Quarter Financial Highlights - Heritage Oil Corporation 3Q Highlights 2006

Source: www.gulfoilandgas.com 11/14/2006, Location: North America

Heritage Oil Corporation reported its financial results for the third quarter of 2006.Heritage CEO, Tony Buckingham, stated “The results in the first nine-months of this year are generally in-line with our expectations; however, shareholders can reasonably expect material increases in operating and financial performance and in the independently recognized value of our assets in the future. Our recent oil discovery in Uganda proves there is a working hydrocarbon system in Block 3A, plus the recent oil discovery in the Sultanate of Oman and the continued development of the West Chumpass field will positively impact Heritage’s future production and financial performance.”

OPERATIONAL HIGHLIGHTS

Uganda
Subsequent to quarter-end, Heritage announced that two upper zones of the Kingfisher-1 well in Block 3A, Uganda tested a stabilized flow rate of approximately 4,120 bopd through a fixed one inch choke at a flowing well head pressure of 221 psia. The oil was light (approximately 30° API) and sweet with a low gas/oil ratio and some associated wax. The test rate was constrained by available completion and test facilities, and flow data indicated that when equipped for production, the well should be capable of flowing at stable rates of approximately 5,600 bopd. The flow data from the test indicated an extremely high permeability of over 2,000 milliDarcies. The tests represented a secondary exploration objective for the well, which will now be sidetracked and drilling will continue to the deeper primary objectives. Heritage has a 50% interest in the license.

Democratic Republic of Congo
Heritage strengthened its presence in the Albert Graben basin by signing a Production Sharing Agreement (PSA) with the government in September for a 39.5% working interest in two blocks covering over 6,000 square kilometres. The exploration work program is scheduled to commence following receipt of a Presidential decree ratifying the block awards. The new DRC blocks include the entire area of Lake Albert onshore and offshore lands that lie in the DRC adjacent to Heritage’s Block 3A, Uganda license and the Block 2 license held by another operator. This new PSA further extends and consolidates Heritage’s acreage position in the highly prospective Albert Graben basin.

Russia
The development of the West Chumpass field is on-going. A multi-well drilling program is planned to commence before the year’s end. The Company is looking to conclude a Joint Venture Agreement with TISE Holding Company whose shareholders include Zarubejneft, Gazprom, Technoexport and Zarubejmontajstroy before the year-end. This association should give Heritage access to oil fields with highly attractive reserves, while the strength and stature of the partners should ensure operations are undertaken in an efficient and transparent manner.

Heritage also continues to actively appraise a number of other Russian oil and gas opportunities, in line with its strategy to build a more substantial presence in development and producing assets in that country.

Oman
The testing of the West Bukha-2 appraisal/development well in Block 8, offshore the Sultanate of Oman is being undertaken. Subsequent to quarter-end, Heritage announced that the lower Thamama formation flowed 4,392 bopd and 1.4 mmscf/d of gas through a 50/64’ choke at a flowing tubing pressure of 2,512 psia. The oil was light (approximately 42° API). Further testing of the primary reservoir target (Mishrif/Mauddud formations) is planned. Heritage has a 10% working interest in the license.

Kurdistan and Iraq
Heritage continues to appraise opportunities and believes that it is well placed to participate in a meaningful way in the long-term development of the oil industry in this region.

Republic of Congo
Heritage expects to complete the sale of its Congolese assets by year-end, which will raise $28 million in cash, of which $2 million is to be placed in a security account.

FINANCIAL

Total revenue from continuing operations for the three and nine-month periods ended September 30, 2006 were $2.7 million and $6.7 million respectively, up materially from revenue reported in the comparable periods in 2005 ($0.15 million in Q3 2005 and $1.0 million for the first three quarters in 2005). Production in the third quarter of 2006 of 229 bpd from the Bukha field, Oman was 18% higher than in the same period last year.

There was a net loss of $1,681,729 (Cdn$1,880,918) in the third quarter of 2006 compared to a gain of $196,520 (Cdn$229,747) in the same period last year. The third quarter net loss was in line with the loss reported in the second quarter of this year. In Q3 2006, the basic and diluted loss per share were $0.08, compared to basic and diluted earnings per share of $0.01 in the same period last year. In the first nine-months of 2006, the basic and diluted loss per share were $0.13, compared to basic and diluted loss per share of $0.04 in the same period last year.


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