BNK.L Regulatory News (BNK)

30 Mar 2007 14:25

For Immediate Release BANKERS FILES 2006 ANNUAL DOCUMENTS

CALGARY, March 30, 2007 - Bankers Petroleum Ltd. today announced that it has filed its 2006 annual disclosure documents with Canadian securities commissions.

Banker's 2006 Financial Review contains the Company's audited consolidatedfinancial statements and notes for the year-ended December 31, 2006, relatedmanagement's discussion and analysis, message from the president and associatedinformation about the Company. The 2006 Annual Information Form (AIF) containsinformation about Bankers' oil and gas activities and Company management anddirectors; disclosure and reports relating to reserves data and other oil andgas information according to National Instrument 51-101, Standards forDisclosure for Oil and Gas Activities, has been filed separately from the AIF.

In April, Bankers will file with securities commissions its 2007 Management Information Circular, providing governance and voting information for shareholders in advance of the Company's May 22 annual general meeting.

Copies of the documents are available on SEDAR at www.sedar.com and the Company's website at www.bankerspetroleum.com.

Following is the MD&A along with the audited consolidated financial statements and notes as it appears on SEDAR and the Company's website.

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following is management's discussion and analysis (MD&A) of BankersPetroleum Ltd's (Bankers or the Company) operating and financial results forthe year ended December 31, 2006, compared to the preceding two year periods,as well as information and expectations concerning the Company's outlook basedon currently available information. The MD&A should be read in conjunction withthe audited consolidated financial statements for the years ended December 31,2006, 2005 and 2004, together with the notes related thereto. Additionalinformation relating to Bankers, including its Annual Information Form, is onSEDAR at www.sedar.com or on the Company's website at www.bankerspetroleum.com.All dollar values are expressed in U.S. dollars, unless otherwise indicated,and are prepared in accordance with Canadian generally accepted accountingprinciples (GAAP).

This report is prepared as of March 29, 2007.

NON-GAAP MEASURES

Funds from operations is a non-GAAP measure that represents cash provided by(used in) operating activities, as per consolidated statements of cash flows,before changes in non-cash working capital. The Company considers this a keymeasure as it demonstrates its ability to generate the funds necessary forfuture growth.Netback per barrel and its components are calculated by dividing revenue,royalties, operating, sales and transportation expenses by the gross salesvolume during the period. Netback per barrel is a non-GAAP measure but it iscommonly used by oil and gas companies to illustrate the unit contribution ofeach barrel produced. Net operating income is similarly a non-GAAP measure that represents revenuenet of royalties and operating and sales and transportation expenses. TheCompany believes that net operating income is a useful supplemental measure toanalyze operating performance and provides an indication of the resultsgenerated by the Company's principal business activities prior to theconsideration of other income and expenses.The non-GAAP measures referred to above do not have any standardized meaningprescribed by GAAP and therefore may not be comparable to similar measures

usedby other companies.

CAUTION REGARDING FORWARD-LOOKING INFORMATION

Certain information contained in this news release and MD&A respecting the Company and the Company's properties constitute forward-looking statements.

The use of any of the words "target", "plans", "anticipate", "continue","estimate", "expect", "may", "will", "project", "should", "believe" and similarexpressions are intended to identify forward-looking statements. Suchforward-looking information, including but not limited to statements as toproduction targets, timing of the Company's planned work program andmanagement's belief as to the potential of certain properties, involve knownand unknown risks, uncertainties and other factors which may cause the actualresults of the Company and its operations to be materially different fromestimated costs or results expressed or implied by such forward-lookingstatements.Such factors include, among others general risks and uncertainties associatedwith exploration, development, petroleum operations and risks associated withequipment procurement and equipment failure as well as those described under"Risk Factors" in the Company's Annual Information Form and in each managementdiscussion and analysis. Although the Company has attempted to take intoaccount important factors that could cause actual costs or results to differmaterially, there may be other factors that cause costs of the Company'sprogram or results not to be as anticipated, estimated or intended. There canbe no assurance that such statements will prove to be accurate as actualresults and future events could differ materially from those anticipated insuch statements. Accordingly, readers should not place undue reliance onforward-looking information. BUSINESS PROFILE Bankers Petroleum Ltd. is a Canadian-based oil and gas exploration andproduction company focused on opportunities in unconventional petroleum assets.The Company is targeting growth in production and reserves through utilizationof its technical capability and entrepreneurial approach with a particularfocus on international heavy oil prospects and natural gas from its largeundeveloped land base of unconventional shale plays.The Company operates in two distinct international areas, Albania (locatednorthwest of Greece in South Eastern Europe) and the United States, through itssubsidiaries, Bankers Petroleum Albania Ltd. and Bankers Petroleum (US) Inc.All of the Company's revenue is currently generated from its operations inAlbania.In Albania, Bankers operates in the Patos Marinza heavy oilfield pursuant to alicense agreement with AKBN, the Albanian National Petroleum Agency and aPetroleum Agreement with Albpetrol Sh.A (Albpetrol), the state owned oil andgas corporation. The Company has a 25 year license to develop and receive 100%of the benefit of all production from the Patos Marinza heavy oil project whichis the largest onshore oilfield in continental Europe, holding approximatelytwo billion barrels of original oil in place.In the United States, Bankers holds an average 75% working interest in anaggregate of approximately one-half million net acres in four prospects in theNorthern and Central regions of the United States, where it is currentlypursuing the exploration of shale and tight gas sand plays. These prospects arelocated in four distinct basins that are considered to be prospective fornatural gas: the Palo Duro Basin in the Texas panhandle, the Ardmore and Arkomabasins in Oklahoma, the Black Warrior basin in Mississippi and Alabama, and theAppalachian basin in New York. OVERVIEW Results at a Glance 2006 2005 2004 Financial ($000s, except as noted) Oil and gas revenue 31,586 13,709 3,483 Net operating income 13,111 3,921 1,320 Loss for the year (1,561) (3,498) (1,217) Funds from (used in) 8,512 (171) (512) operations Additions to property, plant and equipment 67,727 35,048 4,914 Total assets 138,030 56,846 23,072

Long-term debt (including current 2,000 -

- portion) Total long-term 6,594 282 101 liabilities Shareholders' equity 115,170 50,798 20,626 Operating Average daily production 3,490 1,687 1,066 (bopd) Average sales volume 3,392 1,668 945 (bopd) Average price ($/barrel) 25.51 22.52 22.30 Netback ($/barrel) 10.59 6.44 8.45 In 2006, the Company continued to increase its production, revenue and fundsfrom operations through well re-activations in Albania. The active well countincreased to 122 at the end of 2006 from 67 in 2005 and 34 in 2004.Average oil price increased to $25.51 per barrel from $22.52 per barrel in 2005and $22.30 per barrel in 2004. The increase in 2006 was primarily related tothe commencement of regular crude oil exports at prices higher than thosereceived domestically. Net back per barrel improved to $10.59 in 2006 from$6.44 in 2005 and $8.45 in 2004. The improvement was a result of higher oilprices as well as the 20% reduction in the unit operating costs from $12.55 perbarrel in 2005 to $10.08 per barrel in 2006.Capital expenditures increased to $67.7 million in 2006 from $35.0 million in2005 and $4.9 million in 2004. In Albania, capital expenditures were $37.5million in 2006 compared to $19.7 million a year ago as a result of anaccelerated program designed to meet the Plan of Development targets. In theU.S., capital expenditures doubled to $30.2 million compared to a year ago,primarily as a result of the acquisition of new shale prospects and increaseddrilling activities in the Palo Duro basin.Shareholders' equity increased to $115.2 million from $50.8 million in 2005 and$20.6 million in 2004. In late 2006, the Company arranged a $20.0 million debtfacility with a financial institution in Albania. Approximately $6.7 million ofthe loan was drawn down at year-end.

Highlights

2006 was a year of significant achievements for Bankers both in Albania and the United States. The highlights of the year are as follows:

* Average production increased 107% to 3,490 bopd from 1,687 bopd in 2005.

The exit production in December 2006 was 4,406 bopd.

* Crude oil revenues rose to $31.6 million from $13.7 million a year ago, an

increase of 130%.

* Net operating income increased 236% to $13.1 million from $3.9 million in

2005.

* Four shale gas prospects in the Northern and Central regions of the Unites

States were acquired from Vintage Petroleum LLC for a total consideration

of $30.0 million of which $20.0 million was satisfied through the issuance

of 26 million shares. Upon completion of the transaction, the Company paid

$1.0 million in cash and transferred approximately 30,000 net acres to

third parties to settle competing claims in respect of some the acquired

acreage.

* A $20.0 million debt facility was closed late in the year with Raiffeisen

Bank Sh.A in Albania. The debt facility comprises a $15.0 million term loan

payable over five years and $5.0 million operating line of credit.

* An equity financing of 50 million common shares on a bought deal basis was

closed in March for net proceeds of $40.5 million.

Albania

* In February 2006, an export sales contract with an Italian refinery was

entered into for monthly crude oil exports. During the year, Bankers

exported 32% of its production at an average price of $30.86 per barrel.

* The Company's Plan of Development for the Patos Marinza heavy oil field was

approved by the Albanian authorities. This approval allows Bankers to

take-over the remaining wells in the field on a defined basis and produce

and sell oil under Albpetrol's existing license for a period of 25 years

with an option to extend at Bankers' discretion for further five year

increments.

* Operating expenses declined 20% to $10.08 per barrel from $12.56 per barrel

in 2005, contributing significantly to the increase in netbacks. * A scoping study for an Enhanced Oil Recovery (EOR) project in the Patos Marinza field was initiated to evaluate the ability to further increase crude oil recovery in the field.

