Interim Report: Sep. 30, 1998

Management Discussion of the
Six Month Period Ended September 30, 1998
Financial Statements Compared to the
Six Month Period Ended September 30, 1997

(Unaudited: Prepared by Management).

www.borealis.com
   pr@borealis.com

Dear Fellow Shareholders:

For the period ended September 30, 1998 your company had a loss of $1,324,925 as compared to a loss of $1,287,394 for the period ended September 30, 1997. It should be noted that $206,964 of that loss came from the fact that our books are presently kept in Canadian Dollars, but that the Royalty Payable is denominated in US Dollars. This loss has been incurred because of the relative weakness of the Canadian Dollar.

Our General and Administrative expenses for the period ended September 30, 1998 declined to $769,756 from $1,246,981 for the period ended September 30, 1997. Our total deficit as of September 30, 1998 amounted to $34,714,001 as compared to $32,554,808 for the period ended September 30, 1997.

The Cash Funds in for the six months ending September 30, 1998, were within $39,000 of matching our General and Administrative overheads.

Our total deficit has grown to $2,126,519 as of September 30, 1998 as compared with $315,689 for the period ended September 30, 1997.

Management is confident that these level of losses are sustainable for the foreseeable future and can be financed without any increase in the number of shares outstanding in Borealis Exploration Limited and without borrowing any money. We expect the operating loss to be as great or greater for the fiscal 1999 year ending on March 31, 1999, as compared to fiscal year ended March 31, 1998.

We at Borealis have, of course, continued high hopes for your company's future.

Weekly updates and Daily updates on the share price can be obtained by going to our web site at www.borealis.com, or by writing pr@borealis.com and asking to be placed on the boreynet.


Borealis Exploration Limited


Rodney T. Cox
Chief Executive Officer/Chairman

Isaiah W. Cox
Chief Operating Officer/President


The discussion of the Company's business and operations in this report includes in several instances forward-looking statements, which are based upon management's good faith assumptions relating to the financial, market, operating and other relevant environments that will exist and affect the Company's business and operations in the future. No assurance can be made that the assumptions upon which management based its forward-looking statements will prove to be correct, or that the Company's business and operations will not be affected in any substantial manner by other factors not currently foreseeable by management or beyond the Company's control. All forward-looking statements involve risks and uncertainty, the Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect the events or circumstances after the date hereof or to reflect the occurrence of unanticipated events including those described in this report, and such statements shall be deemed in the future to be modified in their entirety by the Company's public pronouncements, including those contained in all future reports and other documents filed by the Company with the relevant Securities Commissions.