Exhibit 99.1
 PETROFLOW ENERGY LTD.




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##### 



TABLE OF CONTENTS
 PageFORWARD-LOOKING STATEMENTS
    
    
    3PETROFLOW ENERGY LTD
    
    
    4Corporate Structure
    
    
    4Intercorporate Relationships
    
    
    5GENERAL DEVELOPMENT OF THE BUSINESS OF THE COMPANY
    
    
    5History
    
    
    5Three Year History
    
    
    6Recent Developments
    
    
    9Significant Acquisitions
    
    
    9DESCRIPTION OF THE BUSINESS OF THE COMPANY
    
    
    10General
    
    
    10Revenue Sources
    
    
    10Competitive Conditions
    
    
    11Intangible Properties
    
    
    11Economic Dependence
    
    
    11Changes to Contracts
    
    
    11Personnel
    
    
    11Environmental Protection
    
    
    11Foreign Operations
    
    
    12Reorganizations
    
    
    12STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION
    
    
    12Disclosure of Reserves Data
    
    
    12Pricing Assumptions
    
    
    21Reconciliations of Changes in Reserves
    
    
    22Undeveloped Reserves
    
    
    24Significant Factors or Uncertainties
    
    
    24Future Development Costs
    
    
    24Oil and Gas Properties
    
    
    25Producing and Non-Producing Wells
    
    
    25Properties with No Attributed Reserves
    
    
    26Tax Horizon
    
    
    27Costs Incurred
    
    
    27Exploration and Development Activities
    
    
    27Production History
    
    
    28DESCRIPTION OF CAPITAL STRUCTURE
    
    
    33DIVIDENDS
    
    
    33MARKET FOR SECURITIES
    
    
    33Trading Price and Volume
    
    
    33
 -i-




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TABLE OF CONTENTS
  PageDIRECTORS AND OFFICERS
    
    
    34Cease Trade Orders
    
    
    35Bankruptcies
    
    
    36Penalties or Sanctions
    
    
    37Conflicts of Interest
    
    
    37AUDIT COMMITTEE
    
    
    38Audit Committee Charter
    
    
    38Composition of the Audit Committee
    
    
    38Relevant Education and Expertise
    
    
    38Audit Committee Oversight
    
    
    39Pre-Approval Policies and Procedure
    
    
    39External Auditor Service Fees
    
    
    39RISK FACTORS
    
    
    39LEGAL PROCEEDINGS AND REGULATORY ACTIONS
    
    
    44Legal Proceedings
    
    
    44Regulatory Actions
    
    
    44INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
    
    
    44TRANSFER AGENT AND REGISTRAR
    
    
    44MATERIAL CONTRACTS
    
    
    45INTERESTS OF EXPERTS
    
    
    45ADDITIONAL INFORMATION
    
    
    45APPENDIX A
    
    
    AAPPENDIX B
    
    
    BAPPENDIX C
    
    
    C
 -ii-




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##### 



FORWARD-LOOKING STATEMENTS
 Company Petroflow AIF
  
    
    the performance characteristics of the Companys oil and natural gas properties;
    
    oil and natural gas production levels;
    
    the size of the oil and natural gas reserves;
    
    projections of market prices and costs;
    
    supply and demand for oil and natural gas;
    
    expectations regarding the ability to raise capital and to continually add to
reserves through acquisitions and development;
    
    treatment under governmental regulatory regimes and tax laws; and
    
    capital expenditure programs.
  
    
    volatility in market prices for oil and natural gas;
    
    liabilities inherent in oil and gas operations;
    
    uncertainties associated with estimating oil and natural gas reserves;
    
    competition for, among other things, capital, acquisitions of reserves,
undeveloped lands and skilled personnel;
    
    incorrect assessments of the value of acquisitions;
    
    geological, technical, drilling and processing problems;
    
    fluctuations in foreign exchange or interest rates and stock market volatility;
    
    changes in income tax laws or changes in tax laws and incentive programs
relating to the oil and gas industry; and
    
    the other factors discussed under Risk Factors in this AIF.
    -3-




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##### 



PETROFLOW ENERGY LTD.
 Corporate Structure
 Common Shares TSX AMEX TSX-V
 Companies Act
 Canada Business Corporations Act CBCA Preferred
Shares
      Special Corporate
Powers Act
 -4-




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##### 



Intercorporate Relationships
 NAPCUS Prize
 
 GENERAL DEVELOPMENT OF THE BUSINESS OF THE COMPANY
 History
   Macon Shaker
 -5-




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##### 



Three Year History
  Year ended December 31, 2006
 Agreement Oklahoma Properties Enterra Energy Trust Enterra Farmout Agreement force majeure
 -6-




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##### 



Year ended December 31, 2007
     Year ended December 31, 2008
    -7-




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##### 



SemGroup
    JVA Patrón
  -8-




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##### 



Recent Developments
  TSX Staff Notice 2008-0005
    Guaranty Order
 Significant Acquisitions
  -9-




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##### 



DESCRIPTION OF THE BUSINESS OF THE COMPANY
 General
   Risk Factors
  (a)
    
    risk capital required to secure or evaluate the investment opportunity;(b)
    
    the potential return on the project, if successful;(c)
    
    the likelihood of success; and(d)
    
    the risked return versus cost of capital.
   Revenue Sources
  -10-




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##### 



Competitive Conditions
  Intangible Properties
  Economic Dependence
  Changes to Contracts
 General Development of the Business of the Company  Three Year History
  Personnel
  Environmental Protection
  -11-




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##### 



Foreign Operations
  Reorganizations
 Intercorporate Relationships
 STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION
 Statement
 Reserves Report Haas Standards of Disclosure for Oil and Gas Activities
    Disclosure of Reserves Data
 Aggregate Gross and Net Reserves  Constant Price and Costs
  -12-




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##### 



COMPANY TOTALS
 Summary of Oil and Gas ReservesConstant Price and CostsAs of December 31, 2008Light and Medium Oil
    
    Natural Gas
    
    Natural Gas LiquidsGross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetReserves Category
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)PROVEDDeveloped Producing
    
    
    1,262
    
    
    
    1,018
    
    
    
    6,589
    
    
    
    5,277
    
    
    
    4,114
    
    
    
    3,289Developed Non-Producing
    
    
    170
    
    
    
    138
    
    
    
    676
    
    
    
    541
    
    
    
    354
    
    
    
    283Undeveloped
    
    
    1,135
    
    
    
    910
    
    
    
    4,178
    
    
    
    3,332
    
    
    
    4,273
    
    
    
    3,405TOTAL PROVED
    
    
    2,567
    
    
    
    2,066
    
    
    
    11,443
    
    
    
    9,150
    
    
    
    8,741
    
    
    
    6,977
 COMPANY TOTALS
 Net Present Values of Future Net RevenuesConstant Prices and CostsAs of December 31, 2008Before Income Taxes Discounted at (%/year)0%
    
    5%
    
    10%
    
    15%
    
    20%Reserves Category
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)PROVEDDeveloped Producing
    
    
    247,082
    
    
    
    187,518
    
    
    
    150,480
    
    
    
    125,581
    
    
    
    107,798Developed Non-Producing
    
    
    26,005
    
    
    
    18,394
    
    
    
    14,319
    
    
    
    11,743
    
    
    
    9,940Undeveloped
    
    
    134,897
    
    
    
    79,900
    
    
    
    47,212
    
    
    
    26,467
    
    
    
    12,632TOTAL PROVED
    
    
    407,984
    
    
    
    285,812
    
    
    
    212,011
    
    
    
    163,791
    
    
    
    130,370
 COMPANY TOTALS
 Net Present Values of Future Net RevenuesConstant Prices and CostsAs of December 31, 2008After Income Taxes Discounted at (%/year)0%
    
    5%
    
    10%
    
    15%
    
    20%Reserves Category
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)PROVEDDeveloped Producing
    
    
    168,796
    
    
    
    129,657
    
    
    
    105,243
    
    
    
    88,802
    
    
    
    77,045Developed Non-Producing
    
    
    17,360
    
    
    
    12,466
    
    
    
    9,807
    
    
    
    8,115
    
    
    
    6,925Undeveloped
    
    
    69,135
    
    
    
    34,727
    
    
    
    14,436
    
    
    
    1,723
    
    
    
    6,606TOTAL PROVED
    
    
    255,291
    
    
    
    176,850
    
    
    
    129,486
    
    
    
    98,640
    
    
    
    77,364
 CANADA
 Summary of Oil and Gas ReservesConstant Price and CostsAs of December 31, 2008Light and Medium Oil
    
    Natural Gas
    
    Natural Gas LiquidsGross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetReserves Category
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)PROVEDDeveloped Producing
    
    
    19
    
    
    
    18
    
    
    
    41
    
    
    
    40
    
    
    
    13
    
    
    
    11Developed Non-Producing
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    Undeveloped
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TOTAL PROVED
    
    
    20
    
    
    
    20
    
    
    
    43
    
    
    
    42
    
    
    
    13
    
    
    
    11
 -13-




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##### 



CANADA
 Net Present Values of Future Net RevenuesConstant Prices and CostsAs of December 31, 2008Before Income Taxes Discounted at (%/year)0%
    
    5%
    
    10%
    
    15%
    
    20%Reserves Category
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)PROVEDDeveloped Producing
    
    
    1,501
    
    
    
    1,212
    
    
    
    1,013
    
    
    
    868
    
    
    
    759Developed Non-Producing
    
    
    94
    
    
    
    87
    
    
    
    81
    
    
    
    76
    
    
    
    71Undeveloped
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TOTAL PROVED
    
    
    1,595
    
    
    
    1,299
    
    
    
    1,094
    
    
    
    944
    
    
    
    830
 CANADA
 Net Present Values of Future Net RevenuesConstant Prices and CostsAs of December 31, 2008After Income Taxes Discounted at (%/year)0%
    
    5%
    
    10%
    
    15%
    
    20%Reserves Category
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)PROVEDDeveloped Producing
    
    
    886
    
    
    
    728
    
    
    
    618
    
    
    
    539
    
    
    
    479Developed Non-Producing
    
    
    55
    
    
    
    53
    
    
    
    49
    
    
    
    47
    
    
    
    44Undeveloped
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TOTAL PROVED
    
    
    941
    
    
    