United States

* In Texas, the Company drilled Misener #1, Jones #1 and Stansell #1 wells

during 2006, two of which are currently suspended pending future completions. * Subsequent fracture stimulation of Misener #1 well resulted in oil production at low rates.

* The Company also fracture stimulated the Cogdell #1-1 well in zones that

had produced at a reported 2.8 million cubic feet of natural gas per day

upon initial completion in 2003 before a being damaged by a mechanical

failure; however, the stimulation was unable to regain any significant gas

productivity. * In Oklahoma, Bankers drilled its first well, Nickel Hill #1-26, and successfully fracture stimulated it prior to the end of the year. The

vertical well had a stabilized rate of 470 mcf of natural gas per day along

with six barrels per day of condensate, encountering a net thickness of 330

feet of Woodford shale and 222 billion cubic feet of original gas in place

per section. The well is presently shut-in, awaiting pipeline hookup.

* Bankers also drilled the Lake Holdenville #35-1 well which encountered

Woodford shale of a net thickness of 160 feet and 63 billion cubic feet of

original gas in place per section. The well is in the process of being

fracture stimulated and tested.

* In New York, Bankers is in the process of drilling and setting intermediate

casing on three wells to just above the Company's main objective, the

Trenton-Black River formations. The intermediate hole was drilled and

cased for the Butler Creek well in 2006, the South Mill Pond well in early

2007, and the third well, Legasse Road, will be drilled and cased to intermediate hole after the winter season.

GROWTH STRATEGY

Bankers' strategy is focused on unconventional oil and gas assets that havelong-life reserves with production growth potential. Employing its knowledgebase and operational expertise, the Company is working to optimize its existingassets while pursuing new opportunities with upside potential that complimentits current portfolio of resources, creating long-term value for shareholders.This will be accomplished through the attainment of its main objectives: toincrease production, reserves, cash flow and net asset value through theoptimization of its portfolio of assets.

Bankers' strategic priorities are to:

* Increase reserves and production;

* Control costs through efficient management of operations, taking advantage

of economies of scale; * Pursue new technology applications to improve operations and assist exploration endeavours; * Explore undeveloped acreage to identify and create development opportunities; * Maintain a culture that promotes integrity; * Leverage relationships and knowledge base;

* Maintain a strong focus on employee, contractor and community health and

safety; * Provide economic benefits to communities in which its operates; * Managing environmental and social performance to minimize ecological impacts and ensure continued stakeholder support; and

* Maintain a strong balance sheet by controlling debt and managing capital

expenditures.

In pursuing the long-term growth strategy, Bankers is focused on accessing theheavy oil upside from its Albanian assets, which includes the effectiveimplementation of the Patos Marinza development plan as well as identifying EORtechniques to increase the field's recoverable reserves. The effective takeoverand redevelopment of existing wells from Albpetrol continues to increaseproduction, averaging annual production growth of approximately 2,000 bopdsince the take-over of the field. This is in line with Bankers' goal ofreaching 10,000 to 15,000 bopd from primary recovery techniques by 2010. Inaddition, the Company's strategy involves identifying and integrating otherpotential opportunities in Albania to increase overall value.In the U.S., Bankers' strategy is focused on exploring and developing thepotential of the undeveloped acreage in its four shale gas plays in Texas,Oklahoma, New York, and Alabama/Mississippi. The total net acreage holdings inunconventional gas plays strengthen and diversify the Company's land positionsin areas that exhibit strong potential for shale and tight sand production.Bankers' goal is to define and execute a commercial development program for aproject by year-end, obtaining a natural gas production rate of approximatelyfour mmcf/d, and, in the long-term, become a major player in U.S.unconventional resource plays.Bankers takes a methodical approach to exploration, utilizing solid engineeringand science to fully understand the manufacturing process that is required toeconomically produce from shale formations. In addition, it leverages theknowledge and relationships of other U.S. shale gas industry players. Thus, theCompany will be better able to identify shale opportunities as well aspotential upside from secondary oil and gas targets.

Key Performance Indicators

Key performance indicators relate to those factors that Bankers can directlyaffect, and are indicators of the Company's ability to provide long-term valueto its shareholders. They include optimizing the cost of operations over timeand improving exploration and development performance and operations throughtechnology and best practices. Key measurements include operating costs,production volumes and safety performance. These key performance indicators arecontinuously reviewed and monitored.In addition, strengthening relationships with employees, governments,communities and other stakeholders are important aspects of the business forBankers. The effective management of these relationships allows the Company totap into new growth opportunities and efficiently develop operations for thefuture.CAPABILITY TO DELIVER RESULTS

Activity in oil and gas industry is subject to a range of external factors thatare difficult to actively manage, including commodity prices, resource demand,environmental regulations and climate conditions. Bankers gives significantconsideration to these factors and backs up its strategy by employing andpositioning all necessary resources to deliver on its goals and commitment toincrease value for shareholders. The Company focuses its capital onopportunities that provide the potential for the best returns. A comprehensiveinsurance policy is in place to help safeguard its assets, operations andemployees. Relationships with stakeholders and key partners are carefullycultivated to assist in the Company's future development and growth. Theexperienced management team and employees work together to ensure that theCompany can fulfill its commitment to deliver.

INDUSTRY & ECONOMIC FACTORS

Commodity price and foreign exchange benchmarks for the past two years are asfollows: 2006 2005 %

Dated Brent average oil price ($ per barrel) 65.14 55.19

18

U.S./ Canadian dollar year-end 1.1530 1.1656

(2) exchange rate

U.S./ Canadian dollar average exchange 1.1344 1.2083

(7) rate World crude oil prices fluctuated significantly in 2006, topping over $78.00per barrel in July 2006 before settling in between $55.00 to $60.00 per barrelby year-end. The rise in oil prices during the first half of the year could beattributed to political events such as North Korean and Iranian nuclearprograms, Israel-Lebanon war and supply disruptions in Nigeria related toinsurgency as well as low storage levels in the United States. A benignhurricane season, fears of a slowing U.S. economy lowering demand for oil andease of political tensions around the world resulted in a sharp decline inprices during the second half of 2006. Bankers was partially sheltered from the effects of these fluctuations indomestic sales to the Albanian Refining and Marketing Organization, Armo Sh.A(Armo). The price per barrel received by the Company under its contract withArmo is determined by reference to the price of the Brent crude with caps andcollars. The cap for 2006 was $36.75 for Brent which resulted in the maximumprice of $23.85 per barrel for the Company.The price per barrel received by the Company in 2006 under its export contractwas originally tied directly to the Brent crude. This formula was amendedmid-year; under the new formula, the price is determined by reference to theproducts refined from the Company's crude, which is weighted heavily to fueloil and bitumen. The mild weather in late fall and early winter resulted inlower fuel oil demand. Therefore, the drop in fuel oil prices were more steepthan the decline in the Brent crude. As a result, the Company's export pricedeclined by the end of the year. The appreciation of the Canadian dollar against its U.S. counterpart continuedduring 2006. This is largely as a result of concerns over U.S. current accountdeficits and the strength in the Canadian economy, which was fuelled by highcommodity prices.The fluctuations in the Canadian exchange rate affect the Company's Canadiandollar denominated head office overhead. The fluctuations also impact theCanadian dollar denominated short-term investments. The rise of the Canadiandollar during the spring and summer months shortly after Bankers raised fundsin an equity financing was largely responsible for a foreign exchange gain

of$660,000 in 2006. RESULTS OF OPERATIONSProduction and Revenue 2006 2005 %

Average daily production (bopd) 3,490 1,687

107 Average sales volume (bopd) 3,392 1,668 103 Average price ($/barrel) 25.51 22.52 13 Oil and gas revenue ($000) 31,586 13,709 130 During 2006, production continued to increase as more wells were re-activatedin Albania, bringing the active well count to 122 from 67 in the precedingyear. Total wells taken over in the field amount to 211, of which approximatelyone-half of the shut-in wells are waiting for workovers or service. Averageproduction increased 107% to 3,490 bopd from 1,687 bopd for the preceding year.The exit production rate was approximately 4,406 at year-end 2006.Bankers sold 68% of its crude domestically to Armo at an average price of$23.70 per barrel during the year compared to $22.52 per barrel in 2005. Themodest improvement resulted from an increase in the price cap included in theCompany's contract with Armo from $35.00 per barrel to $36.75 per barrel forBrent crude.The remaining crude was exported to an Italian refinery under an export salescontract at an average price of $30.86 per barrel. The crude price under thiscontract is determined by reference to a basket of refined products whichfluctuates seasonally.

The Company is reviewing its options as to whether amendments are necessary to this contract and continues to seek other export options.

The average oil price for the year was $25.51 per barrel, up 13% from $22.52per barrel for the preceding year due to the increase in exports and the Brentcap in the Armo contract. Oil and gas revenues for the year were $31.6 million,an increase of 130% over the $13.7 million for the preceding year.

Royalties, Direct Expenses and Netbacks

Royalties are calculated pursuant to the Petroleum Agreement with Albpetrol inAlbania, and consist of Albpetrol's pre-existing production and a 1% grossoverriding royalty on production. Royalties increased to $3.02 per barrel from$2.46 per barrel compared to the preceding year. The increase in royalties overthe last year was related to the greater number of wells being taken over fromAlbpetrol, which resulted in higher pre-existing production. Albpetrol'spre-existing production made up 12% of total production in 2006 compared to 11%in 2005.Operating expenses declined to $10.08 per barrel from $12.56 per barrel in2005. The reduction in operating expenses is part of a continuing trend thatresults from operating efficiencies gained through greater experience in fieldoperations and economies of scale as the proportionate share of fixed operatingexpenses decline with production increases. Well servicing related costs makeup a significant portion of overall operating expenses. These expenses tend tofluctuate from period to period and may result in higher unit operatingexpenses when well failures exceed the average experienced to date. Sales andtransportation expenses increased to $1.82 per barrel from $1.06 per barrel inthe preceding year. This increase was directly related to the incremental costsof additional transportation, inspection and port fees associated with crudeoil exports.

