Tanganyika Oil Company Ltd.
OMX : TYKS
TSX : TYK

Tanganyika Oil Company Ltd.

November 14, 2008 02:30 ET

Tanganyika Announces Third Quarter 2008 Results

CALGARY, ALBERTA--(Marketwire - Nov. 14, 2008) - Tanganyika Oil Company Ltd. (the "Company") (TSX:TYK)(OMX:TYKS) today announces interim operating and financial results for the third quarter ended September 30, 2008. Unless otherwise stated, all figures contained in this report are in United Stated Dollars.



Three and Nine Months Ended September 30, 2008 and September 30, 2007

Three Three Nine Nine Twelve
months months months months months
ended ended ended ended ended
Financial Sept 30, Sept 30, Sept 30, Sept 30, December 31,
Highlights 2008 2007 2008 2007 2007
---------------------------------------------------------------
Revenue 71,798,736 7,040,891 150,012,979 18,533,223 35,912,560
Net profit
(loss)
- Continuing
operations 33,080,051 (6,857,993) 62,883,970 (17,561,572) (21,972,725)
Per share
(basic) 0.532 (0.121) 1.036 (0.312) (0.389)
Per share
(diluted) 0.529 (0.121) 1.034 (0.312) (0.389)
Profit
(loss)
- Discont-
inued
operations
(2) 0 42,731,533 554,961 46,519,141 45,006,004
Per share
(basic) 0.000 0.754 0.009 0.827 0.798
Per share
(diluted) 0.000 0.751 0.009 0.824 0.795
Profit
(loss) for
the period 33,080,051 35,873,540 63,438,931 28,957,569 23,033,279
Per share
(basic) 0.532 0.633 1.045 0.515 0.408
Per share
(diluted) 0.529 0.630 1.043 0.513 0.407
Cash Flow
from
Continuing
operations
(1) 53,801,874 (795,229) 105,548,583 (1,874,102) 1,839,233
Per share
(basic) 0.866 (0.014) 1.739 (0.033) 0.033
Per share
(diluted) 0.861 (0.014) 1.735 (0.033) 0.033
Total
Assets 449,367,869 282,395,575 449,367,869 282,395,575 287,561,314
Working
Capital,
including
cash 151,646,343 83,047,234 151,646,343 83,047,234 53,424,460
Working
Capital,
excluding
cash 60,139,761 5,397,381 60,139,761 5,397,381 11,122,248
Weighted
Average
shares
outstanding
(basic) 62,158,396 56,701,120 60,708,310 56,268,070 56,427,858
Weighted
Average
shares
outstanding
(diluted) 62,485,501 56,928,545 60,832,981 56,464,371 56,626,839

Operational
Highlights
Average
daily
production
- Company
gross
(bbl/d)
Syria -
Oudeh 4,042 2,440 3,710 2,461 2,538
Syria -
Tishrine-
Sheikh
Mansour 16,736 6,454 13,253 6,456 6,671
--------------------------------------------------------------------------
Total
Syria 20,778 8,894 16,963 8,917 9,209
--------------------------------------------------------------------------
Average
daily
production
- Company
net
(bbl/d)
Syria -
Oudeh 2,216 1,081 1,975 1,081 1,140
Syria -
Tishrine-
Sheikh
Mansour 6,232 366 4,237 330 468
--------------------------------------------------------------------------
Total
Syria 8,448 1,447 6,212 1,411 1,608
--------------------------------------------------------------------------
Average
sales
price
($/bbl)
Syria
Oudeh 90.83 52.76 85.46 45.33 52.64
Tishrine 95.45 46.02 92.52 42.16 55.87
Operational
costs
($/bbl)
Syria (3) 7.79 9.88 8.84 9.74 10.53

(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) On September 25, 2007 the Company sold its interest in West Gharib
Concession in Egypt. Financial results related to these assets have
been recorded as Discontinued Operations in the companies financial
statements.

(3) Gross field production cost, before deduction of operating expenses
related to base crude production, divided by gross field production.


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

PRESIDENT'S MESSAGE

Tanganyika announced on September 25, 2008 that it had entered into a definitive agreement (the "Support Agreement") pursuant to which Sinopec International Petroleum Exploration and Production Corporation ("SIPC") agreed, subject to the terms of the Support Agreement, to make an offer to acquire all the outstanding common shares of Tanganyika by way of a negotiated take-over bid (the "Offer") for C$31.50 per share in cash.

On October 30 2008, Mirror Lake Oil and Gas Company Limited, a wholly-owned subsidiary (the "Offeror") of SIPC mailed the offering documents relating to Offer. The Offer and the Take-over Bid Circular of the Offeror were accompanied by Tanganyika's Directors' Circular, which confirmed that the Tanganyika Board of Directors determined that the Offer is fair from a financial point of view to the shareholders of Tanganyika and is in the best interests of Tanganyika and Tanganyika's shareholders, and recommended that Tanganyika shareholders accept the Offer. The Company's financial advisor provided the Tanganyika Board of Directors with the Fairness Opinion, which states that, as of the date thereof, the consideration to be received by holders of Tanganyika Shares pursuant to the Offer is fair, from a financial point of view, to Shareholders.

The Offer is open for acceptance until 10:00 a.m. (Calgary time) on December 5, 2008, unless withdrawn or extended. The Offer is subject to certain conditions, including acceptance of the Offer by holders of at least 66 2/3 percent of the outstanding common shares of Tanganyika, calculated on a fully diluted basis, and receipt of all required regulatory approvals, including all required approvals from the government of The People's Republic of China.

Full details of the Offer are contained in the Take-over Bid Circular of the Offeror and related materials and Tanganyika's Directors' Circular, copies of which are available on SEDAR at www.sedar.com.

Tanganyika is pleased to report that record production levels and realized oil prices have resulted in the Company recording $33.1 million of earnings from continuing operations during the third quarter of 2008. This places the Company in a strong financial position with $92 million in cash, allowing development to continue from cash flow.

Gross field production grew by over 26% during the third quarter of 2008, averaging 20,778 bopd (8,448 net bopd). Average realized oil prices remained strong during the third quarter and were over $90/bbl in Oudeh and $95/bbl in Tishrine. During the third quarter, the Company completed the mobilization of the last of three new drilling rigs contracted to the Company, bringing the total number of rigs under contract to the Company to six.

Drilling results in both Oudeh and Tishrine continued to be positive during the third quarter of 2008. The Oudeh developmental drilling program continued to add production by focusing on lower viscosity areas within the proven Shiranish B reservoir. The Tishrine drilling program continues to appraise and develop the West Tishrine extensions that were first reported during the third quarter of 2007. The southwest extension of the West Tishrine field added a significant updip area now recognized in the Company's reserve base. A second new discovery area is the northern down-dip extensions in the Chilou B -- Jaddala reservoir of the West Tishrine field. Both West Tishrine extension areas continue to positively impact production, reserves and validate the trapping model making further appraisal on the Tishrine anticline very exciting for the Company.

As expected, 2008 is proving to be a pivotal year for the Company as we demonstrate our ability to grow and convert our world class reserve base into proven producing assets capable of generating strong earnings and operating cash flow.

Signed "Gary S. Guidry", President and CEO

November 12, 2008

MANAGEMENT'S DISCUSSION AND ANALYSIS

(Amounts in United States Dollars unless otherwise indicated)

Three and nine months ended September 30, 2008 and September 30, 2007

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 three and nine months ended September 30, 2008 and September 30, 2007 and the audited consolidated financial statements for the period ended December 31, 2007 and related notes therein prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). The Quarter ended September 30, 2007 included for comparison purposes has not been reviewed by our external auditors. The effective date of this MD&A is November 12, 2008.

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 Toronto Stock Exchange ("TSX") under the symbol "TYK". The Company's Swedish Depository Receipts are traded on the OMX Nordic 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 primarily focused on its exploration and development properties in Syria.

Proposed Transaction: $31.50 CDN Per Share Offer for Tanganyika

Tanganyika announced on September 25, 2008 that it had entered into a definitive agreement (the "Support Agreement") pursuant to which Sinopec International Petroleum Exploration and Production Corporation ("SIPC") agreed, subject to the terms of the Support Agreement, to make an offer to acquire all the outstanding common shares of Tanganyika by way of a negotiated take-over bid (the "Offer") for C$31.50 per share in cash, which represented a substantial premium to both the recent and historical trading prices of Tanganyika's shares.