    781
    
    
    
    667
    
    
    
    589
    
    
    
    523
 UNITED STATES
 Summary of Oil and Gas ReservesConstant Price and CostsAs of December 31, 2008Light and Medium Oil
    
    Natural Gas
    
    Natural Gas LiquidsGross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetReserves Category
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)PROVEDDeveloped Producing
    
    
    1,243
    
    
    
    1,000
    
    
    
    6,548
    
    
    
    5,237
    
    
    
    4,101
    
    
    
    3,277Developed Non-Producing
    
    
    169
    
    
    
    136
    
    
    
    674
    
    
    
    539
    
    
    
    354
    
    
    
    283Undeveloped
    
    
    1,135
    
    
    
    910
    
    
    
    4,178
    
    
    
    3,332
    
    
    
    4,273
    
    
    
    3,406TOTAL PROVED
    
    
    2,547
    
    
    
    2,046
    
    
    
    11,400
    
    
    
    9,108
    
    
    
    8,728
    
    
    
    6,966
 UNITED STATES
 Net Present Values of Future Net RevenuesConstant Prices and CostsAs of December 31, 2008Before Income Taxes Discounted at (%/year)0%
    
    5%
    
    10%
    
    15%
    
    20%Reserves Category
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)PROVEDDeveloped Producing
    
    
    245,581
    
    
    
    186,306
    
    
    
    149,466
    
    
    
    124,712
    
    
    
    107,038Developed Non-Producing
    
    
    25,911
    
    
    
    18,307
    
    
    
    14,239
    
    
    
    11,667
    
    
    
    9,870Undeveloped
    
    
    134,897
    
    
    
    79,900
    
    
    
    47,212
    
    
    
    26,468
    
    
    
    12,632TOTAL PROVED
    
    
    406,389
    
    
    
    284,513
    
    
    
    210,917
    
    
    
    162,847
    
    
    
    129,540
 -14-




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##### 



UNITED STATES
 Net Present Values of Future Net RevenuesConstant Prices and CostsAs of December 31, 2008After Income Taxes Discounted at (%/year)0%
    
    5%
    
    10%
    
    15%
    
    20%Reserves Category
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)PROVEDDeveloped Producing
    
    
    167,910
    
    
    
    128,929
    
    
    
    104,625
    
    
    
    88,264
    
    
    
    76,566Developed Non-Producing
    
    
    17,305
    
    
    
    12,413
    
    
    
    9,758
    
    
    
    8,068
    
    
    
    6,881Undeveloped
    
    
    69,135
    
    
    
    34,727
    
    
    
    14,436
    
    
    
    1,723
    
    
    
    (6,606
    )TOTAL PROVED
    
    
    254,350
    
    
    
    176,069
    
    
    
    128,819
    
    
    
    98,055
    
    
    
    76,841
 Aggregate Gross and Net Reserves  Forecast Price and Costs
  COMPANY TOTALS
 Summary of Oil and Gas ReservesForecast Price and CostsAs of December 31, 2008Light and Medium Oil
    
    Natural Gas
    
    Natural Gas LiquidsGross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetReserves Category
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)PROVEDDeveloped Producing
    
    
    1,477
    
    
    
    1,197
    
    
    
    6,667
    
    
    
    5,341
    
    
    
    4,148
    
    
    
    3,316Developed Non-Producing
    
    
    170
    
    
    
    138
    
    
    
    685
    
    
    
    548
    
    
    
    354
    
    
    
    284Undeveloped
    
    
    1,142
    
    
    
    916
    
    
    
    5,545
    
    
    
    4,425
    
    
    
    4,512
    
    
    
    3,597TOTAL PROVED
    
    
    2,789
    
    
    
    2,251
    
    
    
    12,897
    
    
    
    10,314
    
    
    
    9,014
    
    
    
    7,197PROBABLE
    
    
    508
    
    
    
    405
    
    
    
    3,501
    
    
    
    2,789
    
    
    
    2,723
    
    
    
    2,161TOTAL PROVED PLUS
    
    
    3,297
    
    
    
    2,656
    
    
    
    16,398
    
    
    
    13,103
    
    
    
    11,737
    
    
    
    9,358PROBABLE
 COMPANY TOTALS
 Net Present Values of Future Net RevenuesForecast Prices and CostsAs of December 31, 2008Before Income Taxes Discounted at (%/year)0%
    
    5%
    
    10%
    
    15%
    
    20%Reserves Category
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)PROVEDDeveloped Producing
    
    
    551,430
    
    
    
    379,645
    
    
    
    285,406
    
    
    
    227,177
    
    
    
    187,978Developed Non-Producing
    
    
    61,753
    
    
    
    37,804
    
    
    
    27,164
    
    
    
    21,204
    
    
    
    17,338Undeveloped
    
    
    459,678
    
    
    
    277,295
    
    
    
    177,425
    
    
    
    117,309
    
    
    
    78,502TOTAL PROVED
    
    
    1,072,861
    
    
    
    694,745
    
    
    
    489,995
    
    
    
    365,690
    
    
    
    283,818PROBABLE
    
    
    294,914
    
    
    
    176,353
    
    
    
    113,004
    
    
    
    75,666
    
    
    
    52,017TOTAL PROVED PLUS
    
    
    1,367,775
    
    
    
    871,098
    
    
    
    602,999
    
    
    
    441,356
    
    
    
    335,835PROBABLE
 -15-




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##### 



COMPANY TOTALS
 Net Present Values of Future Net RevenuesForecast Prices and CostsAs of December 31, 2008After Income Taxes Discounted at (%/year)0%
    
    5%
    
    10%
    
    15%
    
    20%Reserves Category
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)PROVEDDeveloped Producing
    
    
    354,648
    
    
    
    284,840
    
    
    
    190,316
    
    
    
    153,905
    
    
    
    129,247Developed Non-Producing
    
    
    9,234
    
    
    
    24,473
    
    
    
    17,863
    
    
    
    14,132
    
    
    
    11,697Undeveloped
    
    
    255,914
    
    
    
    147,186
    
    
    
    87,779
    
    
    
    52,231
    
    
    
    29,486TOTAL PROVED
    
    
    649,796
    
    
    
    420,499
    
    
    
    295,958
    
    
    
    220,267
    
    
    
    170,430PROBABLE
    
    
    158,328
    
    
    
    91,164
    
    
    
    55,398
    
    
    
    34,463
    
    
    
    21,330TOTAL PROVED PLUS
    
    
    808,124
    
    
    
    511,663
    
    
    
    351,356
    
    
    
    254,730
    
    
    
    191,760PROBABLE
 CANADA
 Summary of Oil and Gas ReservesForecast Price and CostsAs of December 31, 2008Light and Medium Oil
    
    Natural Gas
    
    Natural Gas LiquidsGross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetReserves Category
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)PROVEDDeveloped Producing
    
    
    20
    
    
    
    20
    
    
    
    45
    
    
    
    40
    
    
    
    12
    
    
    
    11Developed Non-Producing
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Undeveloped
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TOTAL PROVED
    
    
    23
    
    
    
    21
    
    
    
    46
    
    
    
    41
    
    
    
    12
    
    
    
    11PROBABLE
    
    
    7
    
    
    
    7
    
    
    
    14
    
    
    
    14
    
    
    
    3
    
    
    
    3TOTAL PROVED PLUS
    
    
    30
    
    
    
    29
    
    
    
    360
    
    
    
    55
    
    
    
    15
    
    
    
    14PROBABLE
 CANADA
 Net Present Values of Future Net RevenuesForecast Prices and CostsAs of December 31, 2008Before Income Taxes Discounted at (%/year)0%
    
    5%
    
    10%
    
    15%
    
    20%Reserves Category
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)PROVEDDeveloped Producing
    
    
    4,384
    
    
    
    3,117
    
    
    
    2,387
    
    
    
    1,924
    
    
    
    1,607Developed Non-Producing
    
    
    206
    
    
    
    183
    
    
    
    165
    
    
    
    149
    
    
    
    135Undeveloped
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TOTAL PROVED
    
    
    4,590
    
    
    
    3,300
    
    
    
    2,552
    
    
    
    2,073
    
    
    
    1,742PROBABLE
    
    
    1,425
    
    
    
    1,163
    
    
    
    974
    
    
    
    834
    
    
    
    728TOTAL PROVED PLUS
    
    
    6,015
    
    
    
    4,463
    
    
    
    3,526
    
    
    
    2,907
    
    
    
    2,470PROBABLE
 -16-




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##### 



CANADA
 Net Present Values of Future Net RevenuesForecast Prices and CostsAs of December 31, 2008After Income Taxes Discounted at (%/year)0%
    
    5%
    
    10%
    
    15%
    
    20%Reserves Category
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)PROVEDDeveloped Producing
    
    
    2,586
    
    
    
    1,871
    
    
    
    1,458
    
    
    
    1,193
    
    
    
    1,013Developed Non-Producing
    
    
    124
    
    
    
    113
    
    
    
    103
    
    
    
    94
    
    
    
    87Undeveloped
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TOTAL PROVED
    
    
    2,710
    
    
    
    1,984
    
    
    
    1,561
    
    
    
    1,287
    
    
    
    1,100PROBABLE
    
    
    841
    
    
    
    698
    
    
    
    595
    
    
    
    518
    
    
    
    459TOTAL PROVED PLUS
    
    
    3,551
    
    
    
    2,682
    
    
    
    2,156
    
    
    
    1,805
    
    
    
    1,559PROBABLE
 UNITED STATES
 Summary of Oil and Gas ReservesForecast Price and CostsAs of December 31, 2008Light and Medium Oil
    
    Natural Gas
    
    Natural Gas LiquidsGross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetReserves Category
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)
    
    (mbbl)PROVEDDeveloped Producing
    
    
    1,455
    
    
    
    1,176
    
    
    
    6,622
    
    
    
    5,301
    
    
    
    4,136
    
    
    
    3,305Developed Non-Producing
    
    
    169
    
    
    
    137
    
    
    
    684
    
    
    
    546
    
    
    
    354
    
    
    
    284Undeveloped
    
    
    1,142
    
    
    
    916
    
    
    
    5,545
    
    
    
    4,425
    
    
    
    4,512
    
    
    
    3,597TOTAL PROVED
    
    
    2,766
    
    
    
