The re-emergence of a strong junior exploration and producing sector is extremely important to Canada’s oil and gas industry. This sector has historically driven a great deal of growth, usually drilling risk/reward plays that were outside the criteria of Royalty Trusts and were too small for the big producers. Junior exploration and production companies have found niche opportunities to establish and grow their companies. Management and the Board are pleased with Altima’s progress over the past year. Last year our capital was directed to assemble the land base and working interest required to go forward with the exploration prospect inventory assembled by our technical team. This year Altima’s capital program is directed to increasing our production capacity with additional gathering lines and compression facilities, and toward new drilling to expand the reserve base and production capacity.

When Altima set out in March 2006 to acquire certain oil and gas interests and participate in the drilling of a Mississippian Elkton test well located in the Chambers Area of the West-Central Alberta Deep Basin, the Board and Management set out to create a strong junior exploration and production company with the goal of building significant shareholder value.

In the spring of 2006, Altima entered the Chambers play by participating in the Chambers 3-17-41-11 W5M discovery well, followed by a second discovery in 2007 at 16-21-41-11 W5M on a farm-in from ConocoPhillips. Altima's growth continued as additional land was purchased and pipelining and infrastructure was built, resulting in first production commencing in November 2007.

Early in 2008, strong headwinds began to develop which had a major effect on curtailing industry activity. Alberta's punishing royalty policy changes in the fall of 2007, followed by a worldwide economic turndown in 2008 due to the financial meltdowns and bailouts added to the economic challenges, and many companies did not survive. Unbridled Energy Inc., Altima's partner in the Chambers project, was severely compromised as a result of their US investments. The acquisition of Unbridled by Altima, and the subsequent sale of certain US properties reduced Unbridled's debt of approximately $3.6 MM by 80%, and allowed the merged companies to once again continue forward.

Today, Altima's exploration program remains focused on both conventional and resource based deeper multi-zone gas and gas condensate targets in the Chambers-Ferrier area of the Western Canadian Sedimentary Deep Basin and on a light gravity oil play in the Rainbow Lake area of northwestern Alberta.

The Chambers-Ferrier area continues to see significant industry drilling activity. From 2006 through 2011, forty-two (42) wells were drilled within a nine Township block surrounding Altima's lands, with only two (2) wells abandoned: a success rate of 95%. Participants are industry wide and include Baytex, Devon Canada Corp., Taqua North, NuVista Energy, Husky Energy, and Conoco Phillips, who collectively drilled 33 of the 42 referenced wells.

Altima's Chambers project takes advantage of recent economic incentives through the Alberta Royalty Framework (ARF) and the Natural Gas Deep Drilling Program (NGDDP), introduced in May 2010. These programs provide for reduced royalties and offset credits to royalty payments of approximately $750,000 for a typical vertical and up tp $1.7 MM for a typical horizontal Chambers-Ferrier well. These changes facilitate the ability for investors to more quickly recover upfront capital investments. Additionally, new spacing regulations provide for increased drilling density of up to four wells per section per pool, resulting in the potential for 80+ wells to be drilled on Altima holdings at Chambers.

Altima has a strong experienced management and technical team that is committed to building large reserves to add significant shareholder value. The Company will control operations to maintain costs and focus activities. The team is experienced and focused on working to improve Altima's prospects and potential, and to execute a sound business plan with long term strategies that have been and will continue to be key.

I would like to thank our shareholders for their support and the Board of Directors for their hard work as we embark on transitioning Altima into a leading Junior Oil and Gas explorer and producer.

Richard W. Switzer
President & CEO
Altima Resources Ltd.