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
















                                              COMPTON PETROLEUM CORPORATION
                                              CONSOLIDATED FINANCIAL STATEMENTS
                                              December 31, 2005


<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, 2005 and 2004 and the  consolidated
statements  of  earnings,  retained  earnings,  and cash flow in the three year
period ended December 31, 2005. 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).  These standards  require that we plan and perform an audit to
obtain  reasonable  assurance  whether  the  financial  statements  are free of
material misstatement. The Company is not required to have, nor were we engaged
to perform an audit of its internal control over financial reporting. Our audit
included  consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the  circumstances,  but
not for the  purpose  of  expressing  an opinion  on the  effectiveness  of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the  accounting  principles  used and  significant  estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  these consolidated financial statements present fairly, in all
material  respects,  the  financial  position of the Company as at December 31,
2005 and 2004 and the  results  of its  operations  and cash flow for the three
year period  ended  December 31, 2005 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 19 to the consolidated financial statements.




Calgary, Alberta                                  (SIGNED) "GRANT THORNTON LLP"
Canada                                                    Chartered Accountants
March 13, 2006


<PAGE>


<TABLE>
<CAPTION>
=================================================================================================
COMPTON PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------------------------
As at December 31,                                            2005                         2004
-------------------------------------------------------------------------------------------------
(thousands of dollars)
<S>                                                        <C>                         <C>
ASSETS

Current
    Cash                                                   $    8,954                  $   10,068
    Accounts receivable and other                             132,484                     115,113
    Unrealized risk management gain (Note 16a (i))                 --                       1,985
                                                           ----------                  ----------
                                                              141,438                     127,166

Property and equipment (Note 4)                             1,587,371                   1,178,550
Goodwill (Note 2)                                               7,914                       7,914
Deferred financing charges and other (Note 8)                  13,156                       9,729
Deferred risk management loss (Note 16a (ii))                   5,610                       7,252
                                                           ----------                  ----------
                                                           $1,755,489                  $1,330,611
                                                           ==========                  ==========
LIABILITIES

Current
    Bank debt (Note 5)                                     $       --                  $  220,000
    Accounts payable                                          203,869                     125,483
    Unrealized risk management loss (Note 16a (i))              3,150                          --
    Income taxes payable                                           --                         301
                                                           ----------                  ----------
                                                              207,019                     345,784

Bank debt (Note 5)                                            177,900                          --
Senior term notes (Note 6)                                    357,640                     198,594
Asset retirement obligations (Note 10)                         20,770                      18,006
Unrealized risk management loss (Note 16a (iii))               14,809                      11,416
Future income taxes (Note 15b)                                312,117                     261,196
Non-controlling interest (Note 3)                              68,898                      71,537
                                                           ----------                  ----------
                                                            1,159,153                     906,533
                                                           ----------                  ----------

SHAREHOLDERS' EQUITY

Capital stock (Note 11b)                                      226,444                     135,526
Contributed surplus (Note 12a)                                  9,173                       3,840
Retained earnings                                             360,719                     284,712
                                                           ----------                  ----------
                                                              596,336                     424,078
                                                           ----------                  ----------
                                                           $1,755,489                  $1,330,611
                                                           ==========                  ==========
</TABLE>

Commitments and contingent liabilities (Note 18)

On behalf of the Board

M.F. Belich (signed)                    J.A. Thomson (signed)
Director                                Director


        See accompanying notes to the consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================
COMPTON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended December 31,                                           2005                  2004                  2003
-------------------------------------------------------------------------------------------------------------------
(thousands of dollars, except per share data)
<S>                                                           <C>                   <C>                   <C>
REVENUE
  Oil and natural gas revenues                                $ 557,879             $ 391,659             $ 346,565
  Royalties                                                    (132,717)              (93,416)              (82,566)
                                                              ---------             ---------             ---------
                                                                425,162               298,243               263,999
                                                              ---------             ---------             ---------
EXPENSES
  Operating                                                      66,802                55,655                49,916
  Transportation                                                 10,858                 8,595                 8,447
  General and administrative                                     21,223                15,215                12,206
  Interest and finance charges (Note 7)                          34,951                33,733                30,595
  Tender costs (Note 8)                                          20,750                    --                    --
  Depletion and depreciation                                    105,504                82,554                61,749
  Foreign exchange gain (Note 9)                                 (7,353)              (14,631)              (47,368)
  Accretion of asset retirement obligations (Note 10)             1,975                 1,670                 1,436
  Stock-based compensation (Note 12a)                             5,903                 3,410                   793
  Risk management loss (Note 16a (iv))                           19,302                 8,808                 4,132
                                                              ---------             ---------             ---------
                                                                279,915               195,009               121,906
                                                              ---------             ---------             ---------

EARNINGS BEFORE TAXES AND NON-CONTROLLING INTEREST              145,247               103,234               142,093
                                                              ---------             ---------             ---------
INCOME TAXES  (Note 15a)
  Current                                                         5,071                 2,751                 3,282
  Future                                                         52,317                33,432                20,041
                                                              ---------             ---------             ---------
                                                                 57,388                36,183                23,323
                                                              ---------             ---------             ---------

EARNINGS BEFORE NON-CONTROLLING  INTEREST                        87,859                67,051               118,770
Non-controlling interest (Note 3)                                 6,533                 3,418                  (110)
                                                              ---------             ---------             ---------
NET EARNINGS                                                  $  81,326             $  63,633             $ 118,880
                                                              =========             =========             =========
NET EARNINGS PER SHARE (Note 13)
  Basic                                                       $    0.65             $    0.54             $    1.02
                                                              =========             =========             =========
  Diluted                                                     $    0.62             $    0.51             $    0.97
                                                              =========             =========             =========

<CAPTION>
===================================================================================================================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Years ended December 31,                                           2005                  2004                  2003
-------------------------------------------------------------------------------------------------------------------
(thousands of dollars)
<S>                                                           <C>                   <C>                   <C>
RETAINED EARNINGS, beginning of year                          $ 284,712             $ 224,569             $ 112,039
Net earnings                                                     81,326                63,633               118,880
Premium on redemption of shares (Note 11b)                       (5,319)               (3,490)               (6,350)
                                                              ---------             ---------             ---------

RETAINED EARNINGS, end of year                                $ 360,719             $ 284,712             $ 224,569
                                                              =========             =========             =========
</TABLE>


        See accompanying notes to the consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>
=====================================================================================================================
COMPTON PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
Years ended December 31,                                           2005                   2004                   2003
---------------------------------------------------------------------------------------------------------------------
(thousands of dollars)
<S>                                                           <C>                    <C>                    <C>
OPERATING ACTIVITIES
  Net earnings                                                $  81,326              $  63,633              $ 118,880
     Amortization of deferred charges and other                   2,190                  2,101                  2,208
     Tender costs                                                20,750                     --                     --
     Depletion and depreciation                                 105,504                 82,554                 61,749
     Accretion of asset retirement obligations                    1,975                  1,670                  1,436
     Unrealized foreign exchange gain                            (7,808)               (14,652)               (47,388)
     Future income taxes                                         52,317                 33,432                 20,041
     Unrealized risk management loss                             10,171                  2,179                     --
     Stock-based compensation                                     5,903                  3,410                    760
     Asset retirement expenditures                                 (749)                  (614)                (2,683)
     Non-controlling interest                                     6,533                  3,418                   (110)
                                                              ---------              ---------              ---------
                                                                278,112                177,131                154,893
  Change in non-cash working capital (Note 17)                    8,441                (12,594)                 1,318
                                                              ---------              ---------              ---------
                                                                286,553                164,537                156,211
                                                              ---------              ---------              ---------