    2,229
    
    
    
    12,851
    
    
    
    10,272
    
    
    
    9,002
    
    
    
    7,186PROBABLE
    
    
    501
    
    
    
    398
    
    
    
    3,488
    
    
    
    2,776
    
    
    
    2,723
    
    
    
    2,158TOTAL PROVED PLUS
    
    
    3,267
    
    
    
    2,629
    
    
    
    16,339
    
    
    
    13,048
    
    
    
    11,725
    
    
    
    9,344PROBABLE
 -17-




---



##### 



UNITED STATES
 Net Present Values of Future Net RevenuesForecast Prices and CostsAs of December 31, 2008Before Income Taxes Discounted at (%/year)0%
    
    5%
    
    10%
    
    15%
    
    20%Reserves Category
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)PROVEDDeveloped Producing
    
    
    547,046
    
    
    
    376,528
    
    
    
    283,019
    
    
    
    225,254
    
    
    
    186,370Developed Non-Producing
    
    
    61,548
    
    
    
    37,621
    
    
    
    26,999
    
    
    
    21,055
    
    
    
    17,204Undeveloped
    
    
    459,678
    
    
    
    277,295
    
    
    
    177,425
    
    
    
    117,309
    
    
    
    78,501TOTAL PROVED
    
    
    1,068,272
    
    
    
    691,444
    
    
    
    487,443
    
    
    
    363,619
    
    
    
    282,075PROBABLE
    
    
    293,489
    
    
    
    175,190
    
    
    
    112,029
    
    
    
    74,832
    
    
    
    51,289TOTAL PROVED PLUS
    
    
    1,361,761
    
    
    
    866,634
    
    
    
    599,472
    
    
    
    438,450
    
    
    
    333,364PROBABLE
 UNITED STATES
 Net Present Values of Future Net RevenuesForecast Prices and CostsAs of December 31, 2008After Income Taxes Discounted at (%/year)0%
    
    5%
    
    10%
    
    15%
    
    20%Reserves Category
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)
    
    ($ thousands)PROVEDDeveloped Producing
    
    
    352,062
    
    
    
    246,969
    
    
    
    188,858
    
    
    
    152,711
    
    
    
    128,234Developed Non-Producing
    
    
    39,110
    
    
    
    24,360
    
    
    
    17,760
    
    
    
    14,038
    
    
    
    11,609Undeveloped
    
    
    255,914
    
    
    
    147,186
    
    
    
    87,779
    
    
    
    52,231
    
    
    
    29,486TOTAL PROVED
    
    
    647,086
    
    
    
    418,515
    
    
    
    294,397
    
    
    
    218,980
    
    
    
    169,329PROBABLE
    
    
    157,487
    
    
    
    90,466
    
    
    
    54,803
    
    
    
    33,945
    
    
    
    20,872TOTAL PROVED PLUS
    
    
    804,573
    
    
    
    508,981
    
    
    
    349,200
    
    
    
    252,925
    
    
    
    190,201PROBABLE
 Additional Information Concerning Future Net Revenue
  COMPANY TOTALS
 Total Future Net RevenueAs at December 21, 2008Constant Prices &Costs
    
    Forecast Prices & Costs(Undiscounted)
    
    (Undiscounted)Proved Plus($Thousands)
    
    Proved Reserves
    
    Proved Reserves
    
    Probable ReservesRevenue
    
    
    662,374
    
    
    
    1,443,867
    
    
    
    1,846,304Royalties (net of ARTC)
    
    
    415
    
    
    
    610
    
    
    
    688Operation costs
    
    
    183,969
    
    
    
    263,088
    
    
    
    327,570477,990
    
    
    
    1,180,167
    
    
    
    1,518,046Development costs
    
    
    67,312
    
    
    
    104,312
    
    
    
    146,712Abandonment and reclamation costs
    
    
    2,694
    
    
    
    2,996
    
    
    
    3,55970,006
    
    
    
    107,308
    
    
    
    150,271Future Net Revenue before
deducting future income tax
expenses
    
    
    407,984
    
    
    
    1,072,861
    
    
    
    1,367,775Future Income Tax expenses
    
    
    152,693
    
    
    
    423,065
    
    
    
    559,651Future net revenue after deducting
future income tax expenses
    
    
    254,957
    
    
    
    649,796
    
    
    
    808,124
 -18-




---



##### 



Estimated ProductionFor the Year Ended December 31, 2009Constant Prices &Costs
    
    Forecast Prices & Costs(Undiscounted)
    
    (Undiscounted)Estimated production for the year
    
    
    
    
    
    
    
    
    
    Proved Plusended December 31, 2009
    
    Proved Reserves
    
    Proved Reserves
    
    Probable ReservesOil (Mbbl)
    
    
    204
    
    
    
    212
    
    
    
    219Gas (Mbbl)
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,167NGL (Mbbl)
    
    
    539
    
    
    
    539
    
    
    
    570Mboe
    
    
    1,811
    
    
    
    1,826
    
    
    
    1,931
 CANADA
 Total Future Net RevenueAs at December 31, 2008Constant Prices &Costs
    
    Forecast Prices & Costs(Undiscounted)
    
    (Undiscounted)Proved Plus($Thousands)
    
    Proved Reserves
    
    Proved Reserves
    
    Probable ReservesRevenue
    
    
    3,775
    
    
    
    7,560
    
    
    
    8,889Royalties (net of ARTC)
    
    
    372
    
    
    
    610
    
    
    
    688Operation costs
    
    
    1,808
    
    
    
    2,352
    
    
    
    2,1871,595
    
    
    
    4,598
    
    
    
    6,014Development costs
    
    
    
    
    
    
    
    
    
    
    Abandonment and reclamation costs
    
    
    
    
    
    
    
    
    
    
    Future Net Revenue before
deducting future income tax
expenses
    
    
    1,595
    
    
    
    4,598
    
    
    
    6,014Future Income Tax expenses
    
    
    654
    
    
    
    1,880
    
    
    
    2,463Future net revenue after
deducting future income tax
expenses
    
    
    941
    
    
    
    2,718
    
    
    
    3,551
 Estimated ProductionFor the Year Ended December 31, 2009Constant Prices &Costs
    
    Forecast Prices & Costs(Undiscounted)
    
    (Undiscounted)Estimated production for the
    
    
    
    
    
    
    
    
    
    Proved Plusyear ended December 31, 2009
    
    Proved Reserves
    
    Proved Reserves
    
    Probable ReservesOil (Mbbl)
    
    
    3
    
    
    
    3
    
    
    
    4Gas (Mbbl)
    
    
    6
    
    
    
    6
    
    
    
    10NGL (Mbbl)
    
    
    2
    
    
    
    2
    
    
    
    2Mboe
    
    
    11
    
    
    
    11
    
    
    
    16
 -19-




---



##### 



UNITED STATES
 Total Future Net RevenueAs at December 31, 2008Constant Prices &Costs
    
    Forecast Prices & Costs(Undiscounted)
    
    (Undiscounted)Proved Plus($Thousands)
    
    Proved Reserves
    
    Proved Reserves
    
    Probable ReservesRevenue
    
    
    658,972
    
    
    
    1,436,925
    
    
    
    1,837,416Royalties (net of ARTC)
    
    
    
    
    
    
    
    
    
    
    Operation costs
    
    
    182,577
    
    
    
    261,345
    
    
    
    325,384476,395
    
    
    
    1,175,580
    
    
    
    1,512,032Development costs
    
    
    67,312
    
    
    
    104,312
    
    
    
    146,712Abandonment and reclamation costs
    
    
    2,694
    
    
    
    2,996
    
    
    
    3,55970,006
    
    
    
    107,308
    
    
    
    150,271Future Net Revenue before
deducting future income tax
expenses
    
    
    406,389
    
    
    
    1,068,272
    
    
    
    1,361,761Future Income Tax expenses
    
    
    152,039
    
    
    
    421,186
    
    
    
    557,188Future net revenue after
deducting future income tax
expenses
    
    
    254,350
    
    
    
    647,086
    
    
    
    804,573
 Estimated ProductionFor the Year Ended December 31, 2009Constant Prices &Costs
    
    Forecast Prices & Costs(Undiscounted)
    
    (Undiscounted)Estimated production for the
    
    
    
    
    
    
    
    
    
    Proved Plusyear ended December 31, 2009
    
    Proved Reserves
    
    Proved Reserves
    
    Probable ReservesOil (Mbbl)
    
    
    201
    
    
    
    210
    
    
    
    215Gas (Mbbl)
    
    
    1,062
    
    
    
    1,069
    
    
    
    1,133NGL (Mbbl)
    
    
    537
    
    
    
    537
    
    
    
    568Mboe
    
    
    1,800
    
    
    
    1,816
    
    
    
    1,918
  -20-




---



##### 



Future Net Revenue
Constant Prices and Costs
By Production Group
As of December 31, 2008
 Unit Value BeforeFuture Net revenues
    
    Income Taxbefore Income Taxes -
    
    Discounted ATDiscounted at
    
    10%/year ($/Mcf)Reserves Category
    
    Production Group
    
    10%/year
    
    ($/Bbl)Proved
    
    Light and Medium Oil (1)
    
    $
    35,344
    
    
    $
    17.10Natural Gas (2)
    
    $
    176,667
    
    
    $
    3.22Total Proved plus Probable
    
    Light and Medium Oil (1)
    
    $
    39,016
    
    
    $
    15.80Natural Gas (2)
    
    $
    208,316
    
    
    $
    3.02
 Notes:
 (1)
    
    Including solution gas and other by-products.(2)
    
    Including by-products but excluding solution gas from oil wells. Future Net Revenue
Forecast Prices and Costs
By Production Group
As of December 31, 2008
 Unit Value BeforeFuture Net revenues
    
    Income Taxbefore Income Taxes -
    
    Discounted ATDiscounted at
    
    10%/year ($/Mcf)Reserves Category
    
    Production Group
    
    10%/year
    
    ($/Bbl)Proved
    
    Light and Medium Oil (1)
    
    $
    94,391
    
    
    $
    41.92Natural Gas (2)
    
    $
    395,449
    
    
    $
    6.39Total Proved plus Probable
    
    Light and Medium Oil (1)
    
    $
    107,785
    
    
    $
    40.58Natural Gas (2)
    
