such designated hedges.

4. Oil and Gas Interests



June 30, 2007
----------------------------------------------
Accumulated
Cost depletion Net book value
----------------------------------------------
Syrian Arab Republic 138,618,226 20,430,331 118,187,895
----------------------------------------------------------------------
Arab Republic of Egypt 34,207,640 12,771,289 21,436,351
----------------------------------------------------------------------
Total 172,825,866 33,201,620 139,624,246
----------------------------------------------
----------------------------------------------

December 31, 2006
----------------------------------------------
Accumulated
Cost depletion Net book value
----------------------------------------------
Syrian Arab Republic 94,867,241 11,680,092 83,187,149
----------------------------------------------------------------------
Arab Republic of Egypt 32,114,384 11,556,587 20,557,797
----------------------------------------------------------------------
Total 126,981,625 23,236,679 103,744,946
----------------------------------------------
----------------------------------------------


5. Share Capital

(a) The authorized and issued share capital is as follows:

Authorized - Unlimited number of common shares without par value Issued and outstanding:



June 30, 2007
---------------------------------------------------------------
Number Amount
---------------------------------------------------------------
Balance, beginning of year 55,632,696 $ 228,236,373
Private placements, net - -
Exercise of options 801,500 7,392,006
---------------------------------------------------------------
Balance, end of period 56,434,196 $ 235,628,379
---------------------------------------------------------------


6. Contributed Surplus



June 30, 2007 December 31, 2006
--------------------------------------------------------------------------
Balance, beginning of year 6,201,643 5,782,777
Stock based compensation 2,508,229 1,504,888
Transfer to share capital on
exercise of options (1,637,161) (1,086,022)
Cancellation of options (29,395)

--------------------------------------------------------------------------
Balance, end of period 7,043,316 6,201,643
--------------------------------------------------------------------------


7. Stock Option Information



June 30, 2007
--------------------------------------------------------------------------
Outstanding Weighted Average
Options Exercise Price CDN$
--------------------------------------------------------------------------
Outstanding, beginning of year 2,104,000 11.94
Granted 1,242,250 18.22
Exercised (801,500) 8.18
Cancelled or expired (45,000) 14.14
--------------------------------------------------------------------------
Outstanding, end of period 2,499,750 16.23
--------------------------------------------------------------------------


Employee stock options are measured at their fair value on the date of the grant and recognized on a straight line basis as an expense over the vesting period, if any, applicable to the options. The fair value of the options granted to consultants is recognized immediately.

The estimated fair value of the options granted during the period ended June 30, 2007 ranged from CDN $2.04 to CDN $7.46 per option, determined using the Black-Scholes option pricing model with the following assumptions:



--------------------------------------------------------------------------
June 30, 2007
--------------------------------------------------------------------------
Risk-free rate 4.22% - 4.35%
Expected life . 5 - 3 years
Estimated volatility in the market price of common shares 45% - 53%
Expected dividend rate 0%
--------------------------------------------------------------------------


8. Related Party Transactions

The Company has entered into transactions with related parties, which were measured at the exchange amounts. Significant related party transactions were as follows:

a) During the six months ended June 30, 2007, the Company paid $95,299 (June 30, 2006 - $157,193) to Namdo Management Services Ltd., a private corporation owned by Lukas H. Lundin, a director of the Company, pursuant to a services agreement.

b) During the three months ended June 30, 2007, the Company received $89,902 (2006 - $104,739) from Pearl Exploration and Production Ltd. ("Pearl") for administrative and other services. The Company and Pearl had certain officers in common during the quarter and continue to have directors in common.

9. Supplemental Cash Flow Information



Three Three Six Six Twelve
months months months months months
ending ending ending ending ending
June 30, June 30, June 30, June 30, December
2007 2006 2007 2006 31, 2006
----------------------------------------------------------
Changes in non-cash
working capital:
Accounts receiv-
able and other
assets and
advances (15,550,992) (4,218,135)(25,747,972) (6,779,136)(21,906,206)
Due to joint
venture partners (31,685) 260,435 (838) 67,815 32,433
Prepaid expenses (398,817) (631,830) (561,930) (487,924) (236,119)
Accounts payable
and accrued
liabilities 4,432,885 2,868,259 5,975,620 3,190,505 18,035,544
----------------------------------------------------------
(11,548,609) (1,721,271)(20,335,120) (4,008,740) (4,074,348)

Changes in non-cash
working capital
relating to:
Operating
activities (1,571,923) (109,390) (3,460,754) (540,188) (6,891,651)
Investing
activities (9,976,686) (1,611,881)(16,874,366) (3,468,552) 2,817,303
----------------------------------------------------------
(11,548,609) (1,721,271)(20,335,120) (4,008,740) (4,074,348)
----------------------------------------------------------


