---

(Final)



Viceroy Exploration Ltd.(an exploration stage company)



Consolidated Financial StatementsFor the Years
Ended December 31, 2005 and 2004 (expressed in Canadian dollars)

---

Management Report

The accompanying consolidated financial statements and all
information in the Annual Report are the responsibility of management. These
consolidated financial statements have been prepared by management in accordance
with generally accepted accounting principles in Canada and reconciled to United
States generally accepted accounting principles. Management is responsible for
the information and representations in the consolidated financial statements,
including the estimates and judgements required for their preparation.

Management is also responsible for establishing and maintaining
internal controls and procedures over the financial reporting process designed
to provide reasonable assurance that assets are safeguarded and reliable
financial records are maintained.

The Board of Directors is responsible for ensuring that
management fulfills its responsibilities for financial reporting and internal
controls. The Board carries out this responsibility principally through its
Audit Committee.

The Audit Committee is appointed by the Board and consists
entirely of non-management directors. The Audit Committee meets with management
and the independent auditors to review any significant accounting, internal
control and auditing matters, and to review and finalize the annual financial
statements of the Company along with the independent auditors report prior to
the submission of the financial statements to the Board of Directors for final
approval.

PricewaterhouseCoopers LLP, Chartered Accountants, having been
appointed by the shareholders to serve as the Companys external auditors, have
examined the consolidated financial statements of the Company and their report
follows.

|*"Patrick G. Downey "*                | *"John P. Fairchild "* 
|------------------------------------- | -----------------------
|                                      |                        
|Patrick G. Downey                     | John P. Fairchild      
|President and Chief Executive Officer | Chief Financial Officer
|                                      |                        
|                                      |                        
|Vancouver, British Columbia           |                        
|March 10, 2006                        |                        

---

|                                                                                                           |                                                                                                                                                                                                                                                      
|---------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Independent
        Auditors Report
      
      To the Shareholders of 
        Viceroy Exploration Ltd. | PricewaterhouseCoopers LLP
      Chartered Accountants
      PricewaterhouseCoopers Place
      250 Howe Street, Suite 700
      Vancouver, British Columbia
      Canada V6C 3S7
      Telephone +1 (604) 806 7000
      Facsimile +1 (604) 806 7806

We have audited the consolidated balance sheets of Viceroy Exploration
  Ltd. (an exploration stage company) as at December 31, 2005 and 2004 and the
  consolidated statements of operations and deficit and cash flows for years then
  ended. These financial statements are the responsibility of the Companys
  management. Our responsibility is to express an opinion on these financial statements
  based on our audits.

We conducted our audits in accordance with Canadian generally
accepted auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.

In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the Company as at
December 31, 2005 and 2004 and the results of its operations and its cash flows
for the years then ended in accordance with Canadian generally accepted
accounting principles.



Chartered Accountants

Vancouver, British Columbia March 10, 2006

---

|Viceroy Exploration Ltd.             
|-------------------------------------
|(an exploration stage company)       
|Consolidated Balance Sheets          
|as at December 31                    
|(expressed in
      Canadian dollars)

|                                                                              |  | 2005       |   |  | 2004       |  
|----------------------------------------------------------------------------- |  | ---------- | - |  | ---------- | -
|                                                                              |  | $          |   |  | $          |  
|Assets                                                                        |  |            |   |  |            |  
|                                                                              |  |            |   |  |            |  
|Current assets                                                                |  |            |   |  |            |  
|Cash and cash equivalents                                                     |  | 23,116,259 |   |  | 14,498,984 |  
|Prepaid expenses and accounts receivable                                      |  | 143,884    |   |  | 188,633    |  
|                                                                              |  | 23,260,143 |   |  | 14,687,617 |  
|                                                                              |  |            |   |  |            |  
|Exploration properties(note 3)                                                |  | 19,944,753 |   |  | 9,920,885  |  
|                                                                              |  |            |   |  |            |  
|Furniture and equipment  corporate office(note 4)                            |  | 48,708     |   |  | 29,441     |  
|                                                                              |  |            |   |  |            |  
|                                                                              |  | 43,253,604 |   |  | 24,637,943 |  
|                                                                              |  |            |   |  |            |  
|Liabilities                                                                   |  |            |   |  |            |  
|                                                                              |  |            |   |  |            |  
|Current liabilities                                                           |  |            |   |  |            |  
|Accounts payable and accrued liabilities                                      |  | 959,140    |   |  | 256,582    |  
|                                                                              |  |            |   |  |            |  
|Shareholders Equity                                                          |  |            |   |  |            |  
|                                                                              |  |            |   |  |            |  
|Capital stock(42,033,043 common
      shares; 2004  35,370,308) (note 6 (b)) |  | 45,116,078 |   |  | 25,812,231 |  
|                                                                              |  |            |   |  |            |  
|Stock options and warrants(note 6
      (e))                                  |  | 4,125,351  |   |  | 2,394,260  |  
|                                                                              |  |            |   |  |            |  
|Deficit                                                                       |  | (6,946,965 | ) |  | (3,825,130 | )
|                                                                              |  |            |   |  |            |  
|                                                                              |  | 42,294,464 |   |  | 24,381,361 |  
|                                                                              |  |            |   |  |            |  
|                                                                              |  | 43,253,604 |   |  | 24,637,943 |  
|Nature of operations(note 1)                                                  |  |            |   |  |            |  
|                                                                              |  |            |   |  |            |  
|Subsequent events(note 12)                                                    |  |            |   |  |            |  

Approved by the Board of Directors



|*"W. David Black"* |  | *"Robert V. Matthews"*
|------------------ |  | ----------------------
|Director           |  | Director              