On October 30, 2008, Mirror Lake Oil and Gas Company Limited, a wholly-owned subsidiary (the "Offeror") of SIPC mailed the offering documents relating to Offer. The Offer and the Take-over Bid Circular of the Offeror were accompanied by Tanganyika's Directors' Circular, which confirmed that the Tanganyika Board of Directors determined that the Offer is fair from a financial point of view to the shareholders of Tanganyika and is in the best interests of Tanganyika and Tanganyika's shareholders, and recommended that Tanganyika shareholders accept the Offer.

The Offer is open for acceptance until 10:00 a.m. (Calgary time) on December 5, 2008, unless withdrawn or extended. The Offer is subject to certain conditions, including acceptance of the Offer by holders of at least 66 2/3 percent of the outstanding common shares of Tanganyika, calculated on a fully diluted basis, and receipt of all required regulatory approvals, including all required approvals from the government of The People's Republic of China.

Full details of the Offer are contained in the Take-over Bid Circular of the Offeror and related materials and Tanganyika's Directors' Circular, copies of which are available on SEDAR at www.sedar.com.

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 all new and existing wells from 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 2008 and 2009 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.

Under the Oudeh Block PSA, SPC is entitled to receive bonuses related to the Company exceeding specified production levels:

- $1.0 million dollars as a result of incremental production exceeding 10,000 BOPD for thirty consecutive days;

- $2.0 million dollars as a result of incremental production exceeding 20,000 BOPD for thirty consecutive days;

- $3.0 million dollars as a result of incremental production exceeding 30,000 BOPD for thirty consecutive days.

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 all new and existing wells from 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 2008 and 2009 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.

Under the Tishrine-Sheikh Mansour Fields PSA, SPC is entitled to receive bonuses related to the Company exceeding specified production levels:

- $2.25 million dollars as a result of incremental production exceeding 20,000 BOPD for thirty consecutive days;

- $4.5 million dollars as a result of incremental production exceeding 30,000 BOPD for thirty consecutive days.



Base Crude Production (BCP)

--------------------------------------------------------------------------
(bbl/d) 2008 2009
--------------------------------------------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
--------------------------------------------------------------------------
Oudeh 860 850 830 820 828 808 790 780
--------------------------------------------------------------------------
Tishrine-Sheikh Mansour 5,714 5,643 5,513 5,444 5,496 5,368 5,244 5,179
--------------------------------------------------------------------------


Operational Update

Syria - Additional Drilling Rigs

The Company has increased its drilling capacity during 2008, adding three additional new drilling rigs to the three existing rigs under contract. All six rigs are currently mobilized and actively drilling in Syria.

Syria - Tishrine

Average gross field production during the third quarter of 2008 was 16,736 barrels of oil per day ("bopd") (Company net: 6,232 bopd). This represents a 28% increase in gross field production over the second quarter of 2008 (52% increase on a net production basis). The Company continues to be very encouraged by Tishrine's growing production and reserve base.

The Company's third quarter drilling continued to focus on two new development areas: the southwest updip extension of the West Tishrine field and the northern down-dip extension of the West Tishrine Field. Twenty two wells completed drilling or were spud during the third quarter (2008 year to date: 48 wells). In addition to geographically extending the Tishrine reserves and resources, oil has been logged and tested at depths of -820 to -845 meters subsea. Reserves have not previously been attributed to reservoirs at this depth.

Syria - Oudeh

Average gross field production during the third quarter of 2008 was 4,042 bopd (Company net: 2,216 bopd). This represents an 11% increase in gross field production over the second quarter of 2008 (15% increase on a net production basis). This is the largest quarter over quarter production increase this year.

The Company's third quarter drilling program was primarily focused on new development wells in the Shiranish reservoir. The wells were specifically drilled in the lower viscosity areas of the field. A total of six wells completed drilling or spud during the third quarter of 2008 (2008 year to date: 16 wells). Two of the wells were drilled in the Southwest area of the field and four were drilled in the main field, encountering excellent Shiranish B reservoir quality, lower viscosity oil and excellent productive capability.

Syria - Thermal Operations

Four new steam generators have been delivered to the fields in Syria during 2008, bringing the total number of steam generators available for use in Syria to ten.

The steam pilot in Tishrine now includes 25 wells:

- Estimated gross cold production from these wells, assuming continued cold production, was 810 bopd

- Actual gross thermal production was 1,362 bopd during September 2008 from these same wells

- The steam pilot continues to focus on the Tishrine West field

- Additional wells are being brought into the thermal program and it's expected that successive steam cycles will yield progressively higher rates of production.

The steam pilot in Oudeh now includes 14 wells:

- Estimated gross cold production from these wells, assuming continued cold production, was 190 bopd

- Actual gross thermal production was 789 bopd during September 2008 from these same wells

- Given the viscosity of the oil in the steamed wells at Oudeh, it is expected that successive steam cycles will yield progressively higher rates of production.

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 properties. The following table shows the estimated share of Tanganyika's crude oil reserves in its Syrian properties using forecast 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.



-----------------------------------------------------------------
Forecast Prices and Costs
-----------------------------------------------------------------
Percent Increase
December 31, 2007 December 31, 2006 (Decrease)
---------------------- --------------------- ------------------
Net Net
Present Present
Value Value
of of Net
Future Future Present
Net Net Value
Reven- Reven- of
ue- Crude ue- Future
Crude Oil 10% Oil 10% Net
Reserves Disc- Reserves Disc- Crude Reven-
(million ount (million ount Oil ue-
barrels) ($ barrels) ($ Reserves 10%
-------------- mill- ------------- mill- ----------- Disc-
Gross Net ions) Gross Net ions) Gross Net ount
---------------------------------------------------------------------------
Proved 185.0 67.7 1,370.0 168.3 88.8 603.0 10% (24)% 127%
---------------------------------------------------------------------------
Proved
plus
Probable 851.4 328.5 5,726.0 764.8 428.7 2,336.0 11% (23)% 145%
---------------------------------------------------------------------------
Proved
plus
Probable
and
Poss-
ible 1,250.7 435.7 6,456.0 1,033.3 603.8 3,469.0 21% (28)% 86%
---------------------------------------------------------------------------


The net present value of future net revenue attributable to Tanganyika's Syrian reserves increased over 120% during 2007 on both a proven and proven plus probable basis (forecast prices and costs). This increase is attributed to both an increase in the gross Syrian reserves and an increase in forecast world oil prices. The 2006 reserve report used forecast future realized prices during the term of Tanganyika's Syrian production sharing agreements ranging from $33.49 to $48.54/bbl. In line with increased world oil prices, the 2007 reserve report now forecasts future realized prices during the term of Tanganyika's Syrian production sharing agreements ranging from $64.16 to $89.64/bbl. The drop in Tanganyika's net reserves recorded during 2007 is a result of these improved world oil prices. As prices increase, future barrels that are required for Tanganyika to recover its costs under the production sharing agreement terms are decreased and thus lower net reserves are recorded even though the value of the reserves increased significantly.

Selected Quarterly Information



Three Months Ended

30-Sep 30-Jun 31-Mar 31-Dec 30-Sep 30-Jun 31-Mar 31-Dec
2008 2008 2008 2007 2007 2007 2007 2006
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Total
revenues
($ 000) 71,799 51,907 26,307 17,379 7,041 6,827 4,664 4,638
Earnings
(loss) -
continuing
operations
($ 000) 33,080 28,978 826 (4,411) (6,858) (5,656) (5,048) (1,909)
Per share
basic -
continuing
operations
$/share 0.532 0.467 0.014 (0.078) (0.121) (0.100) (0.091) (0.037)
Per share
diluted -
continuing
operations
$/share 0.529 0.462 0.014 (0.078) (0.121) (0.100) (0.091) (0.037)
Earnings
(loss) -
discontinued
operations
($ 000)(2) - 555 - (1,513) 42,732 2,051 1,736 1,499
Per share
basic -
discontinued
operations
$/share(2) - 0.009 - (0.027) 0.754 0.036 0.031 0.029
Per share
diluted -
discontinued
operations
$/share(2) - 0.009 - (0.027) 0.751 0.036 0.031 0.029
Earnings
(loss)
($ 000) 33,080 29,533 826 (5,924) 35,874 (3,605) (3,311) (410)
Per share
basic
$/share 0.532 0.467 0.014 (0.104) 0.633 (0.064) (0.059) (0.008)
Per share
diluted
$/share 0.529 0.462 0.014 (0.104) 0.630 (0.064) (0.059) (0.008)
Cash flow
from
continuing
operations
($ 000)(1) 53,802 38,178 13,568 3,714 (794) (982) (98) 6,756
Per share
basic
$/share 0.866 0.616 0.234 0.065 (0.014) (0.017) (0.002) 0.133
Per share
diluted
$/share 0.861 0.608 0.234 0.065 (0.014) (0.017) (0.002) 0.131
Company
total net
production
-
continuing
operations
(bbl/d) 8,448 6,025 4,139 2,192 1,447 1,563 1,224 1,506
Company
total net
production
-
continuing
operations
(bbl) 777,000 548,000 377,000 202,000 133,000 142,000 110,000 139,000


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

(2) On September 25, 2007 the Company sold its interest in West Gharib
Concession in Egypt. Results for these assets have been recorded as
Discontinued Operations.