FINANCING ACTIVITIES
  Issuance (repayment) of bank debt                             (42,100)                43,373                124,500
  Issuance of senior notes                                      353,130                     --                     --
  Issue costs on senior notes                                   (12,670)                    --                   (128)
  Redemption of senior notes                                   (199,973)                    --                     --
  Proceeds from share issuances, net                             89,752                  3,258                  6,400
  Proceeds from partnership unit issuance                            --                 74,343                     --
  Distributions to partner                                       (9,172)                (6,114)                    --
  Redemption of common shares                                    (6,118)                (4,005)                (7,942)
  Change in non-cash working capital (Note 17)                   (1,829)                   324                 (1,387)
                                                              ---------              ---------              ---------
                                                                171,020                111,179                121,443
                                                              ---------              ---------              ---------

INVESTING ACTIVITIES
  Property and equipment additions                             (484,213)              (296,676)              (222,055)
  Corporate acquisitions (Note 2)                                    --                (12,132)                    --
  Property acquisitions                                         (28,575)               (20,830)               (65,622)
  Property dispositions                                              --                 19,276                  2,194
  Change in non-cash working capital (Note 17)                   54,101                 29,166                  8,652
                                                              ---------              ---------              ---------
                                                               (458,687)              (281,196)              (276,831)
                                                              ---------              ---------              ---------

CHANGE IN CASH                                                   (1,114)                (5,480)                   823

CASH, beginning of year                                          10,068                 15,548                 14,725
                                                              ---------              ---------              ---------

CASH, end of year                                             $   8,954              $  10,068              $  15,548
                                                              =========              =========              =========
</TABLE>


        See accompanying notes to the consolidated financial statements.

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(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 19.

      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.  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,   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, 2005
(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 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 at 20% 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 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, 2005
(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 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

      Financial  instruments  consist mainly of accounts  receivable and other,
      accounts  payable,   and  long-term  debt.  The  Company  uses  financial
      instruments for non-trading  purposes to manage fluctuations in commodity
      prices,  foreign currency exchange rates, and interest rates as described
      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)    FLOW-THROUGH SHARES

      Resource  expenditure  deductions  for  income  tax  purposes  related to
      exploration  and  development  activities  funded by  flow-through  share
      arrangements  are  renounced to investors in  accordance  with income tax
      legislation.  The  liability  for future  income taxes is  increased  and
      capital  stock is reduced by the estimated  tax benefits  transferred  to
      shareholders  at  the  time  the  resource  expenditure   deductions  are
      renounced.

h)    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.

i)    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 accumulated future income
      tax balances in the period the change occurs.

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


1.    SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

j)    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 the
      purchaser  takes  possession of the commodity  product.  Other revenue is
      recognized in the period that the service is provided to the customer.

k)    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.

l)    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.

m)    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.

n)    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.

o)    DEFINED BENEFIT PENSION PLAN

      The Company accrues for obligations  under a defined benefit pension plan
      and the related  costs,  net of plan  assets.  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, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


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:

<TABLE>
<CAPTION>
As at December 31,                                                 2005            2004
                                                               ---------      ----------
<S>                                                           <C>            <C>
Non-controlling interest, beginning of year                   $  71,537      $     (110)
   Proceeds from issue of Partnership units, net                      -          74,343
   Earnings attributable to non-controlling interest              6,533           3,418
   Distributions to limited partner                              (9,172)         (6,114)
                                                               ---------      ----------
Non-controlling interest, end of year                         $  68,898      $   71,537
                                                               =========      ==========
</TABLE>

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.

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


3. NON-CONTROLLING INTEREST (CONTINUED)

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, 2005 was $30.6 million (2004 - $39.7 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.

<TABLE>
<CAPTION>
4.     PROPERTY AND EQUIPMENT

                                                                                       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
                                                               ===========             ===========             ===========

<CAPTION>
                                                                                       Accumulated
                                                                                        Depletion
                                                                                           and
as At December 31, 2005                                             Cost              Depreciation                  Net
                                                               -----------            ------------             -----------
<S>                                                            <C>                     <C>                     <C>
Exploration and development costs                              $ 1,161,396             $  (281,614)            $   879,782
Production equipment and processing facilities                     317,477                 (34,150)                283,327
Inventory                                                            6,187                      --                   6,187
Future asset retirement costs                                        9,576                  (3,111)                  6,465
Office equipment                                                     6,005                  (3,216)                  2,789
                                                               -----------             -----------             -----------
                                                               $ 1,500,641             $  (322,091)            $ 1,178,550
                                                               ===========             ===========             ===========
</TABLE>

Employee  salaries  and  insurance  costs of $4.7  million at December 31, 2005
(2004  -  $4.6  million)   directly  related  to  exploration  and  development
activities  were  capitalized.  No other general and  administrative  costs are
capitalized.

As at December 31, 2005 future capital  expenditures  of $192.9 million (2004 -
$89.1  million,  2003 - $62.4  million),  as estimated by  independent  reserve
engineers, relating to the development of proved reserves have been included in
costs subject to depletion.  Undeveloped properties with a cost at December 31,
2005 of $251.3 million (2004 - $187.8 million,  2003 - $161.9 million) included
in exploration and development costs, have not been subject to depletion.

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


4.   PROPERTY AND EQUIPMENT (CONTINUED)

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

<TABLE>
<CAPTION>
As at December 31, 2005                         NATURAL GAS               OIL                   NGL
                                               -------------        ---------------        -------------
                                                $ per mcf             $ per bbl             $ per bbl
<S>                                               <C>                    <C>                  <C>
2006                                              $11.86                 $61.58               $61.87
2007                                              $10.76                 $60.97               $61.64
2008                                               $9.16                 $57.38               $58.19
2009                                               $8.33                 $54.11               $55.05
2010                                               $8.09                 $51.85               $52.58
Approximate % increase thereafter                     2%                     2%                   2%
</TABLE>

<TABLE>
<CAPTION>
5.    CREDIT FACILITIES

As at December 31,                                                         2005             2004
                                                                   -------------      -----------
<S>                                                               <C>                <C>
Authorized                                                        $     289,000      $   240,000
                                                                   =============      ===========

Prime rate                                                        $      22,900      $     3,000
Bankers' Acceptance                                                     155,000          217,000
                                                                   -------------      -----------

Utilized                                                          $     177,900      $   220,000
                                                                   =============      ===========
</TABLE>

As at December 31,  2005,  the Company had arranged  authorized  senior  credit
facilities  with a syndicate of Canadian  banks in the amount of $289  million.
Advances  under the  facilities  can be drawn and  currently  bear  interest as
follows:

       Prime rate plus 0.15%
       Bankers' Acceptance rate plus 1.15%
       LIBOR rate plus 1.15%

Margins  are  determined  based  on the  ratio of  total  consolidated  debt to
consolidated  cash flow. The facilities  reach term on July 5, 2006 and, if not
renewed,  will  mature 366 days later on July 6,  2007.  Accordingly,  the 2005
facilities have been classified as a non-current liability.

