Canadian Superior Reports First Half 2005 Operating Results

Canadian Superior Energy Inc. (TSX: SNG; AMEX: SNG) announced its operating results for the first six months of 2005 with Revenues up 14% and Cash Flow up 14%.

Canadian Superior Energy Inc. presents its operating results for the first six months of 2005. During the first six months of 2005, our management and professional staff have worked very hard to deliver shareholders a growth strategy based on our continued development of solid Western Canadian cash flow and production focusing on our Drumheller area and several opportunities we have in Western Canada and our recent success with our Coal Bed Methane ("CBM") production. This has been combined with "High Impact" opportunities offshore Nova Scotia where we have evolved to become the largest public company holder of exploration acreage and our position in a "World-Class" basin offshore Trinidad and Tobago where a minimum of 5 wells are planned for drilling during the next 36 months. We are well positioned for sustained growth through 2005 and beyond. At the same time, we have applied sound business principles in prudently managing our balance sheet in order to be well positioned to continue to pursue our Offshore Nova Scotia and Trinidad Projects which provide "home run" opportunities for shareholders, as we work to continue to grow in Western Canada.

Highlights of the first six months of 2005 included:

- Record oil and gas revenues of $20.9 million, up 14% from $18.4 million in the same period in 2004, combined with record cash flow of $11.1 million, up 14% compared to $9.7 million for the first six months of 2004;

- In spite an extremely early breakup during the first quarter of 2005, and record rains and flooding during the second quarter, both of which interrupted drilling, completion and tie-in operations, a total of 21 wells were drilled during the first six months of 2005, with a drilling success rate of 95% and 10 wells were tied-in during the period, comprising of 3 producing dual oil and gas wells, and 7 producing gas wells;

- Also, we are pleased to report that during the period we secured a new expanded operating line of credit for $25 million with the Canadian Western Bank;

- Furthermore, planning proceeded for further drilling offshore Nova Scotia, where 2 well sites have been surveyed on our "Mariner" Project lands and where we are currently working with a potential partner for our deepwater "Mayflower" Block;

- In addition, the period was highlighted with drilling planned for later this year in Trinidad and Tobago, where subsequent to the end of the second quarter, on July 20, 2005 we were formally awarded our "Intrepid" Block 5(c) by the Government of Trinidad and Tobago, and we also successfully completed a $11 million financing for the acquisition, drilling and development of the offshore "Intrepid" Block 5(c) off the east coast of Trinidad.

TRINIDAD AND TOBAGO

In the second quarter of 2005, our offshore "Intrepid" Block 5(c) was our primary focus in Trinidad and Tobago, where we are preparing for exploration drilling slated to commence later this year. In particular, our Exploration Team has been evaluating and interpreting detailed 3D seismic data over the "Intrepid" Block 5(c) and over nearby producing fields and has confirmed several drilling locations on the "Intrepid" Block. A number of large structural gas prospects have been identified on the Block with multi-tcf potential and an example of "Intrepid" Block 5(c) Seismic at one proposed drilling location is presented in the Figure in the report.

We are very honored and privileged to have been awarded the right to explore on Block 5(c) by the Government of Trinidad and Tobago (See Signing Picture in the report). Block 5(c), named the "Intrepid" Block by Canadian Superior, covers 80,041 gross acres and has significant natural gas exploration and development potential. We look forward to expediting drilling on this Block, targeting our first well of a planned multi-well drilling program to commence drilling in the 4th quarter of 2005.

Commenting at the Production Sharing Contract Signing Ceremony, the Honorable Eric Williams, Trinidad and Tobago's Minister of Energy and Energy Industries said, "I take this opportunity to welcome Canadian Superior Energy Inc. to our assembly of multi-national energy partners and to congratulate them on their successful participation in the 2003/2004 Bid Round."

In undertaking our planned activities, Canadian Superior is very proud to be in Trinidad and Tobago and sees the awarding of Block 5(c) as a partnership between the people of Trinidad and Tobago and Canadian Superior. We will continue to work very hard to see that our activities benefit the local people and communities alongside our shareholders. It was over 3 years ago when Canadian Superior first identified Trinidad and Tobago as a high priority, "World Class" growth basin for our Corporation. Due to the hard work of many talented individuals, the signing of the "Intrepid" Block 5(c) is an important milestone in progressing our goal to explore and play our part in the development of Trinidad and Tobago's significant oil and gas potential for the benefit of Canadian Superior and all stakeholders, including the people of Trinidad and Tobago.