    $
    494,993
    
    
    $
    6.29
 Notes:
 (1)
    
    Including solution gas and other by-products.(2)
    
    Including by-products but excluding solution gas from oil wells. Pricing Assumptions
  -21-




---



##### 



December 31, 2008 Constant Product Price Schedule
 Crude Oil PricesWest Texas Intermediate ($US/bbl)
    
    $
    44.60Natural Gas (@Field Gate $US/MMBtu)Henry Hub
    
    $
    5.71
 Summary of Price Forecasts
December 31, 2008
 Edmonton LightCrudeWTI Crude Oil(1)
    
    Oil(2)
    
    
    
    US/CAN Exchange RateYear
    
    $ US/BBL
    
    $CAN/BBL
    
    Inflation
    
    $US/$CAN2009
    
    60.00
    
    69.60
    
    2%
    
    0.852010
    
    71.40
    
    83.00
    
    2%
    
    0.852011
    
    83.20
    
    91.40
    
    2%
    
    0.902012
    
    90.20
    
    93.90
    
    2%
    
    0.952013
    
    97.40
    
    96.30
    
    2%
    
    1.00Thereafter
    
    +2%
    
    +2%
 Notes:
 (1)
    
    West Texas Intermediate at Cushing Oklahoma 40 degrees API/0.5% sulphur.(2)
    
    Edmonton Light Sweet 40 degrees API, 0.5% sulphur. Summary of Natural Gas Price Forecasts
December 31, 2008
 U.S. Henry Hub Gas Price
    
    Alberta AECO Spot PriceYear
    
    $US/MMBtu
    
    $CAN/Mcf2009
    
    7.25
    
    7.402010
    
    7.75
    
    8.002011
    
    8.60
    
    8.452012
    
    9.35
    
    8.802013
    
    10.10
    
    9.05Thereafter
    
    +2%
    
    +2%
  Reconciliations of Changes in Reserves
  -22-




---



##### 



Company Totals
 Reconciliation of Changes in Gross Oil & Gas ReservesForecast Prices and CostsAs at December 31, 2008Associated andCompany Totals
    
    Light & Medium Oil(1)
    
    Natural Gas Liquids
    
    Non-Associated GasGross
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    GrossProved
    
    
    
    
    
    
    
    
    
    Proved
    
    
    
    
    
    
    
    
    
    ProvedGross
    
    Gross
    
    plus
    
    Gross
    
    Gross
    
    plus
    
    Gross
    
    Gross
    
    plusProved
    
    Probable
    
    Probable
    
    Proved
    
    Probable
    
    Probable
    
    Proved
    
    Probable
    
    ProbableFactors
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)December 31, 2007
    
    
    2,498
    
    
    
    657
    
    
    
    3,155
    
    
    
    5,199
    
    
    
    2,293
    
    
    
    7,495
    
    
    
    12,654
    
    
    
    2,827
    
    
    
    15,481Discoveries
    
    
    451
    
    
    
    8
    
    
    
    302
    
    
    
    3,823
    
    
    
    430
    
    
    
    4,250
    
    
    
    1,821
    
    
    
    1,513
    
    
    
    3,313Technical Revisions
    
    
    (1
    )
    
    
    2
    
    
    
    (1
    )
    
    
    (7
    )
    
    
    1
    
    
    
    (7
    )
    
    
    (1,444
    )
    
    
    (705
    )
    
    
    (2,280
    )Production
    
    
    (159
    )
    
    
    (159
    )
    
    
    (159
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (134
    )
    
    
    (134
    )
    
    
    (134
    )December 31, 2008
    
    
    2,789
    
    
    
    508
    
    
    
    3,297
    
    
    
    9,014
    
    
    
    2,723
    
    
    
    11,737
    
    
    
    12,897
    
    
    
    3,501
    
    
    
    16,398
 Canada
 Reconciliation of Changes in Gross Oil & Gas ReservesForecast Prices and CostsAs at December 31, 2008Associated andCompany Totals
    
    Light & Medium Oil(1)
    
    Natural Gas Liquids
    
    Non-Associated GasGross
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    GrossProved
    
    
    
    
    
    
    
    
    
    Proved
    
    
    
    
    
    
    
    
    
    ProvedGross
    
    Gross
    
    plus
    
    Gross
    
    Gross
    
    plus
    
    Gross
    
    Gross
    
    plusProved
    
    Probable
    
    Probable
    
    Proved
    
    Probable
    
    Probable
    
    Proved
    
    Probable
    
    ProbableFactors
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)December 31, 2007
    
    
    23
    
    
    
    7
    
    
    
    30
    
    
    
    20
    
    
    
    3
    
    
    
    23
    
    
    
    474
    
    
    
    15
    
    
    
    88Discoveries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Technical Revisions
    
    
    (1
    )
    
    
    2
    
    
    
    (1
    )
    
    
    (7
    )
    
    
    1
    
    
    
    (7
    )
    
    
    (26
    )
    
    
    1
    
    
    
    (26
    )Production
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )December 31, 2008
    
    
    20
    
    
    
    7
    
    
    
    27
    
    
    
    12
    
    
    
    3
    
    
    
    15
    
    
    
    46
    
    
    
    14
    
    
    
    60
 United States
 Reconciliation of Changes in Gross Oil & Gas ReservesForecast Prices and CostsAs at December 31, 2008Associated andCompany Totals
    
    Light & Medium Oil(1)
    
    Natural Gas Liquids
    
    Non-Associated GasGross
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    GrossProved
    
    
    
    
    
    
    
    
    
    Proved
    
    
    
    
    
    
    
    
    
    ProvedGross
    
    Gross
    
    plus
    
    Gross
    
    Gross
    
    plus
    
    Gross
    
    Gross
    
    plusProved
    
    Probable
    
    Probable
    
    Proved
    
    Probable
    
    Probable
    
    Proved
    
    Probable
    
    ProbableFactors
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)
    
    (Mbbl)December 31, 2007
    
    
    2,475
    
    
    
    650
    
    
    
    3,125
    
    
    
    5,179
    
    
    
    2,293
    
    
    
    7,472
    
    
    
    12,581
    
    
    
    2,813
    
    
    
    15,393Discoveries
    
    
    398
    
    
    
    354
    
    
    
    752
    
    
    
    2,155
    
    
    
    1,912
    
    
    
    4,067
    
    
    
    1,821
    
    
    
    1,513
    
    
    
    3,331Technical Revisions
    
    
    52
    
    
    
    (346
    )
    
    
    (451
    )
    
    
    1,682
    
    
    
    (1,482
    )
    
    
    198
    
    
    
    (1,287
    )
    
    
    (707
    )
    
    
    (2,254
    )Production
    
    
    (157
    )
    
    
    (157
    )
    
    
    (157
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (132
    )
    
    
    (132
    )
    
    
    (132
    )December 31, 2008
    
    
    2,768
    
    
    
    501
    
    
    
    3,269
    
    
    
    9,014
    
    
    
    2,723
    
    
    
    11,725
    
    
    
    12,851
    
    
    
    3,487
    
    
    
    16,338
 Note:
 (1)
    
    Including by-products but excluding solution gas from oil wells. -23-




---



##### 



Additional Information Relating to Reserves Data
 Undeveloped Reserves
  
    
    changing economic conditions (due to pricing, operating and capital expenditure
fluctuations);
    
    changing technical conditions (production anomalies (such as water
breakthrough, accelerated depletion));
    
    multi-zone developments (such as a prospective formation completion may be
delayed until the initial completion is no longer economic);
    
    a larger development program may need to be spread out over several years to
optimize capital allocation and facility utilization; and
    
    surface access issues (landowners, weather conditions, regulatory approvals).
 Significant Factors or Uncertainties
  Future Development Costs
  Undiscounted Constant Prices &Undiscounted Forecast Prices & Costs
    
    CostsYear
    
    Proved Reserves
    
    Proved Plus Probable
    
    Proved ReservesTotal
    
    US
    
    Canada
    
    Total
    
    US
    
    Canada
    
    Total
    
    US
    
    Canada2009
    
    
    31,838
    
    
    
    31,838
    
    
    
    
    
    
    
    49,404
    
    
    
    49,404
    
    
    
    
    
    
    
    29,530
    
    
    
    29,530
    
    
    
    2010
    
    
    41,364
    
    
    
    41,364
    
    
    
    
    
    
    
    45,562
    
    
    
    45,562
    
    
    
    
    
    
    
    31,330
    
    
    
    31,330
    
    
    
    2011
    
    
    21,807
    
    
    
    21,807
    
    
    
    
    
    
    
    28,693
    
    
    
    28,693
    
    
    
    
    
    
    
    6,384
    
    
    
    6,384
    
    
    
    2012
    
    
    4,617
    
    
    
    4,617
    
    
    
    
    
    
    
    13,772
    
    
    
    13,772
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2013
    
    
    4,617
    
    
    
    4,617
    
    
    
    
    
    
    
    9,214
    
    
    
    9,214
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    70
    
    
    
    70
    
    
    
    
    
    
    
    68
    
    
    
    68
    
    
    
    
    
    
    
    67
    
    
    
    67
    
    
    
    Total Undiscounted
    
    
    104,313
    
    
    
    104,313
    
    
    
    
    
    
    
    146,713
    
    
    
    104,262
    
    
    
    
    
    
    
    67,311
    
    
    
    67,311
    
    
    
    Total Discounted at 10%
    
    
    47,642
    
    
    
    47,642
    
    
    
    
    
    
    
    64,680
    
    
    
    64,680
    
    
    
    
    
    
    
    34,808
    
    
    
    34,808
    
    
    
    
  -24-




---



##### 



Oil and Gas Properties
 Oklahoma
 General Development of the
Business of the Company  Three Year History
 Alberta
  San Juan Basin
  Permian Basin
  Producing and Non-Producing Wells
  -25-




---



##### 



Producing and Non-Producing Wells
As at December 31, 2008
 Oil wells
    
    Natural Gas Wells
    
    TotalGross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetProducing (1)Oklahoma
    
    
    2
    
    
    
    1
    
    
    
    65
    
    
    
    34.5
    
    
    
    67
    
    
    
    35.5Alberta
    
    
    18
    
    
    
    3.6
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    3.6Texas
    
    
    14
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    14TOTAL PRODUCING
    
    
    34
    
    
    