The Company's financial performance is primarily driven by oil production levels and world oil prices. Average Company net production was at its highest levels during the third quarter of 2008 resulting in the most profitable quarter for Tanganyika. The Company does not have any hedging programs that would impact realized oil prices.

Results of Operations

The profit from continuing operations recorded during the quarter ended September 30, 2008 represents the third consecutive quarter in which Tanganyika has recorded positive earnings. Record high net oil production combined with high realized oil prices to result in a $33.1 million profit from continuing operations during the third quarter of 2008, in comparison to a loss of $6.9 million during the third quarter of 2007. EBITDA (from continuing operations) of $46.5 million was recorded during the third quarter of 2008, an increase of $48.7 million in comparison to the third quarter of 2007.

Net oil production increased by 484% in comparison to the third quarter of 2007. Oudeh's average realized oil price was 72% higher in the third quarter of 2008 than in the third quarter of 2007 and Tishrine's average realized oil price in the third quarter of 2008 was 107% higher than in the third quarter of 2007.

Stock based compensation charges of $1.9 million were recorded during the third quarter of 2008 as the Company continues to utilize its stock option plan as a method of recruiting, retaining and motivating key personnel. Foreign exchange losses of $3.6 million, recorded during the third quarter of 2008, are the result of the Company's Euro holding at quarter end. The Company held 13.4 million Euro at September 30, 2008 relating to Euro denominated letters of credit issued to various suppliers for operations in Syria.

Tanganyika is in the early stages of appraising and developing its Syrian oil fields. The Company continues to add operating, technical and support staff as required for expanding the development and appraisal programs. 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, 2007 that is filed on SEDAR (www.sedar.com).

Production



Three Three Nine Nine
months months months months Year
ended ended ended ended ending
Sept 30, Sept 30, Sept 30, Sept 30, December 31,
2008 2007 2008 2007 2007
--------------------------------------------------------------------------
Production:
Syria:Oudeh
Gross
field
production
(bbl) 371,902 224,452 1,016,626 671,943 926,361
Gross
field
production
(bbl/d) 4,042 2,440 3,710 2,461 2,538
Company
net
production
(bbl)(1) 203,836 99,436 541,176 295,236 416,029
Company
net
(bbl/day) 2,216 1,081 1,975 1,081 1,140
Syria:
Tishrine-
Sheikh
Mansour
Gross
field
production
(bbl) 1,539,734 593,780 3,631,445 1,762,485 2,434,923
Gross
field
production
(bbl/d) 16,736 6,454 13,253 6,456 6,671
Company
net
production
(bbl)(1) 573,364 33,659 1,160,941 89,985 170,999
Company
net
(bbl/day) 6,232 366 4,237 330 468
--------------------------------------------------------------------------
Syria
Total
Total
Company
gross
Syria
(bbl) 1,911,636 818,232 4,648,071 2,434,428 3,361,284
Total
Company
gross
Syria
(bbl/d) 20,778 8,894 16,963 8,917 9,209
Total
Company
net Syria
(bbl)(1) 777,200 133,095 1,702,117 385,221 587,028
Total
Company
net Syria
(bbl/d) 8,448 1,447 6,212 1,411 1,608
--------------------------------------------------------------------------

(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).


Syrian gross production increased 26% during the third quarter of 2008 in comparison to the second quarter of 2008 (394,595 bbl). This increase in gross production resulted in a 42% increase in Tanganyika net production in comparison to the second quarter of 2008 (228,874 bbl). Net production increases are not proportionate to the increases in gross production due to declining base crude production levels and the cost pools that Tanganyika has accumulated to date from appraisal, development and enhanced oil recovery programs in Syria. The terms of the Syrian PSAs allow for 70% of incremental oil production to be utilized by Tanganyika for cost recovery purposes at Oudeh and 48% of incremental production to be utilized by Tanganyika for cost recovery purposes at Tishrine.

Oil Sales



Three Three Nine Nine
months months months months Year
ended ended ended ended ending
Sept 30, Sept 30, Sept 30, Sept 30, December 31,
2008 2007 2008 2007 2007
--------------------------------------------------------------------------
Sales of
oil ($):
Syria:
Oudeh 18,157,622 5,246,148 45,164,299 13,383,945 23,424,301
Tishrine 53,302,927 1,548,971 103,781,431 3,794,186 11,102,845
--------------------------------------------------------------------------
Total 71,460,549 6,795,119 148,945,730 17,178,131 34,527,146
--------------------------------------------------------------------------
Average
oil sales
price ($
per bbl):
Syria:
Oudeh 90.83 52.76 85.46 45.33 52.64
Syria:
Tishrine 95.45 46.02 92.52 42.16 55.87
--------------------------------------------------------------------------


Sales revenue for the three months ended September 30, 2008 was 951% higher than the oil sales revenue during the three months ended September 30, 2007 and 39% higher than oil sales revenue recorded during the second quarter of 2008 ($51.3 million).

Tanganyika recorded record high oil sales revenue during the third quarter of 2008 as a result of two factors:

- Record high quarterly net oil production from Syria, and;

- High world oil prices and Syria realized oil prices.

The Syrian Petroleum Company have provided notification to Syrian heavy oil producers that they have commenced allocating downstream pipeline and facility losses against each oil producers proportionate volume of shipped oil. The Company continues to work with SPC to better understand this claim and the method of loss allocations. The Company is confident of a positive outcome as the terms of the Production Sharing Agreements state that title to custody of the crude oil transfers from the Company to SPC within the contract area. The deduction proposed by SPC is approximately two percent of gross oil shipments. The Company has made a provision of $1.8 million against oil sales revenue during the third quarter ($4.7 million year to date) related to this claim.

Production Costs



Three Three Nine Nine
months months months months Year
ended ended ended ended ending
Sept 30, Sept 30, Sept 30, Sept 30, December 31,
2008 2007 2008 2007 2007
--------------------------------------------------------------------------
Production
Costs
Syria
Gross
production
costs(1) $14,883,070 $8,085,458 $41,071,894 $23,714,032 $35,387,795
Gross
production
volumes(1) 1,911,636 818,232 4,648,071 2,434,428 3,361,284
Cost per
bbl $ 7.79 $ 9.88 $ 8.84 $ 9.74 $ 10.53
--------------------------------------------------------------------------

(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 from continuing operations for the three months ended September 30, 2008 averaged $7.79 per barrel as compared to $9.88 per barrel for the three months ended September 30, 2007. Average per barrel production costs have improved as oil production rates increased. As required under the terms of the Tishrine PSA, during the third quarter ended September 30, 2008, the Company paid to SPC a production bonus of $1.3 million dollars as a result of Tishrine incremental production exceeding 10,000 BOPD for thirty consecutive days.

Base Crude Production Recoverable Costs



BCP Operating Expense - BCP Operating Expense -
Recovery during the period Receivable at
-------------------------- -------------------------
-------------------------- -------------------------
December 31, September 30, December 31, September 30,
2007 2008 2007 2008
-------------------------- -------------------------
Oudeh 3,627,000 2,776,000 5,340,000 7,038,000
Tishrine 11,672,000 9,236,000 18,089,000 23,324,000
----------------------------------------------- -------------------------
Total 15,299,000 12,012,000 23,429,000 30,362,000
----------------------------------------------- -------------------------


Under the terms of the Syrian PSAs, the Company is responsible for paying 100 percent of production costs and is entitled to reimbursement of the portion of costs attributable to BCP. During the first quarter of 2008, the Company received a $5.1 million payment from SPC, $1.1 million for Oudeh and $4.0 million for Tishrine, related to the reimbursement of BCP operating expenses.