During 2006, sales and transportation expenses related to exports were $0.9 million. These expenses were nominal in 2005, as the Company had only one export shipment.

The Company's netback per barrel improved 64% to $10.59 per barrel from $6.44per barrel in 2005. The increase in netbacks largely resulted from higher oilprices received as a result of the reduction in unit operating costs andaddition of exports. Netback ($/bopd) 2006 2005 % Average price 25.51 22.52 13 Royalties 3.02 2.46 23 Sales and 1.82 1.06 71 transportation Operating 10.08 12.56 (20) Netback 10.59 6.44 64

General and Administrative Expenses

General and administrative expenses (G&A) for the year were $5.8 millioncompared to $4.1 million for 2005, which included non-recurring charges ofapproximately $734,000 related to the listing of the Company's common shares onthe AIM Market and its migration to the TSX from the TSX Venture Exchange. Theincrease in G&A reflects higher personnel costs with the addition of newemployees, an increase of $1.6 million compared to 2005; higher consulting feesand travel expenses related to the Company's operating and financingactivities; increased public company compliance costs; and the strengthening ofthe Canadian dollar against the U.S. dollar. Despite the increase in nominalterms, G&A declined on a per barrel basis to $4.52 from $6.62 in 2005 as aresult of higher production.

During the year, the Company capitalized G&A of $1,249,000 compared to $683,000 for the preceding year in Albania and the U.S. These expenses were directly related to acquisition, exploration and development activities.

Stock-based Compensation

The Company determined stock-based compensation expense as $2,442,000 for thestock options vested and/or granted to officers, directors, employees andservice providers in 2006. Of this amount $2,327,000 (2005 - $1,823,000) wascharged to earnings and $115,000 (2005 - nil) was capitalized. The Companydetermined these amounts using the Black-Scholes option pricing model assuminga risk free interest rate range of 3.66% to 4.01% (2005 - 3.28% to 3.92%), adividend yield of 0% (2005 - 0%), an expected volatility range of 54% to 67%(2005 - 25% to 34%) and expected lives of the stock options of five years (2005- five) from the date of grant.

Depletion, Depreciation and Accretion

Depletion, depreciation and accretion expenses for the year were $4.9 millioncompared to $2.0 million for 2005. The increase in depletion, depreciation andaccretion expenses reflects higher production and increase in depletableassets. The Company's independent reserve evaluation prepared in accordancewith the National Instrument NI 51-101 had proved reserves of 38.4 millionbarrels at December 31, 2006, compared to 37.4 million barrels established in2005, based on forecast prices and costs.

Future Income Tax Expense

The net book value of the Albanian assets exceeds their tax values by $6.3 million in Albania. The Company recorded a future income tax expense of $2,844,000 in 2006 (2005 - $181,000) using a tax rate of 50% as a result of this temporary difference between the carrying and tax values of its assets and liabilities.

Bankers is presently not paying cash taxes in any jurisdiction. The Company'scost recovery pool in Albania is $47.1 million. In Canada, the Company hasnon-capital losses of approximately $9.5 million, the benefit of which has notbeen recognized in the financial statements. In the U.S., the Company is notexpected to be taxable for foreseeable future.

Loss for the Year and Funds from Operations

The Company recorded a loss of $1,561,000 ($0.01 per share) during the year compared to a loss of $3,498,000 ($0.01 per share) for the preceding year. Bankers reported a before tax profit of $1,283,000 in 2006 compared to a before tax loss of $3,317,000 in 2005.

Funds from operations for 2006 were $8.5 million during the year compared tofunds used in operation of $171,000 for the preceding year. This turn around isa reflection of higher production and oil prices and lower unit operatingexpenses experienced in the Albanian operations.

U.S.Operations

During 2006, Bankers did not have any producing properties in the United States; as a result U.S. operations did not generate any oil and gas revenues. The U.S. overhead for 2006 was $847,000 compared to $16,000 in 2005. The Company capitalized $279,000 of its 2006 overhead compared to nil in 2005.

During 2006, the Company drilled three wells in the Palo Duro basin, Texas, twoof which are presently suspended pending further completions. One currently hasoil production at low rates. In Carter County, Oklahoma, Bankers drilled andsuccessfully fracture stimulated its first well, Nickel Hill #1-26, by the endof the year, which had stabilized flow rates of 470 million cubic feet per dayof natural gas. Bankers intends to tie-in this well to a nearby gas gatheringsystem during first half of 2007. A second well drilled in Hughes County,Oklahoma, encountered a potentially productive Woodford shale interval.Analysis of additional technical data from this well was used to design afracture stimulation that was completed in the first quarter of 2007. The wellis currently flowing back fracture fluid and then will be tested. Establishingproduction from this well would expand the productive Woodford shale areacurrently being developed by other operators in Hughes County.

Significant Developments in 2006

Two key events occurred during the year for Bankers: the acquisition of fourunconventional shale gas prospects in the United States and the approval of thePlan of Development for the Patos Marinza oilfield in Albania.Bankers successfully closed the acquisition of four unconventional shale gasprospects in the Northern and Central regions of the United States from VintagePetroleum, LLC. The total consideration for the transaction was $30.0 millionof which $10.0 million was paid in cash and the remainder in 25,971,715Bankers' common shares at an ascribed price of $0.88 per share.

As part of the transaction, approximately 30,000 net acres in the Palo Duro Basin was transferred to third parties, together with an additional $1.0 million cash payment, to settle competing claims in respect of some of the acquired acreage.

This acquisition increased Bankers' total net acreage holdings inunconventional gas plays in the U.S. to over 500,000 net acres, includingincreasing the Palo Duro basin holdings in Texas by approximately 118,000 netacres. The new prospect lands are located in the Arkoma and Ardmore basins ofOklahoma, the Black Warrior Basin of Mississippi and Alabama and theAppalachian Basin of New York. The acquisition further diversified Bankers'portfolio of prospects and provided a foothold in these very active basins.The Black Warrior prospect covers approximately 95,000 net acres and targetsPennsylvanian age Pottsville tight gas sands as well as the Mississippian ageFloyd shale. Bankers holds 24,000 net acres in the Arkoma and Ardmore basinprospect, targeting the Caney and Woodford shales, which are Mississippian inage. The 19,000 net acres acquired in the Appalachian Basin play targets theearly Ordovician age, Trenton-Black River limestone-shale sequence withsecondary potential in the late Ordovician age, Utica Shale.In Albania, Bankers received approval of the Patos Marinza Oilfield Plan ofDevelopment, which allows the Company to take-over the remaining wells in thefield on a defined basis and produce and sell oil under Albpetrol's existinglicense for a period of 25 years with an option to extend at the Company'selection for further five year increments. The Plan of Development includestaking over consolidated areas of wells from Albpetrol and redeveloping between80 and 120 wells each year for the first five years along with the necessaryinfrastructure to attain gross oil production between 10,000 and 15,000 bopd.Total development costs are anticipated to range between $155.0 to $213.0million. The Patos Marinza oilfield is estimated to contain some 1.96 billionbarrels of original oil in place with current recovery being approximately 6%.FOURTH QUARTER 2006 Three months ended December 31 2006 2005 % Financial ($000s, except as noted) Oil and gas revenue 9,250 4,644 99 Net operating income 3,694 1,593 132 Loss for the period (107) (755) 74 Funds from (used in) 1,588 650 144 operations Additions to property, plant and equipment 12,374 10,810 14 Total assets 138,030 56,846 142 Shareholders' equity 115,170 50,798 127 Operating Average daily production 4,165 2,173 92 (bopd) Average sales volume 4,113 2,184 88 (bopd) Average price ($/barrel) 24.44 23.13 6 Royalties 3.04 2.77 10 Sales and transportation 1.77 1.20 48 Operating 9.88 12.46 (21) Netback ($/barrel) 9.75 6.69 48

Oil revenue during the fourth quarter 2006 increased substantially compared to2005 levels as a result of higher prices and production. Following the approvalof the Plan of Development, the Company commenced the take-over of wells fromAlbpetrol which resulted in significant production gains. Production averaged4,165 bopd during fourth quarter 2006 compared to 2,173 bopd during the fourthquarter of 2005.When compared to the previous quarter in 2006, revenue during the fourthquarter 2006 was comparable as a result of the offsetting impact of higherproduction and decline in export price. During the fourth quarter the Companyaveraged $26.31 per barrel in exports compared to $30.85 in the precedingquarter. Some of this decline was related to the drop in the world oil pricesduring the quarter. However, the change in the export contract from a Brentbased formula to a basket of refined products also contributed to the declinein average price as the fuel oil prices declined more sharply than that ofBrent crude. As a consequence, the Company averaged $24.44 per barrel of oilduring the fourth quarter of 2006 compared to $26.63 per barrel during thethird quarter and $23.13 per barrel in 2005.

Unit operating expenses during the fourth quarter were $9.88 per barrel, up from $9.05 during the third quarter but down from the same period in 2005. During the fourth quarter the Company took over an area of the field that proved more difficult to establish early production. As a result, higher than normal well failures occurred and well servicing costs were negatively impacted.

Sales and transportation expenses on unit basis went down to $1.77 per barrelfrom $2.10 per barrel compared to the preceding quarter but increased over 2005due to the higher level of exports. The decline reflects the lowerproportionate share of exports in overall sales: 32% of crude was exported inthe fourth quarter compared to 43% for the third quarter.

