EXHIBIT 20.2
                                                                    ------------

















                                COMPTON PETROLEUM CORPORATION
                                CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2006


<PAGE>

INDEPENDENT AUDITORS' REPORT


To the Shareholders of
COMPTON PETROLEUM CORPORATION


We  have  audited  the  accompanying  consolidated  balance  sheets  of  Compton
Petroleum  Corporation  as at December  31,  2006 and 2005 and the  consolidated
statements of earnings,  retained earnings,  and cash flow for each of the three
years in the period  ended  December  31,  2006.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance with Canadian  generally accepted auditing
standards and the standards of the Public  Company  Accounting  Oversight  Board
(United  States).  Those standards  require that we plan and perform an audit to
obtain  reasonable  assurance  whether  the  financial  statements  are  free of
material misstatement. Our audit of the financial statements includes examining,
on a  test  basis,  evidence  supporting  the  amounts  and  disclosures  in the
financial  statements.  A financial  statement audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as at
December 31, 2006 and 2005 and the results of its  operations  and cash flow for
each of the three years in the period ended December 31, 2006 in accordance with
Canadian generally accepted accounting principles.

Canadian generally accepted  accounting  principles vary in certain  significant
respects from accounting  principles  generally accepted in the United States of
America.  Information  relating to the nature and effect of such differences are
presented in Note 20 to the consolidated financial statements.

We also have  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States),  the effectiveness of the Company's
internal  control over  financial  reporting  as of December 31, 2006,  based on
criteria  established in Internal  Control - Integrated  Framework issued by the
Committee of Sponsoring  Organizations of the Treadway Commission (COSO) and our
report dated March 23, 2007,  expressed an unqualified  opinion on  management's
assessment of internal  controls  over  financial  reporting and an  unqualified
opinion on the effectiveness of internal controls over financial reporting.




Calgary, Canada                                  /s/ Grant Thornton LLP
March 23, 2007                                   Chartered Accountants


<PAGE>

INDEPENDENT AUDITORS' REPORT


To the Shareholders of
COMPTON PETROLEUM CORPORATION


We have audited management's assessment, included in the accompanying Management
Report that Compton Petroleum Corporation  maintained effective internal control
over financial reporting as of December 31, 2006, based on criteria  established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway  Commission  (COSO).  The Company's  management is
responsible for maintaining  effective internal control over financial reporting
and for its assessment of the  effectiveness  of internal control over financial
reporting.  Our responsibility is to express opinions on management's assessment
and on the  effectiveness  of the  Company's  internal  control  over  financial
reporting based on our audit.

We  conducted  our  audit  of  internal  control  over  financial  reporting  in
accordance with the standards of the Public Company  Accounting  Oversight Board
(United States).  Those standards  require that we plan and perform the audit to
obtain  reasonable  assurance  about  whether  effective  internal  control over
financial  reporting  was  maintained  in all  material  respects.  Our audit of
internal control over financial reporting included obtaining an understanding of
internal control over financial reporting,  evaluating management's  assessment,
testing  and  evaluating  the design and  operating  effectiveness  of  internal
control,  and performing such other procedures as we considered necessary in the
circumstances.  We believe that our audit  provides a  reasonable  basis for our
opinions.

A company's  internal control over financial  reporting is a process designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that (i) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions of the assets of the company;  (ii)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company;  and (iii) provide  reasonable  assurance  regarding  prevention or
timely  detection  of  unauthorized  acquisition,  use, or  dispositions  of the
company's assets that could have a material effect on the financial statements.

Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion,  management's  assessment that the Company maintained  effective
internal  control  over  financial  reporting  as at December 31, 2006 is fairly
stated,  in all material  respects,  based on criteria  established  in Internal
Control - Integrated Framework issued by COSO. Also, in our opinion, the Company
maintained, in all material respects,  effective internal control over financial
reporting  as of December 31, 2006,  based on criteria  established  in Internal
Control - Integrated Framework issued by COSO.

We also have audited,  in accordance with Canadian  generally  accepted auditing
standards and the standards of the Public  Company  Accounting  Oversight  Board
(United States),  the consolidated  balance sheets of the Company as at December
31, 2006 and 2005 and the consolidated statements of earnings, retained earnings
and cash flow for each of the three years in the period ended  December 31, 2006
and our report dated March 23, 2007,  expressed an unqualified  opinion on those
financial statements.



Calgary, Canada                                  /s/ Grant Thornton LLP
March 23, 2007                                   Chartered Accountants

<PAGE>

COMPTON PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS
As at December 31,                                     2006                2005
--------------------------------------------------------------------------------
(thousands of dollars)

ASSETS

Current
  Cash                                          $       12,232     $      8,954
  Accounts receivable                                   83,535          122,073
  Unrealized risk management
     gain (Note 16a (i))                                22,625                -
  Other current assets (Note 16b (ii))                  24,513           10,726
  Future income taxes (Note 15b)                         1,479            2,609
                                                --------------     ------------
                                                       144,384          144,362

Property and equipment (Note 4 and 19)               1,977,062        1,587,371
Goodwill (Note 2)                                        7,914            7,914
Deferred financing charges and other (Note 8)           14,144           12,841
Deferred risk management loss
   (Note 16a (ii))                                        3,968            5,610
                                                --------------     ------------

                                                $    2,147,472     $  1,758,098
                                                ==============     ============

LIABILITIES

Current
  Accounts payable                              $     141,443      $    203,869
  Unrealized risk management loss
    (Note 16a (i) and (iii))                             4,604            7,758
  Future income taxes (Note 15b)                         7,269                -
                                                --------------     ------------

                                                      153,316           211,627

Bank debt (Note 5)                                    330,000           177,900
Senior term notes (Note 6)                            524,385           357,640
Asset retirement obligations (Note 10)                 29,791            20,770
Unrealized risk management loss
  (Note 16a (iii))                                      6,816            10,201
Future income taxes (Note 15b)                        302,690           314,726
Non-controlling interest (Note 3)                      66,350            68,898
                                                --------------     ------------

                                                    1,413,348         1,161,762
                                                --------------     ------------

SHAREHOLDERS' EQUITY

Capital stock (Note 11b)                              231,992           226,444
Contributed surplus (Note 12a)                         16,974             9,173
Retained earnings                                     485,158           360,719
                                                --------------     ------------

                                                      734,124           596,336
                                                --------------     ------------

                                                $   2,147,472      $  1,758,098
                                                ==============     ============


Commitments and contingent liabilities (Note 18)
Subsequent events (Note 19)

On behalf of the Board

/s/ M.F. Belich, Q.C.                        /s/ J.A. Thomson, C.A.
Director                                     Director


        See accompanying notes to the consolidated financial statements.

<PAGE>

COMPTON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>

Years ended December 31,                                         2006            2005             2004
--------------------------------------------------------------------------------------------------------
(thousands of dollars, except per share data)

<S>                                                      <C>               <C>              <C>
REVENUE
  Oil and natural gas revenues                           $     533,656     $   557,879      $   391,659
  Royalties                                                   (123,677)       (132,717)         (93,416)
                                                         --------------    ------------     ------------
                                                               409,979         425,162          298,243
                                                         --------------    ------------     ------------
EXPENSES
  Operating                                                     95,462          66,802           55,655
  Transportation                                                12,564          10,858            8,595
  General and administrative                                    26,231          21,223           15,215
  Interest and finance charges (Note 7)                         54,075          34,951           33,733
  Tender costs (Note 8)                                              -          20,750                -
  Depletion and depreciation                                   143,057         105,504           82,554
  Foreign exchange (gain) (Note 9)                                (891)         (7,353)         (14,631)
  Accretion of asset retirement obligations (Note 10)            2,257           1,975            1,670
  Stock-based compensation (Note 12a and c)                     10,488           5,903            3,410
  Risk management (gain)  loss (Note 16a (iv))                 (63,721)         19,302            8,808
                                                         --------------    ------------     ------------
                                                               279,522         279,915          195,009
                                                         --------------    ------------     ------------

EARNINGS BEFORE TAXES AND NON-CONTROLLING INTEREST             130,457         145,247          103,234
                                                         --------------    ------------     ------------

INCOME TAXES  (Note 15a)
  Current                                                           44           5,071            2,751
  Future                                                        (3,636)         52,317           33,432
                                                         --------------    ------------     ------------
                                                                (3,592)         57,388           36,183
                                                         --------------    ------------     ------------

EARNINGS BEFORE NON-CONTROLLING  INTEREST                      134,049          87,859           67,051
  Non-controlling interest (Note 3)                              6,623           6,533            3,418
                                                         --------------    ------------     ------------

NET EARNINGS                                             $     127,426     $    81,326      $    63,633
                                                         ==============    ============     ============

NET EARNINGS PER SHARE (Note 13)
  Basic                                                  $        1.00     $      0.65      $      0.54
                                                         ==============    ============     ============

  Diluted                                                $        0.95     $      0.62      $      0.51
                                                         ==============    ============     ============

<CAPTION>

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

Years ended December 31,                                        2006            2005             2004
--------------------------------------------------------------------------------------------------------
(thousands of dollars)
<S>                                                   <C>                 <C>              <C>
RETAINED EARNINGS, beginning of year                     $     360,719    $    284,712      $   224,569
Net earnings                                                   127,426          81,326           63,633
Premium on redemption of shares (Note 11b)                      (2,987)         (5,319)          (3,490)
                                                         --------------    ------------     ------------

RETAINED EARNINGS, end of year                           $     485,158     $   360,719      $   284,712
                                                         ==============    ============     ============
</TABLE>

        See accompanying notes to the consolidated financial statements.

<PAGE>

COMPTON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Years ended December 31,                               2006            2005             2004
------------------------------------------------------------------------------------------------
(thousands of dollars)
<S>                                              <C>             <C>              <C>
OPERATING ACTIVITIES
   Net earnings                                  $    127,426     $     81,326     $    63,633
     Amortization of deferred charges and other         1,996            2,190           2,101
     Tender costs                                           -           20,750               -
     Depletion and depreciation                       143,057          105,504          82,554
     Accretion of asset retirement obligations          2,257            1,975           1,670
     Unrealized foreign exchange (gain)                  (665)          (7,808)        (14,652)
     Future income taxes                               (3,636)          52,317          33,432
     Unrealized risk management (gain) loss           (27,522)          10,171           2,179
     Stock-based compensation                           9,121            5,903           3,410
     Asset retirement expenditures                     (2,352)            (749)           (614)
     Non-controlling interest                           6,623            6,533           3,418
                                                 -------------    -------------    ------------
                                                      256,305          278,112         177,131
   Change in non-cash working capital (Note 17)        18,901            8,441         (12,594)
                                                 -------------    -------------    ------------

                                                      275,206          286,553         164,537
                                                 -------------    -------------    ------------

FINANCING ACTIVITIES
   Issuance (repayment) of bank debt                  152,100          (42,100)         43,373
   Issuance of senior notes                           174,930          353,130               -
   Issue costs on senior notes                         (3,408)         (12,670)              -
   Redemption of senior notes                          (7,520)        (199,973)              -
   Proceeds from share issuances, net                   4,672           89,752           3,258
   Proceeds from partnership unit issuance                  -                -          74,343
   Distributions to partner                            (9,171)          (9,172)         (6,114)
   Redemption of common shares                         (3,433)          (6,118)         (4,005)
   Change in non-cash working capital (Note 17)         1,278           (1,829)            324
                                                 -------------    -------------    ------------

                                                      309,448          171,020         111,179
                                                 -------------    -------------    ------------

INVESTING ACTIVITIES
   Property and equipment additions                  (490,429)        (484,213)       (296,676)
   Corporate acquisitions (Note 2)                          -                -         (12,132)
   Property acquisitions                              (34,444)         (28,575)        (20,830)
   Property dispositions                                1,350                -          19,276
   Change in non-cash working capital (Note 17)       (57,853)          54,101          29,166
                                                 -------------    -------------    ------------

                                                     (581,376)        (458,687)       (281,196)
                                                 -------------    -------------    ------------

CHANGE IN CASH                                          3,278           (1,114)         (5,480)

CASH, beginning of year                                 8,954           10,068          15,548
                                                 -------------    -------------    ------------

CASH, end of year                                $     12,232     $      8,954     $    10,068
                                                 =============    =============    ============
</TABLE>

        See accompanying notes to the consolidated financial statements.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

1.   SIGNIFICANT ACCOUNTING POLICIES

     Compton  Petroleum  Corporation  (the  "Company"  or  "Compton")  is in the
     business of the exploration for and production of petroleum and natural gas
     reserves in the Western Canada Sedimentary Basin.

a)   BASIS OF PRESENTATION

     The consolidated  financial statements of the Company have been prepared in
     accordance with accounting  principles  generally accepted in Canada within
     the framework of the  accounting  policies  summarized  below.  Information
     prepared in accordance with accounting principles generally accepted in the
     United States is included in Note 20.