---

|Viceroy Exploration Ltd.                         
|-------------------------------------------------
|(an exploration stage company)                   
|Consolidated Statements of Operations and Deficit
|for the years ended December 31                  
|(expressed in
      Canadian dollars)            

|                                                               |  | 2005       |   |  | 2004       |  
|-------------------------------------------------------------- |  | ---------- | - |  | ---------- | -
|                                                               |  | $          |   |  | $          |  
|                                                               |  |            |   |  |            |  
|Expenses                                                       |  |            |   |  |            |  
|Stock-based compensation                                       |  |            |   |  |            |  
|Directors/officers/employees (note 6 (e))                      |  | 1,624,434  |   |  | 748,421    |  
|Other consultants (note 6 (e))                                 |  | 353,985    |   |  | 434,664    |  
|                                                               |  | 1,978,419  |   |  | 1,183,085  |  
|                                                               |  |            |   |  |            |  
|Salaries, benefits and officer consultants                     |  | 689,772    |   |  | 638,684    |  
|Stock exchange/transfer agent/listing
      application        |  | 221,640    |   |  | 40,920     |  
|Professional fees                                              |  | 162,322    |   |  | 78,224     |  
|Shareholders communication                                    |  | 44,083     |   |  | 68,892     |  
|Amortization                                                   |  | 33,244     |   |  | 11,284     |  
|Investor relations                                             |  | 304,770    |   |  | 192,801    |  
|Travel and lodging                                             |  | 13,035     |   |  | 40,470     |  
|Office and miscellaneous                                       |  | 203,351    |   |  | 137,349    |  
|                                                               |  |            |   |  |            |  
|Loss before the following                                      |  | 3,650,636  |   |  | 2,391,709  |  
|                                                               |  |            |   |  |            |  
|Interest income                                                |  | (479,782   | ) |  | (83,916    | )
|                                                               |  |            |   |  |            |  
|(Gain) loss/write-down on sale of
      short-term investments |  | (64,613    | ) |  | 19,487     |  
|                                                               |  |            |   |  |            |  
|Bad debt on sale of non-consolidated legacy
      subsidiary   |  | 30,532     |   |  | -          |  
|                                                               |  |            |   |  |            |  
|Foreign exchange (gain) loss                                   |  | (14,938    | ) |  | 50,441     |  
|                                                               |  |            |   |  |            |  
|Loss for the year                                              |  | 3,121,835  |   |  | 2,377,721  |  
|                                                               |  |            |   |  |            |  
|Deficit - Beginning of year                                    |  | 3,825,130  |   |  | 1,447,409  |  
|                                                               |  |            |   |  |            |  
|Deficit - End of year                                          |  | 6,946,965  |   |  | 3,825,130  |  
|                                                               |  |            |   |  |            |  
|Basic and diluted loss per share                               |  | 0.08       |   |  | 0.08       |  
|                                                               |  |            |   |  |            |  
|Weighted average number of shares
      outstanding            |  | 38,663,030 |   |  | 29,232,390 |  

---

|Viceroy Exploration Ltd.             
|-------------------------------------
|(an exploration stage company)       
|Consolidated Statements of Cash Flows
|for the years ended December 31      
|(expressed in
      Canadian dollars)

|                                                          |  | 2005       |   |  | 2004       |  
|--------------------------------------------------------- |  | ---------- | - |  | ---------- | -
|                                                          |  | $          |   |  | $          |  
|                                                          |  |            |   |  |            |  
|Cash flows (used in) from operating activities            |  |            |   |  |            |  
|Loss for the year                                         |  | (3,121,835 | ) |  | (2,377,721 | )
|                                                          |  |            |   |  |            |  
|Non-cash charges (note 9 (a))                             |  | 1,927,115  |   |  | 1,213,856  |  
|Changes in non-cash working capital items (note 9 (b))    |  | 24,928     |   |  | (90,136    | )
|                                                          |  |            |   |  |            |  
|                                                          |  | (1,169,792 | ) |  | (1,254,001 | )
|                                                          |  |            |   |  |            |  
|Cash flows (used in) from investing activities            |  |            |   |  |            |  
|Exploration properties (note 9 (c))                       |  | (8,949,109 | ) |  | (3,466,743 | )
|Furniture and equipment  corporate office                |  | (52,511    | ) |  | (40,725    | )
|Proceeds on sale of short-term investment                 |  | 84,548     |   |  | 57,014     |  
|                                                          |  |            |   |  |            |  
|                                                          |  | (8,917,072 | ) |  | (3,450,454 | )
|                                                          |  |            |   |  |            |  
|Cash flows from financing activities                      |  |            |   |  |            |  
|Bought deal financing  net                               |  | 17,283,418 |   |  | -          |  
|Private placement proceeds  net (note 9
      (d))       |  | -          |   |  | 11,417,706 |  
|Exercise of warrants and stock options                    |  | 1,420,721  |   |  | 3,068,703  |  
|                                                          |  |            |   |  |            |  
|                                                          |  | 18,704,139 |   |  | 14,486,409 |  
|                                                          |  |            |   |  |            |  
|Increase in cash and cash equivalents                     |  | 8,617,275  |   |  | 9,781,954  |  
|                                                          |  |            |   |  |            |  
|Cash and cash equivalents - Beginning of year             |  | 14,498,984 |   |  | 4,717,030  |  
|                                                          |  |            |   |  |            |  
|Cash and cash equivalents - End of year                   |  | 23,116,259 |   |  | 14,498,984 |  
|                                                          |  |            |   |  |            |  
|Cash and cash equivalents consist of :                    |  |            |   |  |            |  
|Cash and
      deposit accounts with banks and brokerages |  | 23,116,259 |   |  | 14,498,984 |  