Netback for the fourth quarter was $9.75 per barrel down from $12.44 per barrel for the preceding quarter and up 48% from $6.69 per barrel in the fourth quarter of 2005.

As a result of these factors, funds from operations declined to $1,588,000 from$2,950,000 during the third quarter. Funds from operations were $650,000 forthe same period in 2005. The Company posted a loss for the quarter of $107,000compared to a loss of $208,000 for the third quarter and $755,000 for the sameperiod in 2005. The loss is less than the previous quarter due primarily tolower depletion and future income tax expenses.During the quarter, Bankers incurred $4.7 million of capital expenditures onwell reactivations and $1.1 million on new central treatment facilities inAlbania. The balance of the expenditures was incurred on ecology pitconstruction, miscellaneous asset acquisitions and capitalized G&A. The Companyspent $6.0 million in capital expenditures in Albania for the same period in2005, which were primarily incurred on well-reactivations.In the U.S., Bankers spent $4.8 million on the drilling and evaluation costs ofthe Misener #1, Nickel Hill #1-26, Lake Holdenville #35-1 and Butler Creek #1wells. Approximately $670,000 was related to lease acquisition costs. Thebalance was capitalized G&A. An additional $4.0 million was spent mainly onlease acquisitions in the U.S. for the same period in 2005. CAPITAL EXPENDITURES ($000) 2006 2005 % Albania 37,480 19,721 90 United States 30,166 15,098 100 Canada 81 229 (65) 67,727* 35,048* 93 * Excluding non-cash capital expenditures

The Company incurred $25.0 million on well reactivations in Albania during2006. The balance of the expenditures was incurred on construction of padfacilities ($661,000); central treatment facilities ($1.8 million); andmiscellaneous asset acquisitions and capitalized G&A. The increase in fieldinventory of $8.0 million was also recorded as an addition to capital assets.In 2005, the Company spent $18.0 million on well re-activations; the balance ofthe expenditures was related to miscellaneous asset acquisitions andcapitalized G&A.In the U.S., Bankers incurred $13.9 million on drilling and evaluation costs ofwells drilled and tested in Texas, Oklahoma and New York in 2006. The leaseacquisition costs including the Vintage acquisition amounted to $15.2 millionexcluding the share consideration of $20.0 million. Geological and geophysicalexpenditures were $307,000 with the balance representing the capitalized G&A of$279,000. In 2005, Bankers spent $14.4 million for lease bonus and acquisitioncosts. Geological and geophysical expenditures amounted to $589,000 and thedrilling costs were $888,000. The Company also capitalized G&A of $129,000.

LIQUIDITY AND CAPITAL RESOURCES

At the end of 2006, the Company had a working capital deficiency of $0.9million and a term loan of $2.0 million (including current portion). Thelong-term debt originates from the new $20.0 million debt facility entered intoduring 2006, comprising a $15.0 million term loan payable over five years and$5.0 million operating line of credit.The Company's capital expenditure budget for Albania for 2007 is approximately$35.0 million. In the U.S., the planned capital expenditures are budgeted at$23.0 million. There are also capital expenditures of $46.0 million contingenton drilling success and initial development drilling.Bankers anticipates that it has sufficient capital resources for Albania tofund the 2007 capital expenditure program and to meet working capitalrequirements. The Company expects to fund the Albanian capital program throughcash flows, which are estimated at $17.0 million; available debt facility of$13.0 million; and advances from Bankers of $5.0 million. It should be notedthat these advances represent repayment of funds recently transferred fromAlbania to the Company for use in general working capital.In March 2007, the Company issued 36,042,858 units on a bought-deal basis fornet proceeds of CDN$23.9 million. In January, the Company entered into anagreement with a U.S. based company to sell a 27% working interest in itsapproximately 375,000 net acres in the Palo Duro basin, Texas, for a totalconsideration of $19.5 million of which $15.0 million will be paid in cash andthe balance in common shares of the purchaser. In March, the U.S. based companyassigned its rights under this agreement to a second U.S. based company. Theterms of the new purchase and sales agreement remain essentially unchanged. TheU.S. company elected to satisfy up to $4.5 million of the purchase pricethrough the issuance of securities, having an ascribed maximum value ofCDN$0.35 per security.The funds raised by the equity financing and the sale of the Palo Duro acreageare anticipated to be more than sufficient to fund the planned capitalexpenditures. The Company expects that should its planned capital program inthe U.S. result in commercial discoveries, it will be able to raise thenecessary funds for an expanded capital program through debt, equity, or jointventure arrangements. However there is no assurance that Bankers will be ableto secure the necessary funds on terms acceptable to it, or at all, throughdebt, equity or other means. CommitmentsPlan of Development

In 2006, the Company's Plan of Development for the Patos Marinza heavy oilfield in Albania was approved by the National Petroleum Agency of Albania (NPA). Under the Plan of Development, the Company estimates the remaining capital expenditures as at January 1, 2007 between $124.8 million to $183.3 million during the life of the Patos Marinza project.

The estimated capital expenditures during the next five years are as follows: ($ millions) Case I Case II 2007 38.3 42.2 2008 31.6 29.4 2009 9.5 41.6 2010 10.9 15.5 2011 9.5 10.7 Remaining 25.0 43.9 124.8 183.3

* The difference between Case I and Case II relates to maximum future

production levels Under the Petroleum Agreement, Bankers is required to submit an annual programto NPA which includes the nature and the amount of capital expenditures to beincurred during that year. Significant deviations in this annual program fromthe Plan of Development will be subject to NPA approval. The PetroleumAgreement provides that disagreements between the parties will be referred toan independent expert whose decision will be binding. The Company has the rightto relinquish a portion or all of the contract area. If only a portion of thecontract area is relinquished then the Company will continue to conductpetroleum operations on the portion it retains and the future capitalexpenditures will be adjusted accordingly. In the event that Bankers is notable to generate sufficient capital resources, it may be required torenegotiate the Plan of Development or relinquish all or part of the contractarea.Office Premises

The Company has long-term lease commitments in Canada and Albania. The minimum lease payments for the next five years are as follow:

2007 295,000 2008 188,000 2009 148,000 2010 148,000 2011 148,000 Thereafter 6,000 $ 933,000 Term LoanThe term loan has no scheduled repayments during the first twelve months afterwhich it is repayable in equal monthly instalments over a 48-month period. Asat December 31, 2006, $2.0 million of the $15.0 million available term loan wasdrawn down, of which $125,000 was classified as a current liability and$1,875,000 as long-term debt. Principal repayments of the term loan over the next five years are as follows: 2007 125,000 2008 500,000 2009 500,000 2010 500,000 2011 375,000 $ 2,000,000 RELATED PARTY TRANSACTIONSBankers contracts with a Canadian drilling company for the provision of rigsand other oil well services at industry competitive rates. Victor Redekop, aDirector of Bankers, is a principal shareholder and officer of this company.During the year ended December 31, 2006, the Company transacted $9.4 million ofservices compared to $4.4 million for 2005. The services can be terminated upon60 days notice at the election of the Company. At December 31, 2006, theCompany owed $878,000 to the drilling company.

During 2006, Bankers incurred legal fees of $338,000 (2005 - $204,000) in transactions with a legal firm of which the corporate secretary of the Company is a partner. The accounts payable to this firm at December 31, 2006 was $22,000.

Bankers also paid $56,000 (2005 - $33,000) for rent and office services to a company related by way of common directors.

OUTLOOK

Bankers will continue to pursue a focused approach to long-term growth. The experience, expertise and entrepreneurial attitude of its people will be applied in a prudent manner, maximizing the potential upside of its development and exploration opportunities.

In 2007, management will focus on the following operational priorities:

* Increase annual average crude oil production to between 5,200 and 5,500 bopd and exit the year between 6,000 and 6,500 bopd. * Improve netbacks from Albanian production to over $11.00 per barrel compared to $10.59 per barrel for 2006 by improving sales contracts,

efficiencies and productivity. This will be facilitated by the following:

*

+ Increased domestic sales prices: In January 2007, the Company

renegotiated the sale price of its crude to Armo. Under the amendment,

the Company will receive 16,050 LEK per ton (adjusted for product quality) from Armo, which translates to $26.52 per barrel at the current exchange rate of 95.45 LEK to one U.S. Dollar. During 2006, the average exchange rate was 98 LEK to one U.S. dollar. Assuming an

exchange rate of 100 LEK to one U.S. dollar, the new price represents

an increase of 6% over the 2006 price of $23.85 per barrel. + Increased export sales prices: The price under Bankers' export sale contract is referenced to a basket of refined products. Based on the current world oil prices, the Company estimates 2007 export price will be between $25.00 to $30.00 per barrel.

* Based on these prices, Bankers estimates an average sale price over $26.00

per barrel during 2007 which will compare favourably to the 2006 average of

$25.52 per barrel.

* Maintaining the cost environment: Bankers expects royalties, operating and

sales and transportation expenses on a per unit basis to be similar to the

2006 levels.

* Complete the study for an EOR project in the Patos Marinza field during the

first half of 2007 and begin testing in the second half of the year,

subject to the receipt of requisite approvals. EOR techniques provide the

potential to increase the field's recovery beyond existing primary production expectations. * Initiate further studies and engineering to follow up on potential secondary water flood development, horizontal wells and an expanded EOR pilot.

* Define and execute a commercial development program for a U.S. shale gas

project by year-end.

* Generate initial natural gas production in the U.S. by the tie-in of the

Oklahoma natural gas discovery, the Nickel Hill #1-26 well, during the first half of the year. * Obtain a natural gas production rate of approximately four mmcf/d by year-end.