     The consolidated  financial  statements include the accounts of the Company
     and its wholly owned subsidiaries.  The consolidated  financial  statements
     also include the accounts of Mazeppa  Processing  Partnership in accordance
     with Accounting Guideline 15 ("AcG-15") "Consolidation of Variable Interest
     Entities", as outlined in Note 3.

     All amounts are presented in Canadian dollars unless otherwise stated.

b)   MEASUREMENT UNCERTAINTY

     The timely  preparation of financial  statements  requires that  Management
     make  estimates  and  assumptions  and  use  judgment   regarding   assets,
     liabilities,  revenues,  and expenses.  Such estimates  relate primarily to
     transactions  and  events  that  have  not  settled  as of the  date of the
     financial statements. Accordingly, actual results may differ from estimated
     amounts as future confirming events occur.

     Amounts  recorded  for  depletion  and  depreciation,  and amounts  used in
     impairment  test  calculations  are based upon  estimates of petroleum  and
     natural gas reserves and future costs to develop those  reserves.  By their
     nature,  these estimates of reserves,  costs, and related future cash flows
     are subject to uncertainty,  and the impact on the  consolidated  financial
     statements of future periods could be material.

     The calculation of asset retirement  obligations  include  estimates of the
     ultimate  settlement amounts,  inflation factors,  credit adjusted discount
     rates,  and timing of settlement.  The impact of future  revisions to these
     assumptions  on the  consolidated  financial  statements of future  periods
     could be material.

     The values of  pension  assets  and  obligations  and the amount of pension
     costs  charged to net  earnings  depend on certain  actuarial  and economic
     assumptions which by their nature are subject to measurement uncertainty.

c)   PROPERTY AND EQUIPMENT

     i)   Capitalized costs

          The  Company  follows  the full  cost  method  of  accounting  for its
          petroleum and natural gas operations  within one Canadian cost centre.
          Under  this  method  all  costs  related  to the  exploration  for and
          development  of petroleum  and natural gas  reserves are  capitalized.
          Costs include lease  acquisition  costs,  geological  and  geophysical
          expenses,  costs of drilling both producing and  non-producing  wells,
          production  facilities,  future asset  retirement  costs,  and certain
          general and  administrative  expenses  directly related to exploration
          and development activities.

          Proceeds from the sale of properties are applied  against  capitalized
          costs, without any gain or loss being realized, unless such sale would
          significantly alter the rate of depletion and depreciation.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

1.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          Expenditures  related to  renewals  or  betterments  that  improve the
          productive  capacity  or extend the life of an asset are  capitalized.
          Maintenance  and  repairs,  other than  major  turnaround  costs,  are
          expensed as incurred.  Major turnaround costs are included in property
          and equipment when incurred and charged to depletion and  depreciation
          in the consolidated statement of earnings over the estimated period of
          time to the next scheduled turnaround.

     ii)  Depletion and depreciation

          Depletion and depreciation of property and equipment is provided using
          the  unit-of-production  method based upon estimated  proved petroleum
          and  natural  gas  reserves.  The  costs  of  significant  undeveloped
          properties  are excluded from costs  subject to depletion  until it is
          determined  whether or not proved  reserves  are  attributable  to the
          properties or impairment  has occurred.  Estimated  future costs to be
          incurred in  developing  proved  reserves are  included and  estimated
          salvage  values  are  excluded  in costs  subject  to  depletion.  For
          depletion and depreciation  purposes,  relative volumes of natural gas
          production  and  reserves  are  converted  at  the  energy  equivalent
          conversion  rate of six  thousand  cubic  feet of  natural  gas to one
          barrel of crude oil.

          Depreciation  of certain  midstream  facilities  is provided  for on a
          straight line basis over 30 years and depreciation of office equipment
          is provided for on a declining  balance  basis which range from 20% to
          30% per year.

     iii) Impairment test

          At each reporting  period the Company  performs an impairment  test to
          determine the  recoverability  of capitalized  costs  associated  with
          reserves. An impairment loss is recognized when the carrying amount of
          a cost centre exceeds its fair value.  The carrying amount of the cost
          centre is not  recoverable  if the carrying  amount exceeds the sum of
          the  undiscounted  cash flows from proved  reserves  plus the costs of
          unproved  properties.  If the sum of the cash  flows is less  than the
          carrying amount, the impairment loss is limited to the amount by which
          the carrying  amount  exceeds the sum of the fair value of  discounted
          proved and probable reserves and the costs of unproved properties that
          have  been  subject  to a  separate  impairment  test and  contain  no
          probable reserves.

     iv)  Asset retirement obligations

          The Company  recognizes the fair value of estimated  asset  retirement
          obligations  on the  consolidated  balance  sheet  when  a  reasonable
          estimate  of fair  value  can be made.  Asset  retirement  obligations
          include those legal  obligations where the Company will be required to
          retire tangible long-lived assets such as well sites,  pipelines,  and
          facilities.   The  asset  retirement  cost,  equal  to  the  initially
          estimated  fair  value  of  the  asset   retirement   obligation,   is
          capitalized  as part  of the  cost of the  related  long-lived  asset.
          Changes  in the  estimated  obligation  resulting  from  revisions  to
          estimated  timing or amount of undiscounted  cash flows are recognized
          as a change in the asset  retirement  obligation and the related asset
          retirement cost.

          Asset  retirement  costs are  amortized  using the  unit-of-production
          method  and  are  included  in  depletion  and   depreciation  in  the
          consolidated statement of earnings.  Increases in the asset retirement
          obligations  resulting  from  the  passage  of time  are  recorded  as
          accretion  of  asset   retirement   obligations  in  the  consolidated
          statement of earnings.

          Actual  expenditures  incurred  are charged  against  the  accumulated
          obligation.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

1.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     v)   Inventories

          Physical  inventory held for exploration,  development,  and operating
          activities  is  included in property  and  equipment  and is valued at
          cost.

d)   GOODWILL

     Goodwill is recorded on a corporate  acquisition when the purchase price is
     in excess of the fair values  assigned to assets  acquired and  liabilities
     assumed.  Goodwill is not amortized and an impairment  test is performed at
     least annually to evaluate the carrying  value. To assess  impairment,  the
     fair value of the  consolidated  entity,  excluding the Mazeppa  Processing
     Partnership,  is determined and compared to the carrying value. If the fair
     value is less than the  carrying  value then a second test is  performed to
     determine the amount of the impairment. Any loss recognized is equal to the
     difference  between the implied  fair value and the  carrying  value of the
     goodwill.

e)   FINANCIAL INSTRUMENTS AND DERIVATIVES

     Financial  instruments consist mainly of cash, accounts  receivable,  other
     current  assets,  accounts  payable,  and long-term  debt. The Company uses
     derivative  financial   instruments  for  non-trading  purposes  to  manage
     fluctuations in commodity  prices,  foreign  currency  exchange rates,  and
     interest  rates as  outlined  in Note 16. The  Company  has  elected not to
     designate  any of its current  risk  management  activities  as  accounting
     hedges and  accounts for all  derivative  financial  instruments  using the
     mark-to-market accounting method.

f)   JOINT OPERATIONS

     Certain  petroleum and natural gas  activities  are conducted  jointly with
     others. These consolidated  financial statements reflect only the Company's
     proportionate interest in such activities.

g)   EARNINGS PER SHARE AMOUNTS

     The Company uses the treasury stock method to determine the dilutive effect
     of stock  options.  This method  assumes that  proceeds  received  from the
     exercise of in-the-money stock options are used to repurchase common shares
     at the average  market price for the period.  Basic net earnings per common
     share are  determined  by dividing  net  earnings by the  weighted  average
     number of common shares outstanding during the period. Diluted earnings per
     share are computed by giving  effect to the  potential  dilution that would
     occur if stock options were exercised.

h)   INCOME TAXES

     Income taxes are recorded using the liability method of accounting.  Future
     income taxes are calculated based on the difference  between the accounting
     and  income  tax basis of an asset or  liability,  using the  substantively
     enacted   income  tax   rates.   Changes  in  income  tax  rates  that  are
     substantively enacted are reflected in the period the change occurs.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

1.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i)   REVENUE RECOGNITION

     Revenue  associated with the production and sale of crude oil, natural gas,
     and  natural  gas liquids  owned by the  Company is  recognized  when title
     passes to the customer  and delivery has taken place.  Revenue as reported,
     represents the Company's share and is presented  before royalty payments to
     governments and other mineral interest owners.  Other revenue is recognized
     in the period that the service is provided to the customer.

j)   STOCK-BASED COMPENSATION PLAN

     The Company records compensation expense in the consolidated  statements of
     earnings for stock options  granted to Directors,  Officers,  and employees
     using the fair-value  method.  Compensation  costs are recognized  over the
     vesting period and the fair values are determined  using the  Black-Scholes
     option pricing model.