Offshore Trinidad is one of the most coveted oil and gas basins in the world today and for good reason. During the first week of May 2005, Trinidad and Tobago was named Country of the Year by Energy Magazine in Association with the Offshore Technology Conference, Houston, Texas. Offshore Trinidad is a "World-Class" basin with multiple large exploration and development opportunities as evidenced by recent drilling successes in the Columbus Basin, as well as having well developed, and developing LNG facilities and capacity, and ready access to international markets. 80% of North America's LNG is supplied from Trinidad and some of the largest producing wells in the world are located in Trinidad close to our acreage. For example, 15 of the top 25 British Petroleum (BP) producing wells worldwide are located in Trinidad. When you align this with the stable fiscal and legal regime that is present in Trinidad and Tobago, you have a win-win situation for all those involved; and, the Government and people are very knowledgeable and supportive of the oil and gas industry and aggressive explorers like Canadian Superior.

In early July, Canadian Superior appointed Mr. Roger De Freitas as Country Manager of operations in Trinidad and Tobago. Mr. De Freitas and our offshore drilling staff are expediting drilling operations in Trinidad and Tobago. Mr. De Freitas started his career in the oilfield in Trinidad and Tobago with Rooks Oilfield and Engineering Supplies and later joined Santa Fe Drilling Company working offshore East Coast Trinidad. During his world-wide 28 year career with Santa Fe, Mr. De Freitas held various supervisory and managerial positions both on and offshore including Country Manager (for semi-submersible drilling offshore Trinidad), Country Manager (for jack up drilling offshore Vietnam/Brunei), Area Manager and Vice President (North Sea/Canada) and Vice President - New Construction (USA/Singapore). We welcome Roger to the Canadian Superior team, Roger brings extensive world-wide and local Trinidad and Tobago experience to Canadian Superior and complements Canadian Superior's existing experienced offshore drilling personnel and will be responsible for the Corporation's Port of Spain Trinidad office.

The Corporation is aggressively undertaking the necessary procurement and contracting for the provision of the various services required for its upcoming drilling project offshore Trinidad and Tobago and has secured the critical longer lead time casing and wellhead components for the first "Intrepid" well. The "Intrepid" Block 5(c) has water depths in the range of 150m to 450 m and all wells in Block 5(c) will be drilled from a semi submersible drilling rig.

Also to assist Canadian Superior in going forward with our planned drilling in Trinidad, the Corporation has entered into a transaction whereby a non-competitive industry partner will participate on a promoted basis, paying 1/3 of Canadian Superior's cost to earn a 1/4 interest in Block 5(c). Accordingly, it is Canadian Superior's intention to operate the drilling of this exciting prospect and retain a 75% interest in the "Intrepid" Block by funding only 2/3 of the total cost of the first "Intrepid" well, which is expected to have a total well cost of approximately U.S. $20 million to drill.

This strategy combined with the financial discipline outlined in this quarterly report should allow Canadian Superior to maximize its interest in the "Intrepid" Block 5(c) prospect as we proceed forward with this exciting project. Accordingly, we are focusing our attention directly on Trinidad to commencing drilling on the "Intrepid" Block as soon as possible.

OFFSHORE NOVA SCOTIA, CANADA

Over the last 5 years due to our focused operations offshore Nova Scotia, Canadian Superior has become the largest public company holder of exploration acreage offshore Nova Scotia with 100% interests in six exploration licenses totaling 1,293,946 acres (See Chart & Map in the report); during this time we have also evolved as one of the few active operators involved in all three main play types in the basin. This has resulted in our Company being fortunate enough to have gained the experience and manpower necessary to drill and operate some of the most complex and technically challenging wells in the world through our Halifax Office which will be integrally involved in our upcoming drilling operations in Trinidad and Tobago.