The senior credit  facilities are secured by a first fixed and floating  charge
debenture in the amount of $600 million  covering all the Company's  assets and
undertakings.

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
6.     SENIOR TERM NOTES

As at December 31,                                                                        2005           2004
                                                                                    -----------     ----------
<S>                                                                                <C>             <C>
Senior term notes
   US$300 million, 7.625% due December 1, 2013                                     $   349,770     $        -
   US$6.75 million, 9.90% due May 15, 2009 (2004 - US$165 million)                       7,870        198,594
                                                                                    -----------     ----------
                                                                                   $   357,640     $  198,594
                                                                                    ===========     ==========
</TABLE>

In November  2005,  a wholly  owned  subsidiary  of the Company  issued  US$300
million senior term notes maturing December 1, 2013. The notes bear interest at
7.625% and are subordinate to the Company's bank credit facilities.

The 7.625%  notes are not  redeemable  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%

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 9.90% notes.  The Company and a wholly owned  subsidiary of the
Company  paid  107.195%  plus  accrued and unpaid  interest  for the  US$158.25
million 9.90% notes  tendered by the note holders.  Information  related to the
tender costs is included in Note 8.

The remaining  US$6.75  million of 9.90% notes are not redeemable  prior to May
15, 2006.  After that time, they can be redeemed in whole or part, at the rates
indicated below:

       May 15, 2006                                           104.950%
       May 15, 2007                                           102.475%
       May 15, 2008 and thereafter                            100.000%

<TABLE>
<CAPTION>
7.    INTEREST AND FINANCE CHARGES

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

Years ended December 31,                                            2005              2004             2003
                                                             ------------      ------------      -----------
<S>                                                          <C>               <C>               <C>
Interest on bank debt, net                                   $    11,520       $     9,662       $    6,611
Interest on senior term notes                                     20,912            21,281           21,711
Finance charges                                                    2,519             2,790            2,273
                                                             ------------      ------------      -----------
Total                                                        $    34,951       $    33,733       $   30,595
                                                             ============      ============      ===========
</TABLE>

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

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


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:

<TABLE>
<CAPTION>
Years ended December 31,                                                                 2005                2004
                                                                                  ------------        ------------
<S>                                                                               <C>              <C>
Deferred financing charges and other, beginning of year                           $     9,729      $       11,532
    Issue costs on 7.625% Senior Notes                                                 12,670                   -
    Pro-rata reduction on repayment of 9.90% Senior Notes                              (7,053)                  -
    Amortization expense                                                               (2,119)             (2,133)
    Other                                                                                 (71)                330
                                                                                  ------------        ------------
Deferred financing charges and other, end of year                                 $    13,156      $        9,729
                                                                                  ============        ============

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

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
                                                                                  ============

<CAPTION>
9.    FOREIGN EXCHANGE (GAIN) LOSS

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

Years ended December 31,                                             2005             2004             2003
                                                               -----------      -----------      -----------
<S>                                                            <C>              <C>              <C>
Foreign exchange gain on translation of US$ debt               $   (7,808)      $  (14,652)      $  (47,388)
Other foreign exchange loss                                           455               21               20
                                                               -----------      -----------      -----------
Total                                                          $   (7,353)      $  (14,631)      $  (47,368)
                                                               ===========      ===========      ===========
</TABLE>

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


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,                                        2005           2004
                                                     ----------      ---------
 Asset retirement obligations, beginning of year     $  18,006       $  7,329
 Liabilities incurred                                    5,218          3,357
 Liabilities settled and disposed                       (1,275)        (4,350)
 Accretion expense                                       1,975          1,670
 Revision of estimates                                  (3,154)            --
                                                     ----------      ---------
 Asset retirement obligations, end of year           $  20,770       $ 18,006
                                                     ==========      =========

The total  undiscounted  amount of estimated  cash flows required to settle the
obligations  was  $185.8  million  (2004 -  $148.9  million),  which  has  been
discounted using a credit-adjusted  risk free rate of 10.7% (2004 - 10.8%). 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.

<TABLE>
<CAPTION>
b)    ISSUED AND OUTSTANDING

      As at December 31,                                   2005                                2004
                                              ------------------------------      -----------------------------
                                                 NUMBER                              Number
                                                   OF                                  of
                                                 SHARES             AMOUNT           Shares            Amount
                                              -----------       ------------      ------------      -----------
                                                  (000S)                               (000S)
<S>                                          <C>               <C>               <C>               <C>
      Common shares outstanding,
       beginning of year                         117,354        $   135,526           116,423       $  131,577
       Shares issued for cash, net                 7,500             87,294                 -                -
       Shares issued for property                      -                  -               110              875
       Shares issued under stock
         option plan                               2,926              4,424             1,271            3,589
       Shares repurchased                           (517)              (800)             (450)            (515)
                                              -----------       ------------      ------------      -----------

     Common shares outstanding,
       end of year                               127,263        $   226,444           117,354       $  135,526
                                              ===========       ============      ============      ===========
</TABLE>

      In February 2005, the Company  issued  7,500,000  common shares for gross
      proceeds of $90.0 million before underwriters' fees and issue expenses of
      $4.1 million.

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


11.   CAPITAL STOCK (CONTINUED)

      The  Company  maintains a Normal  Course  Issuer Bid program on an annual
      basis.  Under the current bid, 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  516,600 common
      shares at an  average  price of $11.84 per share  (2004 - 450,100  common
      shares at an  average  price of $8.90 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 implemented a stock option plan for Directors,  Officers,
      and employees.  The exercise price of each option approximates 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.