     The Company also has an employee stock savings plan. The  contributions are
     recorded as compensation expense as incurred.

k)   DEFERRED FINANCING CHARGES

     Financing  costs  related to the issuance of senior term notes are deferred
     and are amortized over the term of the notes on a  straight-line  basis. If
     the notes are retired,  in whole or in part, prior to maturity,  a pro-rata
     share of the unamortized balance is expensed in the consolidated  statement
     of earnings.

l)   FOREIGN CURRENCY TRANSLATION

     Monetary  assets and  liabilities  of the Company that are  denominated  in
     foreign  currencies are translated into Canadian  dollars at the period-end
     exchange rate, with any resulting gain or loss recorded in the consolidated
     statement of earnings.

m)   DIVIDEND POLICY

     The Company  has  neither  declared  nor paid any  dividends  on its common
     shares.  The Company  intends to retain its earnings to finance  growth and
     expand its operations  and does not anticipate  paying any dividends on its
     common shares in the foreseeable future.

n)   DEFINED BENEFIT PENSION PLAN

     The Company  accrues for  obligations  under a defined benefit pension plan
     and the  related  costs,  net of  plan  assets  for  employees  of  Mazeppa
     Processing  Partnership.  The cost of the pension is actuarially determined
     using the projected  benefit method based on length of service and reflects
     Management's best estimate of expected plan investment performance,  salary
     escalation, and retirement age of employees.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

1.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

o)   RECENT ACCOUNTING PRONOUNCEMENTS

     In 2005, the Canadian  Institute of Chartered  Accountants  ("CICA") issued
     three new  accounting  standards:  Handbook  Section  1530,  "COMPREHENSIVE
     INCOME",  Handbook Section 3855,  "FINANCIAL  INSTRUMENTS - RECOGNITION AND
     MEASUREMENT",  and  Handbook  Section  3865,  "HEDGES".  The new  standards
     introduce the Consolidated  Statement of Comprehensive Income which is used
     to  temporarily  provide for gains and losses  including  foreign  currency
     translation  adjustments  and other  amounts  arising  from changes in fair
     value until they are realized and recorded in net  earnings.  As well,  all
     financial  instruments,  including  derivatives,  are to be included in the
     Company's consolidated balance sheet and measured at fair value. In certain
     situations  assets that are classified as held to maturity will continue to
     be measured at cost. The new standards also include  further  clarification
     on the  application  of hedge  accounting  which will have no impact on the
     Company's  financial  statements  which  currently  reflect  mark-to-market
     accounting  for derivative  instruments.  These new standards are effective
     for fiscal years  beginning on or after October 1, 2006 and early  adoption
     is permitted.  The Company has assessed the impact of these new  accounting
     standards on the consolidated  financial  statements at January 1, 2007 and
     has determined that:

     o    The balance in deferred  financing charges will no longer be disclosed
          separately  but will be netted against the  corresponding  senior term
          notes.

     o    The  presentation of accumulated  other  comprehensive  income will be
          similar to the presentation of United States accounting principles and
          reporting included in Note 20.

     o    The measurement  and recording of financial  instruments at fair value
          will  not  have  a  material  impact  on  the  Company's  consolidated
          financial statements.

     In July 2006, the CICA replaced Handbook Section 1506, "ACCOUNTING CHANGES"
     with a new Section 1506,  "ACCOUNTING  CHANGES" to substantially  harmonize
     with International  Accounting  Standards for the accounting and disclosure
     of changes in  accounting  estimates  and errors.  Under the new  standard,
     accounting  changes  should be  applied  retrospectively  unless  otherwise
     permitted or where  impracticable  to  determine.  In  addition,  voluntary
     changes in accounting  policy are made only if they result in the financial
     statements providing reliable and more relevant information. New disclosure
     is  required  for changes in  accounting  policies,  changes in  accounting
     estimates and  correction  of errors.  The standard is effective for fiscal
     years  beginning on or after  January 1, 2007.  The Company does not expect
     the  application of this revised  standard to have a material impact on the
     consolidated financial statements.

     In December 2006, the CICA issued two new  accounting  standards:  Handbook
     Section  3862,  "FINANCIAL  INSTRUMENTS  -  DISCLOSURES"  and Section 3863,
     "FINANCIAL  INSTRUMENTS -  PRESENTATION".  These new standards will require
     increased  disclosure of financial  instruments with particular emphasis on
     the risks associated with recognized and unrecognized financial instruments
     and how those risks are managed.  The  standards  are  effective for fiscal
     years  beginning  on or after  October 1, 2007 and the Company is currently
     assessing the impact on the consolidated financial statements.

     In December  2006,  the CICA  issued a new  accounting  standard:  Handbook
     Section 1535, "CAPITAL  DISCLOSURES",  requiring  disclosure of information
     about an entity's capital and the objectives,  policies,  and processes for
     managing  capital.  The standard is effective for fiscal years beginning on
     or after October 1, 2007 and the Company is currently  assessing the impact
     on the consolidated financial statements.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

1.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

p)   RECLASSIFICATION

     Certain amounts disclosed for prior years have been reclassified to conform
     with current period presentation.

2.   BUSINESS COMBINATIONS

On April 12, 2004 and November 15, 2004, respectively, the Company acquired 100%
of the issued and outstanding shares of Redwood Energy,  Ltd. and Mayfair Energy
Ltd. for total cash  consideration of $12.1 million plus the assumption of $12.1
million of debt.  Both  entities were  independent  exploration  and  production
companies with operations in the Company's core areas.

The business combinations have been accounted for using the purchase method with
results of operations included in the consolidated financial statements from the
date of acquisition.  Goodwill recognized on these transactions amounted to $7.9
million.

During the year ended  December  31,  2004,  both  companies  were wound up into
Compton Petroleum Corporation and dissolved.

3. NON-CONTROLLING INTEREST

Mazeppa  Processing  Partnership  ("MPP"  or  "the  Partnership")  is a  limited
partnership organized under the laws of the province of Alberta and owns certain
midstream  facilities,  including gas plants and pipelines in Southern  Alberta.
The Company  processes a  significant  portion of its  production  from the area
through  these  facilities  pursuant to a  processing  agreement  with MPP.  The
Company  does not have an  ownership  position  in MPP,  however,  the  Company,
through a management agreement,  manages the activities of MPP and is considered
to be the primary  beneficiary of MPP's  operations.  Pursuant to AcG-15,  these
consolidated   financial  statements  include  the  assets,   liabilities,   and
operations of the Partnership.  Equity in the  Partnership,  attributable to the
partners of MPP, is recorded on consolidation as a non-controlling  interest and
is comprised of the following:

As at December 31,                              2006                 2005
                                           -------------       -------------

Non-controlling interest,
     beginning of year                     $      68,898       $       71,537
   Earnings attributable to
     non-controlling interest                      6,623                6,533
   Distributions to limited partner               (9,171)              (9,172)
                                           -------------       --------------

Non-controlling interest, end of year      $      66,350       $       68,898
                                           =============       ==============

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

3. NON-CONTROLLING INTEREST (CONTINUED)

Commencing May 1, 2004, pursuant to the terms of a processing  agreement between
Compton and MPP,  Compton pays a monthly fee to MPP for the  transportation  and
processing of natural gas through the MPP owned facilities. The fee is comprised
of a fixed base fee of $764 thousand per month plus MPP operating  costs, net of
third party revenues. These amounts are eliminated from revenues and expenses on
consolidation.

The  processing  agreement  has a five year term ending April 1, 2009,  at which
time  Compton may renew the  agreement  under terms  determined  at that time or
purchase  the  Partnership  units for the  predetermined  amount of $55 million,
deemed  to be fair  value.  In the  event  that the  Company  does not renew the
processing  agreement nor exercise the purchase option,  the Limited Partner may
dispose of the Partnership units to an independent third party.

MPP has guaranteed payment of certain obligations of its limited partner under a
credit  agreement  between the limited  partner and a syndicate of lenders.  The
maximum  liability of the Partnership  under the guarantee is limited to amounts
due and payable to MPP by the Company pursuant to the processing agreement.  The
maximum  liability at December 31, 2006 was $21.4 million (2005 - $30.6 million)
payable over the remaining  term of the  processing  agreement.  The Company has
determined  that its exposure to loss under these  arrangements  is minimal,  if
any.

4. PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                                         ACCUMULATED
                                                                          DEPLETION
                                                                             AND
As at December 31, 2006                                  COST           DEPRECIATION             NET
                                                     -------------     ----------------     --------------
<S>                                                  <C>               <C>                  <C>
Exploration and development costs                    $  1,931,594      $      (482,524)     $   1,449,070
Production equipment and processing facilities            582,705              (77,863)           504,842
Inventory                                                   6,818                    -              6,818
Future asset retirement costs                              17,128               (4,906)            12,222
Office equipment                                            9,359               (5,249)             4,110
                                                     -------------     ----------------     --------------
                                                     $  2,547,604      $      (570,542)     $   1,977,062
                                                     =============     ================     ==============

<CAPTION>
                                                                         Accumulated
                                                                          depletion
                                                                             and
As at December 31, 2005                                  Cost           depreciation             Net
                                                     -------------     ----------------     --------------
<S>                                                  <C>               <C>                  <C>
Exploration and development costs                    $  1,553,543      $      (366,902)     $   1,186,641
Production equipment and processing facilities            436,948              (52,771)           384,177
Inventory                                                   6,469                    -              6,469
Future asset retirement costs                              10,365               (3,771)             6,594
Office equipment                                            7,641               (4,151)             3,490
                                                     -------------     ----------------     --------------
                                                     $  2,014,966      $      (427,595)     $   1,587,371
                                                     =============     ================     ==============
</TABLE>

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

4. PROPERTY AND EQUIPMENT (CONTINUED)

At December 31, 2006,  $9.6 million (2005 - $11.1 million)  relating to employee
salaries,  insurance costs and overhead recoveries determined in accordance with
industry procedures were capitalized.

As at December 31, 2006,  future capital  expenditures of $329.7 million (2005 -
$192.9  million,  2004 - $89.1  million),  as estimated by  independent  reserve
engineers,  relating to the development of proved reserves have been included in
costs subject to depletion.  The estimated salvage value of production equipment
and processing facilities at December 31, 2006 was $120.1 million (2005 - $108.6
million, 2004 - $81.0 million) and was excluded from costs subject to depletion.
Undeveloped  properties with a cost at December 31, 2006 of $202.9 million (2005
- $251.3 million, 2004 - $187.8 million) included in exploration and development
costs, have not been subject to depletion.

The  prices  used in the  evaluation  of the  carrying  value  of the  Company's
reserves for the purposes of the impairment test are:

                              NATURAL
As at December 31, 2006         GAS              OIL                NGL
                            -------------   ---------------     -------------
                              $ per mcf        $ per bbl          $ per bbl

2007                              7.77             63.95             60.66
2008                              8.27             65.20             60.10
2009                              8.19             62.83             58.37
2010                              8.18             60.37             56.69
2011                              8.37             58.72             55.21
Approximate % increase
   thereafter                      2.0%              2.0%              2.0%

5.     CREDIT FACILITIES

As at December 31,                          2006               2005
                                      ---------------     --------------
Authorized                            $      500,000      $     289,000
                                      ===============     ==============
Prime rate                            $       35,000      $      22,900
Bankers' Acceptance                          295,000            155,000
                                      ---------------     --------------
Utilized                              $      330,000      $     177,900
                                      ===============     ==============

As at December  31,  2006,  the Company had arranged  authorized  senior  credit
facilities  with a syndicate  of banks in the amount of $500  million.  Advances
under the facilities can be drawn and currently bear interest as follows:

       Prime rate plus 0.75%
       Bankers' Acceptance rate plus 1.75%
       LIBOR rate plus 1.75%

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

5. CREDIT FACILITIES (CONTINUED)

Margins  are  determined  based  on the  ratio  of  total  consolidated  debt to
consolidated  cash flow. The  facilities  reach term on July 4, 2007 and, if not
renewed, will mature 366 days later on July 5, 2008.

The senior credit  facilities  are secured by a first fixed and floating  charge
debenture in the amount of $1.0 billion  covering all the  Company's  assets and
undertakings.

6. SENIOR TERM NOTES

As at December 31,                                   2006            2005
                                                 -------------   ------------
Senior term notes
  US$450 million, 7.625% due December 1, 2013    $     524,385   $    349,770
  US$6.75 million, 9.90% due May 15, 2009                    -          7,870
                                                 -------------   ------------

                                                 $     524,385   $    357,640
                                                 =============   ============

On April 4, 2006,  the Company  issued an  additional  U.S.$150  million  7.625%
senior  term notes due 2013 under the same  terms and  conditions  as the 7.625%
notes outstanding at December 31, 2005. The proceeds from the issue of the notes
were used to repay a portion of the debt outstanding  under the Company's senior
credit facilities. The Company also used a portion of the proceeds to redeem the
balance of the U.S.$6.75  million 9.90% senior notes on May 16, 2006,  being the
first call date, at 104.95%.

