Canadian Superior Reports on Q2 Ops

The following are excerpts from the "Message to Shareholders" in Canadian Superior's 2006 Second Quarter Report, which can be reviewed in its entirety on Canadian Superior's website www.cansup.com by following the "FINANCIAL STATEMENTS" link near the top left of its home page. The message was delivered by M.E. "Mike" Coolen, Canadian Superior's president and chief operating officer.< P> MESSAGE TO SHAREHOLDERS

It is a pleasure to present to you Canadian Superior Energy Inc.'s ("Canadian Superior's") 2006 Second Quarter and 2006 First Half operating results. Our strategic corporate objective is to remain focused on adding shareholder value with high impact offshore exploration, combined with growing cash flow and Western Canadian production and financial discipline. We are pleased to report that in the First Half of 2006 our average daily production, oil and gas revenues and cash flow from operations have all increased over the same period in 2005, in spite of ongoing equipment shortages, a particularly wet June and the decline in the price for natural gas experienced in the 2nd quarter of 2006; although, the 2nd quarter was not as strong as expected for these reasons. Current daily production has increased to over 3,200 boe/d with further gains expected upon tie-in of several additional successful conventional oil and gas wells, as well as over 25 non-operated Coal Bed Methane ("CBM") wells that will be tied-in by year-end. We expect this year and the next several years will be very exciting and rewarding for Canadian Superior and our shareholders, especially in light of our high impact exploration drilling program commencing offshore Trinidad later this year, complemented by our Offshore Nova Scotia, Canada activities and our solid progress in Western Canada.

2006 First Half Highlights include:

--On March 19, 2006, we contracted the Kan Tan IV Semi-Submersible Drilling Rig, managed by A. P. Moller - Maersk A/S ("Maersk"), (OMX: MAERSK B), of Copenhagen, Denmark, one of the world's largest offshore drilling and shipping companies, and owned by Beijing Zhiyuan Industries Company Limited ("Beijing Zhiyuan"), of Beijing, China, a member of the SINOPEC Group of Companies (NYSE: SNP), the 3rd largest company in China, for a firm multi-well drilling contract to drill two Company operated back-to-back wells on our "Intrepid" Block 5(c) offshore Trinidad commencing drilling on the first of these wells later in 2006.

--Revenues in the First Half 2006 of $24.3 million, up 16% compared to the First Half 2005; despite a decline in natural gas prices in the 2nd quarter of 2006 (off 18%), which was the primary reason for revenues in the 2nd quarter remaining level when compared to the same period in 2005.

--Cash Flow from Operations in the First Half 2006 of $12.1 million, up 9% compared to the First Half 2005. Cash Flow in the 2nd quarter was down 8% compared to the same period in 2005 for the reasons previously given.

--Average Daily Production in the First Half 2006 of 2,785 boe/d, up 15% compared to the First Half 2005; and up 9% in Q2 to an average of 2,682 boe/d compared to 2005.

--Average Daily Production, to date, in August 2006 has climbed to an estimated 3,200 boe/d due to our ongoing drilling success and we have several additional successful conventional oil and gas wells awaiting tie-in, as well as over 25 non-operated Coal Bed Methane ("CBM") wells that are to be tied-in by year-end.

TRINIDAD AND TOBAGO

Offshore Trinidad is one of the most coveted oil and gas basins in the world today and we are very excited about commencing drilling on our "Intrepid" Block 5(c) (Please see Map, lower page 3) later this year. Offshore Trinidad is a "World Class" basin with multiple large exploration and development opportunities as evidenced by recent drilling and development 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 offshore Trinidad close to our acreage (Please see Maps, pages 2 and 3).

Our 80,041 acre offshore "Intrepid" Block 5(c) is located about 96 kilometers (60 miles) off the east coast of the island of Trinidad with water depths in the range of 150m to 450m (500 to 1,500 feet). All wells in Block 5(c) will be drilled from a semi-submersible drilling rig, with the first two wells being drilled in water depths of approximately 245m (800 feet). In March 2006 the Corporation entered into firm multi-well drilling contract 100% on its own, at a very attractive rate, for the Kan Tan IV Semi-Submersible Drilling Rig, managed by A. P. Moller - Maersk A/S ("Maersk"), of Copenhagen, Denmark and owned by Beijing Zhiyuan Industries Company Limited ("Beijing Zhiyuan"), of Beijing, China to drill two Company operated exploration wells on Canadian Superior's "Intrepid" Block 5(c) offshore Trinidad. (Please see Kan Tan IV picture, upper page 4).