      The following tables summarize the information relating to stock options:

<TABLE>
<CAPTION>
      As at December 31,                                      2005                                  2004
                                                  ------------------------------        -----------------------------
                                                                      WEIGHTED                             Weighted
                                                                      AVERAGE                              average
                                                     STOCK            EXERCISE             Stock           exercise
                                                    OPTIONS            PRICE              options           price
                                                  -------------      -----------        ------------      -----------
                                                     (000S)                                (000s)
<S>                                               <C>                <C>                <C>               <C>
      Outstanding, beginning of year                    11,655            $3.51              10,672            $2.54
         Granted                                         2,930           $11.89               2,549            $7.34
         Exercised                                      (2,926)           $1.32              (1,271)           $2.56
         Cancelled                                        (213)           $8.30                (295)           $5.26
                                                  -------------      -----------        ------------      -----------
      Outstanding, end of year                          11,446            $6.13              11,655            $3.51
                                                  =============      ===========        ============      ===========
      Exercisable, end of year                           6,219            $3.38               7,812            $2.19
                                                  =============      ===========        ============      ===========
</TABLE>

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


12.   STOCK-BASED COMPENSATION PLANS (CONTINUED)

      The range of exercise prices of stock options outstanding and exercisable
      at December 31, 2005 were 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>
     $0.80 - $2.99                     2,644              2.7            $1.55              2,644             $1.55
     $3.00 - $3.99                     1,509              5.3            $3.47              1,279             $3.40
     $4.00 - $4.99                     1,598              6.1            $4.30              1,215             $4.24
     $5.00 - $6.99                     1,188              2.9            $5.87                597             $5.88
     $7.00 - $9.99                     1,485              3.4            $7.62                427             $7.62
     $10.00 - $12.99                   2,690              4.2           $11.58                 42            $10.60
     $13.00 - $17.38                     332              4.7           $13.70                 15            $13.44
                                 ------------      -----------      -----------       ------------      ------------
                                      11,446              4.1            $6.13              6,219             $3.38
                                 ============      ===========      ===========       ============      ============
</TABLE>

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

      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:

<TABLE>
<CAPTION>
      Years ended December 31,                                     2005            2004            2003
                                                              ----------      ----------       ---------
<S>                                                               <C>             <C>             <C>
      Weighted average fair value of options granted              $5.45           $3.70           $3.01
      Risk-free interest rate                                       3.6%            3.9%            4.3%
      Expected life (years)                                         5.0             5.0             6.1
      Expected volatility                                          43.9%           49.6%           56.0%
</TABLE>

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

<TABLE>
<CAPTION>
      As at December 31,                                                            2005           2004
                                                                               ----------      ---------
<S>                                                                            <C>             <C>
      Contributed surplus, beginning of year                                   $   3,840       $    760
      Stock-based compensation expense                                             5,903          3,410
      Stock options exercised                                                       (570)          (330)
                                                                               ----------      ---------
      Contributed surplus, end of year                                         $   9,173       $  3,840
                                                                               ==========      =========
</TABLE>

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


12.   STOCK-BASED COMPENSATION PLANS (CONTINUED)

      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:

<TABLE>
<CAPTION>
      Years ended December 31,                                     2005             2004            2003
                                                              ----------      -----------       ---------
<S>                                                           <C>             <C>               <C>
      Reduction in net earnings                                  $1,007           $1,545          $2,317
      Reduction in net earnings per common share -
         basic and diluted                                        $0.01            $0.01           $0.02
</TABLE>

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, 2005 and 2004, there were no significant  compensation costs
      related to the  outstanding  variable  component  of these SARs,  (2003 -
      $33,000).  The liability related to the variable  component of these SARs
      amounts to $1.4  million,  which is included  in  accounts  payable as at
      December 31, 2005 (2004 - $1.7 million).  All  outstanding  SARs having a
      variable component expire at various times through 2011.


13.   PER SHARE AMOUNTS

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

<TABLE>
<CAPTION>
  Years ended December 31,                                         2005             2004            2003
                                                              ----------       ----------      ----------
                                                                 (000s)           (000s)          (000s)

<S>                                                           <C>              <C>             <C>
  Weighted average common shares
    outstanding - basic                                         125,627          117,244         116,267
  Effect of stock options                                         6,040            6,789           5,856
                                                              ----------       ----------      ----------
  Weighted average common shares
    outstanding - diluted                                       131,667          124,033         122,123
                                                              ==========       ==========      ==========
</TABLE>

In  calculating  diluted  earnings per common share for the year ended December
31, 2005, the Company excluded 331,800 options (2004 - 288,000, 2003 - 615,100)
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, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


14.   DEFINED BENEFIT PENSION PLAN

Substantially all of the employees of MPP are 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:

<TABLE>
<CAPTION>
As at December 31,                                                                      2005                 2004
                                                                                     -------              -------
<S>                                                                                  <C>                  <C>
Accrued benefit obligation                                                           $ 7,562              $ 5,855
                                                                                     -------              -------
Fair value of plan assets                                                            $ 5,839              $ 5,221
                                                                                     -------              -------
Funded status
   Plan assets less than benefit obligation                                          $(1,723)             $  (634)
   Unamortized net actuarial loss (gain)                                                 891                 (269)
   Unamortized past service costs                                                        862                  933
                                                                                     -------              -------
Accrued benefit asset, included in deferred financing
   charges and other                                                                 $    30              $    30
                                                                                     =======              =======
</TABLE>

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

<TABLE>
<CAPTION>
Years ended December 31,                                                                2005                 2004
                                                                                     -------              -------
<S>                                                                                  <C>                  <C>
Discount rate                                                                            5.0%                 6.3%
Expected rate of return on assets                                                        7.0%                 7.0%
Rate of compensation increase                                                            3.5%                 4.5%
Average remaining service period of covered employees                                15 YEARS             15 years
</TABLE>

Actuarial evaluations are required every three years, the next evaluation being
January 1, 2006

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

<TABLE>
<CAPTION>
Years ended December 31,                                                                2005                 2004
                                                                                     -------              -------
<S>                                                                                  <C>                  <C>
Current service cost                                                                 $   232              $   190
Interest on accrued benefit obligation                                                   372                  336
Interest on assets                                                                      (364)                (333)
Amortization on past service cost                                                         69                   67
                                                                                     -------              -------
Pension expense, included in general and administrative expense                      $   309              $   260
                                                                                     =======              =======
</TABLE>

MPP expects to contribute $340 thousand to the plan in 2006.  Contributions  by
the  participants  to the  pension  plan were $75  thousand  for the year ended
December 31, 2005.

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


15.   INCOME TAXES

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

<TABLE>
<CAPTION>
       Years ended December 31,                                    2005                  2004                  2003
                                                              ---------             ---------             ---------
<S>                                                           <C>                   <C>                   <C>
       Earnings before taxes and non-controlling interest     $ 145,247             $ 103,234             $ 142,093
                                                              ---------             ---------             ---------

       Canadian statutory rate                                    37.6%                 38.6%                 40.6%
       Expected income taxes                                  $  54,613             $  39,848             $  57,690
       Effect on taxes resulting from:
         Non-deductible Crown charges                            15,061                17,611                23,922
         Resource allowance                                     (11,980)              (13,535)              (16,485)
         Non-deductible stock-based compensation                  2,221                 1,316                   309
         Federal capital tax                                      1,896                 2,526                 2,497
         Effect of tax rate changes                              (5,764)               (8,359)              (37,130)
         Non-taxable portion of capital items                        --                (2,831)               (8,202)
         Other                                                    1,341                  (393)                  722
                                                              ---------             ---------             ---------

       Provision for income taxes                             $  57,388             $  36,183             $  23,323
                                                              =========             =========             =========

       Current
          Income taxes                                        $   3,175             $     225             $     785
          Federal capital taxes                                   1,896                 2,526                 2,497
       Future                                                    52,317                33,432                20,041
                                                              ---------             ---------             ---------

                                                              $  57,388             $  36,183             $  23,323
                                                              =========             =========             =========

       Effective tax rate                                         39.5%                 35.0%                 16.4%
                                                              =========             =========             =========
</TABLE>

      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.