In  November  2005,  the Company and a wholly  owned  subsidiary  of the Company
completed  a tender  offer  and  consent  solicitation  to amend  the  Indenture
relating to the 9.9%  notes.  The Company  and a wholly  owned  subsidiary  paid
107.195% plus accrued and unpaid interest for the U.S. 158.25 million 9.9% notes
tendered by the note  holders.  Information  related to the tender  costs can be
found in note 8.

The 7.625% notes are not  redeemable  by the Company  prior to December 1, 2009,
except in limited circumstances.  After that time, they can be redeemed in whole
or part, at the rates indicated below:

       December 1, 2009                                  103.813%
       December 1, 2010                                  101.906%
       December 1, 2011 and thereafter                   100.000%

The senior term notes are subordinate to the Company's senior credit facilities.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

7.     INTEREST AND FINANCE CHARGES

Amounts charged to expense during the year ended are as follows:

Years ended December 31,              2006             2005            2004
                                 -------------    -------------    ------------
Interest on bank debt, net       $      15,356    $      11,520    $      9,662
Interest on senior term notes           35,880           20,912          21,281
Finance charges                          2,839            2,519           2,790
                                 -------------    -------------    ------------

Total                            $      54,075    $      34,951    $     33,733
                                 =============    =============    ============

Finance charges include the  amortization of deferred  charges and other current
year expenses.

The  effective  interest rate on bank debt at December 31, 2006 was 5.6% (2005 -
4.2%).

8. DEFERRED FINANCING CHARGES AND OTHER

The  following  table  presents the  reconciliation  of the beginning and ending
aggregate  carrying  amount of deferred  financing  charges  associated with the
issue of senior term notes:

As at December 31,                                2006                 2005
                                              -------------        ------------
Deferred financing charges and
   other, beginning of year                   $     12,841         $     9,729
  Issue costs on 7.625% Senior Notes                 3,408              12,670
  Pro-rata reduction on repayment
    of 9.90% Senior Notes                             (293)             (7,053)
  Amortization expense                              (1,905)             (2,119)
  Other                                                 93                (386)
                                              -------------        ------------
Deferred financing charges and
   other, end of year                         $     14,144         $    12,841
                                              =============        ============

Costs incurred on the tender for the 9.90% senior term notes in 2005 were as
follows:

Year ended December 31,                                               2005
                                                                  ------------
Premium payment                                                   $     7,814
Consent solicitation fee                                                5,883
Pro-rata reduction of deferred financing charges
   on repayment of 9.90% Senior Notes                                   7,053
                                                                  -----------
Total                                                             $    20,750
                                                                  ===========

The balance of the 9.9% senior notes were  purchased in 2006  pursuant to a call
option provision and no additional tender costs were incurred.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

9. FOREIGN EXCHANGE (GAIN) LOSS

Amounts  charged to foreign  exchange  (gain) loss during the year ended were as
follows:

Years ended December 31,                  2006           2005           2004
                                      ---------      ---------     ----------
Foreign exchange gain on
   translation of US$ debt            $   (665)      $ (7,808)     $ (14,652)
Other foreign exchange (gain) loss        (226)           455             21
                                      ---------      ---------     ----------

Total                                 $   (891)      $ (7,353)     $ (14,631)
                                      =========      =========     ==========

10. ASSET RETIREMENT OBLIGATIONS

The  following  table  presents the  reconciliation  of the beginning and ending
aggregate  carrying amount of the obligations  associated with the retirement of
oil and natural gas assets:

As at December 31,                               2006                 2005
                                             -------------        ------------
 Asset retirement obligations,
   beginning of year                               20,770              18,006
 Liabilities incurred                               7,031               5,218
 Liabilities settled and disposed                    (267)             (1,275)
 Accretion expense                                  2,257               1,975
 Revision of estimates                                  -              (3,154)
                                             -------------        ------------
 Asset retirement obligations, end of year         29,791              20,770
                                             =============        ============

The total  undiscounted  amount of estimated  cash flows  required to settle the
obligations  was  $233.0  million  (2005  -  $185.8  million),  which  has  been
discounted using a credit-adjusted  risk free rate of 10.6% (2005 - 10.7%).  The
majority of these  obligations  are not expected to be settled for several years
or decades  into the future.  Settlements  will be funded from  general  Company
resources at the time of retirement and removal.

11.  CAPITAL STOCK

a)   AUTHORIZED

     The Company is authorized to issue an unlimited number of common shares and
     an unlimited number of preferred shares, issuable in series.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

11.  CAPITAL STOCK (CONTINUED)

b)   ISSUED AND OUTSTANDING

<TABLE>
<CAPTION>
      As at December 31,                                  2006                                  2005
                                             --------------------------------      --------------------------------
                                                NUMBER                                Number
                                                  OF                                    of
                                                SHARES             AMOUNT             Shares             Amount
                                             -------------       ------------      --------------      ------------
                                                   (000s)                                 (000s)
<S>                                          <C>                 <C>               <C>                 <C>
     Common shares outstanding,
       beginning of year                          127,263        $   226,444             117,354       $   135,526
       Shares issued for cash, net                      -                  -               7,500            87,294
       Shares issued under stock
        option plan                                 1,489              5,993               2,926             4,424
       Shares repurchased                            (249)              (445)               (517)             (800)
                                             -------------       ------------      --------------      ------------
      Common shares outstanding,
       end of year                                128,503        $   231,992             127,263       $   226,444
                                             =============       ============      ==============      ============
</TABLE>

     The  Company  maintains  a Normal  Course  Issuer Bid  program on an annual
     basis. Under the current program, the Company may purchase for cancellation
     up to 6,000,000 of its common shares,  representing  approximately  5.0% of
     the  issued  and  outstanding  common  shares at the time the bid  received
     regulatory approval.

     During the year,  the Company  purchased for  cancellation  248,900  common
     shares at an  average  price of $13.79  per  share  (2005 - 516,600  common
     shares at an  average  price of $11.84 per  share)  pursuant  to the normal
     course  issuer bid.  The excess of the  purchase  price over book value has
     been charged to retained earnings.

c)   SHAREHOLDER RIGHTS PLAN

     The  Company  has a  shareholder  rights  plan (the  "Plan")  to ensure all
     shareholders  are treated fairly in the event of a take-over offer or other
     acquisition of control of the Company.

     Pursuant to the Plan,  the Board of Directors  authorized  and declared the
     distribution of one Right in respect of each common share  outstanding.  In
     the event that an  acquisition  of 20% or more of the  Company's  shares is
     completed  and the  acquisition  is not a permitted  bid, as defined by the
     Plan,  each Right will permit the holder to acquire  common shares at a 50%
     discount to the market price at that time.

12.  STOCK-BASED COMPENSATION PLANS

a)   STOCK OPTION PLAN

     The Company has a stock option plan for employees,  including Directors and
     Officers.  The exercise price of each option  approximated the market price
     for the common shares on the date the option was granted.  Options  granted
     under the plan before June 1, 2003 are generally  fully  exercisable  after
     four years and expire ten years after the grant date. Options granted under
     the plan  after June 1, 2003 are  generally  fully  exercisable  after four
     years and expire five years after the grant date.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

12.  STOCK-BASED COMPENSATION PLANS (CONTINUED)

The  following tables summarize the information relating to stock options:

<TABLE>
<CAPTION>
      As at December 31,                                    2006                                  2005
                                                ------------------------------        -----------------------------
                                                                    WEIGHTED                             Weighted
                                                                    AVERAGE                              average
                                                   STOCK            EXERCISE             Stock           exercise
                                                  OPTIONS            PRICE              options           price
                                                -------------      -----------        ------------      -----------
                                                   (000S)                               (000s)
<S>                                             <C>                <C>                <C>               <C>
      Outstanding, beginning of year                  11,446            $6.13              11,655            $3.51
        Granted                                        2,228           $13.99               2,930           $11.89
        Exercised                                     (1,489)           $3.14              (2,926)           $1.32
        Cancelled                                       (574)          $10.92                (213)           $8.30
                                                =============      ===========        ============      ===========

      Outstanding, end of year                        11,611            $7.79              11,446            $6.13
                                                -------------      -----------        ------------      -----------

      Exercisable, end of year                         6,593            $4.82               6,219            $3.38
                                                =============      ===========        ============      ===========
</TABLE>

The range of exercise  prices of stock options  outstanding  and  exercisable at
December 31, 2006 is as follows:

<TABLE>
<CAPTION>
                                              Outstanding Options                          Exercisable Options
                                 ----------------------------------------------       ------------------------------
                                                    Weighted
                                                     average        Weighted                             Weighted
                                  Number of         remaining       average            Number of          average
                                   options         contractual      exercise            options          exercise
      RANGE OF EXERCISE PRICES   outstanding      life (years)       price           outstanding          price
      ------------------------  ------------      -----------      -----------       ------------      ------------
                                   (000s)                                               (000s)
<S>                              <C>                <C>            <C>                <C>               <C>
      $1.25 - $2.99                    1,859              2.2            $1.76              1,859             $1.76
      $3.00 - $3.99                    1,318              4.5            $3.51              1,242             $3.49
      $4.00 - $4.99                    1,402              5.1            $4.28              1,310             $4.25
      $5.00 - $6.99                      972              2.0            $5.86                727             $5.86
      $7.00 - $9.99                    1,267              2.4            $7.61                696             $7.61
      $10.00 - $12.99                  2,827              3.5           $11.64                660            $11.64
      $13.00 - $18.39                  1,966              4.1           $14.38                 99            $13.62
                                 ------------      -----------      -----------       ------------      ------------
                                      11,611              3.5            $7.79              6,593             $4.82
                                 ============      ===========      ===========       ============      ============
</TABLE>

      The  Company  has  recorded   stock-based   compensation  expense  in  the
      consolidated statement of earnings for stock options granted to employees,
      Directors, and Officers after January 1, 2003 using the fair value method.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

12.  STOCK-BASED COMPENSATION PLANS (CONTINUED)

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

      Years ended December 31,               2006        2005       2004
                                           ---------   ---------   --------
      Weighted average fair
        value of options granted              $6.90       $5.45      $3.70
      Risk-free interest rate                   4.0%        3.6%       3.9%
      Expected life (years)                     5.0         5.0        5.0
      Expected volatility                      43.5%       43.9%      49.6%

     The following table presents the reconciliation of contributed surplus with
     respect to stock-based compensation:

      As at December 31,                              2006            2005
                                                  ------------    ------------

      Contributed surplus, beginning of year      $     9,173     $     3,840
      Stock-based compensation expense                  9,121           5,903
      Stock options exercised                          (1,320)           (570)
                                                  ------------    ------------

      Contributed surplus, end of year            $    16,974     $     9,173
                                                  ============    ============

     The  Company  has not  recorded  stock-based  compensation  expense  in the
     consolidated  statement of earnings  related to stock options granted prior
     to 2003.  If the  Company  had  applied  the fair  value  method to options
     granted prior to 2003, the effect would have been as follows:

     Years ended December 31,                        2006     2005    2004
                                                    ------   ------  ------

     Reduction in net earnings                       $412    $1,007  $1,545
     Reduction in net earnings per common share -
      basic and diluted                             $0.00     $0.01   $0.01

b)   SHARE APPRECIATION RIGHTS PLAN

     CICA Handbook section 3870 requires  recognition of compensation costs with
     respect to changes in the  intrinsic  value for the  variable  component of
     fixed share appreciation  rights ("SARs").  During the years ended December
     31,  2006,  2005 and 2004,  there were no  significant  compensation  costs
     related to the outstanding  variable component of these SARs. The liability
     related to the variable  component  of these SARs amounts to $1.2  million,
     which is included in accounts  payable as at December 31, 2006 (2005 - $1.4
     million).  All  outstanding  SARs  having a  variable  component  expire at
     various times through 2011.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

12.  STOCK-BASED COMPENSATION PLANS (CONTINUED)

c)   EMPLOYEE RETENTION PROGRAM

     In recognition of the shortage of qualified personnel that currently exists
     within the industry,  the Company implemented an Employee Retention program
     in July 2006 for its existing employees,  excluding Officers and Directors.
     Under the program and contingent upon various conditions present as at July
     1, 2007, the Company may incur additional  compensation  costs to a maximum
     amount of $4.2  million.  During  the year  ended  December  31,  2006 $1.4
     million  has been  recognized  in  stock-based  compensation  expense  as a
     partial recognition of this potential  liability.  Any amount payable under
     the  program  will be paid on July 1, 2007 at which  time the final  amount
     will be fully determinable.