These two firm Company operated back-to-back wells will evaluate two large separate potential hydrocarbon bearing structures that have been delineated by extensive 3D seismic (Please see lower Map & lower Figure, pages 3 & 4) that Canadian Superior has evaluated, with the first well of the two back-to-back wells to commence drilling shortly after the Kan Tan IV has completed a scheduled refurbishment currently underway in Brownsville, Texas. The refurbishment is taking longer than originally expected and is currently scheduled for completion in early November. Once the refurbishment is complete, the drilling rig will undergo its acceptance testing and then it will be towed to a harbour in Trinidad and then directly to Canadian Superior's first Block 5(c) well site with commencement of drilling scheduled prior to year-end. Each of these offshore exploration wells will be High Pressure ("HP") wells and will be drilled to a depth in excess of 5,000+ m (16,400+ feet) and each is expected to take between 80 - 100 days to drill and evaluate. This drilling program will take approximately 160 to 200 days to complete; with the results of the first well known after about 80 - 100 days into the drilling program.

To assist Canadian Superior in going forward with its drilling in Trinidad, the Corporation has entered into a participation agreement with a non-competitive industry financial partner Challenger Energy Corp. ("Challenger"), (TSX.V: CHA). Challenger will participate on a promoted basis paying 1/3 of Canadian Superior's Block 5(c) exploration program to obtain 25% of Canadian Superior's revenue share of these prospects.

We have been working to finalize engineering and procurement, to facilitate drilling on these exciting plays, as well as progressing the geophysics and regulatory permitting. This has included the procurement and purchase of long lead tangible items (pipe, wellheads, etc.) that are on the critical path and various related drilling services and also the finalization of the staffing plan for the drilling program. We are pleased to report that solid progress is being made in all disciplines and expect to commence drilling in a few short months from now, as outlined above.

In addition, in Trinidad and Tobago, we continued to prepare for the first phase of operations on our Mayaro/Guayaguayare (M/G) "Tradewinds" project (Please see Map, upper page 3), a joint venture with the national oil company, the Petroleum Company of Trinidad and Tobago Limited ("Petrotrin"). This joint venture encompasses securing two near-shore Blocks (55,000 gross acres) off the east coast of Trinidad where we have the potential to establish significant oil reserves in the heart of a known producing hydrocarbons-bearing structural trend. On the M/G Block Land, the Corporation is working on the design of a seismic program to evaluate the near-shore block and is planning this program to be shot in the near future where we intend to drill 2 offshore wells, which will result in Canadian Superior drilling at least five new offshore wells over the next 36 months off the east coast of Trinidad on our extensive strategic lands (3 or more on "Intrepid" and 2 or more on "M/G").

OFFSHORE NOVA SCOTIA, CANADA

Canadian Superior is one of the few active operators involved in all three main play types in the basin and is the public company holding the largest offshore exploration acreage holdings offshore Nova Scotia with 100% interests in six exploration licences totaling 1,293,946 acres (Please see the Chart & Map, page 5). Five of these licences are in the Sable Island area which is a very important source of natural gas supply to the North Eastern United States.

Canadian Superior has proven that it has the geological and technical experience and capability to evaluate, drill and operate some of the most complex and technically challenging wells in the world, whether offshore Nova Scotia or in Trinidad and Tobago. Further drilling is planned by Canadian Superior Offshore Nova Scotia, off the East Coast of Canada on our "Mariner" Block where front end geological and geophysical analysis is complete.

The "Mariner" Project lands are located approximately nine kilometres northeast of Sable Island, offshore Nova Scotia, encompassing an offshore area of 101,800 acres (100% Canadian Superior), and directly offsets five significant discoveries near Sable Island, including ExxonMobil's Venture natural gas field. The first exploration well, "Mariner" I-85, was drilled on this block in 2003/2004 (November 2003 to March 2004). Two new prospective locations have been identified (Please see Map, upper page 6), geohazard well site survey work has been completed and the necessary environmental approvals are in place to progress additional drilling on "Mariner". We are also planning to proceed later this year or early next year with another well on one of these locations where we are currently working on finalizing partners for this well.