10. Segmented Information

Based on Geographic regions



Three months ended June 30, 2007

Syria Egypt Corporate Total
-----------------------------------------------
Sale of oil 6,388,104 3,240,646 - 9,628,750
Interest income - 9,093 437,447 446,540
Other income - 20,732 - 20,732
Production cost (5,101,770) (463,145) - (5,564,915)
Depletion (4,571,511) (635,046) - (5,206,557)
Depreciation 45,329 (30,894) (35,459) (21,024)
General and administration (1,687,296) (89,302) (1,059,951) (2,836,549)
Stock-based compensation - - (1,478,236) (1,478,236)
Foreign exchange gain (loss) (5,694) 141 1,369,590 1,364,037
Other expenses (38,054) (309) 80,211 41,848
-----------------------------------------------
Segment profit (loss) (4,970,892) 2,051,916 (686,398) (3,605,374)
-----------------------------------------------

Segment assets 193,304,509 23,005,139 22,483,174 238,792,822
-----------------------------------------------
Segment expenditures
Oil and gas interests 23,104,262 1,298,510 - 24,402,772
Property, plant and equipment 54,234 (978) 14,825 68,082
-----------------------------------------------
23,158,496 1,297,532 14,825 24,470,854
-----------------------------------------------

Three months ended June 30, 2006

Syria Egypt Corporate Total
-----------------------------------------------
Sale of oil 4,372,578 2,659,979 - 7,032,557
Interest income - - 405,029 405,029
Other income - 41,003 - 41,003
Production cost (7,555,712) (577,628) - (8,133,340)
Depletion (838,821) (587,628) - (1,426,449)
Depreciation (90,300) (22,991) (17,881) (131,172)
General and administration (1,798,876) (142,989) (1,099,364) (3,041,229)
Stock-based compensation - - (454,180) (454,180)
Foreign exchange gain (loss) (1,790) (148) 1,546,334 1,544,396
Other expenses (4,648) (590) (39,409) (44,647)
-----------------------------------------------
Segment profit (loss) (5,917,569) 1,369,008 340,529 (4,208,032)
-----------------------------------------------

Segment assets 59,490,041 27,302,568 51,142,186 137,934,795
-----------------------------------------------
Segment expenditures
Oil and gas interests 11,401,162 6,817,931 - 18,219,093
Property, plant and equipment 146,827 7,156 27,819 181,802
-----------------------------------------------
11,547,989 6,825,087 27,819 18,400,895
-----------------------------------------------

Six months ended June 30, 2007

Syria Egypt Corporate Total
-----------------------------------------------
Sale of oil 10,383,012 6,052,743 - 16,435,755
Interest income - 19,710 1,104,681 1,124,391
Other income - 54,170 - 54,170
Production cost (6,966,021) (895,251) - (7,861,272)
Depletion (8,750,239) (1,214,702) - (9,964,941)
Depreciation (89,793) (61,149) (66,320) (217,262)
General and administration (3,833,901) (165,301) (1,774,997) (5,774,199)
Stock-based compensation - - (2,478,834) (2,478,834)
Foreign exchange gain (loss) (14,819) 557 1,775,299 1,761,037
Other expenses (72,273) (728) 78,185 5,184
-----------------------------------------------
Segment profit (loss) (9,344,034) 3,790,049 (1,361,986) (6,915,971)
-----------------------------------------------

Segment assets 193,304,509 23,005,139 22,483,174 238,792,822
-----------------------------------------------
Segment expenditures
Oil and gas interests 43,750,989 2,093,252 - 45,844,241
Property, plant and equipment 114,419 17,661 32,784 164,864
-----------------------------------------------
43,865,408 2,110,913 32,784 46,009,105
-----------------------------------------------

Six months ended June 30, 2006

Syria Egypt Corporate Total
-----------------------------------------------
Sale of oil 8,174,985 6,044,515 - 14,219,500
Interest income - 860 468,350 469,210
Other income - 96,961 - 96,961
Production cost (10,760,413) (864,828) - (11,625,241)
Depletion (1,371,402) (962,873) - (2,334,275)
Depreciation (186,262) (45,434) (34,968) (266,664)
General and administration (2,908,514) (256,127) (1,730,722) (4,895,363)
Stock-based compensation - - (861,027) (861,027)
Foreign exchange gain (loss) (8,484) 64 1,627,082 1,618,662
Other expenses (57,380) (1,118) (38,888) (97,386)
-----------------------------------------------
Segment profit (loss) (7,117,470) 4,012,020 (570,173) (3,675,623)
-----------------------------------------------

Segment assets 59,490,041 27,302,568 51,142,186 137,934,795
-----------------------------------------------
Segment expenditures
Oil and gas interests 21,475,418 9,166,518 - 30,641,936
Property, plant and equipment 252,173 107,828 64,155 424,156
-----------------------------------------------
21,727,591 9,274,346 64,155 31,066,092
-----------------------------------------------