13.    PER SHARE AMOUNTS

The  following  table  summarizes  the common  shares  used in  calculating  net
earnings per common share:

Years ended December 31,             2006            2005            2004
                                -------------   -------------   -------------
                                   (000s)          (000s)          (000s)
Weighted average common shares
  outstanding - basic                127,820         125,627         117,244
Effect of stock options                5,806           6,040           6,789
                                -------------   -------------   -------------

Weighted average common shares
  outstanding - diluted              133,626         131,667         124,033
                                =============   =============   =============

In calculating diluted earnings per common share for the year ended December 31,
2006, the Company excluded 1,537,100 options (2005 - 331,800, 2004 - 288,000) as
the  exercise  price was  greater  than the average  market  price of its common
shares in those years.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

14.  DEFINED BENEFIT PENSION PLAN

There are 34  employees of MPP  currently  enrolled in a  co-sponsored,  defined
benefit  pension  plan.  The  Company  does not have a  pension  plan for  other
employees. Information relating to the MPP retirement plan is outlined below:

As at December 31,                                    2006                 2005
                                                   ------------    ------------
Accrued benefit obligation
   Accrued benefit obligation
     - beginning of year                           $     7,562     $     6,110
   Current service cost                                    368             284
   Interest cost                                           387             372
   Benefits paid                                          (392)           (378)
   Actuarial (gain) loss                                  (208)          1,174
                                                   ============    ============
   Accrued benefit obligation
     - end of year                                 $     7,717     $     7,562
                                                   ============    ============

Fair value of plan assets
   Fair value of plan assets
     - beginning of year                           $     5,839     $     5,221
   Employee contributions                                   82              75
   Employer contributions                                  439             308
   Benefits paid                                          (392)           (378)
   Actual return on plan assets                            667             613
                                                   ============    ============

   Fair value of plan assets - end of year         $     6,635     $     5,839
                                                   ============    ============

Accrued benefit asset
   Funded status - plan assets less
     than benefit obligation                            (1,082)         (1,723)
   Unamortized net actuarial gain                          414             891
   Unamortized past service costs                          793             862
                                                   ============    ============

   Accrued benefit asset, included
     in deferred financing charges and other
                                                   $       125     $        30
                                                   ------------    ------------

Economic  assumptions used to determine benefit  obligation and periodic expense
were:

Years ended December 31,                               2006           2005
                                                    ------------   ------------
Discount rate                                              5.0%           5.0%
Expected rate of return on assets                          7.0%           7.0%
Rate of compensation increase                              3.5%           3.5%
Average remaining service period
   of covered employees                                16 YEARS       15 years

Actuarial  evaluations are required every three years, the next evaluation being
January 1, 2009.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

14.  DEFINED BENEFIT PENSION PLAN (CONTINUED)

Pension expense, included in MPP operating costs, is as follows:

Years ended December 31,                              2006                2005
                                               ------------         -----------
Current service cost                           $       292          $      232
Interest on accrued benefit obligation                 387                 372
Interest on assets                                    (407)               (364)
Amortization on past service cost                       69                  69
Amortization of net actuarial loss                       9                   -
                                               ------------         -----------
Pension expense, included in
   operating expense                           $       350          $      309
                                               ============         ===========

MPP expects to contribute $437 thousand to the plan in 2007.

15.    INCOME TAXES

a)   The  following  table  reconciles  income taxes  calculated at the Canadian
     statutory rate with actual income taxes:

Years ended December 31,                2006            2005            2004
                                   -------------    ------------   -------------
Earnings before taxes and
   non-controlling interest        $    130,457     $   145,247    $    103,234
                                   -------------    ------------   -------------

Canadian statutory rate                   34.5%           37.6%           38.6%
Expected income taxes              $     45,008     $    54,613    $     39,848
Effect on taxes resulting from:
  Non-deductible Crown charges            2,145          15,061          17,611
  Resource allowance                     (1,987)        (11,980)        (13,535)
  Non-deductible stock-based
    compensation                          3,147           2,221           1,316
  Federal capital tax                         -           1,896           2,526
  Effect of tax rate changes            (49,655)         (5,764)         (8,359)
  Non-taxable portion of capital
    items                                  (115)              -          (2,831)
  Other                                  (2,135)          1,341            (393)
                                   -------------    ------------   -------------
Provision for income taxes         $    (3,592)     $    57,388    $     36,183
                                   -------------    ------------   -------------
Current
  Income taxes                     $         44     $     3,175    $        225
  Federal capital taxes                       -           1,896           2,526
Future                                  (3,636)          52,317          33,432
                                   -------------    ------------   -------------
                                   $    (3,592)     $    57,388    $     36,183
                                   =============    ============   =============

Effective tax rate                       (2.8)%           39.5%           35.0%
                                   =============    ============   =============

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

15.  INCOME TAXES (CONTINUED)

     A  significant  portion of the Company's  taxable  income is generated by a
     partnership. Income taxes are incurred on the majority of the partnership's
     taxable  income  in the  year  following  its  inclusion  in the  Company's
     consolidated net earnings.  Current income tax is dependent upon the amount
     of capital expenditures incurred and the method of deployment.

     During the  second  quarter  of 2006,  the  Canadian  Federal  and  Alberta
     governments enacted corporate tax rate reductions.

b)   The net future income tax liability is comprised of:

      As at December 31,                               2006               2005
                                                ------------        -----------
      Future income tax liabilities
        Property and equipment in
           excess of tax values                 $   229,936         $  232,258
        Timing of partnership items                  83,328             93,532
        Foreign exchange gain on
           long-term debt                             8,729             11,466
        Other                                         2,591                  -
      Future income tax assets
        Attributed Canadian royalty income           (7,462)            (8,830)
        Asset retirement obligations                 (8,642)            (6,984)
        Other                                              -            (9,325)
                                                ------------        -----------
      Net future income taxes                   $   308,480         $  312,117
                                                ============        ===========
      Net future income taxes                   $   308,480         $  312,117
      Current portion                                (5,790)             2,609
                                                ------------        -----------
      Non-current future income taxes           $   302,690         $  314,726
                                                ============        ===========

16.  FINANCIAL INSTRUMENTS

a)   DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT ACTIVITIES

     The  Company is exposed to risks from  fluctuations  in  commodity  prices,
     interest rates, and Canada/US currency exchange rates. The Company utilizes
     various derivative financial instruments for non-trading purposes to manage
     and mitigate its exposure to these risks.  Effective  January 1, 2004,  the
     Company elected to account for all derivative  financial  instruments using
     the mark-to-market method.

     Risk  management  activities  during  the  periods,   utilizing  derivative
     instruments,  relate to commodity price hedges,  foreign currency contracts
     and cross  currency  interest  rate swap  arrangements  and are  summarized
     below:


<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

16.  FINANCIAL INSTRUMENTS (CONTINUED)

     i)   COMMODITY PRICE HEDGES

          The Company enters into hedge  transactions  relating to crude oil and
          natural gas prices to mitigate  volatility in commodity prices and the
          resulting impact on cash flow. The contracts  entered into are forward
          transactions  providing  the  Company  with a range of  prices  on the
          commodities  sold.  Outstanding  hedge  contracts at December 31, 2006
          are:

<TABLE>
<CAPTION>
                                                            DAILY                                         MARK-
                                                          NOTIONAL               AVERAGE                TO-MARKET
      COMMODITY                      TERM                  VOLUME                 PRICE                   GAIN
<S>                            <C>                       <C>             <C>                       <C>
      Natural gas
        Collar                 Nov./06 - Mar./07         38,095 mcf      $8.43 - $11.15/mcf        $          5,818
        Collar                 Apr./07 - Oct./07         28,571 mcf      $6.74 - $9.28/mcf                    3,187
                                                                                                      --------------

                                                                                                              9,005
      Crude Oil
        Collar                 Jan./07 - Dec./07         3,000 bbls      US$75.00 - $84.55/bbl               13,620
                                                                                                      --------------
      Unrealized risk management gain                                                              $         22,625
                                                                                                      ==============
</TABLE>

          The following  financial  instruments  were entered into subsequent to
          December 31, 2006:

      Natural gas
        Collar            Apr./07 - Oct./07    14,286 mcf    $7.35 - $8.88/mcf

          At  December  31,  2005  the  mark-to-market  valuation  of  commodity
          contracts resulted in a $3.2 million unrealized risk management loss.

     ii)  DEFERRED RISK MANAGEMENT LOSS

          As at January 1, 2004, the Company elected not to designate any of its
          risk  management  activities  as  accounting  hedges  and  accordingly
          accounts  for all  derivative  instruments  using  the  mark-to-market
          method.  As a result,  on  January  1, 2004,  the  Company  recorded a
          liability  and a  deferred  risk  management  loss  of  $10.9  million
          relating to then  outstanding  commodity  hedges and the interest rate
          swap.  During the year ended  December 31, 2006,  $1.6 million (2005 -
          $1.6  million)  of the  deferred  loss was  charged to  earnings.  The
          remaining  balance of $4.0  million at December  31, 2006 (2005 - $5.6
          million)  relates  to the  interest  rate swap and will be  charged to
          earnings in annual  amounts of $1.6 million  until  eliminated in 2009
          upon the termination of the swap contract.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

16.  FINANCIAL INSTRUMENTS (CONTINUED)

     iii) CROSS CURRENCY INTEREST RATE SWAP

          Concurrent  with the  issuance  of  9.90%  Senior  Notes in 2002,  the
          Company entered into interest rate swap arrangements expiring May 2009
          that convert fixed rate U.S. dollar denominated  interest  obligations
          into floating rate Canadian dollar denominated  interest  obligations.
          On purchase  of the  majority  of the 9.90%  Senior  Notes in November
          2005, the Company elected not to collapse the cross currency  interest
          rate swap.  Accordingly,  the swap remains outstanding and at December
          31,  2006,  the  Company  valued  the  liability  relating  to  future
          unrealized losses on the swap arrangements to be $11.4 million (2005 -
          $14.8 million) on a mark-to-market  basis. The current portion of this
          amount at December 31, 2006 is $4.6 million (2005 - $4.6 million).

     iv)  RISK MANAGEMENT (GAIN) LOSS

          Risk  management  (gains)  and losses  recognized  during the  periods
          relating to commodity prices,  foreign exchange notes and the interest
          rate swap are summarized below:

