Athlone Energy Ltd.

Athlone Energy Ltd. was incorporated in 1986 and until October 2003, the company was involved in the exploration for gold, diamonds and base metals in Canada, the western United States, Venezuela and Bolivia. Since October 2003, Athlone has been engaged in the exploration, development and production of oil and natural gas in western Canada.

Until January 2005, the company participated in the drilling of petroleum and natural gas properties through joint ventures or farm-outs as a non-operator. However, since January 2005, Athlone has generated substantially all of its exploration projects internally and has drilled the majority of its wells as a 100% owner and operator.

Core Areas

The company currently has a primary core area in the Lloydminster, Alberta region. Athlone also derives its production from Smoky Lake in central Alberta and from Success in southwest Saskatchewan.

The company holds a 100% interest in 3,360 acres near Lloydminster where the primary target is Sparky heavy oil. Well depths are typically in the range of 700 metres and there is uphole gas potential in most locations. At wets central Alberta, Athlone has a 100% interest in 2,880 acres hosting multi-zone light oil and gas opportunities. The well depths are generally about 1,600 metres and there is significant farm-out potential in this area. In southwestern Saskatchewan, the company’s interests range from 50% - 100% on 2,400 acres of land prospective for medium oil and natural gas. Management has stated that there is good potential for land acquisition in this area of Saskatchewan at reasonable prices.

During the second quarter ended July 31, 2006, the company drilled and cased four wells with a success rate of 100%. All four wells are 100% working interest of which three were completed as producing heavy oil wells and one well was completed as a gas well and was tied in during the third quarter ended October 31, 2006. The oil wells, one of which was a new pool discovery, were not placed on production until July and August 2006. Average output of 191 boepd for the second quarter of 2006 was slightly lower than the first quarter average of 201 boepd. This decrease was primarily a reflection of wet weather, which resulted in trucking restrictions, and the timing of the tie-in of the heavy oil wells.

Also during the second quarter, Athlone added to its land position at Lloydminster, west central Alberta and southern Saskatchewan. Based on its second quarter drilling results, management has identified up to 10 further development locations. In total, there are approximately 10-15 drill ready locations in the Lloydminster area and 3 locations in west central Alberta.

Athlone has also acquired 400 km of 2D seismic data for an exclusive term of 9 months in a confidential location. This is a multi-zone area prospective mainly for gas with lighter oil. This confidential area also has straightforward access to existing infrastructure.

The company’s average production during August 2006 was approximately 305 boepd, consisting of 250 bbls/day of heavy oil and 55 boepd of light oil and gas.

In December 2005, Athlone completed a private placement of 2,158,000 flow-through shares at a price of $0.70 per share, raising gross proceeds of $1,510,600. The proceeds were budgeted for use in the company’s ongoing drilling and seismic programs.

In mid-September 2006, Athlone established an initial credit facility with the National Bank of Canada for $2.5 million in order to fund its capital expenditure program during the second half of fiscal 2007 ending January 31, 2007.