In addition to Canadian Superior's "Mariner" exploration project targeting Cretaceous and Jurassic gas bearing sands, we continue to monitor drilling activities near our Abenaki Reef "Marquis" 100% prospects. Our "Marquis Project" lands encompass two exploration licences 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. We also have identified several other large Cretaceous and Jurassic prospects on our 100% "Marauder" and 100% "Marconi" exploration lands which cover an additional 371,000 acres offshore Nova Scotia, offsetting the Sable Island area, and the Corporation has initiated the environmental impact assessment work required prior to conducting further planned high resolution seismic surveys and exploration drilling on these properties (Please see Map, page 6).

Canadian Superior also has a prime deepwater block, the "Mayflower" exploration licence, which covers approximately 712,000 acres. Mapping to date indicates the presence of five sizeable deepwater prospects on this block. These large prospects are structural and are typically formed by mobile salt tectonics (Please see Map & Figure, lower page 6 and upper page 7). We are planning to proceed in due course with a high resolution seismic program over the "Mayflower" block to further define targeted structures to enable future drilling, and to extend this licence by drilling our next "Mariner" well, as discussed in previous reports.

WESTERN CANADA

The Corporation continues its successful Western Canada program despite the very rainy June that slowed activity down in the Province of Alberta. Currently, the Corporation derives all of its production and cash flow from Western Canada, with about 90% of the Corporation's production coming from the Drumheller area, where the Corporation remains focused with continued growth through the drill bit. Also, a more emphasized focus is being given to the Boundary Lake area and surrounding properties such as Giroux Lake and Teepee (Please see Map, page 8) where we have had recent success.

During the second quarter of 2006, the Corporation drilled or participated in 17 gross (6.33 net) wells which included 3 gross (2.70 net) operated wells and 14 gross (3.63 net) non-operated wells. All the wells drilled in the second quarter were drilled in the Drumheller area and are a mix of conventional and CBM wells. Three out of the six operated wells drilled in the first quarter have been tied-in (two await final tie-in and a third is waiting on a commingling application). Of the three second quarter operated wells, two are tied-in and a third is waiting for pooling. Average Daily Production, to date, in August 2006 has climbed to an estimated 3,200 boe/d; and as noted, we have several additional successful conventional oil and gas wells to bring onto production, as well as over 25 non-operated Coal Bed Methane ("CBM") wells that are to be tied-in by year-end.

The land picture for Canadian Superior continues to be steady as the Corporation drills and makes strategic land sale acquisitions in both the Drumheller area and in northwestern Alberta. As of June 30, 2006 the Corporation held 271,789 gross acres (188,270 net acres) of predominately Canadian Superior operated high working interest lands (working interest of approximately 70%). Of these total land holdings, the Corporation holds a good mix of developed and undeveloped lands, with the undeveloped area providing a solid 136,864 gross acres (112,363 net acres).

DRUMHELLER

The Drumheller area is located in Southern Alberta about 60 miles N.E. of Calgary. It is a year round access area with a very well developed oil and gas infrastructure. The area holds both oil and gas resources in a multitude of geological horizons of both conventional and non-conventional nature. The Corporation holds 177,995 gross acres (115,489 net acres) of land in this area with 40% of this still to be developed (Please see Map, page 9). All of Canadian Superior's drilling activity (operated and non-operated) in the second quarter was undertaken in our Drumheller core area. The Corporation continues to expand its 3D seismic library, having just recently participated in a 34 square kilometer survey in the eastern part of this area and initiated and completed a second 20 square kilometer survey in the second quarter. Drilling success in this area, which runs well over 90% for the Corporation, is attributed to the marriage of sound geological understanding and implementation of this 3D technology.

Conventional Oil & Gas

In 2006 the Corporation plans on drilling 25-30 conventional wells in the Drumheller area. With early break up and above normal rainfall in June, the well count at the end of the second quarter was at 8 gross wells. However, an additional 10 gross wells are scheduled for drilling in the third quarter, 5 already drilled, putting the Corporation on track for the projected year-end total. The Corporation continues to target the Mannville section and enjoys an enviable success rate for the area.

Coal Bed Methane

Coal bed methane is recognized as an important emerging play now available to the Canadian oil and gas industry and the Corporation's successful CBM wells and gas gathering project has allowed significant Proven and Proven plus Probable Reserves to be added to the Corporation's reserve base. The Drumheller area is near the heart of recent coal bed methane (CBM) development in Western Canada where Canadian Superior is fortunate to have a concentrated high working interest land position with significant land holdings in both the Horseshoe Canyon and Mannville stratigraphic zones (Please see Map, page 10).

