Blaine Exploration Ltd.

Balance Sheets

(Unaudited)

Dec 31,

Dec 31,

2007

2006

Assets

Current Assets

Cash

$

10,866

$

14,837

Accounts Receivable

15,584

15,621

Electrical Deposits

100

100

Prepaid Expenses

554

572

27,104

31,130

Property and Equipment (Note 2)

190,453

208,109

Investments (Note 3)

93,473

27,869

Total Assets:

$

311,030

$

267,108

Liabilities and Shareholders Equity

Current Liabilities

Operating Loans

$

2,015

Accounts Payable and accruals

6,231

5,819

Payments to Government Agencies

3,032

2,793

9,263

10,627

Long Term Debt

249,658

221,248

(0)

Shareholders' Equity

Opening retained earnings

35,133

21,403

Distribution to Shareholders

(7,750)

(5,000)

Share capital (Note 5)

100

100

Paid in Capital Surplus

0

0

Profit/(loss)

24,626

18,730

52,109

35,233

Total Liabilities:

$

311,030

267,108

Approved by the Directors

See accompanying notes

_______________________

Statements of Income and Retained Earnings

(Unaudited)

Year ended

Year ended

March 31,

March 31,

2007

2006

Revenues

Management Consulting

$

13,000

$

42,200

Financial Consulting

16,300

37,300

Exploration Consulting

Geological Consulting

0

Computer & Programing

0

Engineering Consulting

29,300

79,500

Operational Services

122,919

109,199

Seismic Acquisition

Technical Services

Total Services Income:

122,919

109,199

Property Rental

3,900

3,900

Oil & Gas Royalty

6,191

11,668

Interest and other

6,639

1,371

Total Investment Income:

16,730

16,939

Total Income:

168,949

205,638

Expenses

Operations and Field

Operations Payroll

72,274

102,004

Contract Labor

200

Health/ Life/ WC Insurance

15,746

16,633

Expenses/supplies

Training

320

300

Travel Expenses

1,689

2,834

Travel Meals

Communications

Repairs and maint.

90,029

121,971

2007

2006

Office and Administrative

Office Payroll

$

$

0

Rent

0

Expenses/supplies

581

241

Training

0

Legal/accounting

0

Communications

939

777

Utilities

2,257

2,302

Security

1,560

1,644

Building Maintenance

Insurance

1,491

1,491

Taxes

2,999

2,999

Meals & Entertainment

Travel Meals

Travel Expenses

0

Interest Expenses

20,627

20,536

Depreciation and amortization

23,840

34,947

$

54,294

$

64,937

Total expenses:

$

144,323

$

186,908

Net (loss)/gain:

$

24,626

$

18,730

Retained Earnings

Beginning of year

35,133

21,403

Distributions to Shareholders

(7,750)

(5,000)

Retained earnings at end of year

52,009

35,133

Note 1 - Accounting Policies

Blaine Exploration Ltd. was incorporated under the laws of the State of Oklahoma May 21, 1998. The Corporation has current activities in Oklahoma and Kansas. On June 2, 1998 an election was file with the Internal Revenue Service to classify Blaine Exploration Ltd. as an S-Corporation. On March 31, 1998 the assets of Blaine Exploration Ltd., an Alberta, Canada Corporation, U.S. division were sold at book value to A. Blaine and Cindy A. Hanks for proceeds of $3300. The Corporation is engaged in exploration consulting and technical services. Significant accounting policies of the Corporation are summarized below:

(a) Basis of Presentation

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles.

(b) Property and Equipment

Equipment is recorded at cost and depreciated over the estimated useful lives of the various classes of assets.

Note 2 - Property and Equipment

2007

2006

5 Year Office Equipment

$

3,596

$

3,596

7 Year Furniture & Equipment

2,016

2,016

Computer Equipment

33,920

27,736

Computer Software

979

979

Automobiles

67,500

67,500

Automobile Equipment

5,829

5,829

Seismic Equipment

50,137

50,137

5 Year Tools & Equipment

98

98

7 Year Tools & Equipment

190

190

Buildings

192,037

192,037

$

356,302

$

350,118

Less depreciation & depletion & Amortization

(165,849)

(142,009)

$

190,453

$

208,109

Note 3 - Investments

2007

2006

Land

21,270

21,270

Loans to Employees

0

0

Private Loans to Third Parties

612

Loans to Hanks Oilfield Services

5,912

6,499

Loans to Gateway Resources USA

65,679

0

Shares of Hanks Oilfield Services

0

100

93,473

27,869

Note 4 - Indebtedness

2007

2006

Checks issued in excess of cash

$

0

$

0

Arvest Credit Line

38,712

0

Capital One Credit Line

22,820

0

Seismic Equipment Loan

21,683

22,602

Computer Equipment Loan

370

7,939

Pulling Unit Loan

8,029

18,861

Ford Credit

10,317

19,936

Building Loan from Gateway Resources

26,146

23,183

Buildings

121,581

128,727

249,658

221,248

Note 5 - Share Capital

2007

2006

Common shares, no par value

$

100

$

100

Authorized - 10,000

Issued - 10,000

Shareholders A. Blaine Hanks 5,100 Shares

Heidi B. Hanks 4,900 Shares