Depletion

Depletion for the three month period ended September 30, 2008 was $12.7 million compared to $4.4 million for the three month period ended September 30, 2007. During the third quarter of 2008, depletion was approximately $6.66 per barrel for Syria in comparison to $5.42 per barrel in the third quarter of 2007. 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 $0.3 million for the three months ended September 30, 2008 compared to $0.2 million for the three month period ended September 30, 2007. The interest in 2007 was due to the surplus cash from a private placement in November 2006. The Company completed a private placement on March 14, 2008 in which they raised approximately $73.3 million USD net of placement costs.

General and Administration

General and administration costs for the three months ended September 30, 2008 were $5.4 million compared to $3.0 million for the three month period ended September 30, 2007. The increase in year to date 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. As a result, accommodation and office space is required for the additional personnel. Key drivers of this increased headcount are the increase in rig count and steam generation capacity.

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 September 30, 2008 was $1.9 million and $1.8 million for the three months ended September 30, 2007. The Company continues to utilize its stock option plan as a method of recruiting, retaining and motivating key personnel.

Oil and Gas Interests



September 30, 2008
--------------------------------------------------
Accumulated
Cost depletion Net book value
--------------------------------------------------
Oil and Gas Interests 296,511,548 62,003,523 234,508,025
-------------------------------------------------
-------------------------------------------------


December 31, 2007
--------------------------------------------------
Accumulated
Cost depletion Net book value
--------------------------------------------------
Oil and Gas Interests 218,536,023 31,049,827 187,486,196
-------------------------------------------------
-------------------------------------------------


Oil and gas assets, excluding the sale of North Africa, have increased $82.2 million during the nine months ended September 30, 2008 as a result of development and appraisal drilling and investment in oil, water and gas handling facilities on both the Oudeh and Tishrine oil fields.

Liquidity and Capital Resources

At September 30, 2008 the Company had a cash balance of $91.5 million compared to $42.3 million at December 31, 2007. Non-cash working capital has increased to $60.1 million at September 30, 2008 compared to $11.2 million at December 31, 2007. The increase in non-cash working capital may be attributed to the increased pace of the Company's capital program, dramatically increasing oil sales revenue and continued growth in the accounts receivable related to base crude production recoverable costs.

Tanganyika has historically relied on private placements as a primary source of funds for acquisition, exploration and development. During the first quarter of 2008, 5.0 million shares were issued with gross proceeds of approximately $75.0 million. Previously, in 2006, 10.3 million shares were issued with gross proceeds of approximately $134.5 million.

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 fund the entire 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.

Customary with the Company's ordinary business practices, it has entered into contracts and incurred obligations that will impact the Company's future operations and liquidity.



Payments due by Period
------------------------------------------------------------
Less than 1 After 5
Total year 1 - 3 years 4 - 5 years years
------------------------------------------------------------

Commitments
to
service
companies
(1) 4,749,160 4,749,160 - - -

Commitments
to
purchase
materials
(2) 27,959,985 27,959,985 - - -

Other
commitments 7,277,829 840,760 2,653,649 1,891,710 1,891,710
------------------------------------------------------------
39,986,974 33,549,905 2,653,649 1,891,710 1,891,710
------------------------------------------------------------


(1) The Company has entered into contractual arrangements with a number of service companies related to its Syrian work programs. The terms of certain contracts contain minimum levels of service, contract duration or fee levels. The associated expected committed cost of these contracts is reflected in the table above.

(2) The Company has entered into contractual arrangements with a number of companies to supply various materials related to its Syrian work programs. The expected committed cost related to the supply of these materials is reflected in the table above.

Under terms of the PSAs, SPC is entitled to receive bonuses related to the Company exceeding specified production levels.

Oudeh Block:

- $1.0 million dollars as a result of incremental production exceeding 10,000 BOPD for thirty consecutive days;

- $2.0 million dollars as a result of incremental production exceeding 20,000 BOPD for thirty consecutive days;

- $3.0 million dollars as a result of incremental production exceeding 30,000 BOPD for thirty consecutive days.

Tishrine-Sheikh Mansour Fields

- $2.25 million dollars as a result of incremental production exceeding 20,000 BOPD for thirty consecutive days;

- $4.5 million dollars as a result of incremental production exceeding 30,000 BOPD for thirty consecutive days.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Outstanding Share Data

As at November 12, 2008 the Company had 62,308,031 common shares outstanding and 3,237,249 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 nine months ended September 30, 2008, the Company paid $190,383 (September 30, 2007 - $147,000) to Namdo Management Services Ltd., a private corporation owned by Lukas H. Lundin, a director of the Company. The Company occupies space in the Namdo offices for the Chief Financial Officer, certain directors and Investor Relations personnel. Namdo charges a service fee and recovers out of pocket expenses related to Tanganyika's business.

b) During the Nine months ended September 30, 2008, the Company received $57,583 (September 30, 2007 - $127,773) from Pearl Exploration and Production Ltd. ("Pearl"). Tanganyika and Pearl share office space in Calgary, Alberta and as a result incur common costs that are allocated, invoiced and recovered between the Companies. The Company and Pearl had certain officers in common during the first nine months of 2008 and continue to have directors in common.

c) During the nine months ended September 30 2008, the Company received $49,765 (September 30, 2007 - $nil) from Africa Oil Corp ("AOC"). Tanganyika and AOC share office space in Calgary, Alberta and as a result incur common costs that are allocated, invoiced and recovered between the Companies. The Company and AOC had certain officers and directors in common during the first nine months of 2008 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

As disclosed in the December 31, 2007 annual audited Consolidated Financial Statements, on January 1, 2008, the Company adopted the following Canadian Institute of Chartered Accountants handbook Sections 3031 "Inventories", section 3862 "Financial Instruments - Disclosures", section 3863 "Financial Instruments - Presentation", and section 1535 "Capital Disclosures".

Section 1535 establishes disclosure requirements about an entity's capital and how it is managed. The purpose is to enable users of the financial statements to evaluate the Company's objectives, policies and processes for managing capital.

Sections 3862 and 3863 replaced section 3861, Financial Instruments -- Disclosure and Presentation, revising and enhancing its disclosure requirements, and carrying forward unchanged its presentation requirements. These new sections place increased emphasis on disclosures about the nature and extent of risks arising from financial instruments and how the Company manages those risks.

Section 3031, Inventories, replaced section 3030, Inventories. This new standard provides more extensive guidance on measurement, and expands disclosure requirements to increase transparency. The Corporation's accounting policy for inventories is consistent with measurement requirements in the new standard and therefore results of the Corporation will not be impacted; however, additional disclosures will be required in relation to inventories carried at net realizable value, the amount of inventories recognized as an expense, and the amount of any write downs of inventories.

The Accounting Standards Board confirmed recently that public companies will be required to report under International Financial Reporting Standards (IFRS) effective January 1, 2011. The Company sets out in its financial statement notes a summary of significant differences between Canadian GAAP and IFRS and is currently evaluating the impact of this change on its Consolidated Financial Statements.

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, 2007 Annual Report and Annual Information Form.

Controls and Procedures

Disclosure controls and procedures

The Chief Executive Officer and the Chief Financial Officer are responsible for establishing and maintaining the Company's disclosure controls and procedures. They are assisted in this responsibility by the Company's management team. Disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosures.

It should be noted that while the Chief Executive Officer and Chief Financial Officer believe that the Company's disclosure controls and procedures provide a reasonable level of assurance and that they are effective, they do not expect that the disclosure controls will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Internal control over financial reporting

The Chief Executive Officer and the Chief Financial Officer are responsible for designing internal controls over financial reporting, or causing them to be designed under their supervision, in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP.

An evaluation of the design effectiveness of the Company's internal controls over financial reporting as at December 31, 2007, was performed under the supervision of the Chief Executive Officer and the Chief Financial Officer, with the assistance of the management team. The Chief Executive Officer and the Chief Financial Officer have concluded, as at the date of this MD&A, that the Company's internal controls over financial reporting have been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP.

The Company's internal controls over financial reporting may not prevent or detect all errors, misstatements and fraud. The design of internal controls must also take into account resource constraints. A control system, including the Company's internal controls over financial reporting, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

During 2008, 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.

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.