* Test under balanced drilling techniques in the various areas of Palo Duro

basin.

In Albania, the Company's future growth strategy involves identifying andintegrating other potential opportunities to increase overall value. This mayinclude future opportunities such as potential downstream/ upstream integrationstrategies. For example, in 2007 Bankers will review the possible acquisitionof Albania's refineries as recently announced by the government to undergoprivatization.

In the U.S. Bankers is focused on exploring and developing the potential of its shale gas plays. Activities to further these goals in 2007 include:

* In the Palo Duro basin, Texas, the Company is currently evaluating the

recently drilled Cogdell #64-1 well. Successful results from this well may

lead to commercial production and an expanded drilling program in the

basin.

* A second well is also planned in a different part of the Palo Duro basin to

gather further data. * In Oklahoma, Bankers intends to tie-in the Nickel Hill #1-26 well to a nearby gas gathering system during first half of 2007. In addition, the Company will drill offset horizontal wells as well as vertical wells

further away from the well in the Carter and Johnson Counties in order to

further assess the shale gas potential and development of the basin.

* In Hughes County, Oklahoma, analysis of additional technical data from the

Lake Holdenville well was used to design a fracture stimulation. The well

is currently flowing back fracture stimulation fluid. A successful test of

the Woodford shale will result in further drilling of vertical and horizontal wells in the immediate area. * In New York, after drilling and casing three wells to the intermediate hole, Bankers plans to re-enter each well and drill out utilizing air drilling techniques. In addition, fracture stimulations on two existing wells are expected to be performed during the first half of 2007.

Following the Oklahoma discovery, the Company anticipates that it will start producing natural gas in commercial quantities during the second half of 2007.

The following table summarizes Bankers' 2007 forecasts for the year providedthroughout the MD&A. 2007 Forecast Target Average annual production (Albania) 5,200 - 5,500

bopd

Exit crude oil production rate (December 31, 2007) 6,000 - 6,500 bopd

Exit natural gas production rate (December 31, 4.0 mmcf/d

2007)

Average sales price (per barrel) $26.00 - $27.00 Domestic sales price (per barrel) $25.50 - $27.00 Export sales price (per barrel) $25.00 - $30.00 Netback (per barrel) $10.00 - $11.00 Capital expenditures: Albania $35 million U.S.* $46 million

* includes amounts contingent on drilling success

QUARTERLY SUMMARY

Below is a summary of Bankers' performance over the last eight quarters.

Dec 31 Sept 30 June 30 March 31 Dec 31 2006 2006 2006 2006 2005 ($000s, except as noted) Average daily production 4,165 4,000 3,193 2,579 2,173 (bopd) Average sales volume 4,113 3,776 3,175 2,474 2,184 (bopd) Average price ($/barrel) 24.44 26.63 25.64 25.55 23.13 Royalties ($/barrel) 3.04 3.04 2.98 3.05 2.77 Sales and transportation 1.77 2.10 1.66 1.68 1.20 ($/barrel) Operating ($/barrel) 9.88 9.05 9.91 12.31 12.46 Netback ($/barrel) 9.75 12.44 11.09 8.51 6.69 Oil and gas revenues 9,250 9,240 7,407 5,689 4,644 Royalties 1,149 1,055 860 679 564 Sales and transportation 670 728 480 373 241 Operating 3,737 3,141 2,862 2,741 2,246 Net operating income 3,694 4,316 3,205 1,896 1,593 General and administrative 1,916 1,422 1,450 972 904 Funds from (used in) 1,588 2,950 3,251 723 650 operations Loss for the period (107) (208) (253) (993) (755) Basic and diluted loss per - - - - - share Total assets 138,030 127,106 124,321 98,930 56,846 Term loan (including 2,000 - - - - current portion) Sept 30 June 30 2005 March 31 2005 2005 ($000s, except as noted) Average daily production 1,793 1,527 1,243 (bopd)

Average sales volume (bopd) 1,791 1,475 1,210

Average price ($/barrel) 22.28 22.23 22.15 Royalties 2.59 2.20 1.95 Sales and transportation 0.97 0.99 1.04 Operating 12.23 13.00 15.68 Netback ($/barrel) 6.49 6.04 3.48 Oil and gas revenues 3,670 2,983 2,412 Royalties 426 295 213 Sales and transportation 161 132 113 Operating 1,946 1,744 1,707 Net operating income 1,138 811 379

General and administrative 1,415 1,008 751

Funds from (used in) (94) (200) (526) operations Loss for the period (315) (1,355) (1,073) Basic and diluted loss per - - - share Total assets 53,083 52,533 52,340 Total long-term debt - - -

Fluctuations in quarterly results are due to a number of factors, some of which are not within the Company's control such as seasonality and exchange rates.

* Seasonality of winter operating conditions combined with the timing of transfer of wells from Albpetrol entails that production increases are typically higher in the second and third quarters. However, higher than normal well failures and winter operating conditions resulted in a more

modest increase in average production for the fourth quarter of 2006. Over

the past two years, the Company averaged production increases of

approximately 400 to 500 bopd per quarter.

* As new wells come on stream, there is a build-up period in production,

higher sand production and higher well servicing costs, which is typical

for heavy oil wells in the first year of production.

* The increase in royalties is related to the greater number of wells being

taken over from Albpetrol, which results in higher pre-existing production.

* The decrease in operating costs is a part of a continuing trend that

results from operating efficiencies gained through greater experience in

field operations and economies of scale as the proportionate share of fixed

operating expenses decline with production increases. * Depreciation of the U.S. dollar against all major currencies during the past two years had the effect of increasing operating costs and the investment in property, plant and equipment.

* The increase in G&A reflects the addition of new employees and consultants,

higher travel expenses related to the Company's operating and financing activities; increased public company compliance costs; and the strengthening of the Canadian dollar against the U.S. dollar.

OUTSTANDING SHARE DATA

There were approximately 412 million and 448 million shares outstanding on December 31, 2006 and March 29, 2007, respectively. In addition, the Company had approximately 39 million and 63 million stock options, warrants and compensation options outstanding as of the same dates, respectively.

Officers and executive of the Company have an approximate 15% direct ownershipin the Company. This creates a strong alignment with shareholders and a teamthat is dedicated to activities that support future value creation.

CRITICAL ACCOUNTING ESTIMATES

The Company's financial statements have been prepared in accordance withCanadian generally accepted accounting principles (GAAP). Significantaccounting policies are disclosed in Note 2 to the Audited ConsolidatedFinancial Statements. Preparation of financial statements in accordance withGAAP requires that management make estimates that affect the reported amount ofassets, liabilities, revenues and expenses. The estimates used in applyingthese critical accounting policies for property, plant and equipment are asfollows:

Capitalized Costs

The Company follows the full cost method of accounting for oil and gasoperations whereby all costs associated with the exploration for anddevelopment of oil and gas reserves are capitalized on a country-by-countrybasis. Such costs include land acquisition costs, geological and geophysicalexpenses, carrying charges on non-producing properties, costs of drilling bothproductive and nonproductive wells, production equipment, overhead chargesdirectly related to acquisition, exploration and development activities andasset retirement costs.

Depletion and Depreciation

Capitalized costs within each country are depleted and depreciated on theunit-of-production method based on the estimated gross reserves determined byindependent petroleum engineers. Oil and gas reserves and production areconverted into equivalent units of six thousand cubic feet of natural gas toone barrel of oil. Depletion and depreciation is calculated using thecapitalized costs, plus the estimated future costs to be incurred in developingproved reserves, net of estimated salvage value. Costs of acquiring andevaluating unproved properties are initially excluded from the depletion anddepreciation calculation until it is determined whether or not proved reservescan be assigned to such properties.

Proceeds from the sale of oil and gas properties are applied against capitalized costs, with no gain or loss recognized, unless such a sale would alter the rate of depletion and depreciation by more than 20 per cent in a particular country cost centre, in which case a gain or loss on disposal is recorded.

Office and computer equipment are depreciated on the declining balance method at rates of 20 to 30 percent.

Ceiling test

The Company uses Canadian standards for full cost accounting and for theceiling test calculation pertaining to the measurement of impairment ofpetroleum and natural gas properties. In applying the full cost method, theCompany evaluates petroleum and natural gas assets to determine that thecarrying amount in each cost centre is recoverable and does not exceed the fairvalue of the properties in the cost centre. The carrying amounts are assessedto be recoverable when the sum of the undiscounted cash flows expected from theproduction of proved reserves, and the lower of cost and the market of unprovedproperties exceeds the carrying amount of the cost centre. When the carryingamount is not recoverable, an impairment loss is recognized to the extent thecarrying amount of the cost centre exceeds the sum of the discounted cash flowsexpected from the production of proved and probable reserves and the lower ofcost and market of unproved properties of the cost centre .

Asset Retirement Obligations

The fair value of estimated asset retirement obligations is capitalized toproperty, plant and equipment when the liability is incurred. Asset retirementobligations include those legal obligations where the Company will be requiredto retire tangible long-lived assets such as producing well sites andfacilities. Asset retirement costs for oil and gas properties are amortized aspart of depletion and depreciation using the unit-of-production method.

Increases in the asset retirement obligations resulting from the passage of time are recorded as accretion expense. Actual remediation expenditures incurred are charged against the accumulated obligation.