    18.6
    
    
    
    65
    
    
    
    34.5
    
    
    
    99
    
    
    
    53.1Non-producing (2)Oklahoma
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    2.6
    
    
    
    5
    
    
    
    2.6Alberta
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Texas
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    5TOTAL NON-PRODUCING
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    2.6
    
    
    
    10
    
    
    
    7.6
 Notes:
 (1)
    
    Includes wells that are temporarily shut-in but which are capable of production.(2)
    
    Includes wells that are not capable of production but that are not yet abandoned. Properties with No Attributed Reserves
   Expiring in Year Ended December 31, 2008Unproved Properties (Acres)
    
    (Acres)Gross
    
    Net
    
    Gross
    
    NetCanada
    
    
    8,480
    
    
    
    2,208
    
    
    
    
    
    
    
    United States
    
    
    17,889
    
    
    
    11,339
    
    
    
    
    
    
    
    TOTAL
    
    
    26,369
    
    
    
    13,547
    
    
    
    
    
    
    
    
  Additional Information Concerning Abandonment and Reclamation Costs
  -26-




---



##### 



Abandonment Costs
(Proved Reserves Forecast Prices and
Costs, Undiscounted)
 Year
    
    ($000)2009
    
    
    522010
    
    
    2442011
    
    
    2012
    
    
    Thereafter
    
    
    2,700Total Undiscounted
    
    
    2,996Total Discounted at 10%
    
    
    1,476
 Tax Horizon
  Costs Incurred
  Costs Incurred
Year Ended December 31, 2008
 Total
    
    
    US
    
    
    CanadaExploration Costs
    
    
    
    
    
    
    
    
    
    
    Property Acquisition Costs
    
    
    (28,250
    )
    
    
    (28,250
    )
    
    
    Development Costs
    
    
    84,090
    
    
    
    84,090
    
    
    
    55,840
    
    
    
    55,840
    
    
    
    
 Exploration and Development Activities
  Exploratory Well
    
    
    Development WellsGross
    
    
    Net
    
    
    Gross
    
    
    NetCanada
    
    US
    
    
    Canada
    
    US
    
    
    Canada
    
    US
    
    
    Canada
    
    USOil
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    15Service Wells
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    1Dry Holes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    1TOTAL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    
    
    
    17
  -27-




---



##### 



Production History
  Average Daily Production (1)  Year Ended December 31, 2008
 Quarter Ended31-Dec-08
    
    
    
    
    
    
    
    
    
    30-Sep-08
    
    
    
    
    
    
    
    
    
    30-Jun-08
    
    
    
    
    
    
    
    
    
    31-Mar-08Total
    
    US
    
    Canada
    
    Total
    
    US
    
    Canada
    
    Total
    
    US
    
    Canada
    
    Total
    
    US
    
    CanadaOil (bopd)
    
    
    494
    
    
    
    489
    
    
    
    5
    
    
    
    510
    
    
    
    502
    
    
    
    8
    
    
    
    409
    
    
    
    404
    
    
    
    5
    
    
    
    328
    
    
    
    319
    
    
    
    9Gas and NGL(Mcfpd)
    
    
    16,240
    
    
    
    15,926
    
    
    
    313
    
    
    
    13,374
    
    
    
    13,159
    
    
    
    216
    
    
    
    12,099
    
    
    
    11,929
    
    
    
    170
    
    
    
    10,984
    
    
    
    10,737
    
    
    
    246Boepd
    
    
    3,201
    
    
    
    3,144
    
    
    
    43
    
    
    
    2,739
    
    
    
    2,695
    
    
    
    44
    
    
    
    2,426
    
    
    
    2,393
    
    
    
    33
    
    
    
    2,159
    
    
    
    2,109
    
    
    
    51
 Note:
 (1)
    
    Before deduction of royalties. Production and Netback History
Year Ended December 31, 2008
 Quarter Ended31-Dec-08
    
    
    
    
    
    
    
    
    
    30-Sep-08
    
    
    
    
    
    
    
    
    
    30-Jun-08
    
    
    
    
    
    
    
    
    
    31-Mar-08Total
    
    US
    
    Canada
    
    Total
    
    US
    
    Canada
    
    Total
    
    US
    
    Canada
    
    Total
    
    US
    
    CanadaProduction Volumes:Oil (bbls)
    
    
    45,453
    
    
    
    45,029
    
    
    
    424
    
    
    
    46,878
    
    
    
    46,158
    
    
    
    721
    
    
    
    37,247
    
    
    
    36,818
    
    
    
    429
    
    
    
    29,883
    
    
    
    29,025
    
    
    
    858Gas (Mcf)
    
    
    1,492,939
    
    
    
    1,465,233
    
    
    
    27,706
    
    
    
    1,229,374
    
    
    
    1,210,598
    
    
    
    18,776
    
    
    
    1,099,791
    
    
    
    1,085,541
    
    
    
    14,250
    
    
    
    998,416
    
    
    
    977,092
    
    
    
    21,324NGL (Mcf)
    
    
    1,123
    
    
    
    
    
    
    
    1,123
    
    
    
    1,062
    
    
    
    
    
    
    
    1,062
    
    
    
    1,242
    
    
    
    
    
    
    
    1,242
    
    
    
    1,104
    
    
    
    
    
    
    
    1,104BOE
    
    
    294,463
    
    
    
    289,235
    
    
    
    5,229
    
    
    
    251,951
    
    
    
    247,924
    
    
    
    4,027
    
    
    
    220,752
    
    
    
    217,742
    
    
    
    3,011
    
    
    
    196,470
    
    
    
    191,874
    
    
    
    4,596Average Price
Received:Oil (bbls)
    
    $
    82.25
    
    
    $
    82.76
    
    
    $
    92.58
    
    
    $
    118.14
    
    
    $
    117.75
    
    
    $
    142.99
    
    
    $
    124.47
    
    
    $
    127.03
    
    
    $
    79.90
    
    
    $
    92.25
    
    
    $
    92.61
    
    
    $
    80.07Gas and NGL (Mcf)
    
    $
    8.69
    
    
    $
    6.88
    
    
    $
    6.03
    
    
    $
    9.00
    
    
    $
    13.55
    
    
    $
    5.66
    
    
    $
    9.77
    
    
    $
    9.63
    
    
    $
    14.92
    
    
    $
    7.47
    
    
    $
    7.47
    
    
    $
    7.46BOE
    
    $
    41.67
    
    
    $
    41.69
    
    
    $
    40.73
    
    
    $
    65.96
    
    
    $
    66.16
    
    
    $
    53.48
    
    
    $
    69.73
    
    
    $
    69.47
    
    
    $
    88.14
    
    
    $
    52.02
    
    
    $
    52.04
    
    
    $
    51.34Royalties ($/boe)
    
    $
    9.41
    
    
    $
    9.28
    
    
    $
    18.56
    
    
    $
    13.93
    
    
    $
    13.96
    
    
    $
    11.44
    
    
    $
    14.90
    
    
    $
    14.91
    
    
    $
    14.03
    
    
    $
    11.49
    
    
    $
    11.47
    
    
    $
    12.30Operating Expenses
($/boe)
    
    $
    9.45
    
    
    $
    9.28
    
    
    $
    18.56
    
    
    $
    13.92
    
    
    $
    13.96
    
    
    $
    11.44
    
    
    $
    11.73
    
    
    
    411.41
    
    
    $
    34.98
    
    
    $
    8.69
    
    
    $
    8.51
    
    
    $
    16.19Netbacks ($/boe)
    
    $
    22.92
    
    
    $
    30.49
    
    
    $
    11.94
    
    
    $
    38.11
    
    
    $
    25.55
    
    
    $
    30.61
    
    
    $
    43.10
    
    
    $
    61.82
    
    
    $
    39.13
    
    
    $
    31.84
    
    
    $
    31.36
    
    
    $
    22.85
 -28-




---



##### 



Definitions, Notes and Other Cautionary Statements
  1.
    
    Gross means:
 (a)
    
    in relation to the Companys interest in production and reserves, its gross
reserves, which are the Companys interest (operating and non-operating) share before
deduction of royalties and without including any royalty interests of the Company;(b)
    
    in relation to wells, the total number of wells in which the Company has an
interest; and(c)
    
    in relation to properties, the total area of properties in which the Company
has an interest.
 2.
    
    Net means:
 (a)
    
    in relation to the Companys interest in production or reserves, its net
reserves, which are the Companys interest (operating and non-operating) share after
deduction of royalty obligations, plus the Companys royalty interests in production
of reserves;(b)
    
    in relation to wells, the number of wells obtained by aggregating the
Companys working interest in each of its gross wells; and(c)
    
    in relation to the Companys interest in a property, the total area in which
the Company has an interest multiplied by the working interest owned by the Company.
 3.
    
    Definitions used for reserve categories are as follows:Reserves are estimated remaining quantities of oil and natural gas and related substances
anticipated to be recoverable from known accumulations, from a given date forward, based
on:
 
    
    analysis of drilling, geological, geophysical and reserves data;
    
    the use of established technology; and
    
    specified economic conditions, which are generally accepted as being reasonable.
 Reserves are classified according to the degree of certainty associated with the estimates.
 (a)
    
    Proved reservesare those reserves that can be estimated with a high degree of
certainty to be recoverable. It is likely that the actual remaining quantities
recovered will exceed the estimated proved reserves.(b)
    
    Probable reservesare those additional reserves that are less certain to be
recovered than proved reserves. It is equally likely that the actual remaining
quantities recovered will be greater or less than the sum of the estimated proved plus
probable reserves.
 -29-




---



##### 



Development and Production Status
  (c)
    
    Developed reservesare those reserves that are expected to be recovered from
existing wells and installed facilities or, if facilities have not been installed,
that would involve a low expenditure (for example, when compared to the cost of
drilling a well) to put the reserves on production. The developed category may be
subdivided into producing and non-producing.
 (i)
    
    Developed producing reservesare those reserves that are
expected to be recovered from completion intervals open at the time of the
estimate. These reserves may be currently producing or, if shut-in, they must
have previously been on production, and the date of resumption of production
must be known with reasonable certainty.(ii)
    
    Developed non-producing reservesare those reserves that
either have not been on production, or have previously been on production, but
are shut-in, and the date of resumption of production is unknown.
 (d)
    
    Undeveloped reservesare those reserves expected to be recovered from known
accumulations where a significant expenditure (for example, when compared to the cost
of drilling a well) is required to render them capable of production. They must fully
meet the requirements of the reserves classification (proved, probable) to which they
are assigned.
  Levels of Certainty for Reported Reserves
  
    
    Proved Reserves At least a 90 percent probability that the quantities
actually recovered will equal or exceed the estimated proved reserves; and
    
    Probable Reserves At least a 50 percent probability that the quantities
recovered will equal or exceed the estimated proved plus probable reserves.
 4.
    