---

|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in
      Canadian dollars)         

|1 | Nature of operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | The principal focus of the Company is development of its
      100% owned Gualcamayo gold property in Argentina. In August 2004, the
      Company completed a first phase exploration program on the property which
      included a reverse-circulation drill program and in December 2004 began a
      second phase of exploration consisting mainly of diamond drilling. Also in
      December 2004, a new resource estimate was completed on the three zones of
      mineralization on the property. On January 12, 2005, the Company announced
      completion of a Preliminary Economic Assessment on the main zone of
      mineralization within the property. Based on the recommendations of the
      Preliminary Economic Assessment, the Company continued engineering studies
      throughout 2005 in preparation for a feasibility study in 2006.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | During 2005, the second phase drilling program continued
      on the three zones of mineralization, a regional exploration program
      began, and in December 2005 the second phase drilling program was
      completed with final assays pending as of year end. Also during 2005, the
      Company accelerated, among others, technical engineering, metallurgical
      and environmental impact studies.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | The recoverability of the amounts shown for exploration
      properties is dependent upon the existence of economically recoverable
      reserves, maintaining title and beneficial interest in the properties, the
      ability of the Company to obtain necessary financing to complete the
      development, and upon future profitable production. The amounts shown as
      property acquisition costs do not necessarily represent present or future
      values.                                                                                                                                                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | Although the Company has taken steps to verify title to
      exploration properties in which it has an interest, in accordance with
      industry standards for the current stage of exploration of such
      properties, these procedures do not guarantee the Companys title.
      Property title may be subject to unregistered prior agreements or
      transfers and may be affected by undetected defects.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|2 | Significant accounting policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | Generally accepted accounting principles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | These consolidated financial statements have been
      prepared in accordance with Canadian generally accepted accounting
      principles. Significant measurement differences between Canadian and U.S.
      generally accepted accounting principles, as they relate to these
      financial statements, are described in note 11.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | Principles of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | These consolidated financial statements include the
      accounts of the Company and its wholly owned subsidiaries Oro Belle
      Resources Corporation, Minera De Oro (BVI) Inc., Minas Argentinas
      (Barbados) Inc. and Minas Argentinas S.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | The preparation of financial statements in conformity
      with generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the
      date of the financial statements and the reported amounts of expenditures
      during the reporting period. Actual results could differ from those
      reported.                                                                                                                                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | Foreign currency translations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  | The Companys subsidiaries are integrated foreign
      operations and are translated into Canadian dollars using the temporal
      method. Monetary items are translated at the exchange rate in effect at
      the balance sheet date; non-monetary items are translated at historical
      exchange rates. Income and expense items are translated at the average
      exchange rate for the period. Translation gains and losses are reflected
      in the statement of operations and deficit for the
  period.                                                                                                                                                                                                                                                                                                                                             

---

|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in Canadian
      dollars)         

Cash and cash equivalents

Cash and cash equivalents include cash
on hand, balances with banks and brokerages and highly liquid deposits with an
initial maturity of less than 90 days.

Short-term investments

Effective January 1, 2005, short-term
investments are classified as available-for-sale securities and recorded at fair
value. Previously, short-term investments were recorded at cost and written down
to estimated net recoverable amount if there was an other than temporary decline
in value. The net recoverable amount is based upon the short-term investments
quoted market value.

Exploration property costs

The Company records its interests in
exploration properties at cost. The costs of acquiring mineral properties and
related exploration and development expenditures are deferred and will be
amortized against future production following commencement of commercial
production or are written off if the properties are sold, allowed to lapse or
abandoned.

Management of the Company regularly
reviews the net carrying value of each mineral property. Where management
believes that the carrying value cannot be recovered, the carrying value is
written down to fair value.

Furniture and equipment  corporate
office

Furniture and equipment  corporate
office are recorded at cost and amortized on a straight-line basis over three
years beginning the quarter of purchase.

Income taxes

Income taxes are calculated using the
asset and liability method of accounting for future income taxes. Temporary
differences arising from the difference between the tax basis of an asset or
liability and its carrying amount on the balance sheet are used to calculate
future income tax liabilities or assets. Future income tax liabilities or assets
are calculated using tax rates anticipated to apply in the periods that the
temporary differences are expected to reverse.

Loss per common share

Loss per share is calculated based on
the weighted average number of common shares issued and outstanding during the
period. Diluted losses are calculated using the treasury stock method.

Stock-based compensation

The Company has a stock option plan and
records for stock option grants under the plan in accordance with the fair value
based method of accounting for stock-based compensation using the Black-Scholes
pricing model.

Consolidation of variable interest
entities

Effective January 1, 2005, the Company
adopted Accounting Guideline AcG-15, Consolidation of Variable Interest
Entities, which requires consolidation of entities in which the Company has a
controlling financial interest. The Company has determined that it has no
variable interest entities.

Financial instruments

The carrying values of cash and cash
equivalents, short-term investments, prepaid expenses and accounts receivable
and accounts payable and accrued liabilities approximate book values due to the
short term nature of these instruments.

---

|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in Canadian
      dollars)         

Financial instruments  recognition
and measurement, hedges, and comprehensive income

Effective January 1, 2005, the Company
adopted the new accounting standards for Financial Instruments  Recognition and
Measurement, Hedges, and Comprehensive Income.

Financial instruments other than trade
receivables, trade payables and certain other financial liabilities including
long-term debt are recorded at fair value, not historical cost. If a financial
instrument is measured at fair value, changes in its fair value are recognized
in operations in the period in which they occur except for investments, and
possibly certain other assets, designated as being available-for-sale. Changes
in the fair value are recorded directly in shareholders equity in a special
account called other comprehensive income until the asset disappears or is
impaired. At that time, the gains and losses are recycled to the operations
statement. The result of applying this standard is that income from these
investments will be reported in the operations statement as if the assets were
accounted for at historical cost.

