Canada Southern Announces Earnings, Reserves Filing, and Winter Drilling Updates.CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. -- Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of Southern Petroleum Ltd. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :CSW CSW Commission on the Status of Women CSW Christian Solidarity Worldwide CSW Clinical Social Worker CSW College of the Southwest (New Mexico) CSW Cambridge SoundWorks (audio manufacturer) ) (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CSPLF) (BOSTON Boston, town, England Boston, town (1991 pop. 26,495), E central England, on the Witham River. Boston's fame as a port dates from the 13th cent., when it was a Hanseatic port trading wool and wine. Having recovered from a decline in the 18th and 19th cent. :CSW) (PCX (1) A bitmapped graphics file format that handles monochrome, 2-bit, 4-bit, 8-bit and 24-bit color and uses RLE to achieve compression ratios of approximately 1.1:1 to 1.5:1. Images with large blocks of solid colors compress best under the RLE method. See PC Paintbrush. :CSPLF) (the Company) today reported that net income for the three months ended December December: see month. 31, 2004 was $1.1 million ($0.08 per share) on revenues of $3.4 million, compared to a loss of $490,000 ($0.04 per share) on revenues of $2.6 million for the fourth quarter last year. Net income for the year ended December 31, 2004 was $3.3 million ($0.23 per share) as compared with $17.1 million ($1.18 per share) in the same period last year. Results for the year ended December 31, 2003 were favourably Adv. 1. favourably - showing approval; "he reviewed the play favorably" favorably favourably U.S. favorably adverb 1. impacted by the $22.7 million one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. settlement of the Kotaneelee litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. . Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was $8.1 million ($0.56 per share) for the year ended December 31, 2004 as compared with $22.2 million ($1.54 per share) during the year ended December 31, 2003. Corporate Reporting Changes - We are now using the Annual Information Form ("AIF AIF Annual Information Form AIF Apoptosis-Inducing Factor AIF Agence Intergouvernementale de la Francophonie (French: Intergovernmental Agency for Francophony) AIF Australian Imperial Force ") format as our primary reporting structure and we have filed our annual information for the year ended December 31, 2004 with the System for Electronic Document Analysis and Retrieval The System for Electronic Document Analysis and Retrieval (SEDAR) is a mandatory document filing and retrieval system for Canadian public companies. Similar to EDGAR, SEDAR is operated by the Canadian Securities Administrators, a coordinating body comprising the 13 Canadian ("SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review "); - We have also filed our first Form 40-F report with the Securities Exchange Commission (SEC) as a Foreign Private Issuer ("FPI FPI Formal Public Identifier FPI Front Populaire Ivoirien (French: Ivorian Popular Front, Icory Coast) FPI Federal Prison Industries, Inc. FPI Front Pembela Islam (Indonesian: Islamic Defenders Front) "); - In connection with our FPI status, we now are reporting our oil and gas reserves in compliance with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. National Instrument 51-101. Winter Drilling Program Update Kotaneelee, Yukon Yukon (y  `kŏn), river, c.2,000 mi (3,220 km) long, rising in Atlin Lake, NW British Columbia, Canada, and receiving numerous headwater streams; one of the longest rivers of North America. Drilling of the Kotaneelee L-38 well commenced on August 22, 2004 and reached total depth on March 10, 2005. Due to the technical and drilling challenges experienced by the operator, gross drilling costs are estimated to be $29.5 million ($9.0 million our share). The L-38 well was completed in late March 2005 with estimated gross completion costs of $4.9 million ($1.5 million our share). As part of the completion operation, the well was flowed for a short period of time. However, due to the warm weather in the area and the rapidly deteriorating de·te·ri·o·rate v. de·te·ri·o·rat·ed, de·te·ri·o·rat·ing, de·te·ri·o·rates v.tr. To diminish or impair in quality, character, or value: ice bridges, the decision was made to suspend the flow and remove the drilling rig and test equipment to avoid paying standby standby Medtalk adjective Referring to the immediate availability of a certain specialist–anesthesiologist, surgeon, who can be deployed in a medical emergency. Cf Concurrent. charges. Otherwise, the equipment would need to remain on location until approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. June June: see month. when the river is open for barging operations. While there is natural gas present, there is currently insufficient in·suf·fi·cient adj. 1. Not sufficient. 