Canadian Superior's current activity in CBM is centered on the Horseshoe Canyon in which the Corporation drilled or participated in 26 wells in the first half of the year. All of these wells were successful and the Corporation will continue to develop these assets in 2006. Canadian Superior holds 157 gross (81 net) sections of Horseshoe Canyon rights. These coals contain dry gas and produce little or no water. The Corporation plans to drill or participate in up to 40 Horseshoe Canyon wells in 2006.

An additional resource, currently untapped, that exists in the Drumheller area is the Mannville coals. These coals are buried deeper than the Horseshoe Canyon coals and consequently have higher pressures and larger resource potential associated with them. The Corporation is well positioned with 42 gross (41 net) sections of land in the Mannville CBM fairway. Drilling for these coals would include horizontal drilling techniques. Plans for development of Mannville CBM by Canadian Superior will be measured until the reserve and production parameters are better defined.

WINDFALL/PINE CREEK/GIROUX LAKE

Canadian Superior drilled or participated in two wells in the Windfall area in 2005. Both these wells were successful and have been tied-in. Both wells are producing between 500-750 mcf/d. Building on these successes, the Corporation is planning a fall/winter seismic shoot in the Giroux area (rescheduled due to wet weather and increased activity in Boundary Lake) and carries two budgeted locations in the Windfall/Pine Creek/Giroux area. The Corporation continues to look at this higher reward-medium risk area with a view towards further expansion, using its current land base as a nucleus.

BOUNDARY LAKE/CECIL/TEEPEE

The Boundary Lake area continues to gain momentum for exploration activity for Canadian Superior. This area is a high reward-medium risk area that has multi-zone potential and year round access. Resource size in the area typically runs 2-5 Bcf with initial production rates of 1-4 mmcf/d. As noted in the first quarter report, Canadian Superior was waiting on results of tests of a Boundary Lake well. This testing has been completed and the well is currently being tied-in. The Corporation also drilled a second well in the East Boundary area in the early part of Q3. This well was cased and is awaiting completion. Again, several zones were encountered and preliminary results will not be available until later in the third quarter. A four section land transaction is also pending the results of this well.

Two 3D seismic programs are also slated for the Boundary Lake and the Cecil area. The Boundary Lake 3D will be 72 square kilometers in size and permitting was started early third quarter. The Cecil 3D will be up to 28 square kilometers depending on current land status and final design considerations. The Corporation has also been active in posting land in the general vicinity and continues to build its land base in this emerging area.

EAST LADYFERN Shallow zones of the Cretaceous in the East Ladyfern area show promise. The Corporation (with its partner) completed the 12-27-91-11W6 and the 1-26-91-11W6 well bores and drilled a new shallow location in the first quarter of 2006. Test results are still pending, but with success in these non-sour lower cost zones, the needed infrastructure may be brought into the area and allow economic tie-ins of the Slave Point gas in this area at a later date.

THE FOOTHILLS OF ALBERTA WEST OF THE 5TH MERIDIAN Canadian Superior is also focusing its exploration in Western Canada towards the foothills of Alberta, Canada. This area represents an area of high risk - high reward exploration and production with year round access. In this area, well reserves can range to over 10 Bcf/well with associated natural gas liquids and can produce at rates of over 5-10 mmcf/d. Land strategies for this area include crown sales, rental of freehold acreage and potential farm-ins or joint ventures.

FINANCIAL HIGHLIGHTS

The Corporation recorded a net income of $0.3 million ($0.00 per share) during the second quarter of 2006, up from second quarter of 2005 earnings of $0.01 million. For the six months, the Corporation posted a net loss of $0.3 million ($0.00 per share) down from a net income of $0.1 million ($0.00 income per share) for the first six months of 2005.

Cash flow from operations for the second quarter decreased 8% to $5.3 million from $5.8 million recorded in 2005; although, for the first half, cash flow of $12.1 million was up 9% from a 2005 cash flow of $11.1 million. Increased product volumes were the primary contributor to the cash flow increases, in spite of reduced price performance of natural gas in the second quarter. These increases were achieved by Exploration and Development drilling without production acquisitions, in spite of this decline in natural gas commodity pricing.

Daily production for the second quarter of 2006 averaged 2,682 boe/d which was up 9% from 2005 production of 2,451 boe/d for the same period. Average Daily Production for the First Half of 2006, increased to 2,785 boe/d, up 15% from the 2,431 boe/d recorded in the first half of 2005. The major reason for the increase was the Corporation's ongoing drilling success; including being able to bring more coal bed methane production on-stream in late 2005 and 2006. Average Daily Production, to date, in August 2006 has climbed to an estimated 3,200 boe/d; and as noted previously, we have several additional successful conventional oil and gas wells to bring onto production, as well as over 25 non-operated Coal Bed Methane ("CBM") wells that are to be tied-in by year-end.

