Overview:

The first quarter of 2009 was less active for Crew Energy than previous years as a result of declining commodity prices, the initiation of Alberta’s New Royalty Framework and tight equity and credit markets brought on by the global recession.

Crew Energy drilled seven (1.8 net) wells resulting in a 92% success rate. Included in the first quarter program were two exploration wells resulting in one net cased gas well and one (0.15 net) dry and abandoned well. Crew Energy also participated in five (0.65 net) coal bed methane wells at Wimborne, Alberta. About CAD7 million was spent in the first quarter on equipment purchases for Crew Energy’s proposed 25 mmcf per day Septimus, British Columbia gas plant.

The gas plant has cleared all regulatory hurdles and construction is expected to commence when surface conditions permit with commissioning expected to occur in late third quarter or early fourth quarter. The company also completed a 28 square mile three dimensional seismic program at Portage, British Columbia and spent CAD2.8 million acquiring land offsetting a significant vertical Montney formation discovery in northeast British Columbia.

First quarter commodity prices were significantly lower year over year. Crew Energy’s wellhead natural gas price averaged CAD5.09 per mcf which was 38% lower than the first quarter of 2008 price of CAD8.19 per mcf. Crew Energy’s oil price was down 55% from CAD96.40 per bbl in the first quarter of 2008 to CAD43.34 per bbl in the same period of 2009. This decline in commodity prices had a significant impact on Crew Energy’s funds flow from operations and net loss and played a large factor in the company’s low activity level. The company entered into commodity hedges during the first quarter which will aid in reducing the potential impact of weak commodity pricing for the remainder of 2009.

On May 7, 2009, the company announced that it had entered into a bought deal equity financing agreeing to issue 7,000,000 Common Shares at CAD6.20 per share for aggregate gross proceeds of CAD43.4 million. Proceeds of the offering will initially be used to pay down the company’s bank debt and then will be used to fund a portion of the company’s future capital program. Closing of the offering is expected to occur in late May 2009 and is subject to satisfaction of customary conditions including all necessary regulatory approvals.

In order to provide additional balance sheet flexibility, during the first quarter, the company closed the sale of 130 boe per day of low working interest assets in Saskatchewan for CAD10.7 million. In addition, the company has signed a purchase and sale agreement for the sale of non-core central Alberta assets with current production of 540 boe per day for gross proceeds of CAD22.5 million. This sale is expected to close during the second quarter of 2009.

Risk Management Activity:

With the current economic recession fully established, hedging has become more important in protecting corporate funds from operations from volatile commodity prices. Crew Energy now has over 40% of the company’s non-royalty natural gas volumes hedged at an average floor price of CAD6.13 per gigajoule (gj) from April through October 2009, in order to protect its capital program and balance sheet through the current commodity price downturn. These hedges include 5,000 gj per day collared with an average floor of CAD6.55 per gj and an average ceiling of CAD8.40 per gj for calendar 2009. Crew Energy also acquired natural gas puts on 15,000 gj per day at CAD6 per gj for the period April 1, 2009 through October 31, 2009.

These puts were paid for with the sale of natural gas calls on 15,000 gj per day at an average price of CAD7.83 per gj for the period January 1, 2010 through December 31, 2010.

Looking forward to 2010, Crew Energy has entered into fixed price gas contracts for 5,000 gj per day at an average CAD6.10 per gj for calendar 2010. The company has also hedged oil production for 2010 with a fixed price contract for 250 bbl per day at CAD78.50 WTI per bbl and a collar on 500 bbl per day with a floor of CAD72 WTI per bbl and a ceiling of CAD88 WTI per bbl. Crew Energy will continue to engage in a base level of hedging activity to protect future capital programs and maintain financial flexibility.

Currently all of Crew Energy’s production is sold in Canadian markets and denominated in Canadian dollars. Canadian commodities trade independently of US commodities; however, prices in Canada are closely correlated with prices in the US and are impacted by fluctuations in the exchange rate between the Canadian and US dollar. When the Canadian dollar strengthens in relation to the US dollar we generally experience a decrease in Canadian commodity prices in comparison to US commodity prices. As a result, Crew Energy has fixed the exchange rate on $4 million per month at 1.2400 for the period February 2009 through December 2009.

As a result of the current economic downturn and the decrease in central banks’ prime lending rates, the interest rates charged on banker’s acceptances are at levels not seen in decades. In order to reduce the risk of a future increase in the interest rate charged on banker’s acceptances, the company has entered into contracts fixing the rate on CAD100 million of banker’s acceptances for the period beginning in February 2009 to February 2011 at a rate of 1.10% plus the applicable stamping fee charged by the company’s bank syndicate.

Operations Update:

During the first quarter, the company drilled seven (1.8 net) wells resulting in six (1.65 net) gas wells and one (0.15 net) dry and abandoned well. In addition, Crew Energy tied in ten (10 net) oil wells and 11 (three net) gas wells. Nine of the gas well tie-ins were low working interest coal bed methane wells in the Wimborne area of central Alberta.

Crew Energy currently plans to continue to regulate capital expenditures to approximate funds flow from operations in this low commodity price environment. The primary focus for the company will be to continue with its cost control program on the assets acquired in August 2008 to bring those properties in line with Crew Energy’s traditionally low operating cost structure, optimize production operations at its Pekisko oil play at Princess, Alberta and complete the construction and commissioning of the Septimus gas processing facility.

Montney Play, Northeast British Columbia

Crew Energy controls 184 net sections on the Montney play in northeast British Columbia. The company has now drilled or re-completed 12 wells targeting the Montney and drilled one cased exploration well in the first quarter. Crew Energy continues to concentrate its development drilling efforts in the Septimus area where it is experiencing increasingly better results as drilling and completion techniques improve. The company is currently producing at a restricted rate of seven mmcf per day from the Montney at Septimus and has an estimated seven to eight mmcf per day of additional productive capacity.

All regulatory approvals have been acquired to begin the construction of the Septimus gas plant. This 25 mmcf per day facility is expected to be commissioned late in the third quarter or early in the fourth quarter resulting in a 250% increase in takeaway capacity and a substantial reduction in area operating costs. To optimize productive capacity at Septimus, Crew Energy plans on drilling three to five wells in the third and fourth quarter of 2009. With road and pipeline infrastructure established at Septimus, capital cost efficiencies are expected to improve, further enhancing the economics of this play.

Pekisko Play, Princess Alberta:

Crew Energy tied in ten wells in this area in the first quarter bringing area production up to 3,500 boe per day representing a 45% increase from the 2,400 boe per day rate when the acquisit