There is no impact on these
consolidated financial statements resulting from the adoption of the
above-described new accounting standards.

|3 | Exploration properties                                                                                                                                                                                                                                                                                                                                                  
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                         
|  | The gold exploration properties are located in Argentina,
      substantially all in San Juan province, and are subject to net smelter
      royalties ranging between 1.0% and 3.5%. Certain net smelter royalties set
      at 2.5% on specific claims and leases are capped at US$700,000. A 3%
      royalty on production is payable to the Province of San
  Juan.

| |                      |  | December 31, 2005 | 
| | -------------------- |  | ----------------- | 
| |                      |  | Acquisition       | 
| |                      |  | cost              | 
| |                      |  | $                 | 
| |                      |  |                   | 
| | Property             |  |                   | 
| |                      |  |                   | 
| | Gualcamayo           |  | 5,298,770         | 
| | Salamanca            |  | 260,187           | 
| | Las Flechas          |  | 200,000           | 
| | Evelina              |  | 200,000           | 
| | La Brea/Las Carachas |  | 100,000           | 
| |                      |  |                   | 
| |                      |  | 6,058,957         | 

| |                      |  | December 31, 2004 | 
| | -------------------- |  | ----------------- | 
| |                      |  | Acquisition       | 
| |                      |  | cost              | 
| |                      |  | $                 | 
| |                      |  |                   | 
| | Property             |  |                   | 
| |                      |  |                   | 
| | Gualcamayo           |  | 5,298,770         | 
| | Salamanca            |  | 260,187           | 
| | Las Flechas          |  | 200,000           | 
| | Evelina              |  | 200,000           | 
| | La Brea/Las Carachas |  | 100,000           | 
| |                      |  |                   | 
| |                      |  | 6,058,957         | 

---

|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in Canadian
      dollars)         

By option agreement dated as of July
26, 2004 with effect from April 30, 2004 between the Company and a wholly owned
Argentine subsidiary of Tenke Mining Corp., a Toronto Stock Exchange (TSX)
listed company, the Tenke subsidiary may earn a 75% interest in the Las Flechas
property through expenditures with a pre-agreed minimum annual exploration
expenditures aggregating to US$4.5 million over 5.1 years to June 30, 2009. In
June 2005, the agreement was continued for the second year.

Gualcamayo property exploration
expenditures are as follows:

Balance
    
    
    
    Balance
    
    
    
    BalanceJanuary 1
    
    Expenditures
    
    December 31,
    
    Expenditures
    
    December 31,2004
    
    in 2004
    
    2004
    
    in 2005
    
    2005$
    
    $
    
    $
    
    $
    
    $Drilling
    -
    
    1,058,581
    
    1,058,581
    
    2,628,200
    
    3,686,781Geologist and engineerssalaries/fees/travel/lodging
    122,753
    
    620,643
    
    743,396
    
    750,575
    
    1,493,971Stock-based compensation(note 6 (e))
    -
    
    -
    
    -
    
    214,019
    
    214,019Bonus shares (note 6 (b))
    -
    
    -
    
    -
    
    138,361
    
    138,361Field support
    83,898
    
    629,743
    
    713,641
    
    1,649,540
    
    2,363,181Assays
    38,940
    
    208,879
    
    247,819
    
    330,755
    
    578,574EIS/property permits/canonpayments
    31,923
    
    80,611
    
    112,534
    
    379,166
    
    491,700Road maintenance/drill pads
    3,637
    
    238,762
    
    242,399
    
    812,181
    
    1,054,580Location administration/officesupport
    59,790
    
    185,604
    
    245,394
    
    312,842
    
    558,236Vehicles/equipment/camp
    -
    
    60,732
    
    60,732
    
    505,404
    
    566,136Access road
    -
    
    -
    
    -
    
    690,484
    
    690,484Engineering studies
    -
    
    42,673
    
    42,673
    
    429,340
    
    472,013Argentine value added tax
    12,483
    
    382,276
    
    394,759
    
    1,112,599
    
    1,507,358353,424
    
    3,508,504
    
    3,861,928
    
    9,953,466
    
    13,815,394


The Company does not have any
significant asset retirement obligations at this stage of its activities.

|4 | Furniture and equipment  corporate
  office
|- | --------------------------------------------

| |                         |  | December 31, 2005 | 
| | ----------------------- |  | ----------------- | 
| |                         |  |                   | 
| |                         |  | Cost              | 
| |                         |  | $                 | 
| | Furniture and equipment |  | 45,810            | 
| | Computer equipment      |  | 47,426            | 
| |                         |  | 93,236            | 
| |                         |  |                   | 
| |                         |  | December 31, 2004 | 
| |                         |  |                   | 
| |                         |  | Cost              | 
| |                         |  | $                 | 
| | Furniture and equipment |  | 25,786            | 
| | Computer equipment      |  | 14,939            | 
| |                         |  | 40,725            | 

---

|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in Canadian
      dollars)         

|5 | Income taxes                                                                         
|- | -------------------------------------------------------------------------------------
|  |                                                                                      
|  | As at December 31, 2005, the Company has the following
      tax loss carry forwards:

| | Country   | Category           | Amount $   | Expiry   
| | --------- | ------------------ | ---------- | ---------
| | Argentina | Operating losses   | 10,781,000 | 2007-2010
| | Canada    | Non-capital losses | 7,717,000  | 2006-2013
| |           | Net capital losses | 50,721,000 | N/A      

In Argentina, as at December 31, 2005,
the tax basis of deferred exploration expenditures exceeds the accounting basis
balance of deferred exploration expenditures by approximately $2,705,000.

Future income tax assets are not
recorded for the above tax loss carry forwards and exploration expenditures
temporary difference due to the significant uncertainty of their recovery. The
tax loss carry forwards and exploration expenditures temporary difference may be
subject to audit and adjustment by local tax authorities.

|6 | Capital stock
|- | -------------
|  |              
|  | a)           
|  |              
|  |              
|  |              
|  | b)           

| |                                                                           |  |                  |  |  | Amount     |  
| | ------------------------------------------------------------------------- |  | ---------------- |  |  | ---------- | -
| |                                                                           |  | Number of shares |  |  | $          |  
| |                                                                           |  |                  |  |  |            |  
| | Balance  January 1, 2004                                                 |  | 24,471,158       |  |  | 11,284,526 |  
| |                                                                           |  |                  |  |  |            |  
| | Exercise of private placement warrants                                    |  | 4,200,000        |  |  | 2,520,000  |  
| | Exercise of brokers warrants                                             |  | 350,000          |  |  | 285,679    |  
| | Exercise of stock options                                                 |  | 744,500          |  |  | 545,954    |  
| | Private placement                                                         |  | 5,604,650        |  |  | 12,330,230 |  
| | Related share issue costs, including
      $241,634 stock-based payment   |  | -                |  |  | (1,154,158 | )
| |                                                                           |  |                  |  |  |            |  
| | Balance  December 31, 2004                                               |  | 35,370,308       |  |  | 25,812,231 |  
| |                                                                           |  |                  |  |  |            |  
| | Bought deal financing                                                     |  | 5,750,000        |  |  | 18,687,500 |  
| | Related $1,121,250 underwriters fee and $282,832 expenses
      of issue |  |                  |  |  | (1,404,082 | )
| | Exercise of private placement warrants                                    |  | 215,881          |  |  | 593,673    |  
| | Exercise of brokers warrants                                             |  | 76,854           |  |  | 263,726    |  
| | Exercise of stock options                                                 |  | 590,000          |  |  | 1,024,669  |  
| | Issue of bonus shares                                                     |  | 30,000           |  |  | 138,361    |  
| |                                                                           |  |                  |  |  |            |  
| | Balance  December 31, 2005                                               |  | 42,033,043       |  |  | 45,116,078 |  