    Forecast prices and costsFuture prices and costs that are:
 (a)
    
    generally acceptable as being a reasonable outlook of the future; and
 -30-




---



##### 



(b)
    
    if, and only to the extent that, there are fixed or presently determinable
future prices or costs to which the Company is legally bound by a contractual or other
obligation to supply a physical product, including those for an extension period of a
contract that is likely to be extended, those prices or costs rather than the prices
and costs referred to in paragraph (a).
 5.
    
    Constant prices and costsPrices and costs used in an estimate that are:
 (a)
    
    the Companys prices and costs as at the effective date of the estimation,
held constant throughout the estimated lives of the properties to which the estimate
applies; and(b)
    
    if, and only to the extent that, there are fixed or presently determinable
future prices or costs to which the Company is legally bound by a contractual or other
obligation to supply a physical product, including those for an extension period of a
contract that is likely to be extended, those prices or costs rather than the prices
and costs referred to in paragraph (a).
  6.
    
    Future income tax expenseFuture income tax expenses are estimated:
 (a)
    
    making appropriate allocations of estimated unclaimed costs and losses carried
forward for tax purposes, between oil and gas activities and other business
activities;(b)
    
    without deducting estimated future costs (for example, Crown royalties) that
are not deductible in computing taxable income;(c)
    
    taking into account estimated tax credits and allowances (for example, royalty
tax credits); and(d)
    
    applying to the future pre-tax net cash flows relating to the Companys oil
and gas activities the appropriate year-end statutory rates, taking into account
future tax rates already legislated.
 7.
    
    Development well means a well drilled inside the established limits of an oil and gas
reservoir, or in close proximity to the edge of the reservoir, to the depth of a
stratigraphic horizon known to be productive.8.
    
    Development costs means costs incurred to obtain access to reserves and to provide
facilities for extracting, treating, gathering and storing the oil and gas from the reserves.
More specifically, development costs, including applicable operating costs of support
equipment and facilities and other costs of development activities, are costs incurred to:
 (a)
    
    gain access to and prepare well locations for drilling, including surveying
well locations for the purpose of determining specific development drilling sites,
clearing ground, draining, road building, and relocating public roads, gas lines and
power lines to the extent necessary in developing the reserves;
 -31-




---



##### 



(b)
    
    drill and equip development wells, development type stratigraphic test wells
and service wells, including the costs of platforms and of well equipment such as
casing, tubing, pumping equipment and wellhead assembly;(c)
    
    acquire, construct and install production facilities such as flow lines,
separators, treaters, heaters, manifolds, measuring devices and production storage
tanks, natural gas cycling and processing plants, and central utility and waste
disposal systems; and(d)
    
    provide improved recovery systems.
 9.
    
    Exploration well means a well that is not a development well, a service well or a
stratigraphic test well.10.
    
    Exploration costs means costs incurred in identifying areas that may warrant examination
and in examining specific areas that are considered to have prospects that may contain oil
and gas reserves, including costs of drilling exploratory wells and exploratory type
stratigraphic test wells. Exploration costs may be incurred both before acquiring the
related property and after acquiring the property. Exploration costs, which include
applicable operating costs of support equipment and facilities and other costs of exploration
activities, are:
 (a)
    
    costs of topographical, geochemical, geological and geophysical studies,
rights of access to properties to conduct those studies, and salaries and other
expenses of geologists, geophysical crews and others conducting those studies;(b)
    
    costs of carrying and retaining unproved properties, such as delay rentals,
taxes (other than income and capital taxes) on properties, legal costs for title
defence, and the maintenance of land and lease records;(c)
    
    dry hole contributions and bottom hole contributions;(d)
    
    costs of drilling and equipping exploratory wells; and(e)
    
    costs of drilling exploratory type stratigraphic test wells.
 11.
    
    The following abbreviations are used:
 bbl
    
    barrelbbl/d
    
    barrels per daybopd
    
    barrels of oil per dayBtu
    
    British thermal unitMbbl
    
    thousands of barrelsMcf
    
    thousand cubic feetMcfpd
    
    thousand cubic feet per dayMMcf
    
    million cubic feetMMcfpd
    
    million cubic feet per day
 12.
    
    Numbers may not add due to rounding.13.
    
    The estimates of future net revenue presented do not represent fair market value.
 -32-




---



##### 



14.
    
    Disclosure provided in respect of BOEs may be misleading, particularly if used in isolation.
A boe conversion ratio of 6 Mcf: 1 bbls is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value equivalency at the
wellhead.15.
    
    Estimated future abandonment and reclamation costs related to a property have been taken
into account by Haas in determining reserves that should be attributable to a property and in
determining the aggregate future net revenue there from, there was deducted the reasonable
estimated future well abandonment costs.16.
    
    Both the constant and forecast price and cost assumptions assume the continuance of current
laws and regulations.17.
    
    The extended character of all factual data supplied to Haas was accepted by Haas as
represented. No field inspection was conducted.
 DESCRIPTION OF CAPITAL STRUCTURE
    DIVIDENDS
  MARKET FOR SECURITIES
 Trading Price and Volume
  Price Range ($)Period
    
    High
    
    Low
    
    Trading VolumeJanuary
    
    
    2.30
    
    
    
    1.70
    
    
    
    8,400February
    
    
    2.20
    
    
    
    1.70
    
    
    
    31,530March
    
    
    2.16
    
    
    
    1.55
    
    
    
    97,940
 -33-




---



##### 



Price Range ($)Period
    
    High
    
    Low
    
    Trading VolumeApril
    
    
    4.05
    
    
    
    1.85
    
    
    
    1,314,440May
    
    
    7.00
    
    
    
    3.95
    
    
    
    656,980June
    
    
    9.55
    
    
    
    6.48
    
    
    
    646,980July
    
    
    8.74
    
    
    
    4.85
    
    
    
    311,360August
    
    
    6.00
    
    
    
    5.35
    
    
    
    67,950September
    
    
    5.60
    
    
    
    4.06
    
    
    
    115,300October
    
    
    5.15
    
    
    
    4.20
    
    
    
    92,110November
    
    
    4.50
    
    
    
    3.10
    
    
    
    38,000December
    
    
    3.45
    
    
    
    1.88
    
    
    
    131,550
  DIRECTORS AND OFFICERS
  Name and Municipalityof Residence
    
    Position Held
    
    Principal Occupation for Past Five Years
    
    Director SinceRichard W. Clark(1) (2)(3)Calgary, Alberta
    
    Chairman and
Director
    
    Partner with Gowling Lafleur Henderson LLP
    
    March
22, 2006Joseph Blandford(2)(3)Houston, Texas
    
    Vice Chairman
and Director
    
    Founder and Chief Executive Officer of
Atlantia Corporation, a service company
to the oil and gas industry, from 1979 to
December 2003. Presently Chairman of the
Engineering Foundation Advisory Board at
the University of Texas.
    
    July 22,
2005John Melton(1)Folsom, Louisiana
    
    President,
Chief
Executive
Officer and
Director
    
    President and Chief Executive Officer of
Petroflow since July 2005. Founder and
Chief Executive Officer of TDC Energy
Corporation from 1986 to 2000 and
Chairman until April 2005.
    
    July 22,
2005Donald J. Rowden(2)(3)Bend, Oregon
    
    Director
    
    Chief Executive Officer of MacSema, Inc.
since 1994.
    
    December
10, 2003Richard N. Azar II(1)(3)San Antonio, Texas
    
    Director
    
    President and owner of Brittany Energy,
LLC and Patrón Energy, LLC, independent
oil and gas exploration and production
companies. Partner with Sezar Energy LP
from October 2002 to July 2006.
President of San Antonio Gas & Oil Inc.
from December 1988 to March 2006. Prior
to March 2006, President and Shareholder
of Altex Resources, Inc. Previously
Director of Petroflow from June 2006 to
September 2006.
    
    December
10, 2007
 -34-




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##### 



Name and Municipalityof Residence
    
    Position Held
    
    Principal Occupation for Past Five Years
    
    Director SinceDavid Elgie (1) (2)Calgary, Alberta
    
    Director
    
    President of Stoker Resources Ltd. Prior
thereto, President and Chief Executive
Officer of Cordero Energy Inc. from April
2005 to September 2008. Prior thereto,
Executive Vice President and Chief
Operating Officer of Resolute Energy
Inc. from August 2003 to April 2005.
Prior thereto, Vice-President of
Engineering and Chief Operating Officer
of Southward Energy Ltd.
    
    October
1, 2008Duncan MoodieCalgary, Alberta
    
    Chief Financial
Officer
    
    President of Macon and President of
Framfield Oil & Gas Ltd. from October,
2004 until June, 2006. Prior thereto,
sole owner of public accounting practice
since 1987. Director of Petroflow from
November 2004 to June 2008.
    
    N/ASanford AndrewCasper, Wyoming
    
    Executive Vice
President,
Chief
Operating
Officer
    
    Operations Manager of Baker Energy, a
division of Michael Baker Corporation,
from October 2003 to April 2005. Manager
of Business Development for Critique Inc.
(a natural resources consulting company)
from January 1999 to September 2003.
    
    N/AKevin DavisLittleton, Colorado
    
    Senior Vice
President,
Corporate
Development
    
    Manager, Business Development, Pioneer
Natural Resources, USA, Inc, from
September 2003 to January 2006, director
of Mergers and Acquisitions with
Evergreen Resources, Inc. from November
2002 to September 2003, founder and
operator of KDD Oil & Gas, LLC from
February 2002 to November 2002,Vice
President, Business Development with TDC
Energy LLC from February 1998 to February
2002.
    