2. Incapable of proper functioning. information to estimate expected flow rates or to estimate recoverable proven reserves. Testing will be performed after the well is tied in during the second quarter of 2005. Additional gross costs of $4.6 million ($1.4 million our share) are expected to be incurred for surface equipment and tie-in tie-in n. One thing that is related to or connected with another. Noun 1. tie-in - a fastener that serves to join or connect; "the walls are held together with metal links placed in the wet mortar during construction" of the well for production. Total costs for the project are estimated to be $39 million ($11.9 million our share), of which approximately 50% was incurred prior to year end and reflected in the financial statements for the year ended December 31, 2004. We agreed with the operator's decision to remove the drilling and testing equipment, and to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. the cost and risk of tying in prior to testing. However, readers are cautioned that presently we do not have sufficient information to determine whether or not the well will be commercially successful. At this time we are not aware of, and do not expect, further drilling to occur in the Kotaneelee area in the near future. We believe that any such decision would only be considered subsequent to the receipt of positive production information from the L-38 well and a complete re-evaluation of our existing 2-D seismic data, or acquisition of new seismic data, in the area. In an effort to address the risks associated with our dependence on Kotaneelee, we have directed considerable resources toward other areas with the objective of diversifying our cash flow, production, and proven reserve base. This includes evaluating and acquiring new mineral leases in areas of interest, acquisition of either trade or proprietary 2-D and 3-D seismic and evaluating certain asset and corporate acquisitions. Given the high cost of acquisitions and their related reserves in the current market, we have concentrated our attention on growth through the drill bit. Northeast “Northeastern” redirects here. For the Boston college, see Northeastern University, Boston. Northeast or north east is the ordinal direction halfway between north and east. It is the opposite of southwest. See boxing the compass. British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography We drilled two Company operated wells (one deep test and one shallow This article or section may contain original research or unverified claims. Please help Wikipedia by adding references. See the for details. This article has been tagged since October 2007. Shallow means not very deep. test) in the Mike/Hazel area of northeast British Columbia during the winter 2004/2005 drilling/construction season. As a result of three separate land transactions, we acquired additional mineral rights lands in the area. We are to pay 100% of the drilling and completion costs to earn 85% of the deep mineral rights on our deep test well. The drilling costs for the A-19-L/94-H-2 well are estimated to be approximately $3.9 million net to us, of which approximately 26% was incurred prior to year end and is included in capital costs for the year. We also drilled the shallower A-81-H/94-H-3 well in February February: see month. 2005 on our 100% working interest lands at an estimated cost of $1.0 million. Both of these wells were drilled and cased, however as a result of an unusually short winter drilling season due to early warm weather, we were unable to gain the necessary access for well completion and production testing programs. We are currently examining the alternatives to test the two wells as soon as possible. In addition, we agreed to participate in two non-company operated in-fill shallow wells at Buick
Buick is a brand of automobile built in the United States, Canada, China and in Spain by General Motors Corporation. Creek in which we have a 22.5% working interest at a combined capital cost to the Company of $322,000. Both of these wells were drilled and cased during the first quarter of 2005, and are currently awaiting completion and testing operations. If these wells are successful, they would be tied into the Buick Creek plant where we have a 22.5% working interest.
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Three Year Financial Review
2004 2003 2002
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restated restated
Financial
($000s, except share amounts)
Gross revenues 13,828 13,183 9,937
Cash flow from operations(1) 8,060 22,228 6,580
Per share - basic 0.56 1.54 0.46
Per share - diluted 0.56 1.54 0.46
Net income (loss) 3,279 17,050 1,849
Per share - basic 0.23 1.18 0.13
Per share - diluted 0.23 1.18 0.13
Capital expenditures, net 11,506 4,980 474
Working capital 34,765 38,211 20,963
Total assets 59,789 62,042 29,121
Shareholders' equity 47,090 42,974 25,671
Shares outstanding 14,417,770 14,417,770 14,417,770
Weighted average shares
outstanding
Basic 14,417,770 14,417,770 14,417,770
Diluted 14,435,234 14,423,667 14,417,770
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(1) Cash flow from operations is a non-GAAP measure that does not
have a standardized meaning as prescribed by GAAP and is
therefore unlikely to be comparable to similar measures
presented by other oil and gas companies. We consider it an
important measure as it demonstrates our ability to generate
the cash flow necessary to fund future growth through capital
investment.