---

|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in Canadian
      dollars)         

On November 18, 2003, the Company
completed a private placement for a total of 4,200,000 units for gross proceeds
of $2,100,000. Each unit consisted of one common share and one warrant entitling
the holder to purchase one additional common share at a price of $0.60 until
November 18, 2006. In addition, brokers involved received commission of $102,300
cash and 350,000 warrants (valued at $75,680) to acquire an additional 350,000
shares at an exercise price of $0.60 per share until November 18, 2004. All
above-described warrants were exercised in 2004.

On December 6, 2004, the Company
completed a private placement for a total of 5,604,650 units for gross proceeds
of $12,330,230. Each unit consisted of one common share and one-half
transferable warrant each whole warrant (2,802,325 warrants) entitling the
holder to purchase one additional common share at a price of $2.75 until
December 6, 2006. In addition, brokers involved received commission of $780,015
cash and 354,552 non-transferable warrants (valued at $241,634) to acquire an
additional 354,552 shares at an exercise price of $2.75 per share until December
6, 2006.

On July 5, 2005, the Company completed
a bought deal financing for a total of 5,750,000 common shares for gross
proceeds of $18,687,500.

On December 20, 2005, a total of
30,000 bonus shares were issued among three project consultants, pursuant to the
Companys Stock Option and Share Compensation Plan. The shares were priced at
fair value as of the date of issue.

| | c) | Warrants
| | -- | --------

| |                                          |             | Weighted average
| | ---------------------------------------- | ----------- | ----------------
| |                                          | Number of   | exercise price  
| |                                          | shares      | $               
| |                                          |             |                 
| | Balance  January 1, 2004                | 4,550,000   | 0.60            
| |                                          |             |                 
| | Exercise of private placement warrants   | (4,200,000) | 0.60            
| | Exercise of brokers commission warrants | (350,000)   | 0.60            
| | Private placement                        | 2,802,323   | 2.75            
| | Brokers commission                      | 354,552     | 2.75            
| |                                          |             |                 
| | Balance  December 31, 2004              | 3,156,875   | 2.75            
| |                                          |             |                 
| | Exercise of private placement warrants   | (215,881)   | 2.75            
| | Exercise of brokers commission warrants | (76,854)    | 2.75            
| |                                          |             |                 
| | Balance  December 31, 2005              | 2,864,140   | 2.75            

As at December 31, 2005, a total
2,864,140 warrants are outstanding, each warrant entitling the holder to
purchase one common share at a price of $2.75, for a total of $7,876,385, until
December 6, 2006.

| | d) | Stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | In the period from January 1, 2004 to April 29, 2005, the
      Company had a stock option plan under which the Company may grant options
      to its directors, officers, employees and consultants for up to 10% of the
      issued and outstanding common shares of the Company. The maximum term of
      grant was five years, with the vesting period determined at the discretion
      of the Board of Directors. The exercise price of each option was no less
      than the closing price on the trading day immediately preceding the day on
      which the Company announced the grant of the option or, if the grant was
      not announced, on the grant date less applicable discount, if any,
      permitted by the policies of the regulatory authorities and approved by
      the Board of Directors.

---

|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in Canadian
      dollars)         

At the Companys annual meeting of
shareholders held April 22, 2005, the shareholders ratified, subject to
regulatory approval which has since been received, a new 10% rolling stock
option plan called the Stock Option and Share Compensation Plan which is
consistent with the policies of the TSX and took effect on April 29, 2005
subject to the listing of the Companys shares on the TSX. The Companys common
shares were listed and posted for trading on the TSX at the opening on May 2,
2005 and were simultaneously delisted from the TSX Venture Exchange.

| |                                                                           |           | Weighted        
| | ------------------------------------------------------------------------- | --------- | ----------------
| |                                                                           |           | average exercise
| |                                                                           | Number of | price           
| |                                                                           | shares    | $               
| |                                                                           |           |                 
| | Balance  January 1, 2004                                                 | 2,039,500 | 0.83            
| |                                                                           |           |                 
| | Granted to directors/officers/employees                                   | 778,000   | 1.62            
| | Granted to other consultants                                              | 520,000   | 1.40            
| | Exercise of options by
      directors/officers/employees                 | (405,000) | 0.51            
| | Exercise of options granted pursuant to a 2003 acquisition                | (339,500) | 0.39            
| |                                                                           |           |                 
| | Balance  December 31, 2004                                               | 2,593,000 | 1.29            
| |                                                                           |           |                 
| | Granted to directors/officers/employees                                   | 1,012,000 | 2.87            
| | Granted to project geologists and engineers
      capitalized to property |           |                 
| | exploration expenditures                                                  | 185,000   | 4.07            
| | Granted to other consultants                                              | 270,000   | 2.51            
| | Exercise of options by directors/officers/employees                       | (510,000) | 0.93            
| | Exercise of options by other consultants                                  | (80,000)  | 1.70            
| |                                                                           |           |                 
| | Balance  December 31, 2005                                               | 3,470,000 | 2.03            

As at December 31, 2004, options
granted with vesting requirements were fully vested.