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

<TABLE>
<CAPTION>
       As at December 31,                                                                 2005            2004
                                                                                    -----------     -----------
<S>                                                                                 <C>             <C>
       Future income tax liabilities
         Property and equipment in excess of tax values                             $  232,258      $  199,931
         Timing of partnership items                                                    93,532          67,089
         Foreign exchange gain on long-term debt                                        11,466          10,169
       Future income tax assets
         Attributed Canadian royalty income                                             (8,830)         (9,015)
         Asset retirement obligations                                                   (6,984)         (6,057)
         Other                                                                          (9,325)           (921)
                                                                                    -----------     -----------

       Net future income tax liability                                              $  312,117      $  261,196
                                                                                    ===========     ===========
</TABLE>
<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


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 and cross currency interest
      rate swap arrangements and are summarized below:

      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, 2005 are:

<TABLE>
<CAPTION>
                                                  DAILY                                  MARK-
                                                NOTIONAL             AVERAGE           TO-MARKET
     COMMODITY                TERM               VOLUME               PRICE           GAIN (LOSS)
     ---------                ----               ------               -----           -----------
     <S>             <C>                       <C>           <C>                      <C>
     Natural gas
       Collar        Nov. 1/05 - Mar. 31/06    38,095 mcf    $8.70 - $12.74/mcf       $     (929)
       Fixed         Nov. 1/05 - Mar. 31/06     9,524 mcf    $9.03/mcf                    (1,735)
       Collar        Apr. 1/06 - Oct. 31/06    42,857 mcf    $8.73/mcf - $12.87/mcf         (929)
                                                                                      ----------
                                                                                          (3,593)
     Crude Oil
       Collar          Jan. 1 - Dec. 31/06     3,000 bbls    US$55.00 - $75.17/bbl           443
                                                                                      ----------

     Unrealized risk management loss                                                  $   (3,150)
                                                                                      ==========
</TABLE>

      The Company has not entered into any additional  contracts  subsequent to
      December 31, 2005.

      At December 31, 2004 the mark-to-market  valuation of commodity contracts
      resulted in a $2.0 million unrealized risk management asset.

      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,  2005,  $1.6  million  (2004 - $3.6  million) of the
      deferred  loss was charged to  earnings.  The  remaining  balance of $5.6
      million  at  December  31,  2005  (2004 - $7.3  million)  relates  to the
      interest  rate swap and will be charged to earnings in annual  amounts of
      $1.6 million until eliminated in 2009.

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


16.   FINANCIAL INSTRUMENTS (CONTINUED)

      iii) CROSS CURRENCY INTEREST RATE SWAP

      Concurrent  with the closing of the 9.90% senior notes  offering in 2002,
      the Company entered into interest rate swap arrangements with its banking
      syndicate  that  convert  fixed  rate U.S.  dollar  denominated  interest
      obligations  into  floating  rate Canadian  dollar  denominated  interest
      obligations.  This arrangement  resulted in an effective interest rate of
      7.63% during period ended December 31, 2005 (2004 - 7.24%,  2003 - 7.85%)
      net of gains  realized.  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  and  incur  the   associated   costs  of
      approximately  $12.2 million.  Accordingly,  the swap remains outstanding
      and at December 31, 2005,  the Company  valued the liability  relating to
      future  unrealized  losses on the swap  arrangements  to be $14.8 million
      (2004 - $11.4 million) on a mark-to-market basis.

      iv) RISK MANAGEMENT (GAINS) LOSSES

      Risk management (gains) and losses recognized during the periods relating
      to the above are summarized below:

<TABLE>
<CAPTION>
                                                     COMMODITY      INTEREST
      YEAR ENDED DECEMBER 31, 2005                   CONTRACTS      RATE SWAP         TOTAL
                                                     ---------      ---------       --------
      <S>                                            <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
                                                     ========       ========       ========


                                                     Commodity      Interest
      Year ended December 31, 2004                   Contracts      Rate Swap         Total
                                                     ---------      ---------       --------

      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>

      Risk  management  loss of $4.1  million for year ended  December 31, 2003
      reflects realized losses recognized under hedge accounting.

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


16.   FINANCIAL INSTRUMENTS (CONTINUED)

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 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
      institutions and believes these risks are minimal.

      ii) FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

      Other  than its  senior  term  notes,  the fair  values of the  Company's
      financial  assets and  liabilities  that are  included  in the  Company's
      consolidated  balance  sheet as at December 31, 2005,  approximate  their
      carrying value.  The estimated fair value of senior term notes was $361.1
      million as at December 31, 2005 (2004 - $218.5 million) based upon market
      information.

      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.  During  2003,  a gain of $2.5  million was realized and
      included in revenue.  Subsequent to December 31, 2005 the Company entered
      into the following forward contracts:

                                                       NOTIONAL       EXCHANGE
     FOREIGN CURRENCY                 TERM              AMOUNT          RATE
     ----------------                 ----              ------          ----

     Currency forward        Jan. 1 - Dec. 31/06    US$55,000/day       1.1530
     Currency forward        Jan. 1 - Dec. 31/06    US$55,000/day       1.1630

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


17.   CASH FLOW

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

<TABLE>
<CAPTION>
Years ended December 31,                                 2005             2004             2003
                                                     --------         --------         --------
<S>                                                  <C>              <C>              <C>
Accounts receivable and other                        $(17,371)        $(20,176)        $(16,593)
Accounts payable                                       78,385           39,598           23,635
Taxes payable                                            (301)          (2,526)           1,541
                                                     --------         --------         --------

                                                     $ 60,713         $ 16,896         $  8,583
                                                     ========         ========         ========

Net change in non-cash working capital
Relating to:
    Operating activities                             $  8,441         $(12,594)        $  1,318
    Financing activities                               (1,829)             324           (1,387)
    Investing activities                               54,101           29,166            8,652
                                                     --------         --------         --------

                                                     $ 60,713         $ 16,896         $  8,583
                                                     ========         ========         ========
</TABLE>

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

<TABLE>
<CAPTION>
Years ended December 31,                                 2005             2004             2003
                                                     --------         --------         --------
<S>                                                  <C>              <C>              <C>
Interest paid                                        $ 31,444         $ 28,604         $ 26,923
                                                     ========         ========         ========

Current income taxes paid                            $  4,101         $  4,952         $  1,485
                                                     ========         ========         ========
</TABLE>

18.   COMMITMENTS AND CONTINGENT LIABILITIES

a)    COMMITMENTS

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

<TABLE>
<CAPTION>
                                           2006        2007        2008        2009        2010
                                        -------     -------     -------     -------     -------
<S>                                     <C>         <C>         <C>         <C>         <C>
Operating leases                        $11,277     $ 4,809     $ 2,609     $    --     $    --
Office rent                               1,356         249          --          --          --
MPP partnership distributions             9,172       9,172       9,172       3,057          --
9.90% senior notes                           --          --          --       7,870          --
Other                                        52          --          --          --          --
                                        -------     -------     -------     -------     -------

                                        $21,857     $14,230     $11,781     $10,927     $    --
                                        =======     =======     =======     =======     =======
</TABLE>

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 minor in nature and are not expected to have a
      material impact on the financial position or results of operations of the
      Company.