CHANGES IN ACCOUNTING POLICIES

There have been no changes to any accounting policies.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are controls and other procedures that aredesigned to provide reasonable assurance that information required to bedisclosed in regulatory filings is recorded, processed, summarized and reportedwithin the time periods specified and include controls and procedures designedto ensure that information required to be disclosed is accumulated andcommunicated to management as appropriate to allow timely decisions regardingrequired disclosure.Bankers President and Chief Financial Officer have evaluated the effectivenessof the Company's disclosure controls and procedures. The evaluation took intoconsideration the processes, systems and capabilities relating to regulatoryfilings, public disclosures, and the identification and communication ofmaterial information as well as the functioning of the officers, the board ofdirectors, and board committees. Based on this evaluation, management hasconcluded that the Company's disclosure controls are effective to providereasonable assurance that material information relating to the Company is madeknown to management on a timely basis.There have been no significant changes to Bankers' disclosure controls or inother factors that could significantly affect these controls subsequent to theevaluation date and the filing date of the MD&A. BANKERS PETROLEUM LTD. CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31

(Expressed in Thousands of United States dollars)

ASSETS 2006 2005 Current assets Cash and cash equivalents $ 6,329 13,529 $ Accounts receivable 7,214 3,846 Crude oil inventory 713 335

Deposits and prepaid expenses 1,121

1,016 15,377 18,726

Property, plant and equipment (Note 122,653

38,120 3) $ 138,030 56,846 $ LIABILITIES Current liabilities Operating loan (Note 4) $ 4,772 $ -

Accounts payable and accrued 11,369

5,766 liabilities

Current portion of term loan (Note 125

- 4) 16,266 5,766 Term loan (Note 4) 1,875 -

Asset retirement obligations (Note 1,593

- 5)

Future income tax liability (Note 9) 3,126

282 SHAREHOLDERS' EQUITY Share capital (Note 6) 116,696 53,205 Contributed surplus (Note 6) 4,456 2,014 Deficit (5,982) (4,421) 115,170 50,798 $ 138,030 56,846 $ Commitments (Note 10) Subsequent events (Note 13)

See accompanying notes to consolidated financial statements.

APPROVED BY THE BOARD"Robert Cross" Director"Victor Redekop" Director BANKERS PETROLEUM LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

FOR THE YEAR ENDED DECEMBER 31 ( Expressed in Thousands of United States dollars, Except Per Share Amounts) 2006 2005 Revenue Oil and gas revenue 31,586 13,709 $ $ Royalties (3,743) (1,498) 27,843 12,211 Expenses Operating 12,481 7,643

Sales and transportation 2,251 647 General and administrative 5,760

4,078 Interest on term loan 68 -

Stock-based compensation (Note 2,327

1,823 6)

Depletion, depreciation and 4,902

2,012 accretion 27,789 16,203 Other income (expenses) Interest 569 556

Foreign exchange gain (loss) 660

(570) Gain on sale of investment - 689 1,229 675

Earnings (loss) before income 1,283

(3,317) taxes Future income tax expense (2,844) (181) (Note 9) Loss for the year (1,561) (3,498) Deficit, beginning of year (4,421) (923) Deficit, end of year $ (5,982) $ (4,421) Basic and diluted loss per $ (0.01) $ (0.01) share

See accompanying notes to consolidated financial statements.

BANKERS PETROLEUM LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31 (Expressed in Thousands of United States dollars)

2006 2005 Cash provided by (used in) Operating activities Loss for the year $ (1,561) $ (3,498) Items not involving cash:

Depletion, depreciation and accretion 4,902

2,012 Future income tax expense 2,844 181

Stock-based compensation (Note 6) 2,327

1,823 Gain on sale of investment - (689) 8,512 (171)

Change in non-cash working capital (338)

(3,859) (Note 11) 8,174 (4,030) Investing activities

Additions to property, plant and

equipment (67,727) (35,048)

Proceeds from sale of investments -

2,033 Purchase of investments - (513) Restricted cash - 1,144

Change in non-cash working capital 2,090

3,832 (Note 11) (65,637) (28,552) Financing activities

Issue of common shares, net of share

issue costs (Note 6) 43,491 31,590 Operating loan (Note 4) 4,772 - Term loan (Note 4) 2,000 - 50,263 31,590

Decrease in cash and cash equivalents (7,200)

(992)

Cash and cash equivalents, beginning 13,529

14,521 of year

Cash and cash equivalents, end of

year (Note 11) $ 6,329 13,529

See accompanying notes to consolidated financial statements.

1. NATURE OF OPERATIONS

The Company is engaged in the exploration for and development and production of oil and natural gas in Albania and the United States.

In Albania, the Company operates in the Patos Marinza oilfield pursuant to apetroleum agreement (the "Petroleum Agreement") with Albpetrol Sh.a("Albpetrol"), the state owned oil company, under Albpetrol's existing licensewith the National Petroleum Agency ("NPA"). The license has a 25 year termwith an option to extend at the Company's election for further five yearincrements.

In the United States, the Company is engaged in exploration for oil and natural gas in Texas, Oklahoma, Mississippi, Alabama and New York.

2. SIGNIFICANT ACCOUNTING POLICIES These consolidated financial statements have been prepared in accordance withCanadian generally accepted accounting principles. The principal accountingpolicies are outlined below: (a) Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned operating subsidiaries: Bankers Petroleum Albania Ltd. (formerly Bankers International Energy Ltd.) and Bankers Petroleum (U.S.) Inc.

(b) Foreign currency translation

Transactions denominated in foreign currencies are translated into UnitedStates dollar equivalents at exchange rates approximating those in effect atthe transaction dates. Foreign currency denominated monetary assets andliabilities are translated at the year-end exchange rate. Gains and lossesarising from foreign currency translation are recognized in the statement ofoperations and deficit. (c) Measurement Uncertainty

Timely preparation of the financial statements in conformity with Canadian generally accepted accounting principles requires that Management make estimates and assumptions and use judgment regarding assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, actual results may differ from estimated amounts as future confirming events occur.

Amounts recorded for depletion, depreciation, asset retirement obligations,future income taxes, and amounts used for asset impairment calculations arebased on estimates of oil and natural gas reserves and future costs required todevelop these reserves. By their nature, these estimates of reserves and therelated future cash flows are subject to measurement uncertainty and the impacton the financial statements of future periods could be material.

Recovery of costs in the United States cost centre is uncertain and dependent upon achieving commercial production, or sale and additional financing.

(d) Revenue recognition Revenue associated with the sales of the Company's oil and gas is recognized inincome when title and risk pass to the buyer, collection is reasonably assuredand the price is determinable. (e) Income taxes Future income taxes are recorded using the asset and liabilitymethod. Under the asset and liability method, future tax assets andliabilities are recognized for the future tax consequences attributable todifferences between the financial statement carrying amounts of existing assetsand liabilities and their respective tax bases. Future tax assets andliabilities are measured using the enacted or substantively enacted tax ratesexpected to apply when the asset is realized or the liability settled. Theeffect on future tax assets and liabilities of a change in tax rates isrecognized in income in the period that substantive enactment or enactmentoccurs. To the extent that the Company does not consider it more likely thannot that a future tax asset will be recovered, it provides a valuationallowance against the excess. (f) Per share amounts

Basic loss per share is calculated using the weighted-average number of common shares outstanding during the year.

The Company uses the treasury stock method to compute the dilutive effect ofoptions, warrants and similar instruments. Under this method the dilutiveeffect on loss per share is recognized on the use of the proceeds that could beobtained upon exercise of options, warrants and similar instruments. Itassumes that the proceeds would be used to purchase common shares at theaverage market price during the year. For the years presented, thiscalculation proved to be anti-dilutive.

Weighted average number of common shares used in the calculation of basic and diluted loss per share was 388,782,758 in 2006 (2005 - 318,570,243).

(g) Cash and cash equivalents

Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less.

(h) Crude oil inventory

Crude oil inventory is valued at the lower of average cost of production and net realizable value.

(i) Property, plant and equipment Capitalized Costs The Company follows the full cost method of accounting for its oil and gasoperations whereby all costs associated with the exploration for anddevelopment of oil and gas reserves are capitalized on a country-by-countrybasis. Such costs include land acquisition costs, geological and geophysicalexpenses, carrying charges on non-producing properties, costs of drilling bothproductive and non-productive wells, production equipment, overhead chargesdirectly related to acquisition, exploration and development activities and

asset retirement costs. Depletion and Depreciation Capitalized costs within each country are depleted and depreciated on theunit-of-production method based on the estimated gross proved reservesdetermined by independent petroleum engineers. Oil and gas reserves andproduction are converted into equivalent units of six thousand cubic feet ofnatural gas to one barrel of oil. Depletion and depreciation is calculatedusing the capitalized costs, plus the estimated future costs to be incurred indeveloping proved reserves, net of estimated salvage value. Costs of acquiringand evaluating unproved properties are initially excluded from the depletionand depreciation calculation until it is determined whether or not provedreserves can be assigned to such properties.

Proceeds from the sale of oil and gas properties are applied against capitalized costs, with no gain or loss recognized, unless such a sale would alter the rate of depletion and depreciation by more than 20 per cent in a particular country cost centre, in which case a gain or loss on disposal is recorded.

Office and computer equipment are depreciated on the declining balance method at rates of 20 to 30 percent.

Ceiling test The Company uses Canadian standards for full cost accounting and for theceiling test calculation pertaining to the measurement of impairment ofpetroleum and natural gas properties. In applying the full cost method, theCompany evaluates petroleum and natural gas assets to determine that thecarrying amount in each cost centre is recoverable and does not exceed the fairvalue of the properties in the cost centre. The carrying amounts are assessedto be recoverable when the sum of the undiscounted cash flows expected from theproduction of proved reserves and the lower of cost and the market of unprovedproperties exceeds the carrying amount of the cost centre. When the carryingamount is not recoverable, an impairment loss is recognized to the extent thecarrying amount of the cost centre exceeds the sum of the discounted cash flowsexpected from the production of proved and probable reserves and the lower ofcost and market of unproved properties of the cost centre. Asset retirement obligations

The fair value of estimated asset retirement obligations is capitalized toproperty, plant and equipment when the liability is incurred. Asset retirementobligations include those legal obligations where the Company will be requiredto retire tangible long-lived assets such as producing well sites andfacilities. Asset retirement costs for oil and gas properties are amortized aspart of depletion and depreciation using the unit-of-production method.