As at December 31, 2005, two options
for 90,000 shares are subject to vesting over various periods to March 10, 2006.

The following table summarizes
information on stock options outstanding at December 31, 2005:

Range of
    
    Weighted average
    Weighted averageexercise prices
    Number of
    remaining
    exercise price$
    shares
    contractual life in years
    $0.50  0.93
    120,000
    2.82
    0.571.25  1.35
    1,273,000
    3.01
    1.261.57
    450,000
    3.70
    1.572.25  2.46
    1,027,000
    3.96
    2.423.24  3.55
    510,000
    4.82
    3.484.61
    90,000
    4.97
    4.613,470,000
    3.69
    2.03


---

|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in Canadian
      dollars)         

The following table summarizes
information on stock options outstanding at December 31, 2004:

Weighted averageRange of
    Number of
    remaining
    Weighted averageexercise prices
    shares
    contractual life in years
    exercise price$
    
    
    $0.50
    300,000
    3.70
    0.500.93 -1.35
    1,613,000
    3.50
    1.231.57
    480,000
    4.70
    1.572.25
    200,000
    4.81
    2.252,593,000
    3.84
    1.29


| | e) | Stock options and warrants
| | -- | --------------------------

| |                                                                                   |  | Number of |   |  | Amount    |  
| | --------------------------------------------------------------------------------- |  | --------- | - |  | --------- | -
| |                                                                                   |  | shares    |   |  | $         |  
| |                                                                                   |  |           |   |  |           |  
| | Balance  January 1, 2004                                                         |  | 2,389,500 |   |  | 1,252,471 |  
| |                                                                                   |  |           |   |  |           |  
| | Stock-based compensation to
      directors/officers/employees                    |  | 778,000   |   |  | 748,421   |  
| | Stock-based compensation to other consultants                                     |  | 520,000   |   |  | 434,664   |  
| | Stock-based payment of warrants granted as
      brokers commission              |  | 354,552   |   |  | 241,634   |  
| | Exercise of stock-based compensation to directors/officers/
      employees       |  | (405,000  | ) |  | (147,539  | )
| | Exercise of warrants granted as brokers
      commission                         |  | (350,000  | ) |  | (75,680   | )
| | Exercise of options granted pursuant to a 2003 acquisition                        |  | (339,500  | ) |  | (59,711   | )
| |                                                                                   |  |           |   |  |           |  
| | Balance  December 31, 2004                                                       |  | 2,947,552 |   |  | 2,394,260 |  
| |                                                                                   |  |           |   |  |           |  
| | Stock-based compensation to directors/officers/employees                          |  | 1,012,000 |   |  | 1,624,434 |  
| | Stock-based compensation to other
      consultants                               |  | 270,000   |   |  | 353,985   |  
| | Stock-based compensation to project geologists and
      engineers capitalized to |  |           |   |  |           |  
| | property exploration
      expenditures                                           |  | 95,000    |   |  | 214,019   |  
| | Stock-based compensation to project geologist and engineer
      not vested       |  | 90,000    |   |  | -         |  
| | Exercise of stock-based compensation by
      directors/officers/employees        |  | (510,000  | ) |  | (332,891  | )
| | Exercise of stock-based compensation by other consultants                         |  | (80,000   | ) |  | (76,078   | )
| | Exercise of stock-based compensation by
      brokers warrants                   |  | (76,854   | ) |  | (52,378   | )
| |                                                                                   |  |           |   |  |           |  
| | Balance  December 31, 2005                                                       |  | 3,747,698 |   |  | 4,125,351 |  

---

|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in Canadian
      dollars)         

Assumptions used in calculating the
fair value of stock-based compensation using the Black-Scholes pricing model
are:

For the year ended December 31, 2005:

| |                                   |                        |                  | Stock options granted to
| | --------------------------------- | ---------------------- | ---------------- | ------------------------
| |                                   |                        |                  | project geologists and  
| |                                   | Stock options granted  | Stock options    | engineers capitalized to
| |                                   | to directors/officers/ | granted to other | property exploration    
| |                                   | employees              | consultants      | expenditures            
| |                                   |                        |                  |                         
| | Number of common shares           | 1,012,000              | 270,000          | 185,000                 
| | Grant price per share             | $2.46 - $3.55          | $2.46 - $3.55    | $3.70 - $4.61           
| | Exercise price per share          | $2.46 - $3.55          | $2.46 - $3.55    | $3.55 - $4.61           
| | Risk-free interest rate (percent) | 3.73 - 3.75            | 3.73  3.75      | 3.73  3.84             
| | Annual dividend per share         | nil                    | nil              | nil                     
| | Price volatility (percent)        | 56  69                | 56  69          | 69                      
| | Option life in years              | 5                      | 5                | 5                       
| | Weighted average grant date fair  |                        |                  |                         
| | value per share                   | $2.87                  | $2.51            | $4.07                   

For the year ended December 31, 2004:

| |                                   | Stock options granted  | Stock options    | Warrants granted
| | --------------------------------- | ---------------------- | ---------------- | ----------------
| |                                   | to directors/officers/ | granted to other | as brokers     
| |                                   | employees              | consultants      | commission      
| |                                   |                        |                  |                 
| | Number of common shares           | 778,000                | 520,000          | 354,552         
| | Grant price per share             | $1.26 - $2.25          | $0.93 - $1.57    | $2.37           
| | Exercise price per share          | $1.26 - $2.25          | $0.93 - $1.57    | $2.75           
| | Risk-free interest rate (percent) | 3.73 - 4.13            | 3.84 - 4.13      | 2.86            
| | Annual dividend per share         | nil                    | nil              | nil             
| | Price volatility (percent)        | 55-90                  | 56-90            | 58              
| | Option/warrant life in years      | 5                      | 5                | 2               
| | Weighted average grant date fair  |                        |                  |                 
| | value per share                   | $0.96                  | $0.84            | $0.68           

|7 | Related party transactions
|- | --------------------------
|  |                           
|  | a)                        
|  |                           
|  | b)                        
|  |                           
|  | c)                        