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


19.   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:

<TABLE>
<CAPTION>
For the years ended December 31,                               2005          2004          2003
                                                          ---------     ---------     ---------
<S>                                                       <C>           <C>           <C>
Net earnings for year, as reported                        $  81,326     $  63,633     $ 118,880

Adjustments
   Accounting for income taxes (Note d)                          --            --          (743)
   Risk management gain (loss), net (Note f)                  1,067         2,236       (14,425)
   Depletion and depreciation, net (Note a)                     650            --            --
                                                          ---------     ---------     ---------
Net earnings before change in
   accounting principle - U.S. GAAP                          83,043        65,869       103,712
Cumulative effect of change in
   accounting principle, net (Note h)                            --            --        (5,681)
                                                          ---------     ---------     ---------

Net earnings - U.S. GAAP                                  $  83,043     $  65,869     $  98,031
                                                          =========     =========     =========
</TABLE>

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


19.  UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

CONSOLIDATED STATEMENTS OF EARNINGS - U.S. GAAP

<TABLE>
<CAPTION>
For the years ended December 31,                               2005          2004          2003
                                                          ---------     ---------     ---------
<S>                                                       <C>           <C>           <C>
Revenue, net of royalties                                 $ 425,162     $ 298,243     $ 263,999
Expenses
   Operating                                                 66,802        55,655        49,916
   Transportation                                            10,858         8,595         8,447
   General and administrative                                21,223        15,215        12,206
   Interest and finance charges                              55,701        33,733        30,595
   Depletion and depreciation (Note a)                      104,525        82,554        61,749
   Foreign exchange (gain) loss                              (7,353)      (14,631)      (47,368)
   Accretion of asset retirement
     obligations (Note h)                                     1,975         1,670         1,436
   Stock-based compensation                                   5,903         3,410           793
   Guarantee (Note i)                                          (375)           --            --
   Risk management loss (Note f)                             17,660         5,165        28,428
                                                          ---------     ---------     ---------
Net earnings before taxes and
   non-controlling interest                                 148,243       106,877       117,797
   Income tax expense (Note a, f)                            58,292        37,590        14,195
   Non-controlling interest (Note i)                          6,908         3,418          (110)
                                                          ---------     ---------     ---------
Net earnings before change in
   accounting principle - U.S. GAAP                          83,043        65,869       103,712
Cumulative effect of change in
   accounting principle, net (Note h)                            --            --        (5,681)
                                                          ---------     ---------     ---------

Net earnings - U.S. GAAP                                  $  83,043     $  65,869     $  98,031
                                                          =========     =========     =========

Net earnings per common share
  before change in accounting principle
  - U.S. GAAP
   Basic                                                  $    0.66     $    0.56     $    0.89
   Diluted                                                $    0.63     $    0.53     $    0.85
Net earnings per common share
  - U.S. GAAP
   Basic                                                  $    0.66     $    0.56     $    0.84
   Diluted                                                $    0.63     $    0.53     $    0.80

STATEMENTS OF OTHER COMPREHENSIVE INCOME

For the years ended December 31,                               2005          2004          2003
                                                          ---------     ---------     ---------

  Net earnings for the year - U.S. GAAP                   $  83,043     $  65,869     $  98,031
  Accounting for hedging (Note f)                                --            --           858
                                                          ---------     ---------     ---------

  Comprehensive income (Note e)                           $  83,043     $  65,869     $  98,889
                                                          =========     =========     =========
</TABLE>

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


19.  UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
As at December 31,                                                2005                              2004
                                                      --------------------------        --------------------------
                                                      AS REPORTED      U.S. GAAP        As reported      U.S. GAAP
                                                      -----------      ---------        -----------      ---------
<S>                                                    <C>            <C>                <C>            <C>
Assets
   Cash                                                $    8,954     $    8,954         $   10,068     $   10,068
   Other current assets                                   132,484        132,484            117,098        117,098
   Property and equipment (Note a)                      1,587,371      1,588,350          1,178,550      1,178,550
   Goodwill                                                 7,914          7,914              7,914          7,914
   Deferred financing charges and
      other (Note g)                                       13,156         10,489              9,729          6,944
   Deferred risk management loss (Note f)                   5,610             --              7,252             --
                                                       ----------     ----------         ----------     ----------

                                                       $1,755,489     $1,748,191         $1,330,611     $1,320,574
                                                       ==========     ==========         ==========     ==========


Liabilities and shareholders' equity
   Current liabilities                                 $  207,019     $  207,019         $  345,784     $  345,784
   Long term debt (Note g)                                535,540        532,873            198,594        195,809
   Asset retirement obligations                            20,770         20,770             18,006         18,006
   Unrealized hedge loss (Note f)                          14,809         14,809             11,416         11,416
   Guarantee obligation (Note i)                               --          1,248                 --          1,623
   Future income taxes (Notes a, c, f)                    312,117        310,182            261,196        258,357
   Non-controlling interest (Note i)                       68,898         67,650             71,537         69,914
                                                       ----------     ----------         ----------     ----------

                                                        1,159,153      1,154,551            906,533        900,909
                                                       ----------     ----------         ----------     ----------

   Capital stock (Note d)                                 226,444        256,431            135,526        165,513
   Contributed surplus                                      9,173          9,173              3,840          3,840
   Retained earnings                                      360,719        328,036            284,712        250,312
                                                       ----------     ----------         ----------     ----------

                                                          596,336        593,640            424,078        419,665
                                                       ----------     ----------         ----------     ----------

                                                       $1,755,489     $1,748,191         $1,330,611     $1,320,574
                                                       ==========     ==========         ==========     ==========
</TABLE>

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


19.  UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
For the years ended December 31,                               2005          2004           2003
                                                          ---------     ---------      ---------
<S>                                                       <C>           <C>            <C>
Operating activities
   Net earnings                                           $  83,043     $  65,869      $  98,031
   Amortization of deferred charges
     and other                                               22,940         2,101          2,208
   Depletion and depreciation                               104,525        82,554         61,749
   Accretion of asset retirement obligations                  1,975         1,670          7,117
   Unrealized foreign exchange gain                          (7,808)      (14,652)       (47,388)
   Future income taxes                                       53,221        34,839         10,913
   Unrealized risk management (gain) loss                     8,529        (1,464)        24,296
   Other                                                     11,687         6,214         (2,033)
   Change in non-cash working capital                        62,542        20,742         20,525
                                                          ---------     ---------      ---------

Cash from operating activities                              340,654       197,873        175,418
                                                          ---------     ---------      ---------

Cash from financing activities                              171,020       111,179        121,443
                                                          ---------     ---------      ---------

Cash used in investing activities (Note j)                 (512,788)     (310,362)      (285,483)
                                                          ---------     ---------      ---------

Change in cash                                               (1,114)       (1,310)        11,378

Cash, beginning of year                                      10,068        11,378             --
                                                          ---------     ---------      ---------

Cash, end of year                                         $   8,954     $  10,068      $  11,378
                                                          =========     =========      =========
</TABLE>

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


19.   UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

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.  The Company has completed an impairment  test  calculation  at
      December 31, 2005 and for all prior years,  with no write-downs  required
      under either Canadian or U.S. GAAP.

