Royalty Incentives:

On March 3, 2009, the Alberta government announced new royalty initiatives which reduce royalties based on future drilling activity. There are two measures being implemented. The first is a CAD200 per drilling meter royalty credit based on drilling activity on crown lands from April 1, 2009 to April 1, 2010. The company is committed to drill 125 wells on the farm-in lands during that period and could potentially generate a royalty credit of CAD12 million through that activity as about 75% of the Farm-In lands are crown lands.

This credit can be used to offset 50% of Crown royalties payable after the wells have been drilled, until March 31, 2011. With the Edmonton Sands drilling costs similar to the CAD200 per drilling meter royalty credit, the impact of the reduction in Crown royalties is that the drilling portion of the Edmonton Sands wells will be at no net cost to the company.

The second measure announced was that new wells tied in for production on crown lands from April 1, 2009 to April 1, 2010 would pay a reduced Crown royalty rate of 5% for the first 500 MMcf of gas production. All of these measures have the potential to significantly reduce future Crown royalty’s payable by the company.

Share Offering:

On May 7, 2009, the company entered into an agreement with a syndicate of underwriters to purchase on a bought deal basis pursuant to a short form prospectus, 63,200,000 common shares at a price of CAD0.95 per common share for gross proceeds to Anderson Energy of about CAD60 million. Anderson Energy has also granted the underwriters an option to buy up to an additional 9,480,000 common shares for additional gross proceeds of about CAD9 million, to cover over-allotments.

J.C. Anderson Energy , chairman of the board, certain members of the Anderson Energy family and Brian Dau, president and chief executive officer, are expected to acquire over 12% of the Offering (11% if the over allotment option is exercised).

Proceeds of the Offering will be used to pay down the company’s bank debt and fund its capital program including commitments under the Farm-In. On May 13, 2009, the company agreed with its lenders to renew its credit facilities to July 13, 2010 at a combined amount of CAD100 million, subject to customary loan and security documentation, completion of the offering and normal course closing conditions. Pro forma debt, net of working capital deficiency, after giving effect to the offering would be CAD74 million at March 31, 2009.

Closing of the Offering is expected to occur on or about May 28, 2009 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals, including the approval of the Toronto stock exchange.

Review Of Financial Results:

Overview:

Sales volumes for the three months ended March 31, 2009 averaged 8,505 BOED, a new record for the company and 11% higher than the fourth quarter of 2008. Significantly lower natural gas and crude oil prices decreased funds from operations for the three months ended March 31, 2009 to CAD8.8 million, 33% lower than the fourth quarter of 2008. Product prices on a combined BOE basis have decreased 25% from the fourth quarter of 2008.

The Alberta new royalty framework came into effect on January 1, 2009 and, when combined with lower commodity prices, resulted in a reduction in royalty’s payable on the company’s Edmonton Sands gas wells.

Capital expenditures were CAD13.5 million for the three months ended March 31, 2009. During the first quarter of 2009, the company drilled 11 gross (8.3 net) wells with a 100% success rate. The company tied in 32 gross (24.5 net) wells for production during the first quarter of 2009. Debt, net of working capital, was CAD131 million at March 31, 2009, CAD6 million higher than at December 31, 2008 as a result of capital expenditures during the quarter being in excess of funds from operations.

On May 7, 2009, the company announced a bought deal share financing for gross proceeds of about CAD60 million. Net proceeds after commission and expenses are estimated to be CAD56.5 million and will be used to pay down bank debt and fund the company’s capital program, including the previously announced Edmonton Sands farm-in.

Revenue and Production: Gas sales comprised 83% of Anderson Energy’s total oil and gas sales volumes for the three months ended March 31, 2009, consistent with the fourth quarter of 2008.

Gas sales volumes for the three months ended March 31, 2009 increased 11% to 42.3 MMcfd from 38.1 MMcfd in the fourth quarter of 2008. The increase is a result of realizing a full quarter of production from the 55 wells that were tied in during the last quarter of 2008 as well as new production from wells tied in during the first quarter of 2009. Gas sales volumes increased 8% from the first quarter of 2008 as a result of drilling success partially offset by property dispositions in the fourth quarter of 2008.

Oil sales for the three months ended March 31, 2009 averaged 443 bpd compared to 491 bpd in the fourth quarter of 2008 and 588 bpd for the first quarter of 2008. The majority of the company’s oil production is from central and eastern Alberta. Oil sales have declined since the first quarter of 2008 due to properties sales in 2008 and repairs required on oil wells in the first quarter of 2009.

Natural gas liquids sales for the three months ended March 31, 2009 averaged 1,005 bpd compared to 850 bpd in the fourth quarter of 2008 and 757 bpd for the first quarter of 2008.

Royalty and other revenue include adjustments to revenue related to periods prior to the acquisition date of properties acquired in 2005.