---

|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in Canadian
      dollars)         

|8 | Geographic segment information                
|- | ----------------------------------------------
|  |                                               
|  | Assets by geographic segment are as
  follows:

December 31,
    
    
    December 31,2005
    
    
    2004$
    
    
    $Canada
    
    22,633,525
    
    
    14,646,602Argentina
    
    20,604,375
    
    
    9,991,341Barbados
    
    15,704
    
    
    -43,253,604
    
    
    24,637,943


|9 | Supplemental cash flow
  information
|- | ------------------------------------

| | a) | Changes in non-cash charges:
| | -- | ----------------------------

| |                                                                |  | 2005      |   |  | 2004      | 
| | -------------------------------------------------------------- |  | --------- | - |  | --------- | 
| |                                                                |  | $         |   |  | $         | 
| | Amortization                                                   |  | 33,244    |   |  | 11,284    | 
| | Stock-based compensation                                       |  | 1,978,419 |   |  | 1,183,085 | 
| | (Gain) loss/write-down on sale of
      short-term investments |  | (64,613   | ) |  | 19,487    | 
| | Rent recovery                                                  |  | (19,935   | ) |  | -         | 
| |                                                                |  | 1,927,115 |   |  | 1,213,856 | 

| | b) | Changes in non-cash working capital
  items:
| | -- | --------------------------------------------

| |                                                                       |  | 2005    |   |  | 2004    |  
| | --------------------------------------------------------------------- |  | ------- | - |  | ------- | -
| |                                                                       |  | $       |   |  | $       |  
| | Decrease (increase) in prepaid expenses and
      accounts receivable |  | 44,749  |   |  | (27,308 | )
| | Decrease in accounts payable and accrued liabilities                  |  | (19,821 | ) |  | (62,828 | )
| |                                                                       |  | 24,928  |   |  | (90,136 | )

| | c) | The Company entered into the following non-cash investing
      activities:
| | -- | ---------------------------------------------------------------------------

| |                                                                     |  | 2005    |  |  | 2004 | 
| | ------------------------------------------------------------------- |  | ------- |  |  | ---- | 
| |                                                                     |  | $       |  |  | $    | 
| |                                                                     |  |         |  |  |      | 
| | Stock-based compensation to project
      geologists and engineers  |  |         |  |  |      | 
| | capitalized to property exploration
      expenditures              |  | 214,019 |  |  | -    | 
| | Bonus shares capitalized to property
      exploration expenditures |  | 138,361 |  |  | -    | 

| | d) | The Company entered into the following non-cash financing
      activities:
| | -- | ---------------------------------------------------------------------------

| |                                        |  | 2005 |  |  | 2004    | 
| | -------------------------------------- |  | ---- |  |  | ------- | 
| |                                        |  | $    |  |  | $       | 
| |                                        |  |      |  |  |         | 
| | Share issue costs, stock-based payment |  | -    |  |  | 241,634 | 

---

|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in Canadian
      dollars)         

|10 | Operating lease obligations                                               
|-- | --------------------------------------------------------------------------
|   |                                                                           
|   | As at December 31, 2005, operating lease obligations are
      as follows:

| |                  |  | Payments due by period | 
| | ---------------- |  | ---------------------- | 
| |                  |  |                        | 
| |                  |  | Total                  | 
| |                  |  | $                      | 
| |                  |  |                        | 
| | Vancouver office |  | 118,853                | 
| | Argentina office |  | 7,377                  | 
| |                  |  |                        | 
| |                  |  | 126,230                | 

|11 | United States generally accepted accounting
      principles                                                                                                                                                                                                                                            
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                         
|   | The consolidated financial statements have been prepared
      in accordance with generally accepted accounting principles (GAAP) in
      Canada which conforms in all material respects with United States
      generally accepted accounting principles (U.S. GAAP) except as described
      below:
|   |                                                                                                                                                                                                                                                                                                         
|   | a)                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                         
|   | b)                                                                                                                                                                                                                                                                                                      

The significant quantitative effects on the consolidated
  financial statements relative to U.S. GAAP are as follows:

| | i. | Consolidated Statements of
Operations
| | -- | -------------------------------------

| |                                                                         |  | 2005        |   |  | 2004       |  
| | ----------------------------------------------------------------------- |  | ----------- | - |  | ---------- | -
| |                                                                         |  | $           |   |  | $          |  
| | Loss                                                                    |  |             |   |  |            |  
| | As reported under Canadian GAAP                                         |  | (3,121,835  | ) |  | (2,377,721 | )
| | Adjustment for exploration expenditures in the year                     |  | (10,023,868 | ) |  | (3,508,504 | )
| |                                                                         |  |             |   |  |            |  
| | Loss under U.S. GAAP before other comprehensive income
      adjustment |  | (13,145,703 | ) |  | (5,886,225 | )
| |                                                                         |  |             |   |  |            |  
| | Other comprehensive gain:                                               |  |             |   |  |            |  
| | unrealized holding loss                                                 |  | -           |   |  | 9,796      |  
| |                                                                         |  |             |   |  |            |  
| | Comprehensive loss under U.S. GAAP                                      |  | (13,145,703 | ) |  | (5,876,429 | )
| |                                                                         |  |             |   |  |            |  
| | Loss per share under U.S. GAAP                                          |  | (0.34       | ) |  | (0.20      | )

| | ii. | 
| | --- | 

---

|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in Canadian
      dollars)         

| | iii. | Consolidated Balance Sheets
| | ---- | ---------------------------

| |                                                          |  | 2005        |   |  | 2004       |  
| | -------------------------------------------------------- |  | ----------- | - |  | ---------- | -
| |                                                          |  | $           |   |  | $          |  
| |                                                          |  |             |   |  |            |  
| | Exploration properties                                   |  |             |   |  |            |  
| | As reported under Canadian GAAP                          |  | 19,944,753  |   |  | 9,920,885  |  
| | Adjustment for cumulative exploration
      expenditures |  | (13,885,796 | ) |  | (3,861,928 | )
| |                                                          |  |             |   |  |            |  
| | Exploration properties under U.S. GAAP                   |  | 6,058,957   |   |  | 6,058,957  |  
| |                                                          |  |             |   |  |            |  
| | Shareholders Equity                                     |  |             |   |  |            |  
| | As reported under Canadian GAAP                          |  | 42,294,464  |   |  | 24,381,361 |  
| | Adjustment for cumulative exploration
      expenditures |  | (13,885,796 | ) |  | (3,861,928 | )
| |                                                          |  |             |   |  |            |  
| | Shareholders Equity under U.S. GAAP                     |  | 28,408,668  |   |  | 20,519,433 |  