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Three Year Operating Review
2004 2003 2002
Operational
Sales volumes
Carried interest natural gas mcf/d 2,077 6,106 8,677
Natural gas mcf/d 4,970 2,035 1,796
Oil and natural gas liquids bbls/d 31 31 28
Combined (6:1) (1) boe/d 1,206 1,388 1,774
Average sales prices
Natural gas $/mcf 5.72 5.80 3.79
Oil and natural gas liquids $/bbl 39.24 34.23 27.93
Combined $/boe 34.43 34.77 21.59
Total proved reserves mboe 1,238 1,579 2,192
Undeveloped land
Gross acres 238,507 237,258 234,637
Net acres 69,484 69,584 65,271
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(1) means barrels of oil equivalent, with natural gas converted at
6 mcf per barrel of oil equivalent.
Operations Update Sales volumes continue to decrease from existing producing properties as expected, due to natural production declines. For the three months ended December 31, 2004, total volumes were down 13% to 1,196 barrels of oil equivalent per day (boe/d) from the 1,382 boe/d recorded in the same period last year. For the year ended December 31, 2004, volumes declined 13% year-over-year from 1,388 boe/d to 1,206 boe/d. Kotaneelee sales volumes represent 65% of the Company's total sales volumes for the ended December 31, 2004 versus 73% in the comparable period of 2003. While Kotaneelee sales volumes declined by 24% year-over-year, this decline was partially offset by production gains at our Town and Clarke Clarke , Arthur Charles Born 1917. British writer, scientist, and underwater explorer noted for his stories of space exploration. His works include 2001: A Space Odyssey (1968). Lake properties. Primarily as a result of taking over the marketing of our Kotaneelee gas from our partners, we achieved an acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. of sales volumes, and related net revenues that enabled us to record 13 months during the year. The impact of this one-time event was an additional average 46 boe/day for the year. Gross Kotaneelee well production for the month of December 2004 was 4.8 Mmcf per day from the B-38 well and 10.5 Mmcf per day from the I-48 well, compared to 7.9 Mmcf per day from B-38 and 13.7 Mmcf per day for I-48 in December 2003. Gross water production for the month of December 2004 was 1,413 bbls per day from the B-38 well and 763 bbls per day from the I-48 well, compared with 1,427 bbls per day for B-38 and 161 bbls per day for I-48 in December 2003. In an effort to extend the remaining life of the B-38 well, during the spring of 2005, the operator is installing a siphon siphon (sī`fən, –fŏn), tube through which a liquid is lifted over an elevation by the pressure of the atmosphere and is then emptied at a lower level. string in order to improve the lifting of the increasing amount of water. We are participating to the extent of our working interest in the operation. As the project is not yet complete, we do not know if, or to the degree of which, it will be successful in extending the economic life of the well. Annual Information Form and NI 51-101 Reserves Disclosure Our Annual Information Form ("AIF") for the year ended December 31, 2004 has been filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") and also filed as part of our Form 40-F filing with the SEC. The AIF contains the supplemental disclosure, including detailed reserves information, as mandated and required by Canadian Securities Administrators Canadian Securities Administrators(CSA) is a forum for the 13 securities regulators of Canada's provinces and territories to coordinate and harmonize regulation of the Canadian capital markets. National Instrument 51-101 including the Statements and Reports required by Forms 51-101F1, 51-101F2 and 51-101F3. The purpose of Canadian NI 51-101 is to enhance the quality, consistency Consistency can refer to:
tr.v. ele·vat·ed, ele·vat·ing, ele·vates 1. To move (something) to a higher place or position from a lower one; lift. 2. To increase the amplitude, intensity, or volume of. 3. reserves reporting to a higher level of confidence and accountability The traceability of actions performed on a system to a specific system entity (user, process, device). For example, the use of unique user identification and authentication supports accountability; the use of shared user IDs and passwords destroys accountability. . This document may be obtained at SEDAR's website address of www.sedar.com or at the SEC's website address of www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . A link to the Company's SEDAR and SEC filings can also be found on the Company website address of www.cansopet.com. Foreign Private Issuer Reporting Status On November November: see month. 8, 2004, the Board of Directors adopted a resolution providing for us to commence filing with the SEC as a "Foreign Private Issuer" in satisfaction of our periodic reporting obligations under Section 13(a) of the Exchange Act of 1934. We have filed our annual report with the SEC on Form 40-F, which is available to eligible Canadian companies This is a list of companies from Canada.