<TABLE>
<CAPTION>
                                              Commodity         Foreign           Interest
Year ended December 31, 2006                  Contracts         Currency          Rate Swap         Total
                                            --------------    --------------     ------------     -----------
<S>                                         <C>                <C>              <C>               <C>
Unrealized
  Amortization of deferred loss             $           -      $          -     $      1,642      $   1,642
  Change in fair value                            (25,775)                -           (3,389)       (29,164)
                                            --------------     -------------    -------------     ----------
                                                  (25,775)                -           (1,747)       (27,522)
Realized
  Cash settlements                                (39,217)           (1,405)           4,423        (36,199)
                                            --------------     -------------    -------------     ----------
Total (gain) loss                           $     (64,992)     $     (1,405)    $      2,676      $ (63,721)
                                            ==============     =============    =============     ==========
</TABLE>

<TABLE>
<CAPTION>

                                              Commodity         Foreign           Interest
Year ended December 31, 2005                  Contracts         Currency          Rate Swap         Total
                                            --------------    --------------     ------------     -----------

<S>                                         <C>               <C>               <C>               <C>
Unrealized
  Amortization of deferred loss             $           -     $           -      $     1,642      $    1,642
  Change in fair value                              5,136                 -            3,393           8,529
                                            --------------    --------------     ------------     -----------
                                                    5,136                 -            5,035          10,171
Realized
  Cash settlements                                  9,663                 -             (532)          9,131
                                            --------------    --------------     ------------     -----------

Total loss                                  $      14,799     $           -      $     4,503      $   19,302
                                            ==============    ==============     ============     ===========
</TABLE>

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

16.    FINANCIAL INSTRUMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                Commodity         Foreign          Interest
Year ended December 31, 2004                    Contracts        Currency          Rate Swap         Total
                                            --------------    --------------     ------------     -----------
<S>                                         <C>               <C>                <C>              <C>
Unrealized
  Amortization of deferred loss             $       2,001     $           -      $     1,642      $    3,643
  Change in fair value                             (3,986)                -            2,522          (1,464)
                                            --------------    --------------     ------------     -----------
                                                   (1,985)                -            4,164           2,179
Realized
  Cash settlements                                  9,151                 -           (2,522)          6,629
                                            --------------    --------------     ------------     -----------
Total loss                                  $       7,166     $           -      $     1,642      $    8,808
                                            --------------    --------------     ------------     -----------
</TABLE>

b)   OTHER FINANCIAL INSTRUMENTS AND RISK

     i)   CREDIT RISK MANAGEMENT

          Accounts receivable include amounts receivable for oil and natural gas
          sales which are generally  made to large credit worthy  purchasers and
          amounts  receivable  from joint venture  partners  which are generally
          recoverable  from  production.  Accordingly,  the Company views credit
          risks on these amounts as low.

          The  Company is exposed to losses in the event of  non-performance  by
          counter-parties to financial instruments. The Company deals with major
          financial institutions and believes these risks are minimal.

     ii)  FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

          The carrying value of cash, accounts receivable, other current assets,
          current  liabilities,  and  bank  debt  approximate  fair  value.  The
          estimated  fair value of senior  term  notes was $503.4  million as at
          December 31, 2006 versus the carrying amount of $524.4 million.  Other
          current  assets are  comprised  of  prepaid  expenses,  Crown  royalty
          deposits and marketable  securities  valued at cost. The fair value of
          the  marketable  securities  at December 31, 2006 exceeded the cost by
          $1.3 million.

     iii) FOREIGN CURRENCY RISK MANAGEMENT

          The Company is exposed to  fluctuations  in the exchange  rate between
          the Canadian  dollar and the U.S.  dollar.  Crude oil and to a certain
          extent natural gas prices are based upon reference prices  denominated
          in U.S.  dollars,  while the  majority of the  Company's  expenses are
          denominated in Canadian dollars. When appropriate,  the Company enters
          into  agreements to fix the exchange rate of Canadian  dollars to U.S.
          dollars in order to manage the risk.

          On December 31, 2006, all existing foreign exchange  contracts expired
          and the Company has not entered into any new  contracts  subsequent to
          year end.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

17.  CASH FLOW

Changes in non-cash working capital items increased (decreased) cash as follows:

Years ended December 31,                2006            2005           2004
                                   -------------   -------------   ------------
Accounts receivable and other
   current assets                  $     24,751    $    (17,371)   $   (20,176)
Accounts payable                        (62,425)         78,385         39,598
Taxes payable                                 -            (301)        (2,526)
                                   -------------   -------------   ------------
                                   $    (37,674)   $     60,713    $    16,896
                                   =============   =============   ============
Net change in non-cash working
    capital relating to:
  Operating activities             $      18,901   $      8,441    $   (12,594)
  Financing activities                    1,278          (1,829)           324
  Investing activities                  (57,853)         54,101         29,166
                                   -------------   -------------   ------------
                                   $    (37,674)   $     60,713    $    16,896
                                   -------------   -------------   ------------

Amounts paid during the year relating to interest expense and capital taxes were
as follows:

Years ended December 31,            2006              2005             2004
                               -------------     -------------     ------------
Interest paid                  $     48,857      $     31,444      $    28,604
                               -------------     -------------     ------------
Current income taxes paid      $         14      $      4,101      $     4,952
                               =============     =============     ============

18.  COMMITMENTS AND CONTINGENT LIABILITIES

a)   COMMITMENTS

     The Company has committed to certain  payments over the next five years, as
     follows:

<TABLE>
<CAPTION>
                                             2007             2008              2009            2010            2011
                                        ----------      -----------       -----------     -----------      ----------
<S>                                     <C>             <C>               <C>             <C>              <C>
Operating leases                        $   3,737       $    3,365        $    2,846      $        -       $       -
Office facilities                           3,509            4,923             4,800           4,800           4,800
MPP partnership distributions               9,172            9,172             3,057               -               -
                                        ----------      -----------       -----------     -----------      ----------
                                        $  16,418       $   17,460        $   10,703      $    4,800       $   4,800
                                        ==========      ===========       ===========     ===========      ==========
</TABLE>

     The Company has entered into a lease  agreement  for new office  facilities
     commencing  October 2008. Annual  commitments under the lease agreement are
     approximately $4.8 million per year for the 10 year term.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

18.  COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

b)   LEGAL PROCEEDINGS

     The Company is  involved in various  legal  claims  associated  with normal
     operations.  These  claims,  although  unresolved  at the current  time, in
     management's  opinion,  are not  significant and are not expected to have a
     material  impact on the financial  position or results of operations of the
     Company.

19.  SUBSEQUENT EVENTS

     Prior to December 31, 2006, the Company entered into  transactions  for the
     sale of certain  minor  non-core  properties,  effective  at year end.  The
     transactions  closed  subsequent  to year  end and net  proceeds  of  $45.9
     million from the dispositions  were received.  The  dispositions  have been
     recorded as at the closing  dates and have not been  recognized in the 2006
     financial statements.

20.  UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING

RECONCILIATION OF CONSOLIDATED  FINANCIAL  STATEMENTS TO UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES

These  consolidated  financial  statements have been prepared in accordance with
accounting  principles  generally accepted in Canada ("Canadian GAAP") which, in
most  respects,  conforms to  accounting  principles  generally  accepted in the
United States of America ("U.S.  GAAP").  The  significant  differences in those
principles,  as they apply to the  Company's  statements  of  earnings,  balance
sheets, and statements of cash flows, are described below.

RECONCILIATION OF NET EARNINGS UNDER CANADIAN GAAP TO U.S. GAAP:

For the years ended December 31,                2006         2005        2004
                                             ---------     --------    --------
Net earnings for year, as reported           $ 127,426     $ 81,326    $ 63,633

Adjustments
  Risk management gain, net (Note e)             1,166        1,067       2,236
  Depletion and depreciation, net (Note a)     (7,744)          650           -
                                             ---------     --------    -------

Net earnings - U.S. GAAP                     $ 120,848     $ 83,043    $ 65,869
                                             =========     ========    =======

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

20.  UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

CONSOLIDATED STATEMENTS OF EARNINGS - U.S. GAAP

For the years ended December 31,                2006         2005        2004
                                            ---------    ---------   ---------
Revenue, net of royalties                   $ 409,979    $ 425,162   $ 298,243
Expenses
  Operating                                    95,462       66,802      55,655
  Transportation                               12,564       10,858       8,595
  General and administrative                   26,231       21,223      15,215
  Interest and finance charges                 54,075       55,701      33,733
  Depletion and depreciation (Note a)         153,964      104,525      82,554
  Foreign exchange (gain)                        (891)      (7,353)    (14,631)
  Accretion of asset retirement
    obligations                                 2,257        1,975       1,670
  Stock-based compensation                     10,488        5,903       3,410
  Guarantee (Note h)                             (375)        (375)          -
  Risk management (gain) loss (Note e)        (65,363)      17,660       5,165
                                            ---------    ---------   ---------
  Earnings before taxes and
     non-controlling interest                 121,567      148,243     106,877
  Income tax (recovery) expense
    (Note a, e, g)                             (6,279)      58,292      37,590
  Non-controlling interest(Note h)              6,998        6,908       3,418
                                            ---------    ---------   ---------
Net earnings - U.S. GAAP                    $ 120,848    $  83,043   $  65,869
                                            =========    =========   =========

Net earnings per common share
  - U.S. GAAP
  Basic                                     $    0.95    $    0.66   $    0.56
  Diluted                                   $    0.90    $    0.63   $    0.53


CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

For the years ended December 31,                 2006         2005        2004
                                            ---------    ---------   ---------

Balance, end of year                        $       -    $       -   $       -
Pension plan - adoption of FAS 158 (Note g)     (893)            -           -
                                            ---------    ---------   ---------
Adjusted balance, end of year               $   (893)    $       -   $       -
                                            =========    =========   =========

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

20.  UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
As at December 31,                                         2006                                 2005
                                              -------------------------------      -------------------------------
                                              AS REPORTED         U.S. GAAP        As reported         U.S. GAAP
                                              ------------       ------------      -------------      ------------
<S>                                           <C>                <C>               <C>                <C>
Assets
  Cash                                        $    12,232        $    12,232       $      8,954       $     8,954
  Other current assets                            132,152            132,152            135,408           135,408
  Property and equipment (Note a)               1,977,062          1,967,135          1,587,371         1,588,350
  Goodwill                                          7,914              7,914              7,914             7,914
  Deferred financing charges and
    other (Notes f, g)                             14,144             12,160             12,841            10,174
  Deferred risk management loss (Note e)            3,968                  -              5,610                 -
                                              ------------       ------------      -------------      ------------
                                              $ 2,147,472        $ 2,131,593       $  1,758,098       $ 1,750,800
                                              ============       ============      =============      ============

Liabilities and shareholders' equity
  Current liabilities                         $   153,316        $   153,316       $    211,627       $   211,627
  Long term debt (Note f)                         854,385            852,526            535,540           532,873
  Asset retirement obligations                     29,791             29,791             20,770            20,770
  Unrealized risk management loss                   6,816              6,816             10,201            10,201
  Guarantee obligation (Note h)                         -                873                  -             1,248
  Unfunded pension liability (Note g)                   -              1,082                  -                 -
  Future income taxes (Notes a, c, e)             302,690            297,755            314,726           312,791
  Non-controlling interest (Note h)                66,350             65,477             68,898            67,650
                                              ------------       ------------      -------------      ------------
                                                1,413,348          1,407,636          1,161,762         1,157,160
                                              ------------       ------------      -------------      ------------