| | iv. | Consolidated Cash Flows
| | --- | -----------------------

| |                                                               |  | 2005        |   |  | 2004       |  
| | ------------------------------------------------------------- |  | ----------- | - |  | ---------- | -
| |                                                               |  | $           |   |  | $          |  
| |                                                               |  |             |   |  |            |  
| | Cash flows used in operating activities                       |  |             |   |  |            |  
| | As reported under Canadian GAAP                               |  | (1,169,792  | ) |  | (1,254,001 | )
| | Adjustment for exploration expenditures in
      the year     |  | (8,949,109  | ) |  | (3,466,743 | )
| |                                                               |  |             |   |  |            |  
| | Cash flows used in operating activities
      under U.S. GAAP |  | (10,118,901 | ) |  | (4,720,744 | )
| |                                                               |  |             |   |  |            |  
| | Cash flows (used in) from investing
      activities          |  |             |   |  |            |  
| | As reported under Canadian GAAP                               |  | (8,917,072  | ) |  | (3,450,454 | )
| | Adjustment for exploration expenditures in
      the year     |  | 8,949,109   |   |  | 3,466,743  |  
| |                                                               |  |             |   |  |            |  
| | Cash flows from investing activities under
      U.S. GAAP    |  | 32,037      |   |  | 16,289     |  

| | v. | Recent accounting pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | Uncertain Tax Positions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | In July 2005, Financial Accounting Standards Board (FASB)
      Exposure Draft, Accounting for Uncertain Tax Positions  an Interpretation
      of FASB Statement 109, was released for comment. Its principal purpose is
      to give guidance on recording tax provisions, if any. Under the draft,
      with respect to tax exposure, a liability for the full amount of the tax
      exposure is to be recorded if it is not probable that the filing position
      will be sustained and no liability for exposure is to be recorded if it is
      probable that the filing position will be sustained.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The FASB and the International Accounting Standards Board
      (IASB) have a joint short-term convergence project underway that includes
      this topic and the FASB has decided to consider proposals from this joint
      project prior to proceeding with the Exposure Draft, Accounting for
      Uncertain Tax Positions.                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | In Canada, the Accounting Standards Board is undertaking
      a project on income taxes to converge certain aspects of Section 3465,
      Income Taxes, with amendments being considered as part of the
      above-referred joint FASB/IASB short-term convergence project. The portion
      of the Canadian project addressing Accounting for Uncertain Tax Positions
      may be issued separately from the main project, with a final standard
      being issued in 2006 and with an effective date in
2006.                                                                                             

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|Viceroy Exploration Ltd.                      
|----------------------------------------------
|(an exploration stage company)                
|Notes to Consolidated Financial Statements    
|for the years ended December 31, 2005 and 2004
|(expressed in Canadian
      dollars)         

The Company has determined that the
U.S. rule, if enacted, has no material impact on the Companys financial
statements.

Stripping Costs Incurred during
Production

Effective for reporting periods
beginning after December 15, 2005, the FASB ratified the consensus reached by
the Emerging Issues Task Force in release of Issue 04-6, that stripping costs
incurred during the production phase of a mine are variable production costs
that should be included in the cost of inventory produced (that is extracted)
during the period that the stripping costs are incurred. The Task Force noted
that the consensus does not address the accounting for stripping costs during
the pre-production phase of a mine.

In Canada, the Emerging Issues
Committee (EIC) issued Draft Abstract D56 on October 17, 2005, Accounting or
Stripping Costs in the Mining Industry. In respect of stripping costs incurred
during the production phase, the EIC reached a consensus that stripping costs in
the production phase should be capitalized if the stripping activity can be
shown to represent a betterment to the mineral property. This being the case, a
difference between U.S. and Canadian GAAP would arise.

The Company will comply with the EIC
pronouncement as appropriate and will report any significant differences to U.S.
GAAP.

|12 | Subsequent Events                                                                                                              
|-- | -------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                
|   | During the period from January 1, 2006 to February 28,
      2006, the Company issued common shares from treasury as
  follows:

| |                                                                                    |  | Number of  |  |  | Amount     | 
| | ---------------------------------------------------------------------------------- |  | ---------- |  |  | ---------- | 
| |                                                                                    |  | shares     |  |  | $          | 
| |                                                                                    |  |            |  |  |            | 
| | Bought deal financing, net of underwriters
      fee and estimated issue expenses |  | 9,600,000  |  |  | 56,650,000 | 
| | Exercise of brokers warrants                                                      |  | 198,729    |  |  | 681,943    | 
| | Exercise of private placement warrants                                             |  | 275,736    |  |  | 758,274    | 
| | Exercise of stock options to                                                       |  |            |  |  |            | 
| | - directors/officers/employees                                                     |  | 440,000    |  |  | 1,497,400  | 
| | - other consultants                                                                |  | 5,000      |  |  | 27,984     | 
| |                                                                                    |  |            |  |  |            | 
| |                                                                                    |  | 10,519,465 |  |  | 59,615,601 | 

On February 16, 2006, the Company
completed a bought deal financing with a syndicate of underwriters which
resulted in the Company issuing 9,600,000 of its common shares at a price of
$6.25 per share for total gross proceeds of $60,000,000 before a 5% cash
commission of $3,000,000 and issue expenses estimated at $350,000. The net
proceeds, together with the Companys existing funds, will be used by the
Company for the exploration and advancement of the Companys Gualcamayo gold
project in San Juan province, Argentina, and for general working capital.

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