Directory: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Current Companies . Similarly, we will file all of our future quarterly reports on Form 6-K commencing the first quarter of 2005. As a result, we will no longer be filing our periodic reports with the SEC on Forms 10-K and Form 10-Q Form 10-Q See 10-Q. , or current reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. . As we have in the past, we will continue to adhere to adhere to verb 1. follow, keep, maintain, respect, observe, be true, fulfil, obey, heed, keep to, abide by, be loyal, mind, be constant, be faithful 2. all relevant U.S. and Canadian securities laws, rules and regulations. Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial Net income for the year ended December 31, 2004 was $3.3 million, or $0.23 per share compared to a restated $17.1 million, or $1.18 per share, for 2003. Net income for the fourth quarter ended December 31, 2004 was $1.1 million, or $0.08 per share compared to a restated loss of $490,000, or $0.04 per share in the 2003 comparative. In the fourth quarter of 2004, we recorded a one-time benefit of an $841,000 reduction in income tax expense as a result of utilizing certain tax pools previously thought to be unusable. During the fourth quarter of 2003, the loss was mainly as a result of the recognition of $1million of expense for settlement with the contingent interest contingent interest n. an interest in real property which, according to the deed (or a will or trust), a party will receive only if a certain event occurs or certain circumstances happen. grantees on the Kotaneelee litigation. Cash flow from operations was $8.1 million, or $0.56 per share, in 2004, a 64% drop from 2003, where we had cash flow of $22.2 million, or $1.54 per share. The decrease in net income and cash flow from operations is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the impact of the one-time settlement of the Kotaneelee litigation in the third quarter of 2003. In addition, declining production volumes, higher depletion depletion n. when a natural resource (particularly oil) is being used up. The annual amount of depletion may, ironically, provide a tax deduction for the company exploiting the resource because if the resource they are exploiting runs out, they will no longer be able costs, higher lease operating costs operating costs npl → gastos mpl operacionales and increased general and administrative expenses contributed to the decrease. Impact of Conversion of Kotaneelee to a Working Interest Effective May 1, 2004, we converted our 30.67% carried interest in the Kotaneelee field to a corresponding 30.67% working interest. Although the conversion has no impact on the aggregate amounts of our share of field production and related field operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. , the conversion has financial statement disclosure implications as discussed below. Proceeds from carried interests decreased significantly from 2003 to 2004 and revenue from working interest natural gas sales increased significantly during the same period. These changes are due to conversion of Kotaneelee to a working interest effective May 1, 2004. Carried interest revenues in future periods are expected to be minimal. Proceeds from carried interests represent passive net investment income in a net cash flow stream, and appropriately were recorded after the reduction of all royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. , lease operating costs and capital expenditures. The conversion to a working interest at Kotaneelee and certain of our other properties in previous years represents a decision by us toward direct management of our oil and gas assets. As the majority of our carried interest revenue (prior to conversion) related to Kotaneelee, our carried interest revenues have decreased significantly. Subsequent to May 1, 2004, sales from the Kotaneelee field are being reported as working interest natural gas sales while royalties and lease operating costs for Kotaneelee are being included under their respective captions. As a result, working interest natural gas sales, royalties and lease operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. have increased significantly over comparable periods. Capital expenditures for Kotaneelee are no longer a deduction deduction, in logic, form of inference such that the conclusion must be true if the premises are true. For example, if we know that all men have two legs and that John is a man, it is then logical to deduce that John has two legs. from carried interest revenue but are