Planning is underway to pursue further drilling Offshore Nova Scotia off the East Coast of Canada on our "Mariner" Block. Canadian Superior's "Mariner" Project lands are located approximately nine kilometers northeast of Sable Island, Offshore Nova Scotia. This project encompasses an offshore area of 101,800 acres and directly offsets five significant discoveries near Sable Island, including the ExxonMobil Venture natural gas field. The first exploration well, "Mariner" I-85, was drilled on this block in 2003/2004 (November 2003 to March 2004). The "Mariner" I-85 exploration well encountered gas pay in multiple zones. This was substantiated through drill cuttings and analysis taken while drilling through the prospective reservoir zones and further through the analyses of electric wireline logs. The "Mariner" I-85 exploration well was greater than 100 meters (328 feet) structurally higher than the downdip gas well on the "Arcadia" Significant Discovery License (SDL) located 13 kilometers (8 miles) to the east of "Mariner" I-85. Our offshore drilling and technical teams continue to advance further operations offshore Nova Scotia.

In addition, to Canadian Superior's "Mariner" exploration project targeting Cretaceous and Jurassic gas bearing sands, we continue to work on our Abenaki Reef "Marquis" project and our "Mayflower" deepwater project. Our "Marquis Project" lands encompass two exploration licenses with approximately 111,000 contiguous acres located in shallow water depths close to the existing Sable Offshore Energy Project producing infrastructure and EnCana's Deep Panuke discoveries.

Furthermore, Canadian Superior's "Mayflower" deepwater project exploration license covers approximately 712,000 acres and is located approximately 460 kilometers (285 miles) east of Boston. Mapping to date indicates the presence of five sizeable deepwater prospects. These large prospects are structural and are typically formed by mobile salt tectonics. Prospect sizes range from 50 to 200 square kilometers (19 to 77 square miles) in size and are located in 1,300 to 2,500 meter (4,265 - 8,200 feet) water depths. We are currently working with a potential partner for our deepwater "Mayflower" prospect and we are planning to proceed in the near future with a high resolution seismic program over the "Mayflower" block to further define targeted structures to enable future drilling.

We also have identified several other large Cretaceous and Jurassic prospects on our "Marauder" and "Marconi" exploration lands which cover an additional 371,000 additional acres offshore Nova Scotia, offsetting the Sable Island area.

The Sable Island area gas supply is very important and strategic for the North Eastern United States gas supply, and we are of the opinion that being the largest public company holder of high quality exploration acreage in this area will be very rewarding for Canadian Superior and our shareholders.

WESTERN CANADA

Operations Summary

Great emphasis and effort continues to be applied to Western Canada by our exploration and operations teams to maintain and grow our cash flow and production, focusing on developing our Drumheller, Alberta core area and several other drilling opportunities. The Corporation continued its drilling success in the Drumheller area, in the second quarter, with a 100% success rate, where it drilled 4 conventional and participated in 13 CBM (coal bed methane) wells. We also continue to explore in areas such as Boundary Lake, Teepee, and Windfall/Pine Creek where Canadian Superior Energy is preparing for 3rd and 4th quarter drilling.

Drumheller

In our Drumheller area of Central Alberta, Canada, which is accessible year round and located approximately 60 miles N.E. of the city of Calgary, our Corporation has major acreage and production holdings in both conventional Cretaceous plays and in the CBM zones of the Horseshoe Canyon and Manville sections. At the end of the second quarter, Canadian Superior held 181,675 gross acres of land at Drumheller in this multi-zone area. During the second quarter, we drilled four conventional wells (3.5 net). All of these wells were successful and two have been tied-in and the others are awaiting tie-in. Another conventional well tied-in during the second quarter was a first quarter well which is producing at approximately 100 BOE/d but that has the capability of over 250 BOE/d once facility capacity related issues are resolved in the third quarter. Of particular note in the second quarter, the Corporation drilled a successful horizontal well in the Wildunn area of Drumheller which was tied-in in July. Stabilized test rates for the well were over 230 BOE/d. The Corporation plans to shoot more seismic data in the Drumheller area as follow-up on some of the recent discoveries that the Company has made.

The Drumheller area is in the heart of recent coal bed methane development in Western Canada where Canadian Superior has one of the single largest concentrated high working interest land positions of any operator. During the second quarter, Canadian Superior was active with coal bed methane drilling and participated in 13 CBM wells. These wells, along with the 8 CBM wells that were completed in the first quarter, are awaiting a CBM gas gathering infrastructure which should be complete in the second half of 2005. The Corporation plans to participate in approximately 45 CBM wells this year and is using this experience and technology gained as a guideline for future operated developments of our large CBM acreage holding, approximately 108 sections (over 69,000 net acres) which includes both Horseshoe Canyon and the Manville coals. The CBM production being obtained from the Horseshoe Canyon formation does not produce any significant associated water. These encouraging results will be utilized in the near future to provide a solid foundation for development of the extensive CBM potential that exists over our large high working interest acreage base within the Drumheller area. As an indicator of the latent land value of our CBM acreage in this area, recent land sale prices in the Drumheller area for coal bed methane rights have exceeded $250,000 per section (approximately $390 per acre).

