GEOCAN average number of common shares for the period 2006 was 56.5 million (diluted) as compared to 28.5 million (diluted) for 2005. The average share numbers primarily reflect the effect of the timing of the Assure Energy, Inc. acquisition and a subsequent bought deal private placement financing, both of which occurred in the latter part of 2005 and were previously announced by the company.

Cash flow for 2006 was a record for the company and an increase of 42% as compared to 2005. Average production for the year increased 41% to a record 3,077 boepd from 2,188 boepd in 2005. GEOCAN reached an exit production rate of 3,544 boepd while achieving record operating and corporate netbacks in 2006 in the process.

Earnings loss for 2006 was ($0.97 million) or ($0.02 /share) (diluted) as compared to earnings of $1.55 million or $0.05/share (diluted) in 2005. The earnings loss for 2006 resulted primarily from higher than anticipated depletion, depreciation and accretion in 2006 due to lower than anticipated drilling success in replacing its proven reserves. Total proven plus probable reserves however, were up 312% due to a significant heavy oil discovery with high recovery potential. GEOCAN's first quarter 2007 drilling program improved the company's success rate with 11 wells drilled and all wells cased for production.

GEOCAN's most notable accomplishment of 2006 was the discovery of a significant heavy oil pool in the Lloydminster core area (100% working interest) that has potential for a major steam assisted gravity drainage recovery program. With approximately 25 million probable recoverable barrels, as assessed by independent third-party engineers DeGolyer and MacNaughton Canada Limited, this project has the potential to be very significant for GEOCAN.

Finding development and acquisition costs for proved reserves were $33.03/boe before future capital ($35.26/boe after future capital). FD&A costs for proved and probable reserves were $1.78/boe before future capital ($9.44/boe including future capital). The total proved plus probable FD&A calculation includes the probable reserves assigned to SAGD as well as SAGD capital of approximately $200 million.

The oil and gas industry experienced many challenges in 2006 and GEOCAN was not immune to them. Although the price of heavy oil, which represents 45% of GEOCAN's commodity mix, strengthened 23%, lower prices for natural gas, down 35%, had an impact on the company, as they did on the entire oil and gas industry. GEOCAN operates about 90% of its production which enabled the company to control costs resulting in year over year production and general and administration expenses remaining essentially flat on a per unit basis. This was in contrast to a general industry trend of higher per unit costs resulting from increased oilfield services and labour costs.

Highlights of 2006 include:

- The discovery of a significant heavy oil pool near Lloydminster added 24.8 million barrels of probable reserves.

- On the strength of this discovery GEOCAN's year-end independently assessed proved and probable (P+P) reserves increased 312% to 32.5 million boe compared with 7.9 million boe at the end of 2005.

- Proved reserves were well balanced in 2006, with 28% allocated to light and medium oil, 30% to natural gas and 42% to heavy oil.

- Average production rose 41% from 2,188 boepd in 2005 to 3,077 boepd in 2006, as GEOCAN surpassed the one million boe annual production threshold.

- The reserves replacement ratio was approximately 24 times, based on additions to proved plus probable reserves of approximately 24.5 million boes. The company came close to replacing its one million boe of production from proved additions with a proved reserves replacement ratio of 0.83.

- Gross revenues reached $47.9 million, up 43% from $33.4 million in 2005.

- Cash flow rose 42% to a record $18.4 million in 2006 from $13 million in 2005.

- Netbacks rose 15% in 2006 to $21.49/boe compared with $18.69/boe in 2005, driven by netbacks on heavy oil that were up 15% to $15.09/bbl although netbacks on light/medium oil were down 11% to $35.42/bbl and natural gas netbacks decreased 51% to $3.24/mcf driven by the 35% drop in natural gas prices. The company's balanced commodity mix served it well throughout the year, limiting the downward impact of decreasing natural gas prices on cash flow.

- Despite increasing costs for oilfield services and labour, GEOCAN kept cost increases to 5% for field operations and 7% for general and administration, both on a boe basis, due to the fact that the company operates approximately 90% of its production.

- Gross undeveloped land portfolio grew 60% to 322 gross sections (212 net) in 2006. Total gross land is currently 394 sections (260 net), most of which are in gas and light oil prone areas, providing prospects for drilling well into 2007 and beyond.

- GEOCAN acquired Columbus Exploration Ltd. in July 2006, adding production, facilities and 21,142 gross acres (13,808 net) of undeveloped land northwest of Edmonton.

- Capital expenditures were focused primarily on drilling 30 gross (22.13 net) wells, completions and tie-ins for $29.2 million. The company spent an additional $2.7 million to acquire 18,560 gross (14,200 net) acres of undeveloped land at Crown sales in British Columbia, Alberta and Saskatchewan. Seismic programs (2D and 3D) and the acquisition of third party seismic required $2.4 million. -- www.cnxmarketlink.com