The following are some forward looking statements:

- growing production and reserve base;

- extending the reserves and resources;

- encountering excellent reservoir quality, lower viscosity oil and excellent productive capability;

- it is expected that successive steam cycles will yield progressively higher rates of production;

- 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;

- estimated future development costs;

- consider issuances of equity securities, debt or the divestiture of assets;

- outlook for realized oil prices;

- ongoing facilities investments;

- ongoing recruiting efforts.

Reserve statements are forward looking statements as they involve estimates and assumptions that the reserves and resources described exist in the quantities predicted or estimated, and can be profitably produced in the future.

Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those which are implied by such statements. Risks and uncertainties include, but are not limited to the following:

- market prices for oil;

- fluctuations in foreign exchange rates;

- availability of financing;

- capital and operating expenses;

- political and civil unrest;

- government actions with regards to regulations and taxes;

- general economic conditions.

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 by Canadian GAAP such as Cash Flow from Continuing Operations, Cash Flow from Discontinued Operations, EBITDA (EBITDA equals profit (loss) for the period less income from discontinued operations, plus depreciation, depletion and interest and bank charges) 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.

Reconciliation of Cash Flow from Continuing Operations

This document contains the term "cash flow from continuing operations", which should not be considered an alternative to, or more meaningful than "cash flow from operating activities" as determined in accordance with Canadian GAAP.



Three Three Nine Nine
months months months months Year
ended ended ended ended ended
Sept 30, Sept 30, Sept 30, Sept 30, December 31,
2008 2007 2008 2007 2007
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------
Cash flows
from
operating
activities 47,538,880 14,825,419 72,521,048 14,175,864 (6,277,540)
Changes in
non-cash
working
capital
related to
operations 6,262,994 (4,788,729) 33,027,535 (3,151,165) 22,478,501
Changes in
non-cash
working
capital
related to
discontinued
operations - (8,113,139) - (5,116,562) (6,579,489)
Funds
provided
from
discontinued
operations - (2,718,780) - (7,782,239) (7,782,239)
---------- ---------- ----------- ----------- -----------

Cash Flow
from
Continuing
Operations 53,801,874 (795,229) 105,548,583 (1,874,102) 1,839,233
---------- ---------- ----------- ----------- -----------


Reconciliation of EBITDA



Three Three Nine Nine
months months months months Year
ended ended ended ended ended
Sept 30, Sept 30, Sept 30, Sept 30, December 31,
2008 2007 2008 2007 2007
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------
Profit
(loss) for
the period
before
discontinued
operations 33,080,051 (6,857,993) 62,883,970 (17,561,572) (21,972,725)
Depletion 12,730,485 4,435,992 30,953,696 13,186,231 19,369,735
Interest
and bank
charges 622,282 173,967 925,297 168,062 150,514
Depreciation 116,483 94,833 357,875 250,946 656,861
---------- ---------- ----------- ----------- -----------

EBITDA 46,549,301 (2,153,201) 95,120,838 (3,956,333) (1,795,615)
---------- ---------- ----------- ----------- -----------


Outlook

Refer to the Proposed Transaction section earlier in the MD&A for a discussion of the $31.50 per share negotiated takeover bid currently offered to Tanganyika shareholders.

The investment Tanganyika has made to date on Syrian operations 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 increased oil reserve figures for the third consecutive year in 2007.

With an increased investment in drilling rigs, workover rigs and steam generation capacity, 2008 activities are focused on increasing production rates and testing Enhanced Oil Recovery techniques from proved developed reserves, converting existing undeveloped proved and probable reserves into production and continuing to appraise and better define the hydrocarbon recovery potential of both Oudeh and Tishrine. Production has been continuously increasing over the past three quarters and the Company believes continued production increases may be expected during 2008. 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.



KEY DATA

Three Three Nine Nine
months months months months Year
ended ended ended ended ended
Sept 30, Sept 30, Sept 30, Sept 30, December 31,
2008 2007 2008 2007 2007
--------------------------------------------------------------------------
Return on
equity, %(1) 10.50% 16.04% 20.14% 12.99% 10.40%
Return on
capital
employed,
%(2) 10.97% 16.16% 20.95% 13.27% 10.84%
Debt/equity
ratio, %(3) 0% 0% 0% 0% 0%
Equity
ratio, %(4) 86% 87% 86% 87% 84%
Share of
risk
capital,
%(5) 86% 87% 86% 87% 84%
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 Nine Nine
months months months months Year
ended ended ended ended ended
Sept 30, Sept 30, Sept 30, Sept 30, December 31,
2008 2007 2008 2007 2007
--------------------------------------------------------------------------
Shareholders'
equity,
USD(1) 6.24 4.31 6.24 4.31 4.25
Operating
cash flow
including
discontinued
operations,
USD(2) 0.96 0.04 1.97 0.10 0.26
Cash flow
from
operations
including
discontinued
operations(3) 0.87 0.04 1.74 0.14 0.20
Earnings
including
discontinued
operations(4) 0.532 0.633 1.04 0.515 0.408
Earnings
including
discontinued
operations
(fully
diluted)(5) 0.529 0.630 1.04 0.515 0.408
Dividend - - - - -
Quoted
price at
the end of
the financial
period 28.19 18.25 28.19 18.25 18.25
P/E-ratio(6) 53.0 28.8 27.0 35.5 44.7
Number of
shares at
financial
period end 62,227,197 56,873,696 62,227,197 56,873,696 56,938,696
Weighted
average
number of
shares for
the
financial
period(7) 62,158,396 56,701,120 60,708,310 56,268,070 56,427,858
Weighted
average
number of
shares for
the
financial
period
(fully
diluted)
(5,7) 62,485,501 56,928,545 60,832,981 56,464,371 56,626,839


(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 SHEETS
(Unaudited)
(expressed in U.S. dollars)

September December
30, 2008 31, 2007
------------ -----------
------------ -----------

ASSETS $ $
Current assets
Cash 91,506,582 42,302,212
Restricted cash (Note 3) 28,472,277 148,271
Advances to contractors 5,040,490 6,727,904
Accounts receivable and other assets 81,678,198 45,829,461
Inventory 4,245,037 2,462,836
Prepaid expenses 1,945,715 1,694,757
------------ -----------
212,888,299 99,165,441

Oil and gas interests (note 7) 234,508,025 187,486,196
Property, plant and equipment 1,971,545 909,677
------------ -----------
449,367,869 287,561,314
------------ -----------
------------ -----------

LIABILITIES
Current liabilities
Accounts payable and other accrued liabilities 61,241,956 45,740,981
------------ -----------
61,241,956 45,740,981

SHAREHOLDERS' EQUITY

Share capital (Note 8) 321,119,959 242,458,322
Contributed surplus (Note 9) 13,065,831 8,860,819
Accumulated other comprehensive income 689,624 689,624
Retained Earnings (deficit) 53,250,499 (10,188,432)
------------ -----------
388,125,913 241,820,333
------------ -----------
449,367,869 287,561,314
------------ -----------
------------ -----------


Approved by the Directors:

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



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

Accumu-
lated
Other
Comprehen-
Contrib- Retained sive
Share uted Earnings income
Capital Surplus (deficit) (loss) Total
--------------------------------------------------------------------------
As at
December
31, 2006 $228,236,373 $ 6,201,643 $(33,221,711) $(175,745) $201,040,560
Issue of
shares 10,646,612 - - - 10,646,612
Stock-based
compensation 2,784,445 1,474,313 - - 4,258,758
Profit for
the period - - 28,957,569 - 28,957,569
--------------------------------------------------------------
As at
September
30, 2007 241,667,430 7,675,956 (4,264,142) (175,745) 244,903,499
--------------------------------------------------------------
Issue of
shares 626,187 - - - 626,187
Stock-based
compensation 164,705 1,184,863 - - 1,349,568
Loss for the
period - - (5,924,290) - (5,924,290)
Discontinued
operations
(Note 5) - - - 865,369 865,369
--------------------------------------------------------------
As at
December
31, 2007 242,458,322 8,860,819 (10,188,432) 689,624 241,820,333
--------------------------------------------------------------
Issue of
shares 77,541,309 - - - 77,541,309
Stock-based
compensation 1,120,328 4,205,012 - - 5,325,340
Profit for
the period - - 63,438,931 - 63,438,931
--------------------------------------------------------------
As at
September
30, 2008 $321,119,959 $113,065,831 $ 53,250,499 $ 689,624 $388,125,913
--------------------------------------------------------------