    N/ALouis G. Schott
New Orleans, Louisiana
    
    In-house
Counsel &
Assistant
Corporate
Secretary
    
    TDC Energy LLC, from May 1996 to June
2005, Senior Vice President & General
Counsel (managed or performed all land
and legal functions; also Corporate
Secretary and a Director). Secretary of
Petroflows wholly owned subsidiary,
North American Petroleum Corporation USA;
also acting as Land Manager.
    
    N/ASally FletchingerNew Orleans, Louisiana
    
    Corporate
Controller
    
    Controller of TDC Energy Corporation,
from August 1992 to June 2005. Prior to
that, ten years experience in public
accounting.
    
    N/A
 Notes:
 (1)
    
    Member of the Audit Committee(2)
    
    Member of the Compensation Committee(3)
    
    Member of the Reserves Committee
  Cease Trade Orders
  -35-




---



##### 



(a)
    
    was subject to an order that was issued while the director or executive
officer was acting in the capacity as director, chief executive officer or chief
financial officer, or(b)
    
    was subject to an order that was issued after the director or executive
officer ceased to be a director, chief executive officer or chief financial officer
and which resulted from an event that occurred while that person was acting in the
capacity as director, chief executive officer or chief financial officer,
  1.
    
    The trading in shares of Caribou Resources Corp. was the subject of a cease trade
order in the provinces of Alberta, British Columbia and Saskatchewan for failure to file
and mail to the shareholders required financial statements. The financial statements were
subsequently filed and mailed to the shareholders and the cease trade orders were lifted.
During the periods of the cease trade orders, Mr. Donald Rowden was a director.2.
    
    On April 12, 2002 Caribou Resources Corp. was involuntarily delisted by the TSX-V for
failure to meet minimum listing requirements. At the time, Mr. Donald Rowden was a
director.3.
    
    Trading in the shares of Shaker Resources Inc., formerly Oyama Industries Ltd., was
suspended by the Alberta Stock Exchange from November 27, 1997 to January 15, 2002 for
failure to complete a major transaction within 18 months. A major transaction was
completed in June, 2002. Mr. Rowden was a director at the time and remained a director
until September 30, 2004. Mr. Richard Clark was President and a director at the time.
 Bankruptcies
  (a)
    
    is, as at the date hereof, or has been within the 10 years before the date
hereof, a director or executive officer of any company (including the Company) that,
while that person was acting in that capacity, or within a year of that person ceasing
to act in that capacity, became bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency or was subject to or instituted any proceedings,
arrangement or compromise with creditors or had a receiver, receiver manager or
trustee appointed to hold its assets, or(b)
    
    has, within the 10 years before the date hereof, become bankrupt, made a
proposal under any legislation relating to bankruptcy or insolvency, or become subject
to or instituted any proceedings, arrangement or compromise with creditors, or had a
receiver, receiver manager or trustee appointed to hold the assets of the director,
executive officer or shareholder,
  1.
    
    On January 30, 2007, Caribou Resources Corp., formerly Rimron Resources Inc., formerly
Niaski Environmental Services Inc., received protection under the Companies Creditors
Arrangement Act(CCAA) from the Alberta Court of Queens Bench. The Court approved the
 -36-




---



##### 



CCAA Plan on July 31, 2007. Mr. Donald Rowden was a director during this period and
remained a director until July 30, 2007.2.
    
    On March 20, 2000 Caribou Resources Corp. made a proposal to its creditors under the
Bankruptcy and Insolvency Act(Canada) which was approved by the creditors on April 13,
2000. The trustee was discharged in May, 2001. At the time Mr. Rowden was a director.3.
    
    Mr. John Melton was a director of TDC Energy LLC which filed for Chapter 11
Reorganization in August 2002 with the U.S. Bankruptcy Court, Eastern District of
Louisiana, U.S.A. The plan was approved and discharged in May 2003 and all obligations
were fully discharged by April 22, 2005. Mr. Melton resigned as a director effective
April 12, 2005.
 Penalties or Sanctions
  (a)
    
    any penalties or sanctions imposed by a court relating to Canadian securities
legislation or by a Canadian securities regulatory authority or has entered into a
settlement agreement with a Canadian securities regulatory authority, or(b)
    
    any other penalties or sanctions imposed by a court or regulatory body that
would be likely to be considered important to a reasonable investor making an
investment decision,
  1.
    
    On February 12, 2009, Mr. Keith Conrad, an insider of the Company, entered into a
Settlement Agreement and Undertaking with the Alberta Securities Commission, pursuant to
which he admitted purchasing shares of an unrelated public company with knowledge of a
material fact about that company that had not been generally disclosed while in a special
relationship with that company. Although Mr. Conrad had an honest but mistaken belief that
the material fact had been disclosed, he admitted that he had failed to exercise reasonable
care that such was the case. Mr. Conrad agreed to pay a settlement amount and costs
totalling $47,000 and to cease trading or purchasing securities for a period of one year
except through a registrant that has been provided with a copy of the settlement agreement.
 Conflicts of Interest
   -37-




---



##### 



AUDIT COMMITTEE
  Audit Committee Charter
  Composition of the Audit Committee
 Audit Committees NI 52-110 Venture Issuers Composition of the Audit Committee
 Relevant Education and Expertise
    -38-




---



##### 



Audit Committee Oversight
  Pre-Approval Policies and Procedures
  External Auditor Service Fees
 (1)
 2008
    
    2007Audit Fees(1)
    
    $
    205,426
    
    
    $
    95,000Audit-Related Fees(2)
    
    $
    234,245
    
    
    $
    56,500Tax Fees(3)
    
    $
    49,835
    
    
    $
    27,416All Other Fees
    
    
    
    
    
    
    Total
    
    $
    489,506
    
    
    $
    178,916
 Note:
 (1)
    
    Audit fees consist of fees for the audit of the Companys annual financial statements or
services that are normally provided in connection with statutory and regulatory filings or
engagements, including the restatement of the 2007 and 2006 audited financial statements.(2)
    
    Audit-related fees consist of fees for assurance and related services that are reasonably
related to the performance of the audit or review of the Companys financial statements and
are not reported as Audit Fees. During fiscal 2008, the services provided in this category
included audit of the US GAAP reconciliation in connection with the Form 40-F and Form S-8.(3)
    
    Tax fees consist of fees for tax compliance services, tax advice and tax planning. During
fiscal 2008 and 2007, the services provided in this category include assistance and advice in
relation to the preparation of corporate income tax returns.
 RISK FACTORS
  Development of Additional Reserves
   -39-




---



##### 



Oil and Natural Gas Prices
    Substantial Capital Requirements
  Additional Funding Requirements
  -40-




---



##### 



Reliance on Operators
   Enforcement of Operating Agreements
  Reliance on Key Employees
  Operating Risks
  Reserves
  Depletion of Reserves
  -41-




---



##### 



Competition
  Delays in Business Operations
  Income Taxes
  Purchase of Reserves
  Issuance of Debt
  -42-




---



##### 



Borrowing
  Environmental Concerns
  Title
  Potential Conflicts of Interest
 Canada Business Corporations Act
 Permits and Licenses
  Climate Change Regulation
  -43-




---



##### 



LEGAL PROCEEDINGS AND REGULATORY ACTIONS
 Legal Proceedings
  Regulatory Actions
  INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
  1.
    
    As discussed above in General Development of the Business of the Company, on November
24, 2008 the Company announced that it had executed a formal JVA with Patrón, a privately
held Texas limited liability company, to mutually develop the Hunton Resource Play and
other formations in Oklahoma. Mr. Richard Azar, a director of Petroflow, owns 20% of
Patrón. Mr. Azar abstained from voting in relation to the Boards approval of the JVA.
The transaction was a related party transaction under Multilateral Instrument 61-101
Protection of Minority Security Holders in Special Transactions(MI 61-101). The
transaction was exempt from the formal valuation and minority shareholder requirements of
MI 61-101 as neither the fair market value of the assets nor the consideration paid
exceeded 25% of the Companys market capitalization. Mr. Azar is a resident of San
Antonio, Texas.
 TRANSFER AGENT AND REGISTRAR
  -44-




---



##### 



MATERIAL CONTRACTS
  1.
    
    Amended and Restated Credit Agreement dated effective March 29, 2007 in favour of
Guaranty Bank, and other banks that are party to the Credit Agreement dated March 29, 2007
between Guaranty Bank and those banks and NAPCUS.2.
    
    Farmout Agreement dated as of March 1, 2006 between Enterra Acquisitions Corp. and
NAPCUS. See General Development of the Business of the Company  History.3.
    
    Drilling Agreement dated April 4, 2007, effective June 2007, between Goober Drilling
Company and NAPCUS.
 INTERESTS OF EXPERTS
   ADDITIONAL INFORMATION
 www.sedar.com
   -45-




---



##### 



APPENDIX A
 AUDIT COMMITTEE CHARTER
 (Adopted by the Board of Directors of Petroflow Energy Ltd. effective April 17, 2007)
 PURPOSE
 Committee Board Corporation Applicable
Laws
 COMPOSITION, PROCEDURES AND ORGANIZATION
 1.
    
    The Committee shall consist of not less than three members of the Board of Directors of the
Corporation (the Board), each of whom:
 (a)
    
    must meet any independence tests; and(b)
    
    must satisfy any financial literacy or other competency standards;
 as set out under Applicable Laws, except as may be allowed under any applicable exemptions
provided for under Applicable Laws or any exemption orders obtained from applicable
regulatory authorities.2.
    
    The Board, at its first meeting following the annual meeting of shareholders of the
Corporation, shall appoint the members of the Committee for the ensuing year. The Board may
at any time remove or replace any member of the Committee and may fill any vacancy in the
Committee.3.
    
    Unless the Board shall have appointed a chair of the Committee, the members of the Committee
shall elect a chair (the Chairman) from amongst their number.4.
    
    The Corporate Secretary or Associate Secretary of the Corporation shall be the secretary of
the Committee, unless otherwise determined by the Committee.5.
    
    The quorum for meetings shall be a majority of the members of the Committee (except where
the Committee has four members, in which case a quorum shall be two members), present in
person or by telephone or other telecommunication device that permits all persons
participating in the meeting to speak and to hear each other.6.
    