      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 a $979
      thousand  reduction to depletion and  depreciation  expense for U.S. GAAP
      purposes during the year ended December 31, 2005 (2004 - $nil).

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.

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.

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


19. UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

      The net future income tax liability is comprised of:

     As at December 31,                                     2005           2004
                                                      ----------     ----------
     Future income tax liabilities
         Property and equipment                       $  232,908     $  199,931
         Timing of partnership items                      93,532         67,089
         Foreign exchange gain on long-term debt          11,466         10,169
     Future income tax assets
         Attributed Canadian royalty income               (8,830)        (9,015)
         Asset retirement obligations                     (6,984)        (6,057)
         Other                                           (11,910)        (3,760)
                                                      ----------     ----------

     Future income taxes                              $  310,182     $  258,357
                                                      ==========     ==========

d)    FLOW THROUGH SHARES

      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.

      There have been no  flow-through  shares issued  subsequent to 2003.  The
      impact of recording  flow-through shares at their fair value for the year
      ended  December 31, 2003, was to increase the future income tax provision
      by $0.7 million and to increase capital stock by a corresponding amount.

      During  2003,  the Company  received  $4.2  million in proceeds  from the
      issuance of flow-through shares of which $4.2 million remained unspent as
      at December 31, 2003. Accordingly,  under U.S. GAAP, these proceeds would
      be disclosed separately on the balance sheet as restricted cash and would
      not be treated as cash or cash  equivalents  for  statement  of cash flow
      reporting purposes.

e)    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 other than as described under Note 19(f).

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


19.   UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

f)    DERIVATIVE INSTRUMENTS AND HEDGING

      On January 1, 2004, the Company  implemented 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, 2005,  $1.6
      million  (2004 - $3.6  million)  of the  deferred  loss  was  charged  to
      earnings.  The  remaining  balance of $5.7 million  (2004 - $7.3 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, 2005
      and 2004.

      Prior to January 1, 2004, the natural gas and crude oil futures contracts
      were accounted for as cash flow hedges.  These contracts were recorded at
      fair value on the balance  sheet as a $2.0 million  liability at December
      31, 2003. The effective  portion of the change in fair value was recorded
      in  comprehensive  income,  net of tax.  The  ineffective  portion of the
      change in fair  value  was  recorded  in net  earnings,  net of tax.  The
      effective  portion of these commodity  contracts was a $0.9 million gain,
      which was recorded in  comprehensive  income as at December 31, 2003. The
      ineffective  portion  of these  commodity  contracts  was $nil  which was
      recorded in net earnings as at December 31, 2003.

g)    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, 2005 deferred  financing  charges and senior term notes were
      reduced by $2.7 million (2004 - $2.8 million).

h)    ASSET RETIREMENT OBLIGATIONS

      In 2003, the Company early adopted the Canadian  Accounting  Standard for
      asset retirement obligations,  as outlined in the CICA handbook,  section
      3110. This standard is equivalent to U.S. SFAS 143, "Accounting for Asset
      Retirement Obligations",  which is effective for fiscal periods beginning
      on or after  January  1,  2003.  Early  adopting  the  Canadian  standard
      eliminated a U.S. GAAP  reconciling item in respect to accounting for the
      obligations.  However,  a  difference  was created in how the  transition
      amounts are  disclosed.  U.S.  GAAP requires the  cumulative  impact of a
      change in an  accounting  principle  be  presented  in the  current  year
      consolidated  statement  of earnings  and prior  periods not be restated.
      Consequently,  prior year comparative periods, under U.S. GAAP, have been
      revised to eliminate  the prior period  restatement  made under  Canadian
      GAAP.

<PAGE>

===============================================================================
COMPTON PETROLEUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


19.   UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

i)    GUARANTEE

      As discussed 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.
      Only  Canadian  GAAP  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. In 2005, it was determined that the offsetting  adjustment,  as
      previously   disclosed  as  an  unrealized   loss  on  guarantee  on  the
      consolidated  balance sheet was not  appropriate.  Accordingly,  the 2004
      amount has been reclassified to conform with current year presentation.

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

j)    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,
      2005 of $54.1  million  (2004 - $29.2  million,  2003 - $8.7 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, 2005
(Tabular amounts in thousands of dollars, unless otherwise stated)
-------------------------------------------------------------------------------


19.   UNITED STATES ACCOUNTING PRINCIPLES AND REPORTING (CONTINUED)

k)    RECEIVABLE AND PAYABLE AMOUNTS

<TABLE>
<CAPTION>
      As at December 31,                                                  2005                2004
                                                                 -------------       -------------
                                                                     (in thousands of Canadian
                                                                             dollars)
     <S>                                                         <C>                 <C>
     Accounts receivable and other includes the following:
         Revenue receivable                                      $      96,026       $      72,510
                                                                 -------------       -------------
         Joint interest receivable                                      26,172              32,077
         Deposits, prepaids and other                                   10,286              12,511
                                                                 -------------       -------------

                                                                 $     132,484       $     117,098
                                                                 =============       =============

     As at December 31,                                                   2005                2004
                                                                 -------------       -------------
                                                                     (in thousands of Canadian
                                                                             dollars)
     Accounts payable includes the following:
         Trade payables                                          $     161,607       $      97,608
         Royalties payable                                              32,001              18,488
         Other payables                                                 10,261               9,387
                                                                 -------------       -------------

                                                                 $     203,869       $     125,483
                                                                 =============       =============
</TABLE>

l)    RECENT ACCOUNTING PRONOUNCEMENTS

      In the year ended December 31, 2005, the Company  adopted,  for U.S. GAAP
      purposes,   FIN  47,   "Accounting  for  Conditional   Asset   Retirement
      Obligations" in order to address the diverse  accounting  practices which
      have  developed  with  regard  to the  timing  or  recognition  for asset
      retirement  obligations.  This  interpretation did not have any impact on
      the consolidated  financial statements as an asset retirement  obligation
      has been provided for all the Company's long-lived assets.

