PennantEnergy Inc. - Manitoba

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Daly Field, Manitoba

Pennant Energy Inc. began in the oil and gas business with the objective of establishing cash flow through participation in a low risk development drilling project and then from there, develop or farmin on higher risk/reward projects. In 2004 such a project was presented to Pennant by an experienced, established operator Rideau Petroleums Ltd. through the offer to participate in a 4 well drilling program in the Daly Field, Manitoba. The Daly field produces medium grade crude from the Lodgepole and Bakken formations and many wells produce from both formations on a commingled basis at moderate rates. The initial 4 well program was successful and therefore the Company made the commitment to participate with Rideau to drill 4 more wells. Subsequently those 4 wells were drilled and were also successful. To date we have been successful in all eight wells drilled in the Daly field which has provided the company with stable cash flow and is part of the reason why we still only have 12.5 million shares issued and outstanding.

The drilling program participation terms called for the Company to pay for 25% of the drilling and completion costs of each well to earn a reversionary working interest of 22.5% before payout, reverting to 15% after payout. As of October 2006 four of the wells had achieved payout.

During 2006 the Company participated with Rideau in the drilling of an exploration well in the Daly field to test the potential of formations deeper than the Lodgepole and Bakken formations. Unfortunately the deep formations were encountered wet; however the Bakken was completed and is producing.