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

Three Three Nine Nine
months months months months Year
ended ended ended ended ended
Sept 30, Sept 30, Sept 30, Sept 30, December 31,
2008 2007 2008 2007 2007
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------
(restated (restated
- note 5) - note 5)
Revenue
Sale of
oil 71,460,549 6,795,119 148,945,730 17,178,131 34,527,146
Interest
income 338,187 245,772 1,067,249 1,355,092 1,385,414
---------- ---------- ----------- ----------- -----------
71,798,736 7,040,891 150,012,979 18,533,223 35,912,560
---------- ---------- ----------- ----------- -----------
Expenses
Production
costs 11,982,709 4,618,829 29,059,881 11,584,850 20,088,262
Depletion 12,730,485 4,435,992 30,953,696 13,186,231 19,369,735
General
and
admini-
stration 5,391,871 3,043,324 14,479,218 8,654,413 13,834,551
Stock-
based
compen-
sation
(note 10) 1,859,165 1,779,924 5,325,340 4,258,758 5,608,326
Interest
and bank
charges 622,282 173,967 925,297 168,062 150,514
Deprec-
iation 116,483 94,833 357,875 250,946 656,861
Foreign
exchange
loss
(gain) 3,592,164 (247,985) 3,604,176 (2,008,465) (1,822,964)
Loss on
sale of
assets
(Note 7) 2,423,526 - 2,423,526 - -
---------- ---------- ----------- ----------- -----------
38,718,685 13,898,884 87,129,009 36,094,795 57,885,285
---------- ---------- ----------- ----------- -----------
Profit
(loss) for
the period
before
discon-
tinued
operations 33,080,051 (6,857,993) 62,883,970 (17,561,572) (21,972,725)

Discon-
tinued
operations
(note 5) - 42,731,533 554,961 46,519,141 45,006,004
---------- ---------- ----------- ----------- -----------
Profit
(loss)for
the period 33,080,051 35,873,540 63,438,931 28,957,569 23,033,279

Retained
earnings
(deficit) -
beginning
of period 20,170,448 (40,137,682) (10,188,432) (33,221,711) (33,221,711)
---------- ---------- ----------- ----------- -----------
Retained
earnings
(deficit) -
end of
period 53,250,499 (4,264,142) 53,250,499 (4,264,142) (10,188,432)
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------
Other
compre-
hensive
income - - - - -
---------- ---------- ----------- ----------- -----------
Compre-
hensive
income
(loss)
for the
period 33,080,051 35,873,540 63,438,931 28,957,569 23,033,279
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------

Profit
(loss) per
share -
Continuing
operations
Basic 0.532 (0.121) 1.036 (0.312) (0.389)
Diluted 0.529 (0.121) 1.034 (0.312) (0.389)
Profit per
share -
Discontinued
operations
Basic - 0.754 0.009 0.827 0.798
Diluted - 0.751 0.009 0.824 0.795

Weighted
average
number
of shares
outstanding
Basic 62,158,396 56,701,120 60,708,310 56,268,070 56,427,858
Diluted 62,485,501 56,928,545 60,832,981 56,464,371 56,626,839



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

Three Three Nine Nine
months months months months Year
ended ended ended ended ended
Sept 30, Sept 30, Sept 30, Sept 30, December 31,
2008 2007 2008 2007 2007
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------
(restated (restated
- note 5) - note 5)
Cash
flows
from
operating
activities
Profit
(loss)
for the
period
exclu-
ding
discon-
tinued
opera-
tions 33,080,051 (6,857,993) 62,883,970 (17,561,572) (21,972,725)
Items
not
affect-
ing
cash
Stock-
based
compen-
sation 1,859,165 1,779,924 5,325,340 4,258,758 5,608,326
Deprec-
iation 116,483 94,833 357,875 250,946 656,861
Depletion 12,730,485 4,435,992 30,953,696 13,186,231 19,369,735
Realized
foreign
exchange
loss
(gain) 3,592,164 (247,985) 3,604,176 (2,008,465) (1,822,964)
Loss on
sale of
assets
(Note 7) 2,423,526 - 2,423,526 - -
---------- ---------- ----------- ----------- -----------
53,801,874 (795,229) 105,548,583 (1,874,102) 1,839,233
Funds
provided
from
discon-
tinued
opera-
tions - 2,718,780 - 7,782,239 7,782,239
---------- ---------- ----------- ----------- -----------
53,801,874 1,923,551 105,548,583 5,908,137 9,621,472

Changes
in
non-cash
opera-
ting
working
capital
Changes
in
non-
cash
working
capital
related
to
opera-
tions (6,262,994) 4,788,729 (33,027,535) 3,151,165 (22,478,501)
Discon-
tinued
opera-
tions
(Note 5) - 8,113,139 - 5,116,562 6,579,489
---------- ---------- ----------- ----------- -----------

(6,262,994) 12,901,868 (33,027,535) 8,267,727 (15,899,012)
---------- ---------- ----------- ----------- -----------

47,538,880 14,825,419 72,521,048 14,175,864 (6,277,540)
---------- ---------- ----------- ----------- -----------
Cash
flows from
investing
activities
Additions
to oil
and gas
interests (30,735,273)(42,491,110) (82,170,473) (86,303,604)(119,406,790)
Additions
to
property,
plant
and
equipment (819,014) (359,353) (1,419,743) (489,086) (509,816)
Pledge
for bank
guarantee
released - 900,000 - 900,000 900,000
Cash
security
for
letters
of
credit (25,238,493) - (28,324,006) - (148,271)
Changes
in
non-cash
working
capital
related
to
invest-
ing
activities 2,890,581 6,875,623 12,105,450 (8,925,135) 9,665,009
Proceeds
on sale
of
assets
(Note 7) 2,000,000 - 2,000,000 - -
Discon-
tinued
opera-
tions
(Note 5) - 57,670,806 554,961 55,603,924 54,951,044
---------- ---------- ----------- ----------- -----------
(51,902,199) 22,595,966 (97,253,811) (39,213,901) (54,548,824)
---------- ---------- ----------- ----------- -----------
Cash
flows
from
financing
activities
Issuance
of
common
shares 1,655,133 4,891,767 77,541,309 10,646,612 11,272,799

Effect of
exchange
rate
changes
on cash
and cash
equivalents
denominated
in foreign
currency (3,592,164) 247,985 (3,604,176) 2,008,465 1,822,964
---------- ---------- ----------- ----------- -----------
Increase
(decrease)
in cash (6,300,350) 42,561,137 49,204,370 (12,382,960) (47,730,601)

Cash -
beginning
of period 97,806,932 35,088,716 42,302,212 90,032,813 90,032,813
---------- ---------- ----------- ----------- -----------

Cash -
end of
period 91,506,582 77,649,853 91,506,582 77,649,853 42,302,212
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------

Supple-
mentary
inform-
ation
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 and Nine months ended September 30, 2008 and September 30, 2007

(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 2 to the audited consolidated financial statements in the Company's Annual Report for the period ended December 31, 2007. 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, 2007.

2. Significant Accounting Policies

The Interim Consolidated Financial Statements have been prepared following the same accounting policies and methods of computation as the Annual Consolidated Financial Statements for the year ended December 31, 2007. The following provides further clarification to certain accounting policies of the Company, related to its international operations that have been consistently applied.

a) Revenue Recognition

The Company's operations are conducted in accordance with Production Sharing Agreements ("PSA"s) between the Company, the Government of the Syrian Arab Republic and the Syrian Petroleum Company ("SPC"). Title to the crude oil produced on the contract areas transfers from the Company to a third party at a delivery point in the contract areas. Revenue is recorded when title passes from the Company to the third party.

Revenue is recorded by the Company on its net share of production after deducting all royalties and third parties' share of production. Under the terms of the PSAs, SPC is entitled to receive that portion of oil which may be attributed to Base Crude Production ("BCP"). BCP represents that quantity of oil that was being produced at the time the PSAs were signed. BCP declines over the term of the PSAs at a rate of 5 percent per annum. The Government of the Syrian Arab Republic is entitled to a 12.5 percent in-kind royalty on the incremental production above BCP. The remaining oil is shared between SPC and the Company as follows:

Oudeh Block PSA:

- 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.