  Capital stock (Note c)                          231,992            261,979            226,444           256,431
  Contributed surplus                              16,974             16,974              9,173             9,173
  Retained earnings                               485,158            445,897            360,719           328,036
  Accumulated other comprehensive
  Income (loss) (Note g)                                -               (893)                 -                 -
                                              ------------       ------------      -------------      ------------
                                                  734,124            723,957            596,336           593,640
                                              ------------       ------------      -------------      ------------
                                              $ 2,147,472        $ 2,131,593       $  1,758,098       $ 1,750,800
                                              ============       ============      =============      ============
</TABLE>

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

20.  UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

For the years ended December 31,                  2006         2005       2004
                                              ---------   ----------  ---------
 Operating activities
  Net earnings                                $ 120,848   $   83,043  $  65,869
  Amortization of deferred charges
    and other                                     1,996       22,940      2,101
  Depletion and depreciation                    153,964      104,525     82,554
  Accretion of asset retirement obligations       2,257        1,975      1,670
  Unrealized foreign exchange (gain)               (665)      (7,808)   (14,652)
  Future income taxes                            (6,323)      53,221     34,839
  Unrealized risk management (gain) loss        (29,164)       8,529     (1,464)
  Other                                          13,392       11,687      6,214
  Change in non-cash working capital            (38,952)      62,542     20,742
                                              ---------   ----------  ---------

Cash from operating activities                  217,353      340,654    197,873
                                              ---------   ----------  ---------

Cash from financing activities                  309,448      171,020    111,179
                                              ---------   ----------  ---------

Cash used in investing activities (Note i)     (523,523)    (512,788)  (310,362)
                                              ---------   ----------  ---------

Change in cash                                    3,278       (1,114)    (1,310)

Cash, beginning of year                           8,954       10,068     11,378
                                              ---------   ----------  ---------
Cash, end of year                             $  12,232   $    8,954  $  10,068
                                              =========   ==========  =========



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

a)   FULL COST ACCOUNTING

     The full cost method of accounting for crude oil and natural gas operations
     under Canadian and U.S. GAAP differ in the following respects.

     Under U.S.  GAAP, an impairment  test is applied to ensure the  unamortized
     capitalized  costs in each cost centre do not exceed the sum of the present
     value,  discounted at 10%, of the  estimated  constant  dollar,  future net
     operating  revenue from proved reserves plus unimpaired  unproved  property
     costs less applicable taxes. Under Canadian GAAP, a similar impairment test
     calculation  is performed  with the  exception  that cash flows from proved
     reserves  are  undiscounted  and utilize  forecasted  pricing to  determine
     whether  impairments exist. If an impairment exists, then the amount of the
     write  down is  determined  using  the fair  value of  reserves.  Under SEC
     regulations, the excess above the ceiling is not expensed if, subsequent to
     the  end  of  the  period,  but  prior  to the  release  of  the  financial
     statements,  oil and natural gas prices increase  sufficiently such that an
     excess above the ceiling would have been eliminated if the increased prices
     were used in the calculation.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

20.  UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

a)   FULL COST ACCOUNTING (continued)

     The Company has completed an impairment  test  calculation  at December 31,
     2006 which indicated an impairment of our oil and natural gas properties of
     approximately $52 million,  net of income tax. However,  natural gas prices
     subsequent  to December 31, 2006 have  improved  sufficiently  to eliminate
     this calculated  impairment.  As a result,  the Company was not required to
     record a write-down of it's oil and natural gas  properties  under the full
     cost method of accounting.  Based on spot prices for oil and natural gas as
     of December 31, 2006,  commodity  hedges increased the full cost ceiling by
     $21 million, net of income tax.

     Depletion and  depreciation on property and equipment is provided using the
     unit-of-production  method under Canadian and U.S. GAAP.  Both methods also
     use proved  reserves to determine  the rate  however,  for  Canadian  GAAP,
     proved reserves are determined  using  forecasted  prices whereas U.S. GAAP
     applies  constant  prices.  This  reconciliation  item resulted in an $10.9
     million  increase to  depletion  and  depreciation  expense  for U.S.  GAAP
     purposes  during  the year ended  December  31,  2006 (2005 - $1.0  million
     reduction).

b)   STOCK-BASED COMPENSATION

     Under  Canadian  GAAP,  compensation  costs  have  been  recognized  in the
     consolidated  financial  statements for stock options  granted to employees
     and directors on or after January 1, 2003.  For the effect on periods prior
     to 2003 of stock-based compensation on the Canadian GAAP financials,  which
     would be the same adjustment under U.S. GAAP, see Note 12.

     For the year ended  December  31,  2006,  the Company  adopted  SFAS 123(R)
     "Share-based payment" using the modified prospective  approach.  Under this
     amended  standard,  the intrinsic  method of accounting for liability based
     stock  compensation  plans was no longer an  alternative.  Liability  based
     stock  compensation  plans,  including share  appreciation  rights, are now
     re-measured at fair value at each reporting  period up until the settlement
     date.  The  adoption of this amended  standard  did not have a  significant
     impact on the consolidated financial statements.

c)   FUTURE INCOME TAXES

     Under U.S.  GAAP  enacted  tax rates are used to  calculate  future  taxes,
     whereas  Canadian  GAAP uses  substantively  enacted tax rates.  The future
     income tax adjustments included in the reconciliation of net earnings under
     Canadian GAAP to U.S. GAAP and the balance sheet effects include the effect
     of such rate  differences,  if any,  as well as the tax effect of the other
     reconciling items noted.


     U.S.  GAAP  requires  flow-through  shares be  recorded at their fair value
     without any adjustment for the  renouncement  of the tax deductions and any
     temporary  difference resulting from the renouncement must be recognized in
     the determination of tax expense in the year incurred.

     The cumulative retained earnings adjustment relating to flow-through shares
     issued prior to December 31, 2003 was $30.0 million.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

20.  UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

c)   FUTURE INCOME TAXES (continued)

       The net future income tax liability is comprised of:

      As at December 31,                                2006            2005
                                                  -----------     -----------
      Future income tax liabilities
        Property and equipment                   $   227,103     $   232,908
        Timing of partnership items                   83,328          93,532
        Foreign exchange gain on long-term debt        8,729          11,466
        Other                                            489               -
      Future income tax assets
        Attributed Canadian royalty income            (7,462)         (8,830)
        Asset retirement obligations                  (8,642)         (6,984)
        Other                                              -         (11,910)
                                                  -----------     -----------

      Future income taxes                        $   303,545     $   310,182
                                                  -----------     -----------
                                                  -----------     -----------

      Net future income taxes                    $   303,545     $   310,182
      Current portion                                 (5,790)          2,609
                                                  -----------     -----------

      Non-current future income taxes            $   297,755     $   312,791
                                                  -----------     -----------
                                                  -----------     -----------

d)   COMPREHENSIVE INCOME

     Statement of Financial  Accounting Standards 130,  "Comprehensive  Income",
     requires the reporting of comprehensive income in addition to net earnings.
     Comprehensive  income includes net income plus other comprehensive  income.
     Management believes that it has no comprehensive income.

e)   DERIVATIVE INSTRUMENTS AND HEDGING

     On January 1, 2004, the Company  adopted under Canadian GAAP, EIC 128 which
     requires derivatives not designated as hedges to be recorded on the balance
     sheet as either assets or liabilities  at their fair value.  Changes in the
     derivative's  fair value are recognized in current period  earnings.  Under
     the  transitional  rules,  any gain or loss at the  implementation  date is
     deferred and recognized  into revenue once realized.  At January 1, 2004, a
     deferred  loss was  recognized in the amount of $10.9  million.  During the
     year ended  December 31, 2006,  $1.6 million  (2005 - $1.6  million) of the
     deferred  loss was  charged  to  earnings.  The  remaining  balance of $4.0
     million (2005 - $5.6 million) relates to the interest rate swap and will be
     recognized  in annual  amounts of $1.6 million  until  eliminated  in 2009.
     Currently,  the Company has not designated any of its financial instruments
     as hedges for accounting purposes under U.S. or Canadian GAAP.

     The deferred  loss,  recognized  at January 1, 2004 under the Canadian GAAP
     transitional  provision of EIC 128, has already been recognized in earnings
     for U.S. GAAP and became a reconciling item at December 31, 2006 and 2005.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

f)   DEFERRED FINANCING CHARGES

     Under U.S. GAAP,  discounts on long-term debt are classified as a reduction
     of long-term debt rather than as deferred  financing  charges.  At December
     31, 2006 deferred  financing  charges and senior term notes were reduced by
     $1.9 million (2005 - $2.7 million).

g)   DEFINED BENEFIT PENSION PLAN

     At December 31, 2006, the Company adopted, for U.S. GAAP purposes SFAS 158,
     "Employers' Accounting for Defined Benefit Pension and Other Postretirement
     Plans, an amendment of FASB  Statements No. 87, 88, 106 and 132(R)".  These
     amendments require the Company to recognize the over or under funded status
     of defined benefit pension plans on the balance sheet as either an asset or
     liability  and to recognize  changes in the funding  status  through  other
     comprehensive income. The transitional provisions, on adoption,  require an
     adjustment  to the  closing  balance  of  accumulated  other  comprehensive
     income. Canadian GAAP currently requires recognition of the accrued benefit
     or  liability  and does not  require the  Company to  recognize  the funded
     status of the plan on the balance sheet.

h)   GUARANTEE

     As disclosed in Note 3 to the consolidated  financial  statements,  MPP has
     guaranteed  payment of certain  obligations of its limited  partner under a
     credit  agreement  between the limited  partner and a syndicate of lenders.
     Canadian  GAAP  only   requires   disclosure  of  this  type  of  financial
     arrangement. U.S. GAAP, under FIN 45 "Guarantor's Accounting and Disclosure
     Requirements for Guarantees,  Including Indirect Guarantees of Indebtedness
     of Others",  requires the fair valuation of the guarantee and the inclusion
     of the  liability  in  the  consolidated  balance  sheets.  The  offsetting
     adjustment is reflected as a charge to non-controlling interest.

     The   guarantee  is   amortized   to   earnings,   net  of  the  effect  on
     non-controlling interest, over the term of the guarantee.

i)   STATEMENTS OF CASH FLOW

     The   consolidated   statements  of  cash  flow  include  under   investing
     activities,  changes in working  capital for items not affecting cash, such
     as  accounts  payable  and  accounts  receivable  related  to the  non-cash
     elements of property and  equipment  additions.  This  presentation  is not
     permitted  under U.S. GAAP. The amount for the year ended December 31, 2006
     of $(57.9)  million (2005 - $54.1  million,  2004 - $29.2 million) has been
     reallocated to the change in non-cash  operating  working  capital for U.S.
     GAAP presentation purposes.