Increases in the asset retirement obligations resulting from the passage of time are recorded as accretion expense. Actual remediation expenditures incurred are charged against the accumulated obligation.

(j) Stock-based compensation

Compensation costs attributable to all stock options granted to employees and directors are measured at fair value at the date of grant using the Black Scholes option pricing model and expensed over the vesting period with a corresponding increase to contributed surplus. Upon exercise of the option, consideration received together with the amount previously recognized in contributed surplus is recorded as an increase to share capital.

(k) Comparative figures

Certain prior year figures have been re-classified to conform to the current year's presentation.

3. PROPERTY, PLANT AND EQUIPMENTThe following table summarizes the Company's property, plant and equipment asat December 31: 2006 2005 Accumulated Depletion Net Book Net Book and Value Value Cost depreciation Oil and gas $ properties - Albania 61,702 $ 6,618 $ 55,084 $ 21,543 Oil and gas properties - United States 66,520 - 66,520 16,062 Equipment, furniture and fixtures 1,329 280 1,049 515 $ 129,551 $ 6,898 $ 122,653 $ 38,120

In May 2006, the Company closed an acquisition of oil and gas properties in theUnited States. The purchase price for the assets was $31 million of which $20million was satisfied by the issuance of 25,971,715 common shares of theCompany with a fair market value of CAD $0.877 per share. The balance was paidin cash.

The Company capitalized general and administrative expenses of $1,249 (2005 - $683) in Albania and the United States that were directly related to exploration and development activities.

Depletion for the year ended December 31, 2006 included $137 million (2005- $123 million) for estimated future development costs associated with proved undeveloped reserves in Albania.

The Company's ceiling test calculation for the Albania cost centre, performedat December 31, 2006, resulted in no impairment loss. The future prices used bythe Company in estimating cash flows were based on forecasts by an independentreserves evaluator, adjusted for the Company's quality and transportationdifferentials. The following table summarizes the benchmark prices used in

thecalculation: Brent Oil Year (US$/bbl) 2007 57.99 2008 60.37 2009 58.88 2010 56.87 2011 55.08 Average annual increase,thereafter 2% 4. TERM LOAN AND OPERATING DEBT FACILITYIn October 2006, the Company closed a $20 million debt financing with aEuropean financial institution based in Albania. The facility is comprised of a$5 million revolving operating loan and a $15 million five-year term loan. Theterm loan and operating debt facility is secured by all of the assets ofBankers Petroleum Albania Ltd., the Company's wholly owned subsidiary,assignment of proceeds from the domestic and export crude oil sales contracts,a pledge of the common shares of Bankers Petroleum Albania Ltd., and aguarantee by the Company.

(a) Operating Loan

The operating loan has a one year term and bears interest at one year LIBORplus 3.5%. The term of the operating loan may be extended for further twelvemonth periods up to four times upon request by the Company and acceptance bythe lender. As at December 31, 2006, $4,772 of the operating loan was drawndown.(b) Term LoanThe term loan has no scheduled repayments during the first twelve months afterwhich it is repayable in equal monthly instalments over a 48-month period. Theterm loan bears interest at one year LIBOR plus 4.5%. As at December 31, 2006,$2 million of the $15 million available term loan was drawn down of which $125was classified as a current liability and $1,875 as long-term debt. Principal repayments of the term loan over the next five years are as follows: 2007 $ 125 2008 500 2009 500 2010 500 2011 375 $ 2,000 5. ASSET RETIREMENT OBLIGATIONS

Prior to the approval of its Plan of Development, the Company did not make aprovision for asset retirement obligations in Albania as there was no legalobligation during the evaluation period. Subsequent to approval in March 2006,the Company estimated the total undiscounted amount required to settle theasset retirement obligations at $9,780. These obligations will be settled atthe end of the Company's 25-year license. The undiscounted liability has beendiscounted using a credit-adjusted risk-free interest rate of 9% to arrive at asset retirement obligations of $1,134.In the United States, the Company estimated the total undiscounted amountrequired to settle the asset retirement obligations as $550. These obligationsare expected to be settled in 15 years. The undiscounted liability has beendiscounted using a credit-adjusted risk-free interest rate of 5.5% to arrive atasset retirement obligations of $357. Asset retirement obligations, December 31, 2005 $ - Liabilities incurred during the period 1,491 Accretion 102

Asset retirement obligations, December 31, 2006 $ 1,593

6. SHAREHOLDERS' EQUITY (a) Share capital and Contributed surplus

Authorized

Unlimited number of common shares with no par value.

Issued Number of Contributed Common Shares Surplus Amount

Balance, December 31, 2004 $ 20,957 $ 593 286,295,739

Shares issued pursuant to 31,000,000 29,588 - private placement

Share issuance costs - (1,557) - Exercise of warrants and 9,219,248 3,282 (247) options Exercise of compensation 1,071,546 679 (155) options Finder's fee 400,000 256 - Stock-based compensation - - 1,823 Balance, December 31, 2005 327,986,533 53,205 2,014 Shares issued pursuant to - private placement 50,000,000 43,200 Issue of common shares for oil and gas properties 25,971,715 20,000 Exercise of compensation options 784,636 381 Shares issued on exercise of warrants 7,323,750 2,608 - Share issuance costs - (2,698) - Stock-based compensation - - 2,442 Balance, December 31, 2006 $ 116,696 $ 4,456

412,066,634 In March 2006, the Company completed a financing with a syndicate on abought-deal basis pursuant to which the Underwriters purchased for resale tothe public, an aggregate of 50,000,000 common shares of the Company at a priceof CAD$1.00 per common share. The net proceeds of the offering were $40,783,net of share issuance costs.

In May 2006, the Company issued 25,971,715 common shares at a fair market value of CAD $0.877 per share, valued at $20,000 as partial consideration for the acquisition of oil and gas properties in the United States (Note 3).

(b) Warrants Number of Weighted Average Warrants Exercise Price (CAD $) Balance, December 31, 2004 30,468,182 0.68 Warrants issued on exercise 535,773 0.95 of compensation options Warrants exercised (7,449,250) 0.44 Balance, December 31, 2005 23,554,705 0.76 Warrants issued on exercise 392,318 0.95 of compensation options Warrants exercised (7,323,750) 0.40 Warrants expired (721,250) 0.40 Balance, December 31, 2006 15,902,023 0.95 The following table summarizes the outstanding and exercisable warrants atDecember 31, 2006. Weighted Average Exercise Price Number of Warrants Expiry Date (CAD $) 15,902,023 November 10, 2009 0.95 (c) Stock OptionsThe Company has established a "rolling" Stock Option Plan (the "Plan"). Thenumber of shares reserved for issuance may not exceed 10% of the total numberof issued and outstanding shares and, to any one optionee, may not exceed 5% ofthe issued and outstanding shares on a yearly basis or 2% if the optionee isengaged in investor relations activities or is a consultant. The exerciseprice of each option shall not be less than the market price of the Company'sstock at the date of grant.

A summary of the changes in stock options is presented as follows:

Number of Weighted Average Options Exercise Price (CAD $) Balance, December 31, 2004 8,500,000 0.25 Options granted 8,025,000 1.10 Options forfeited (150,000) 1.47 Options exercised (1,770,000) 0.28 Balance, December 31, 2005 14,605,000 0.70 Options granted 9,075,000 1.03 Options forfeited (150,000) 1.47 Balance, December 31, 2006 23,530,000 0.83 The following table summarizes the outstanding and exercisable options atDecember 31, 2006.Outstanding Exercisable Weighted Average Expiry Date Remaining Exercise Price Contractual (CAD $) Life 6,150,000 6,150,000 0.22 June 4, 2009 2.4 500,000 500,000 0.50 August 4, 2009 2.6 100,000 100,000 0.50 September 1, 2009 2.7 2,480,000 1,653,333 0.80 February 11, 2010 3.1 425,000 283,334 1.47 April 14, 2010 3.3 2,650,000 1,766,668 1.15 May 25, 2010 3.4 150,000 100,000 1.15 June 1, 2010 3.4 650,000 433,333 1.15 June 24, 2010 3.5 250,000 166,667 1.34 November 3, 2010 3.8 350,000 233,333 1.34 November 22, 2010 3.9 750,000 500,000 1.39 December 16, 2010 4.0 6,650,000 2,214,450 1.15 May 16, 2011 4.4 1,750,000 458,333 0.75 September 4, 2011 4.7 400,000 133,333 0.65 September 15, 2011 4.7 275,000 41,666 0.55 October 2, 2011 4.8 23,530,000 14,734,450 (d) Compensation OptionsIn connection with the November 2004 private placement, the brokers were issued1,856,182 compensation options exercisable to purchase units of the Company ata price of CAD$0.55 per unit. Each unit consists of one common share andone-half of one common share purchase warrant. Each whole warrant entitles theholder to purchase one common share at CAD$0.95 until November 10, 2009.