Additional Western Canadian Opportunities

Canadian Superior also holds operated high working interests in a number of other Alberta and British Columbia properties that are primarily in winter access areas. These other areas total an aggregate of 97,839 gross acres (78,769 net acres) in Alberta and 16,548 gross acres (12,201 net acres) in British Columbia.

Boundary Lake / Teepee

Attention is being given to the higher reward, medium risk opportunities that are located in West Central and North Central Alberta. Canadian Superior continues to purchase, reprocess, interpret and integrate geophysical, geological and engineering data for the Boundary Lake and Teepee areas. The Corporation acquired more land in the first quarter of 2005 and has followed this up with the purchase of 3D seismic data. Additional land will be acquired in the area and the Corporation is currently working on several locations for the Boundary Lake / Teepee area for a late 3rd quarter / 4th quarter spud.

Windfall / Pine Creek

This area also offers multi-zone potential with higher reward, medium risk targets. Of the two wells that were drilled last winter in the Windfall / Pine Creek area, one of these well (an operated well) has been tied-in and is currently producing at 1100 mcf/d (180 BOE/d). The second (non-operated) well awaits tie-in due to rainy conditions in this area this spring and summer. It is anticipated that this well will be tied-in during the traditional drier season of the third quarter. Plans also include a re-completion in an existing well bore and this operation will happen in the third quarter as well. The Corporation continues to explore in this area with a view towards further expanding its production base in this area.

British Columbia - Parkland, Altares, and Umbach

Several transactions are underway in the Parkland, Altares and Umbach areas which include continuations and a completion of an existing well bore. The results of these activities will ultimately form the basis of the go-forward plan in these areas.

FINANCIAL HIGHLIGHTS

Oil and gas revenue, before royalties during the second quarter of 2005, increased 16% to $10.8 million as compared to $9.3 million during the same period in 2004. For the first half of 2005, oil and gas revenues of $20.9 million were 14% higher than 2004 revenues of $18.4 million.

The revenue increases were due to higher average oil and gas commodity prices achieved during 2005. The average sales price for the second quarter of 2005 was $48.46/boe ($7.66/mcf for natural gas and $57.01/bbl for oil and NGLs) up 19 % from $40.83/boe in 2004 ($7.02/mcf for natural gas and $37.00/bbl for oil and NGLs). Average sales prices for the first half or 2005 averaged $47.57/boe ($7.62/mcf for natural gas and $53.67/bbl for oil and NGLs) up 20% from $39.61/boe recorded in 2004 ($6.80/mcf for natural gas and $35.75/bbl for oil and NGLs). Cash flow from operations in the second quarter of 2005 increased 8% percent to $5.8 million, up from $5.3 million in the same period in 2004. For the first half of 2005, cash flow from operations of $11.1 million was up 14% from 9.7 million in the first half of 2004. Gas volumes of 11,375 mcf/d remained stable during the second quarter of 2005 compared to the same period in 2004, while oil volumes decreased 8% to 555 bbls per day in the second quarter of 2005 from an average of 603 bbls per day produced in 2004. Six month gas volumes of 11,235 mcf/d for 2005 were down slightly by 4% from 11,665 mcf/d recorded over the same period in 2004, while oil volumes of 558 bbls/d for the six months were down 8% from 2004 volumes of 609 bbls/d.

Average daily production for the second quarter of 2005 was down slightly and averaged 2,451 boe/d, 2% lower then the 2004 volume of 2,508 boe/d, due to weather delays in drilling, completions and tie-ins. The reduced production is the result of an increased amount of shut in wells resulting from poor field access caused by record rains and flooding in Western Canada that also unexpectedly severely interrupted drilling, completions and tie-ins, as well as shut in facilities in June and some limitations in plant capacity. Over 650 boe/d of production was curtailed in June due to these factors. These volumes are now being returned to production.