Tishrine-Sheikh Mansour Fields PSA:

- 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.

b) PSA Costs

Under the terms of the PSAs, the Company is responsible for paying 100 percent of all operating, capital and administrative costs related to operations on the contract areas. These costs are recorded in the Company's financial statements on an accrual basis. Under the terms of the PSAs, on at least a quarterly basis, the Company submits an activity statement to SPC for audit, documenting the expenditures incurred on the PSA contract areas. SPC approved expenditures, net of those operating expenses attributable to BCP, are added to the costs pools under the PSA and eligible for cost recovery.

The Company is entitled to directly recover from SPC operating expenses attributable to BCP. SPC approved operating expenses are allocated to BCP, and accrued as recoverable, based on the percentage of BCP in relation to gross oil production in the contract areas.

c) Syrian Income Taxes

Under the terms of the PSAs, all Syrian income taxes are the responsibility of SPC from its share of profit and excess cost oil.

3. Restricted Cash

Restricted cash includes outstanding balances relating to letters of credit issued to various suppliers for operations in Syria. At September 30, 2008, an amount of $28,472,277 (December 31, 2007 - $148,271) is restricted as security for letters of credit.

4. Changes in Accounting Policy

On January 1, 2008, the Company adopted four new accounting standards that were issued by the Canadian Institute of Chartered Accountants: Handbook Section 3031, Inventories, Handbook Section 1535, Capital Disclosures, Section 3862, Financial Instruments - Disclosures, and Section 3863, Financial Instruments - Presentation. These standards have been applied prospectively; accordingly, comparative amounts for prior periods have not been restated.

(a) Inventories

Section 3031, Inventories, which replaced section 3030, Inventories provides more extensive guidance on measurement, and expands disclosure requirements to increase transparency. The adoption of this standard has had no impact on the Company's Consolidated Financial Statements.

(b) Capital Disclosures and Financial Instruments - Presentation and Disclosure

Sections 3862 and 3863 replaced section 3861, Financial Instruments - Disclosure and Presentation, revising and enhancing its disclosure requirements, and carrying forward unchanged its presentation requirements. These new sections place increased emphasis on disclosures about the nature and extent of risks arising from financial instruments and how the Company manages those risks. The adoption of this standard has had no impact on the Company's Consolidated Financial Statements.

Section 1535 establishes disclosure requirements about the Company's capital and how it is managed. The purpose is to enable users of the financial statements to evaluate the Company's objectives, policies and processes for managing capital (See Note 14).

(c) International Financial Reporting Standards (IFRS)

The Accounting Standards Board confirmed recently that public companies will be required to report under International Financial Reporting Standards (IFRS) effective January 1, 2011. The Company sets out in note 16 a summary of significant differences between Canadian GAAP and IFRS.

5. Discontinued Operations

The assets and liabilities related to discontinued operations have been reclassified as assets or liabilities of discontinued operations on the Consolidated Balance sheets. Operating results related to these assets and liabilities have been included in Discontinued Operations on the Consolidated Statements of Operations and Comprehensive Income.

On September 5, 2007, the Company entered into an agreement with a third party for the sale of its West Gharib oil and gas interests. The sale price of the interests was $70.0 million, including estimated net working capital of $10.9 million. The transaction was subject to a final statement of adjustments, which was completed in May, 2008. All resulting adjustments have been reflected in the results of operations for the period ending June 30, 2008. Tanganyika has provided indemnities to the purchaser commensurate with a transaction of this type.

The sale closed September 25, 2007. The Company no longer owns any West Gharib oil and gas assets. The West Gharib assets have been accounted for as discontinued operations in accordance with GAAP. Results of the operations have been included in the financial statements up to the closing date of the sale (the date control was transferred to the purchaser).

The Company recorded an estimated gain on disposition of $40.0 million during the twelve months ended December 31, 2007. The gain recorded on disposition is subject to change as a result of the final closing statement of adjustments. A $0.5 million adjustment was recorded to the gain during the nine months ended September 30, 2008 (total adjusted gain on disposal of $40.5 million).



Twelve
Three Months Ended Nine Months Ended Months Ended
Sept 30, Sept 30, Sept 30, Sept 30, December 31,
2008 2007 2008 2007 2007
Revenue
Sale of
oil - 3,203,455 - 9,256,198 9,256,198
Interest
income - 4,089 - 19,160 19,160
Other
income - 10,213 - 64,383 64,383
-------------------- ------------------- ------------
- 3,217,757 - 9,339,741 9,339,741

Expenses
Production
costs - 418,760 - 1,314,011 1,314,011
Depletion - 578,041 - 1,792,743 1,792,743
Depreciation - 28,631 - 89,780 89,780
General
and
admini-
stration - 79,896 - 243,006 243,006
Foreign
exchange
gain - 61 - (496) (496)
Other
expenses - 260 - 981 981
-------------------- ------------------- ------------
- 1,105,649 - 3,440,025 3,440,025
-------------------- ------------------- ------------

- 2,112,108 - 5,899,716 5,899,716
Gain on
disposition - 40,619,425 554,961 40,619,425 39,971,657
-------------------- ------------------- ------------
Income - 42,731,533 554,961 46,519,141 45,871,373
-------------------- ------------------- ------------
Comprehensive
loss -
cumulative
translation
adjustment - - - - (865,369)
-------------------- ------------------- ------------
Profit of
discontinued
operations - 42,731,533 554,961 46,519,141 45,006,004
-------------------- ------------------- ------------


6. Proposed Transaction: $31.50 CDN Per Share Offer for Tanganyika

Tanganyika announced on September 25, 2008 that it had entered into a definitive agreement (the "Support Agreement") pursuant to which Sinopec International Petroleum Exploration and Production Corporation ("SIPC") agreed, subject to the terms of the Support Agreement, to make an offer to acquire all the outstanding common shares of Tanganyika by way of a negotiated take-over bid (the "Offer") for C$31.50 per share in cash, which represented a substantial premium to both the recent and historical trading prices of Tanganyika's shares.

On October 30, 2008, Mirror Lake Oil and Gas Company Limited, a wholly-owned subsidiary (the "Offeror") of SIPC mailed the offering documents relating to Offer. The Offer and the Take-over Bid Circular of the Offeror were accompanied by Tanganyika's Directors' Circular, which confirmed that the Tanganyika Board of Directors determined that the Offer is fair from a financial point of view to the shareholders of Tanganyika and is in the best interests of Tanganyika and Tanganyika's shareholders, and recommended that Tanganyika shareholders accept the Offer.

The Offer is open for acceptance until 10:00 a.m. (Calgary time) on December 5, 2008, unless withdrawn or extended. The Offer is subject to certain conditions, including acceptance of the Offer by holders of at least 66 2/3 percent of the outstanding common shares of Tanganyika, calculated on a fully diluted basis, and receipt of all required regulatory approvals, including all required approvals from the government of The People's Republic of China.

Full details of the Offer are contained in the Take-over Bid Circular of the Offeror and related materials and Tanganyika's Directors' Circular, copies of which are available on SEDAR at www. sedar.com.

7. Oil and Gas Interests



September 30, 2008
--------------------------------------------------
Accumulated
Cost depletion Net book value
--------------------------------------------------
Oil and Gas Interests 296,511,548 62,003,523 234,508,025
-------------------------------------------------
-------------------------------------------------


December 31, 2007
--------------------------------------------------
Accumulated
Cost depletion Net book value
--------------------------------------------------
Oil and Gas Interests 218,536,023 31,049,827 187,486,196
-------------------------------------------------
-------------------------------------------------


During July 2008 the Company disposed of certain rights associated with the development of oil and gas properties located in North Africa. As consideration the Company received $2.0 million on closing and recorded a loss on sale of $2.4 million. The Company may receive an additional $2.5 million of conditional consideration upon future production targets being achieved.

8. Share Capital

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

Authorized - Unlimited number of common shares without par value

Issued and outstanding:



September 30, 2008
--------------------------------------------------------------------------
Number Amount
--------------------------------------------------------------------------
Balance, beginning of period 56,938,696 $242,458,322
Private placements, net 5,000,000 73,291,772

Exercise of options 288,501 5,369,865
--------------------------------------------------------------------------
Balance, end of period 62,227,197 $321,119,959
--------------------------------------------------------------------------
--------------------------------------------------------------------------


On March 24, 2008, the Company completed a private placement consisting of 5,000,000 common shares at CDN $15.00 for net proceeds of $73.3 million.