Oil and gas revenue, net of transportation costs of $156,000, during the second quarter of 2006 of $10.8 million was even with 2005 second quarter revenue which was caused by the combination of increased production in the quarter offset by lower second quarter product prices. Also, second quarter sales were reduced during a plant turnaround (i.e. shut down for maintenance) at our Drumheller facility during June 2006. For the first half of 2006, oil and gas revenues, net of transportation costs of $346,000, of $24.3 million were 16% higher than 2005 revenues of $20.9 million. The revenue increases are due to increased production volumes as well as marginally higher average prices. The average sales price net of transportation costs for the second quarter of 2006 was $44.41/boe ($6.31/mcf for natural gas and $68.78/bbl for oil and NGLs) down 8% from $48.46/boe in 2005 ($7.66/mcf for natural gas and $57.01/bbl for oil and NGLs). Average sales prices net of transportation costs for the six months averaged $48.14/boe ($7.31/mcf for natural gas and $63.71/bbl for oil and NGLs) up marginally from $47.57/boe recorded in 2005 ($7.62/mcf for natural gas and $53.67/bbl for oil and NGLs). Gas volumes of 12,674 mcf/d during the second quarter increased 10% compared to 11,375 mcf/d in the same period in 2005, while oil and NGL volumes were up slightly to 570 bbls/d from an average of 555 bbls/d produced in 2005. 2006 six month average gas volumes of 13,124 mcf/d were up 17% from 11,235 mcf/d recorded over the same period in 2005 while oil volumes of 597 bbls/d for the year were up 7% from 2005 sales of 558 bbls/d.

OUTLOOK - 2006 and Longer Term

In 2006 we continue to build on the hard work and solid foundation the Corporation has developed over the past several years. We are very excited about the future and how well Canadian Superior is positioned to grow shareholder value through the "drill-bit" in Canada and in Trinidad and Tobago. Our strategic corporate objective, as detailed in our 2006 1st Quarter Report, remains to continue to focus on high impact offshore exploration combined with growing cash flow and Western Canadian production while adding shareholder value and continuing to grow with financial discipline by:

• Focusing on our Drumheller core production area in Western Canada
• Taking full advantage of our evolving exciting Western Canadian Coal Bed Methane ("CBM") opportunities
• Continuing forward expeditiously with (1) drilling Offshore Trinidad and Tobago, and (2) also going forward in due course with further drilling Offshore Nova Scotia
• Maintaining high working interest operated positions on our high impact offshore plays, focusing on maintaining a strong balance sheet
• Continuing to build on our tremendous strengths and opportunities with our strong team of experienced management and personnel
• Continuing to focus on increasing value to our shareholders successfully through the "drill-bit" like during the past year
• Keeping a watchful eye open for strategic acquisitions that do arise from time to time.

In closing, with regard to our recent takeover bidding for Canada Southern Petroleum Ltd. ("Canada Southern"), Canadian Superior is of the view that for existing Canadian Superior shareholders the acquisition of Canada Southern would mean an approximately 30% increase in average daily production together with an expanded Western Canada asset base and the additional upside created for Canadian Superior shareholders with Canada Southern's Arctic resource potential.

For Canada Southern shareholders, Canadian Superior is of the view that its amended offer provides Canada Southern shareholders, in addition to the cash component of the offer, with the unique opportunity to participate with Canadian Superior through a business combination that will result (assuming all of the Canada Southern common shares are acquired) in Canada Southern shareholders owning approximately 20% of the combined entity on an accretive basis that would have an expanded Western Canadian production base and at the same time would provide Canada Southern shareholders with the opportunity to participate with Canadian Superior in one of the largest natural gas plays in the world slated for multi-well drilling by Canadian Superior to commence later this year in Trinidad and Tobago with the additional upside created by the Arctic Royalty Trust.

Independent of this potential acquisition, we see the next several years will be very exciting and rewarding for Canadian Superior and our shareholders, especially in light of our high impact exploration drilling program commencing offshore Trinidad, complemented by Offshore Nova Scotia and our solid prospects in Western Canada. We appreciate your past support as shareholders and your continued support.