A summary of the changes in compensation options is presented as follows:

Number of compensation options Balance, December 31, 2004 1,856,182

Compensation options exercised (1,071,546)

Balance, December 31, 2005 784,636

Compensation options exercised (784,636)

Balance, December 31, 2006 Nil (e) Stock-based CompensationUsing the fair value method for stock-based compensation, the Companycalculated stock-based compensation expense as $2,442 for the stock optionsvested and/or granted to officers, directors, employees and service providers. Of this amount $2,327 (2005 - $1,823) was charged to earnings and $115 (2005 -nil) was capitalized. The Company determined these amounts using theBlack-Scholes option pricing model assuming a risk free interest rate range of3.66% to 4.01% (2005 - 3.28% to 3.92%), a dividend yield of 0% (2005 - 0%), anexpected volatility range of 54% to 67% (2005 - 25% to 34%) and expected livesof the stock options of five years (2005 - five) from the date of grant.

7. SEGMENTED INFORMATION

The Company defined its reportable segments based on geographic locations.

United States Year ended December 31, Albania Canada Total 2006 Revenue Oil and gas revenue, net of royalties $ 27,843 $ - $ - $ 27,843 Expenses Operating 12,481 - - 12,481 Sales and transportation 2,251 - - 2,251 General and 2,261 580 2,919 5,760 administrative Interest on long-term 68 - - 68 debt Stock-based compensation 575 123 1,629 2,327 Depletion, depreciation and accretion 4,838 20 44 4,902 22,474 723 4,592 27,789

Segment earnings (loss) 5,369 (723) (4,592) 54

Other income 1,229 Future income tax expense (2,844) Loss for the year $ (1,561) Assets, December 31, 2006 $ 64,822 $ 67,290 $ 5,918 $ 138,030 Additions to property, plant and equipment $ 37,480 $ 30,166 $ 81 $ 67,727 During the year, the Company had sales of $19,887 (2005 -

$13,166)

to the Albanian Refining and Marketing Organization, representing 63% (2005 -96%) of net sales. The export sales to an Italian refinery were $11,699 (2005- $543), representing 37% (2005 - 4%) of net sales. United States Year ended December 31, Albania Canada Total 2005 Revenue Oil and gas revenue, net of royalties $ 12,211 $ - $ - $ 12,211 Expenses Operating 7,643 - - 7,643 Sales and transportation 647 - - 647 General and administrative 1,470 16 2,592 4,078 Stock-based compensation 392 292 1,139 1,823 Depletion, depreciation and accretion 2,006 - 6 2,012 12,158 308 3,737 16,203 Segment earnings (loss) 53 (308) (3,737) (3,992) Other income 675 Future income tax expense (181) Loss for the year $ (3,498) Assets, December 31, 2005 $ 26,629 $ 17,311 $ 12,906 $ 56,846 Additions to property, plant and equipment $ 19,721 $ 15,098 $ 229 $ 35,048 8. RELATED PARTY TRANSACTIONSDuring the year ended December 31, 2006 and 2005, the Company incurred thefollowing expenses with companies related by way of common directors and/orofficers: 2006 2005 Oil well servicing $ 9,435 $ 4,370 Legal fees 338 204 Rent and office 56 33 services The Company contracts for the provision of oil well servicing with a companywhose principal shareholder and officer is a director of the Company. TheCompany incurred legal fees in transactions with a firm of which the corporatesecretary of the Company is a partner. The Company also paid for rent andoffice services to a company related by way of common directors.At December 31, 2006 and 2005, the following amounts payable to these companieswere included in accounts payable and accrued liabilities. These balances bearno interest and have no fixed terms of repayment: ($) 2006 2005 Oil well servicing $ 878 $ 870 Legal fees 22 17

These transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

9. INCOME TAXES

The provision for income taxes reported differs from the amounts computed byapplying the cumulative Canadian federal and provincial income tax rates to theloss before tax provision due to the following: 2006 2005

Earnings (loss) before income taxes $ 1,283 $ (3,317)

Statutory tax rate 32.5% 33.6% 417 (1,115)

Difference in tax rates between 1,459 75

Albania and Canada Non-deductible expenses 757 497 Other 87 - Valuation allowance 124 724 Future income tax expense $ 2,844 $ 181 The significant components of the Company's future income tax assets andliabilities are as follows: 2006 2005 Future income assets

Non-capital loss carryforwards $ 2,761 $ 2,249

Share issue costs 1,037 662

Property, plant and equipment -

United States and Canada 21 - Less: valuation allowances (3,819) (2,911) Future income tax assets $ - $ -

Future income tax liabilities Property, plant and equipment - $

Albania 3,126 $ 282 Future income tax liability $ 3,126 $ 282

The Company has available for deduction against future Canadian taxable income non-capital losses of approximately $9,520. These losses, if not utilized, will expire commencing 2008.

There are no material timing differences in the United States.

The potential income tax benefits of these future income tax assets have beenoffset by a valuation allowance and have not been recorded in these financialstatements.

Future income tax liabilities result from the temporary differences between the carrying value and tax values of its Albanian assets and liabilities.

10. COMMITMENTS

a) Capital expenditures

In March 2006, the Company's Plan of Development for the Patos Marinza heavyoilfield in Albania was approved by the NPA. Under the Plan of Developmentsubmitted to NPA, the Company estimated the remaining capital expenditures asat January 1, 2007 between $125 million to $183 million during the life of thePatos Marinza project. The estimated capital expenditures during the next fiveyears are as follows: ($ millions) Case I Case II 2007 38.3 42.2 2008 31.6 29.4 2009 9.5 41.6 2010 10.9 15.5 2011 9.5 10.7 Remaining 25.0 43.9 124.8 183.3

The difference between Case I and Case II relates to maximum future production levels.

The Petroleum Agreement stipulates that the Company submit to NPA each year anannual program which includes the nature and the amount of capital expendituresto be incurred in that year. Significant deviations in this annual program fromthe Plan of Development will be subject to NPA approval. Disagreements betweenthe parties will be referred to an independent expert whose decision will bebinding.

The Company has the right to relinquish a portion or all of the contract area.

Any relinquishment will reduce the associated capital expenditurecommitments. If only a portion of the contract area is relinquished then theCompany will continue to conduct petroleum operations on the portion retainedand the future capital expenditures will be adjusted accordingly.

b) Office Premises

The Company leases office premises. The minimum lease payments for the nextfive years are as follows: 2007 $ 295 2008 188 2009 148 2010 148 2011 148 Thereafter 6 $ 933 11. SUPPLEMENTAL CASH FLOW INFORMATION 2006 2005 Operating activities Decrease (increase) in current assets Accounts receivable $ (3,368) $ (2,655) Inventory (378) (335) Deposits and prepaid expenses (105) (458) Increase (decrease) in current liabilities Accounts payable and accrued liabilities 3,513 (411) $ (338) $ (3,859) Investing activities Increase in current liabilities Accounts payable and accrued liabilities $ 2,090 $ 3,832 Cash and cash equivalents Cash $ 2,140 $ 3,423 Fixed income investments 4,189 10,106 $ 6,329 $ 13,529 Interest paid $ 68 $ - 12. FINANCIAL INSTRUMENTS

Fair Value

The fair value of the Company's accounts receivable, operating line of creditand accounts payable and accrued liabilities approximate their carrying valuedue to the short term nature of these financial instruments. The fair value ofthe long-term debt approximates its carrying value as it bears interest atmarket rates.

Foreign Exchange Risk

Certain of the Company's expenses are incurred in Canadian and Albanian currencies and are therefore subject to gains and losses due to fluctuations against United States dollar.

Commodity Price Risk

The nature of the Company's operations results in exposure to fluctuations in commodity prices. Management monitors commodity prices and initiates instruments to manage exposure to these risks when it deems appropriate. Currently, no such instruments have been initiated.

Interest Rate Risk

The Company is exposed to interest rate risk to the extent that its operating line of credit and term loan are at floating rates of interest.

Credit Risk

The majority of the Company's accounts receivable is from purchasers of theCompany's oil and gas production. The collection of accounts receivable may beaffected by changes in economic or other conditions. Management believes therisk is mitigated by the size and reputation of the purchasers.

13. SUBSEQUENT EVENTS

(a) On March 7, 2007, the Company announced that it had entered into aletter of understanding with the wholly owned U.S. subsidiary of a Canadianpublic company to sell up to 27% working interest in its approximately 375,000net acres in the Palo Duro basin, Texas. The total consideration to be paidfor the acreage is $19.5 million, of which a minimum of $15.0 million will bein cash and the balance of $4.5 million will be paid through issuance ofsecurities of the Canadian parent. This transaction is expected to close inMay 2007. The proceeds of disposal will be credited to property, plant andequipment with no gains or losses recognized.(b) In March 2007, the Company issued an aggregate of 36,042,858 units at aprice of CAD$0.70 per unit on a bought-deal basis, resulting in net proceeds ofapproximately CAD$23,885 after commissions and share issue expenses ofCAD$150. Each unit consists of one common share and one-half of one commonshare purchase warrant. Each whole warrant will entitle the holder to purchaseone common share of the Company at a price of CAD$0.90 for a period of fiveyears from closing of the offering.

About Bankers Petroleum Ltd.

Bankers Petroleum Ltd. is a Canadian-based oil and gas exploration andproduction company focused on opportunities in unconventional petroleum assets.Bankers holds interests in four prospects in the Northern and Central regionsof the United States, where it is currently pursuing the exploration of shalegas plays. It also operates in the Patos-Marinza oilfield in Albania pursuantto a license agreement, producing heavy oil. Bankers' shares are traded on theToronto Stock Exchange and the AIM Market in London, England under the tickersymbol BNK. - 30 -

For further information, contact:

Susan J. Soprovich VP, Investor Relations and Corporate Governance 403-513-2681 Email: investorrelations@bankerspetroleum.com

Website: www.bankerspetroleum.com

BANKERS PETROLEUM LIMITED