      The Company has assessed new and revised accounting  pronouncements  that
      have been  issued  that are not yet  effective  and  determined  that the
      following may have a significant impact on the Company:

      i)   As of January 1, 2006,  the Company  will be required to adopt,  for
           U.S. GAAP purposes,  revised SFAS 123  "Share-Based  Payment".  This
           amended  statement will eliminate the  alternative to use Accounting
           Principles  Board ("APB") Opinion No. 25's intrinsic value method of
           accounting,  as was provided in the originally issued Statement 123.
           As a result,  public entities will be required to use the grant-date
           fair value of the award in measuring  the cost of employee  services
           received  in  exchange  for an equity  award of equity  instruments.
           Compensation  cost is required to be  recognized  over the requisite
           service period. Changes in fair value of liability awards during the
           requisite  service  period will be recognized as  compensation  cost
           over the vesting  period.  Compensation  cost will not be recognized
           for  equity  instruments  for  which  employees  do not  render  the
           requisite  service.  Although  the  Company  is in  the  process  of
           assessing the impact of this amendment,  the Company does not expect
           the  amendments  to  have a  material  impact  on  its  consolidated
           statements.

      ii)  As of January 1, 2006,  the Company  will be required to adopt,  for
           U.S.  GAAP  purposes,   SFAS  154  "Accounting   Changes  and  Error
           Corrections, a replacement of APB Opinion No. 20 and SFAS 3". Change
           in the SFAS 154 will require  retroactive  application  of voluntary
           changes in accounting  principles,  unless it is impracticable.  The
           Company does not expect this  standard to have a material  impact on
           its 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, 2005,
2004 and 2003 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,                          2005                       2004                      2003
                                         --------------------        --------------------      --------------------
                                         CRUDE OIL    NATURAL        Crude oil    Natural      Crude oil    Natural
                                          & NGL'S       GAS           & NGL's       Gas         & NGL's       Gas
                                         --------------------        --------------------      --------------------
                                          (MBBLS)      (MMCF)          (mbbls)     (mmcf)       (mbbls)      (mmcf)
<S>                                         <C>       <C>               <C>       <C>             <C>       <C>
Balance, beginning of year                  18,771    359,975           14,542    326,573         10,723    314,501
   Revisions of previous estimates           5,550     59,930            2,797     16,547          2,297    (12,821)
   Extensions, discoveries and
      other additions                        6,498     66,940            3,026     47,713          2,869     54,128
   Acquisitions of minerals in place           723      5,564              427      9,444            404      2,333
   Dispositions of minerals in place            --        (56)            (440)    (3,160)            --         --
   Production                               (2,026)   (36,850)          (1,581)   (37,142)        (1,751)   (31,568)
                                         --------------------        --------------------      --------------------

Balance, end of year                        29,516    455,503           18,771    359,975         14,542    326,573
                                         ====================        ====================      ====================

Proved developed reserves
   Balance, beginning of year               15,481    318,177           10,309    288,899          9,723    293,836
   Balance, end of year                     23,827    385,243           15,481    318,177         10,309    288,899
                                         ====================        ====================      ====================
</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):

<TABLE>
<CAPTION>
Capitalized costs

As at December 31,                                                                         2005                2004
                                                                                    -----------         -----------
                                                                                       (in thousands of Canadian
                                                                                               dollars)
<S>                                                                                 <C>                 <C>
Proved properties                                                                   $ 1,665,455         $ 1,218,826
Unproved properties:
    Acquisition                                                                         129,490             117,194
    Exploration                                                                         143,606              83,238
Accumulated depletion and depreciation                                                 (421,510)           (318,583)
                                                                                    -----------         -----------

                                                                                    $ 1,517,041         $ 1,100,675
                                                                                    ===========         ===========
</TABLE>

<PAGE>

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

Costs incurred on unproved properties

<TABLE>
<CAPTION>
                                                                          Includes costs incurred in
                                        --------        --------------------------------------------------------
                                           CUMM.                                                           Prior
As at December 31,                          2005            2005            2004            2003           Years
                                        --------        --------        --------        --------        --------
(in thousands of Canadian dollars)

<S>                                     <C>             <C>             <C>             <C>             <C>
Acquisition                             $129,490        $ 12,296        $ 13,217        $  2,933        $101,044
Exploration                              143,606          60,368          13,418          15,615          54,205
                                        --------        --------        --------        --------        --------

                                        $273,096        $ 72,664        $ 26,635        $ 18,548        $155,249
                                        ========        ========        ========        ========        ========
</TABLE>
<TABLE>
<CAPTION>
Costs incurred

Years ended December 31,                                                   2005            2004            2003
                                                                       --------        --------        --------
                                                                          (in thousands of Canadian dollars)
<S>                                                                    <C>             <C>             <C>
Acquisition costs (net of disposition)
    Proved properties                                                  $ 28,575        $ 12,686        $ 11,224
    Unproved properties                                                  12,296          13,217           2,933
Development costs
    Development of proved undeveloped reserves                          140,504          60,227          25,232
    Other                                                               283,667         136,198         115,612
Exploration costs                                                        46,484          76,648          64,615
                                                                       --------        --------        --------

Total costs incurred                                                   $511,526        $298,976        $219,616
                                                                       ========        ========        ========
</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 MPP.

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)

<TABLE>
<CAPTION>
Years ended December 31,                                         2005                2004                2003
                                                          -----------         -----------         -----------
                                                                  (in thousands of Canadian dollars)
<S>                                                       <C>                 <C>                 <C>
Future cash inflows                                       $ 6,571,858         $ 3,160,270         $ 2,467,604
Future production costs                                    (1,718,793)           (971,392)           (785,187)
Future development costs                                     (209,901)           (102,557)            (76,708)
                                                          -----------         -----------         -----------

Future net cash flows                                       4,643,164           2,086,321           1,605,709
Income taxes                                               (1,344,684)           (539,539)           (460,291)
                                                          -----------         -----------         -----------

Total undiscounted future net cash flows                    3,298,480           1,546,782           1,145,418
10 percent annual discount for estimated timing of
   cash inflows                                            (1,726,975)           (793,904)           (592,409)
                                                          -----------         -----------         -----------

Standardized measure of discounted
    future net cash flows                                 $ 1,571,505         $   752,878         $   553,009
                                                          ===========         ===========         ===========
</TABLE>

The Company  estimates that it will incur $106.8 million in 2006, $44.6 million
in 2007 and $23.9 million in 2008 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:

<TABLE>
<CAPTION>
Years ended December 31,                                          2005                2004                2003
                                                           -----------         -----------         -----------
                                                                    (in thousands of Canadian dollars)
<S>                                                        <C>                 <C>                 <C>
Beginning of year                                          $   752,878         $   553,009         $   653,697
   Sales of production, net of production costs               (336,711)           (226,408)           (197,323)
   Net change in sales prices, net of production costs         614,690              42,728             (64,509)
   Extensions, discoveries and additions                       354,186             161,106             144,565
   Changes in estimated future development costs              (135,499)            (54,838)            (39,965)
   Development costs incurred during the period which
      reduced future development costs                         353,740             184,053              85,586
   Revisions in quantity estimates                             526,474             306,271             (69,386)
   Accretion of discount                                        75,288              75,908             101,612
   Purchase of reserves                                         (7,749)             (7,749)              6,328
   Sales of reserves                                                87               4,416                  --
   Net change in income tax                                   (331,850)            (42,270)            156,350
   Changes in production rates (timing) and other             (294,029)           (243,348)           (223,946)
                                                           -----------         -----------         -----------

Standardized measure, end of year                          $ 1,571,505         $   752,878         $   553,009
                                                           ===========         ===========         ===========
</TABLE>