11. Summary of Significant Differences Between Canadian GAAP and International Financial Reporting Standards (IFRS)

The Company's consolidated financial statements have been prepared in accordance with Canadian GAAP, which differ in certain material respects from International Financial Reporting Standards ("IFRS"). The principal difference between Canadian GAAP and IFRS from a measurement perspective, as applied to the Company's consolidated financial statements is asset impairment.

a) Impairment of oil and gas interests

Under Canadian GAAP, each cost centre should be assessed for impairment as at each annual balance sheet date or whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. An impairment loss should be recognized when the carrying amount of a cost centre is not recoverable and exceeds its fair value. The carrying amount is not recoverable if the carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. Unproved properties and major development projects are included in this recoverability test. A cost centre impairment loss should be measured as the amount by which the carrying amount of assets capitalized in a cost centre exceeds the sum of: the fair value of proved and probable reserves; and the costs (less any impairment) of unproved properties that have been subject to a separate test for impairment and contain no probable reserves. IFRS requires (i) an impairment to be recognized when the recoverable amount of an asset (cash generating unit) is less than the carrying amount;

(ii) the impairment loss is determined as the excess of the carrying amount above the recoverable amount (the higher of fair value less costs to sell and value in use, calculated as the present value of future cash flows from the asset); and (iii) the reversal of an impairment loss when the recoverable amount changes. The differences in accounting policy described above had no impact on these financial statements.

b) Oil and gas interest

The Company follows the full cost method of accounting for oil and gas interest, as set out in AcG 16 issued by the CICA. Under this method, all costs related to exploration and development of oil and gas reserves are capitalized and accumulated in country-by- country cost centres. For purposes of reporting in accordance with IFRS, the Company has early adopted IFRS 6, Exploration For and Evaluation of Mineral Resources, which permits an entity to continue applying its existing policy in respect of exploration and evaluation costs. Under IFRS, once commercial reserves are established and technically feasibility for extraction is demonstrated, the related capitalized costs are allocated to cash generating units. This difference in accounting policy had no impact on the Company's financial statements. The Company's Egyptian assets are considered to be in the development stage for the purposes of IFRS 6. The Egyptian assets are however within one cash generating unit and accordingly there is no difference from AcG 16 where assets are amortized on a country basis. The Company's Syrian assets are considered to be in the exploration and evaluation stage as the Company is still determining the technical feasibility and commercial viability of these assets. Accordingly, the Company continues to account for the Syrian assets under its existing accounting policies.

c) Impairment of long lived assets

Under Canadian GAAP, a long-lived asset should be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. An impairment loss should be recognized when the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. Under IFRS, the carrying amounts of the Company's assets, other than oil and gas properties, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets' recoverable amounts are estimated. An impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount. Impairment losses, if any, are recognized in the income statement. Under Canadian GAAP, the carrying amount of a long-lived asset is not recoverable if the carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. This assessment is based on the carrying amount of the asset at the date it is tested for recoverability, whether it is in use or under development. Under IFRS, the recoverable amount of the Company's assets other than oil and gas properties is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash generating unit to which the asset belongs. In respect of impairment of assets other than oil and gas properties, under Canadian GAAP, an impairment loss is not reversed if the fair value subsequently increases. For IFRS, an impairment loss may be reversed if there has been a change in the estimates used to determine the recoverable value. An impairment loss, on assets other than oil and gas properties, is only reversed to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. The differences in accounting policy described above had no impact on these financial statements.

12. Presentation

Certain figures for prior years have been reclassified in the financial statements to conform with the current year's presentation.



SUPPLEMENTARY INFORMATION

1. LIST OF DIRECTORS AND OFFICERS AT JUNE 30, 2007
a. Directors
Lukas H. Lundin (4)
Gary S. Guidry (4)
Bryan Benitz (1, 2, 3)
John H. Craig (2, 3)
Hakan Ehrenblad
Keith Hill (1, 4)
William A. Rand (1, 2, 3)

(1) Audit Committee
(2) Corporate Governance Committee
(3) Compensation Committee
(4) Reserves Committee

b. Officers:
Lukas H. Lundin, Chairman
Gary S. Guidry, President and CEO
Ian Gibbs, CFO
Mamdouh Nagati, Executive Vice President and General Manager - Egypt
Diane Phillips, Corporate Secretary


2. FINANCIAL INFORMATION
The report for the third quarter 2007 will be published on November 14,
2007.

3. OTHER INFORMATION
Address (Corporate Office)
1400, 700 -- 4th Avenue S.W.
Calgary, Alberta T2P 3J4
Canada

Telephone: 1.403.663.2999
Fax: 1.403.261.1007

Website: www.tanganyikaoil.com

The corporate number of the Company is 318368-8

Contact Information