9. Contributed Surplus



September December
30, 2008 31, 2007
--------------------------------------------------------------------------
Balance, beginning of period 8,860,819 6,201,643
Stock based compensation 5,325,340 5,608,326
Transfer to share capital on exercise of options (1,120,328) (2,949,150)

--------------------------------------------------------------------------
Balance, end of period 13,065,831 8,860,819
--------------------------------------------------------------------------
--------------------------------------------------------------------------


10. Stock Option Information



September 30, 2008
--------------------------------------------------------------------------

Weighted
Average
Outstanding Exercise
Options Price CDN$
--------------------------------------------------------------------------
Outstanding, beginning of period 2,753,850 17.18
Granted 1,166,850 16.89
Exercised (288,501) 15.14
Cancelled or expired (253,266) 17.56
--------------------------------------------------------------------------
Outstanding, end of period 3,378,933 17.23
--------------------------------------------------------------------------
--------------------------------------------------------------------------


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 weighted average estimated fair value of the options granted during the period ended September 30, 2008 was $6.72 per option, determined using the Black-Scholes option pricing model with the following assumptions:



--------------------------------------------------------------------------
September December
30, 2008 31, 2007
--------------------------------------------------------------------------
Risk-free rate 3.29% 4.15% - 4.85%
Expected life 2.25 years 1 - 3 years
Estimated volatility in the market price of
common shares 61% 45% - 55%
Expected dividend rate 0% 0%
--------------------------------------------------------------------------
--------------------------------------------------------------------------


11. 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 nine months ended September 30, 2008, the Company paid $190,383 (September 30, 2007 - $147,000) to Namdo Management Services Ltd., a private corporation owned by Lukas H. Lundin, a director of the Company. The Company occupies space in the Namdo offices for the Chief Financial Officer, certain directors and Investor Relations personnel. Namdo charges a service fee and recovers out of pocket expenses related to Tanganyika's business.

b) During the Nine months ended September 30, 2008, the Company received $57,583 (September 30, 2007 - $127,773) from Pearl Exploration and Production Ltd. ("Pearl"). Tanganyika and Pearl share office space in Calgary, Alberta and as a result incur common costs that are allocated, invoiced and recovered between the Companies. The Company and Pearl had certain officers in common during the first nine months of 2008 and continue to have directors in common.

c) During the nine months ended September 30 2008, the Company received $49,765 (September 30, 2007 - $nil) from Africa Oil Corp ("AOC"). Tanganyika and AOC share office space in Calgary, Alberta and as a result incur common costs that are allocated, invoiced and recovered between the Companies. The Company and AOC had certain officers and directors in common during the first nine months of 2008 and continue to have directors in common.

12. Supplemental Cash Flow Information



Twelve
Three Three Nine Nine months
months months months months ending
ending Sept ending Sept ending Sept ending Sept December
30, 2008 30, 2007 30, 2008 30, 2007 31, 2007
--------------------------------------------------------------------------
Changes in
non-cash
working
capital:
Accounts
receivable
and other
assets and
advances (6,947,495) 8,869,902 (34,277,121) (14,981,255) (25,948,106)
Inventory 538,981 - (1,894,981) - (2,462,836)
Prepaid
expenses (533,747) (266,968) (250,958) (825,121) (1,220,935)
Accounts
payable
and
accrued
liabilities 3,569,848 3,061,418 15,500,975 10,032,406 16,818,384
---------------------------------------------------------------
(3,372,413) 11,664,352 (20,922,085) (5,773,970) (12,813,493)

Changes in
non-cash
working
capital
relating
to:
Operating
activities (6,262,994) 4,788,729 (33,027,535) 3,151,165 (22,478,501)
Investing
activities 2,890,581 6,875,623 12,105,450 (8,925,135) 9,665,009
---------------------------------------------------------------
(3,372,413) 11,664,352 (20,922,085) (5,773,970) (12,813,492)
---------------------------------------------------------------


13. Commitments and Contractual Obligations

Customary with the Company's ordinary business practices, it has entered into contracts and incurred obligations that will impact the Company's future operations and liquidity.



Payments due by Period
-------------------------------------------------------------
Less than 1 After 5
Total year 1 - 3 years 4 - 5 years years
-------------------------------------------------------------

Commitments
to
service
companies
(1) 4,749,160 4,749,160 - - -

Commitments
to
purchase
materials
(2) 27,959,985 27,959,985 - - -

Other
commitments 7,277,829 840,760 2,653,649 1,891,710 1,891,710
-------------------------------------------------------------
39,986,974 33,549,905 2,653,649 1,891,710 1,891,710
-------------------------------------------------------------


(1) The Company has entered into contractual arrangements with a number of service companies related to its Syrian work programs. The terms of certain contracts contain minimum levels of service, contract duration or fee levels. The associated expected committed cost of these contracts is reflected in the table above.

(2) The Company has entered into contractual arrangements with a number of companies to supply various materials related to its Syrian work programs. The expected committed cost related to the supply of these materials is reflected in the table above.

Under terms of the PSAs, SPC is entitled to receive bonuses related to the Company exceeding specified production levels.

Oudeh Block:

- $1.0 million dollars as a result of incremental production exceeding 10,000 BOPD for thirty consecutive days;

- $2.0 million dollars as a result of incremental production exceeding 20,000 BOPD for thirty consecutive days;

- $3.0 million dollars as a result of incremental production exceeding 30,000 BOPD for thirty consecutive days.

Tishrine-Sheikh Mansour Fields

- $2.25 million dollars as a result of incremental production exceeding 20,000 BOPD for thirty consecutive days;

- $4.5 million dollars as a result of incremental production exceeding 30,000 BOPD for thirty consecutive days.

14. Capital Structure

The Company's objective when managing capital is to maintain an appropriate debt to equity ratio consistent with the stage of development of the Company's proven, producing oil and gas reserve base.

The Company's capital structure is comprised of Shareholders' Equity. As oil production increases in Syria, cash flow from operations is expected to increasingly provide required capital for exploration and development activities. 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 appraisal and development programs out of operating cash flow and existing cash on hand. Accordingly, the Company will evaluate the stage of development of its proven and producing oil reserves and consider issuing equity or debt to provide additional financing for its planned exploration and development activities. The Company issued equity during the first quarter of 2008 (See Note 8).

15. Financial Instruments and Risk Management

Tanganyika's financial assets and liabilities at September 30, 2008 comprised cash, restricted cash, accounts receivable and accounts payable and accrued liabilities.

The Company is exposed to financial risks arising from its financial assets and liabilities; the Company does not use derivative instruments to manage its risks. The financial risks include commodity prices, foreign exchange rates, credit risk and liquidity risk.

Fair Value of Financial Assets and Liabilities

The fair values of cash, restricted cash, accounts receivable and accounts payable and accrued liabilities approximate their carrying values due to the short-term maturity of those instruments.

a) Commodity Price Risk

The Company is exposed to commodity price risk since its revenues are dependant on the price of petroleum and the fluctuations associated there with. The Company does not use derivative contracts to manage its exposure to the fluctuations of the price of petroleum.

b) Foreign Exchange Rates

The Company is exposed to foreign exchange risk because it operates internationally. The exposure arises from fluctuations in the US dollar relative to the Canadian dollar, Euro and Syrian pound.

c) Credit Risk

In accordance with the terms of the PSAs, the Company sells all of its oil to SPC. Management does not believe that this concentration of credit risk will result in any loss to the Company based on past payment experience.

d) Liquidity Risk

This is the risk that the Company may not be able to generate enough cash or obtain financing to meet its financial obligations as they come due. Tanganyika actively manages its use of cash in order to reduce its exposure to this risk and, as explained in note 14, the Company will consider the issuance of equity or debt to provide financing as required for future exploration and development.

16. 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 technical feasibility for extraction is demonstrated, the related capitalized costs are allocated to individual fields. This difference in accounting policy does not have a material impact on the Company's financial statements.

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.

17. Presentation

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



SUPPLEMENTARY INFORMATION

1. LIST OF DIRECTORS AND OFFICERS AT SEPTEMBER 30, 2008
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
Essam Zaghloul, VP, Asset Management
Diane Phillips, Corporate Secretary

2. FINANCIAL INFORMATION
The report for the fourth quarter 2008 will be published on or before
February 27, 2009.

3. OTHER INFORMATION
Address (Corporate Office)
#700, 444 -- 7th Avenue S.W.
Calgary, Alberta T2P 0X8
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