In addition, the Corporation recorded a net income of $0.01 million ($0.00 per share) in the second quarter of 2005, up from a net loss of $0.3 million ($0.0 per share) recorded in the second quarter of 2004. In the first half of 2005, the Corporation posted a net income of $0.1 million ($0.0 per share) compared to a net loss of $1.0 million ($0.01 per share) over the same period in 2004.

Furthermore, we are also pleased to report that during the second quarter of 2005, we secured a new expanded operating line of credit for $25 million with the Canadian Western Bank.

LAND INVENTORY

Our undeveloped land acreage in Western Canada at the end of the second quarter of 2005 was approximately 165,562 gross acres (138,622 net acres) with an average working interest of 84%.

Canadian Superior is the largest public company holder of exploration acreage offshore Nova Scotia, where Canadian Superior currently holds 100% working interests in six licenses covering an aggregate of 1,293,946 acres.

In Trinidad and Tobago, Canadian Superior's Mayaro/Guayaguayare (M/G) "Tradewinds" joint venture lands cover 55,000 gross acres and our "Intrepid" Block 5(c) covers 80,041 gross acres. Total acreage is now 135,041 gross acres, resulting in Canadian Superior becoming a significant strategic acreage holder in Trinidad and Tobago.

CORPORATE RESPONSIBILITY AND COMMUNITY INVOLVEMENT

Canadian Superior is a strong advocate of direct corporate involvement in communities contributing to, or affected by, its activities. We believe that direct community involvement enhances our ability to properly achieve common goals. Significant efforts are exerted to ensure that we have a responsible and responsive corporate presence. We conduct regular discussions with community representatives and stakeholders and we take care to ensure that planned activities are fully explained. Our attitude of direct involvement with local communities is consistently supported by sponsorship of community programs.

As detailed in our 2004 Annual Report, in Western Canada, Canadian Superior has been a sponsor of urban and rural communities, charitable organizations and sponsorships including cancer research in Alberta. This included again this year in June, the Corporation being the major sponsor of 4H on Parade which is one of the largest rural youth agricultural shows in North America and the largest rural youth agricultural show in Canada. We intend to actively continue with support for community and charitable programs and initiatives and we encourage our staff and management to do the same. In addition to regular charitable donations, in Nova Scotia, Canadian Superior's contributions continue to include significant support to education and training, as well as to oil and gas related research and development activities, for students enrolled in undergraduate education programs in Nova Scotia.

In Trinidad and Tobago, Canadian Superior considers it important to promote the development of people by imparting to Trinidad and Tobago nationals technology and business expertise in all areas of energy sector activity, and is committed to a number of programs which are associated with the provisions of the Production Sharing Contract between the Government of Trinidad and Tobago and the Ministry of Energy and Energy Industries and Canadian Superior regarding Block 5(c). In addition, and separate from those programs, and also in recognition of our Mayaro/Guayguayare (M/G) Joint Venture with Petrotrin, Canadian Superior has recently established the Canadian Superior Energy Canada - Trinidad and Tobago Charitable Foundation to undertake various additional programs including the promotion of educational training, as well as research and development activities, for students enrolled in undergraduate educational studies in Trinidad and Tobago. This program is modeled after our very successful Nova Scotia program supporting undergraduate education, training and research and development, as briefly outlined above.

In summary, we look forward to continuing to actively support programs related to the communities and stakeholders that support our corporate objectives and growth strategies.

OUTLOOK - 2005 and Longer Term

Accordingly, Canadian Superior believes that its strategy to create high impact opportunities, value and growth is working and the Corporation is well positioned for the remainder of 2005 and the years ahead. For the remainder of 2005, Canadian Superior's "High Impact" offshore program is centered on drilling planned for later this year in Trinidad and Tobago, on our "Intrepid" Block 5(c), and with further activities planned for offshore Nova Scotia in due course.

In addition, we will continue to strive to further develop our Western Canadian operations focusing on our Drumheller, Alberta core producing area, with further evolving emphasis also being placed on Canadian Superior's extensive coal bed methane (CBM) opportunities in the Drumheller area where we have significant holdings.

We will also continue to endeavor to go forward with a corporate strategy which focuses on continued financial discipline and conserving cash and debt capacity to allow us to pursue these exciting corporate opportunities.

We are confident that as the above mentioned opportunities are being developed, the market will continue to recognize the underlying value and the tremendous strengths of our growing Company.

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