    The Committee shall have access to such officers and employees of the Corporation and of the
other consolidated subsidiaries of the Corporation, and to the Corporations external
auditors and to such information respecting the Corporation, as the Committee considers to be
necessary or advisable in order to perform its duties and responsibilities.7.
    
    Meetings of the Committee shall be conducted as follows:
 (a)
    
    the Committee shall meet at least four times annually at such times and at
such locations as may be requested by the Chairman. The Corporations external
auditors or any member of the Committee may request a meeting of the Committee;
 A-1




---



##### 



(b)
    
    the Corporations external auditors shall receive notice of and have the right
to attend all meetings of the Committee;(c)
    
    the Committee shall hold an in camera session at such times as determined
necessary or appropriate by the Committee;(d)
    
    the Committee shall hold an in camera session with the external auditors at
least once a year prior to recommending to the Board the approval of the annual
audited financial statements of the Corporation and at such other times as determined
necessary or appropriate by the Committee; and(e)
    
    the Chief Executive Officer and the Chief Financial Officer of the Corporation
shall be invited to attend all meetings of the Committee (and the Committee has the
authority to require their attendance), except in camera sessions of the members of
the Committee. Other management representatives of the Corporation shall be invited
to attend as necessary.
 REPORTING
 8.
    
    The Committee shall provide the Board with a summary of all meetings and of its
recommendations, together with a copy of the minutes of such meeting for insertion into the
minute book of the Corporation. Where minutes have not yet been published, the Chairman
shall provide the Board with verbal reports as requested.9.
    
    All information reviewed and discussed by the Committee at any meeting shall be retained and
made available for examination by the Board upon request to the Chairman.10.
    
    The external auditors of the Corporation shall have a direct line of communication to the
Committee through the Chairman. The Corporation shall require the external auditors of the
Corporation to report directly to the Committee.
 DUTIES AND RESPONSIBILITIES
 11.
    
    The overall duties and responsibilities of the Committee shall include:
 (a)
    
    assisting the Board in the discharge of its responsibilities relating to the
Corporations accounting principles, reporting practices and internal controls,
approving the Corporations interim financial statements, MD&A and related earnings
news release and recommending to the Board the approval of the Corporations annual
financial statements, MD&A and related earnings news release;(b)
    
    establishing and maintaining a direct line of communication with the
Corporations external auditors and assessing their performance;(c)
    
    ensuring that management of the Corporation has designed, implemented and is
maintaining an effective system of internal controls for the Corporation, in
accordance with Applicable Laws;(d)
    
    reporting regularly to the Board on the fulfilment of the duties and
responsibilities of the Committee;(e)
    
    ensuring that adequate procedures are in place for the review of the
Corporations public disclosure of financial information extracted or derived from the
Corporations financial statements and periodically assessing the adequacy of those
procedures;(f)
    
    reviewing the appropriateness and effectiveness of the Corporations policies
and business practices which impact on the financial integrity of the Corporation,
including those relating to insurance, accounting, information services and systems
and financial controls, management reporting and risk management; and
 A-2




---



##### 



(g)
    
    reviewing any unresolved issues between management and the external auditors
that could affect the financial reporting or internal controls of the Corporation.
 12.
    
    The duties and responsibilities of the Committee as they relate to the external auditors
shall include:
 (a)
    
    recommending to the Board a firm of external auditors to be engaged by the
Corporation;(b)
    
    reviewing the scope and timing of the audit and other related services
rendered or to be rendered by the external auditors and recommending to the Board the
approval of the fee for all audit services;(c)
    
    overseeing the work of the external auditors engaged for the purpose of
preparing or issuing an auditors report or performing other audit, review or attest
services for the Corporation, including the resolution of disagreements between
management of the Corporation and the external auditors regarding financial reporting;(d)
    
    reviewing the audit plan of the external auditors prior to the commencement of
the audit;(e)
    
    reviewing with the external auditors, upon completion of their audit:
 (i)
    
    contents of their report;(ii)
    
    scope and quality of the audit work performed;(iii)
    
    adequacy of the Corporations financial and auditing personnel;(iv)
    
    co-operation received from the Corporations personnel during the audit;(v)
    
    internal resources used;(vi)
    
    significant transactions outside of the normal business of the
Corporation; and(vii)
    
    significant proposed adjustments and recommendations for
improving internal accounting controls, accounting principles or management
systems;
 (f)
    
    pre-approving all non-audit services (and the fee for such services) to be
provided by the external auditors in accordance with Applicable Laws; and(g)
    
    periodically reviewing the Corporations financial and auditing procedures and
the extent to which recommendations made by the external auditors have been
implemented.
 13.
    
    The Committee is also charged with the responsibility to:
 (a)
    
    review the Corporations annual financial statements and MD&A and related
earnings news release and recommend the approval thereof to the Board;(b)
    
    review and approve the Corporations interim financial statements and MD&A and
related earnings news release;(c)
    
    review and approve the financial sections of other public reports of the
Corporation requiring approval by the Board before such documents are publicly
disclosed, other than prospectuses and business acquisition reports which will be
reviewed and approved by the Board;
 A-3




---



##### 



(d)
    
    review regulatory filings and decisions as they relate to the Corporations
consolidated financial statements;(e)
    
    review the minutes of any audit committee meeting of any subsidiary entity of
the Corporation;(f)
    
    review with management, the external auditors and, if necessary, legal counsel
any litigation, claim or other contingency, including tax assessments, that could have
a material affect upon the financial position or operating results of the Corporation
and the manner in which such matters have been disclosed in the consolidated financial
statements;(g)
    
    review the insurance programs of the Corporation and its subsidiary entities
at least annually;(h)
    
    establish procedures for the receipt, retention and treatment of complaints
received by the Corporation regarding accounting, internal accounting controls or
auditing matters;(i)
    
    establish procedures for the confidential, anonymous submission by employees
of the Corporation or any other subsidiary entity of the Corporation of concerns
regarding questionable accounting or auditing matters;(j)
    
    review and approve the Corporations hiring policies regarding partners,
employees and former partners and employees of the present and former external
auditors of the Corporation; and(k)
    
    review and reassess the adequacy of these Terms of Reference at least annually
and recommend to the Board changes which the Committee may deem appropriate.
 14.
    
    The Committee may do such other things within the scope of its responsibilities as it may,
in its discretion, deem appropriate.15.
    
    The Committee has the authority:
 (a)
    
    to engage independent counsel and other advisors as it determines necessary to
carry out its duties; and(b)
    
    to set and pay the compensation for any advisors employed by the Committee.
 A-4




---



##### 



APPENDIX B
 FORM 51-101F2
REPORT ON RESERVES DATA BY
INDEPENDENT QUALIFIED RESERVES EVALUATOR
  1.
    
    We have evaluated the Companys reserves data as at December 31, 2008. The reserves data
are estimates of proved reserves and probable reserves and related future net revenue as at
December 31, 2008, estimated using forecast prices and costs.2.
    
    The reserves data are the responsibility of the Companys management. Our responsibility is
to express an opinion on the reserves data based on our evaluation.We carried out our evaluation in accordance with standards set out in the Canadian Oil and
Gas Evaluation Handbook (the COGE Handbook) prepared jointly by the Society of Petroleum
Evaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy &
Petroleum (Petroleum Society).3.
    
    Those standards require that we plan and perform an evaluation to obtain reasonable
assurance as to whether the reserves data are free of material misstatement. An evaluation
also includes assessing whether the reserves data are in accordance with principles and
definitions presented in the COGE Handbook.4.
    
    The following table sets forth the estimated future net revenue (before deduction of income
taxes) attributed to proved plus probable reserves, estimated using forecast prices and costs
and calculated using a discount rate of 10 percent, included in the reserves data of the
Company evaluated by us for the year ended December 31, 2008 and identifies the respective
portions thereof that we have evaluated and reported on to the Companys Board of Directors:
 Appraisal ofCertain Oil andGas Reserves
    
    Location ofOwned by
    
    ReservesIndependent
    
    Petroflow
    
    (Country orQualified
    
    Preparation Date
    
    ForeignReserves
    
    of Evaluation
    
    Geographic
    
    Net Present Value of Future Net RevenueEvaluator
    
    Report
    
    Area)
    
    (before income taxes, 10% discount rate)Audited
    
    Evaluated
    
    Reviewed
    
    TotalHaas Petroleum
Engineering
Services, Inc.
    
    March 4, 2009
    
    Canada and 
United States
    
    $
    
    $
    602,998,821
    
    
    $
    
    $
    602,998,821
 5.
    
    In our opinion, the reserves data respectively evaluated by us have, in all material
respects, been determined and are in accordance with the COGE Handbook. We express no
opinion on the reserves data that we reviewed but did not audit or evaluate.6.
    
    We have no responsibility to update our reports referred to in paragraph 4 for events and
circumstances occurring after their respective preparation dates.
 B-1




---



##### 



7.
    
    Because the reserves data are based on judgments regarding future events, actual results
will vary and the variations may be material. However, any variations should be consistent
with the fact that reserves are categorized according to the probability of their recovery.
  Haas Petroleum Engineering Services, Inc.
    
    (Signed) Robert W. Haas,
P.E.Texas
    
    Robert W. Haas, P.E.April 22, 2009
 B-2




---



##### 



APPENDIX C
 FORM 51-101F3
REPORT OF MANAGEMENT AND DIRECTORS
ON OIL AND GAS DISCLOSURE
    (a)
    
    reviewed the Companys procedures for providing information to the independent
qualified reserves evaluator;(b)
    
    met with the independent qualified reserves evaluator to determine whether any
restrictions affected the ability of the independent qualified reserves evaluator to
report without reservation; and(c)
    
    reviewed the reserves data with management and the independent qualified
reserves evaluator.
  (a)
    
    the content and filing with securities regulatory authorities of the Companys
Form 51-101F1 containing reserves data and other oil and gas information;(b)
    
    the filing of the Companys Form 51-101F2 which is the report of the
independent qualified reserves evaluators on the reserves data; and(c)
    
    the content and filing of this report.
 C-1




---



##### 



/signed/ John Melton
    
    /signed/ Duncan MoodieJohn Melton
President and Chief Executive Officer
    
    Duncan Moodie
Chief Financial Officer/signed/ Richard Clark
    
    /signed/ Richard AzarRichard Clark
Chairman and Director
    
    Richard Azar
Director
  C-2