<PAGE>

COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(Tabular amounts in thousands of dollars, unless otherwise stated)
--------------------------------------------------------------------------------

20.  UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

j)   RECEIVABLE AND PAYABLE AMOUNTS

      As at December 31,                               2006           2005
                                                    -----------    -----------
                                                     (in thousands of Canadian
                                                             dollars)
      Accounts receivable includes the following:
        Revenue receivable                         $    60,720    $    91,203
        Joint interest receivable                       18,032         24,482
        Other receivables                                4,783          6,388
                                                    ===========    ===========

                                                   $    83,535    $   122,073
                                                    -----------    -----------

      As at December 31,                                  2006           2005
                                                    -----------    -----------
                                                     (in thousands of Canadian
                                                             dollars)
      Accounts payable includes the following:
        Trade payables                             $   112,624    $   161,607
        Royalties payable                               17,856         32,001
        Other payables                                  10,963         10,261
                                                    ===========    ===========

                                                   $   141,443    $   203,869
                                                    -----------    -----------

k)   RECENT ACCOUNTING PRONOUNCEMENTS

     As of January 1, 2006, the Company  adopted,  for U.S. GAAP purposes,  SFAS
     154 "Accounting Changes and Error Corrections, a replacement of APB Opinion
     No. 20 and SFAS 3". The  standard  required  retrospective  application  of
     voluntary changes in accounting  principles,  unless it was  impracticable.
     The adoption of this  standard has had no material  impact on the Company's
     consolidated financial statements.

     New and  revised  accounting  pronouncements  have  been  evaluated  by the
     Company and it was  determined  that the  following  may have a significant
     impact on the consolidated financial statements:

     i)   As of January 1, 2007 the Company will be required to adopt,  for U.S.
          GAAP purposes,  FASB Interpretation No. 48 "Accounting for Uncertainty
          in Income Taxes,  an  interpretation  of FASB  Statement No. 109". The
          interpretation   provides  clarification  and  guidance  on  financial
          statement  recognition and disclosure of uncertain tax positions taken
          or  anticipated  in a tax return.  The Company has assessed the impact
          and does not believe  that the adoption of this  standard  will have a
          material impact on its consolidated financial statements.

     ii)  As of January 1, 2008, the Company will be required to adopt, for U.S.
          GAAP  purposes,  SFAS 157  "Fair  Value  Measurements".  The  standard
          provides a common definition of fair value,  expands  disclosure about
          fair value  measurements,  and establishes a methodology for measuring
          fair value under U.S.  GAAP.  The Company is assessing the impact this
          standard will have on its consolidated financial statements.

<PAGE>

SUPPLEMENTAL OIL AND NATURAL GAS INFORMATION (UNAUDITED)

A)  NET PROVED OIL AND NATURAL GAS RESERVES

The net proved oil and natural gas reserve  estimates  as at December  31, 2006,
2005 and 2004 set forth  below  were  prepared  in  accordance  with  guidelines
established by the Securities and Exchange Commission and accordingly were based
on existing  economic and  operating  conditions.  Oil and natural gas prices in
effect as of the respective year ends were used without any escalation except in
those  instances  where the sale was  covered  by  contract,  in which  case the
applicable  contract  price was used.  Operating  costs,  royalties,  and future
development costs were based on current costs with no escalation.

There are numerous  uncertainties  inherent in  estimating  quantities of proved
reserves  and in  projecting  the  future  rates of  production  and  timing  of
development  expenditures.  The following reserve data represents estimates only
and should not be construed as being exact.  Moreover,  the present value should
not be construed as the current  market value of the  Company's  oil and natural
gas reserves or the costs that would be incurred to obtain equivalent  reserves.
All of the reserves are located in Canada.

Estimated Quantities of Reserves

<TABLE>
<CAPTION>
Years ended December 31,                          2006                     2005                     2004
                                         -----------------------   ----------------------   ----------------------
                                         CRUDE OIL    NATURAL      Crude oil    Natural     Crude oil    Natural
                                          & NGLS        GAS         & NGLs        Gas         & NGLs       Gas
                                         ----------- -----------   ----------- ----------   ----------- ----------
                                          (MBBLS)     (MMCF)         (mbbls)    (mmcf)        (mbbls)     (mmcf)
<S>                                          <C>        <C>            <C>       <C>            <C>       <C>
Balance, beginning of year                   29,515     455,503        18,771    359,975        14,542    326,573
  Revisions of previous estimates           (1,130)      66,149         5,550     59,930         2,797     16,547
  Extensions, discoveries and
    other additions                           1,840      74,649         6,498     66,940         3,026     47,713
  Acquisitions of minerals in place             201      10,270           723      5,564           427      9,444
  Dispositions of minerals in place           (229)     (12,939)            -        (56)         (440)    (3,160)
  Production                                 (2,577)    (40,301)       (2,026)   (36,850)       (1,581)   (37,142)
                                         ----------- -----------   ----------- ----------   ----------- ----------

Balance, end of year                         27,620     553,331        29,516    455,503        18,771    359,975
                                         ==========  ==========     ========== ==========   =========== ==========

Proved developed reserves
  Balance, beginning of year                 23,827     385,243        15,481    318,177        10,309    288,899
  Balance, end of year                       23,334     411,075        23,827    385,243        15,481    318,177
                                         ==========  ==========     ========== ==========   =========== ==========
</TABLE>

B)   CAPITALIZED COSTS RELATED TO OIL AND NATURAL GAS ACTIVITIES

The  aggregate  capitalized  costs of oil and natural gas  activities  and costs
incurred  in  oil  and  natural  gas  property  acquisitions,  development,  and
exploration activities were as follows (excluding MPP and parts inventory):

Capitalized costs

As at December 31,                                    2006                2005
                                             --------------       -------------
                                                 (in thousands of Canadian
                                                         dollars)

Proved properties                         $      2,231,401     $     1,665,455
Unproved properties:
  Acquisition                                      131,333             129,490
  Exploration                                      108,487             143,606
Accumulated depletion and depreciation            (561,961)           (421,510)
                                             --------------       -------------
                                          $      1,909,260     $     1,517,041
                                             ==============       =============

<PAGE>

SUPPLEMENTAL OIL AND NATURAL GAS INFORMATION (UNAUDITED) (CONTINUED)


Costs incurred on unproved properties

<TABLE>
<CAPTION>
                                                                          Includes costs incurred in
                                          -----------     ------------------------------------------------------------
                                          CUMMULATIVE                                                        Prior
As at December 31,                           2006           2006             2005            2004            Years
                                          -----------     ----------      -----------     -----------      ----------
(in thousands of Canadian dollars)

<S>                                    <C>             <C>             <C>             <C>              <C>
Acquisition                            $     131,333   $      1,843    $      12,296   $      13,217    $     103,977
Exploration                                  108,487       (35,119)           60,368          13,418           69,820
                                          -----------     ----------      -----------     -----------      -----------

                                       $     239,820   $   (33,276)    $      72,664   $      26,635    $     173,797
                                          ===========    ===========      ===========     ===========      ============

</TABLE>
Costs incurred

<TABLE>
<CAPTION>
Years ended December 31,                                                        2006            2005             2004
                                                                          -----------     -----------      -----------
                                                                              (in thousands of Canadian dollars)

<S>                                                                    <C>             <C>              <C>
Acquisition costs (net of disposition)
  Proved properties                                                    $      33,094   $      28,575    $      12,686
  Unproved properties                                                          1,843          12,296           13,217
Development costs
  Development of proved undeveloped reserves                                 304,316         140,504           60,227
  Other                                                                      111,773         283,667          136,198
Exploration costs                                                             72,448          46,484           76,648
                                                                          -----------     -----------      -----------

Total costs incurred                                                   $     523,474   $     511,526    $     298,976
                                                                          ===========     ===========      ===========
</TABLE>

Costs  are  transferred  into  the  depletion  base on an  ongoing  basis as the
undeveloped  properties  are evaluated and proved  reserves are  established  or
impairment determined.  Pending determination of proved reserves attributable to
the above costs, the Company cannot assess the future impact on the amortization
rate.

C)   STANDARDIZED  MEASURE  OF  DISCOUNTED  FUTURE  NET CASH  FLOWS AND  CHANGES
     THEREIN RELATING TO PROVED OIL AND NATURAL GAS RESERVES

The standardized measure of discounted future net cash flows and changes therein
relating to proved oil and natural gas reserves  ("Standardized  Measure")  does
not purport to present the fair market  value of the  Company's  oil and natural
gas properties.  An estimate of such value should consider, among other factors,
anticipated  future prices of oil and natural gas, the probability of recoveries
in excess of  existing  proved  reserves  and  acreage  prospects,  and  perhaps
different  discount  rates.  It  should  be  noted  that  estimates  of  reserve
quantities,  especially  from new  discoveries,  are  inherently  imprecise  and
subject  to  substantial   revisions.   The  computation  also  excludes  values
attributable to the Company's midstream interests,  referred to in the Financial
Statements as Mazeppa Processing Partnership.

Under the  Standardized  Measure,  future cash inflows are estimated by applying
year end prices, adjusted for contracts currently in place to deliver production
to the  estimated  future  production of year end proved  reserves.  Future cash
inflows are reduced by estimated future  production and development  costs based
on year end costs to determine  pre-tax cash inflows.  Future taxes are computed
by applying  the  statutory  tax rate to the excess of pre-tax cash inflows over
the Company's tax basis in the associated proved oil and natural gas properties.
Tax credits and net  operating  loss carry  forwards are also  considered in the
future  income tax  calculation.  Future net cash inflows after income taxes are
discounted using a 10 percent annual discount rate to arrive at the Standardized
Measure.

<PAGE>

SUPPLEMENTAL OIL AND NATURAL GAS INFORMATION (UNAUDITED) (CONTINUED)

Years ended December 31,                     2006         2005          2004
                                         ------------  ------------  ----------
                                             (in thousands of Canadian dollars)

Future cash inflows                      $  5,253,029  $  6,571,858  $3,160,270
Future production costs                    (1,946,470)   (1,718,793)   (971,392)
Future development costs                     (339,699)     (209,901)   (102,557)
                                         ------------  ------------  ----------

Future net cash flows                       2,966,860     4,643,164   2,086,321
Income taxes                                 (519,798)   (1,344,684)   (539,539)
                                         ------------  ------------  ----------

Total undiscounted future
   net cash flows                           2,447,062     3,298,480   1,546,782
10 percent annual discount for
   estimated timing of cash inflows        (1,185,942)   (1,726,975)   (793,904)
                                         ------------  ------------  ----------

Standardized measure of discounted
  future net cash flows                  $  1,261,120  $  1,571,505  $  752,878
                                         ============  ============  ==========

The Company estimates that it will incur $158.2 million in 2007, $110.2 million
in 2008 and $35.8 million in 2009 to develop proved undeveloped reserves.

The  following  table sets  forth an  analysis  of changes in the  standardized
measure of  discounted  future net cash flows from  proved oil and  natural gas
reserves:

Years ended December 31,                     2006          2005         2004
                                         ------------  ------------  ----------
                                            (in thousands of Canadian dollars)

Beginning of year                        $  1,571,505  $    752,878  $  553,009
  Sales of production, net of
    production costs                         (291,896)     (336,711)   (226,408)
  Net change in sales prices, net
    of production costs                      (731,330)      614,690      42,728
  Extensions, discoveries and
    additions                                 183,795       354,186     161,106
  Changes in estimated future
    development costs                        (221,882)     (135,499)    (54,838)
  Development costs incurred during
     the period which reduced future
     development costs                        314,251       353,740     184,053
  Revisions in quantity estimates             (74,504)      526,474     306,271
  Accretion of discount                       215,170        75,288      75,908
  Purchase of reserves                        (23,176)       (7,749)     (7,749)
  Sales of reserves                            47,220            87       4,416
  Net change in income tax                     396,818     (331,850)    (42,270)
  Changes in production rates
    (timing) and other                       (124,851)     (294,029)   (243,348)
                                         ------------  ------------  ----------

Standardized measure, end of year        $  1,261,120  $  1,571,505  $  752,878
                                         ============  ============  ==========