instead recorded as capital asset additions on our balance sheet. --------------------------------------------------------------------- --------------------------------------------------------------------- Sales volumes 2004 2003 % Change --------------------------------------------------------------------- Natural gas Working interest mcf/d 4,492 1,887 138 Carried interest mcf/d 2,077 6,106 (66) Royalty interest mcf/d 478 147 224 --------------------------------------------------------------------- Total natural gas mcf/d 7,046 8,141 (13) Oil and natural gas liquids bbls/d 31 31 - --------------------------------------------------------------------- Combined (6:1) boe/d 1,206 1,388 (13) --------------------------------------------------------------------- --------------------------------------------------------------------- Sales volumes, on a boe basis, were 1,206 boe per day, down 13% from the 1,388 boe per day in 2003. Expected production declines continue to affect our sales volumes for most of our areas with an average natural gas production rate of 7.0 mmcf/d in 2004 compared to 8.1 mmcf/d in 2003. Although our natural gas working interest volumes increased 138% over last year, this is solely the result of the conversion of our Kotaneelee carried interest to a working interest, as noted above, which is also reflected in the decrease in natural gas carried interest volumes from last year. Production from our Kotaneelee field continues to decline due to a combination of reservoir reservoir (rĕz`əvôr, -vwär), storage tank or wholly or partly artificial lake for storing water. Building an embankment or dam to preserve a supply of water for irrigation is an ancient practice; India and Egypt have many old and pressure declines and increased water production. Our average net natural gas sales from Kotaneelee during 2004 were 4.7 mmcf/d, or approximately 65% of our total natural gas sales, with associated gross water production of 2,483 bbls/d, compared to averages of 6.1 mmcf/d (approximately 73% of total natural gas sales) and 1,452 bbls/d, respectively, for 2003. Included in the natural gas working interest volumes for 2004 is an additional one-time amount of 274 mcf/d (46 boe/d) of sales which represents an extra month of Kotaneelee production. Previous to the conversion to a working interest, Kotaneelee carried interest results had been reported with a one month lag. With the conversion to a working interest, we obtain more timely access to revenue and operating cost information for the field. Consequently, the 2004 results from operations reflect thirteen months of operating activity for the Kotaneelee field. The natural gas production declines were offset by increased royalty interest royalty interest The proportional ownership interest by the owner of oil and gas rights in income produced by the asset. See also overriding royalty interest. volumes from our Town area in northeast British Columbia. The operator drilled several successful wells in 2004 and our royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. volumes from this area increased 224% over last year. Oil and natural gas liquids ("NGLs") production remained constant from last year at 31 bbls/d.
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Revenues ($000s) 2004 2003 % Change
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Natural gas
Working interest 9,310 4,060 129
Carried interest (1) 3,381 8,749 (61)
Royalty interest 1,051 326 223
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Total natural gas 13,742 13,135 5
Oil and natural gas liquids 451 384 17
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Total 14,193 13,519 5
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(1) "Carried interest" is net of related carried interest royalties,
lease operating costs and capital.
Our gross revenue from the sale of petroleum and natural gas in 2004 was 5% higher at $14.2 million, compared to $13.5 million in 2003. Working interest revenue was significantly higher at $9.3 million in 2004 compared to $4.1 million in 2003. This gain was mostly the result of the conversion of the Kotaneelee carried interest to a working interest. A corresponding decrease in the carried interest revenues also results from this conversion. Overall natural gas sales were $13.7 million in 2004, slightly higher than the $13.1 million received in 2003. The natural declines in our natural gas working and carried interest producing properties were more than offset by the three-fold increase in royalty income received from our Town property. Included in natural gas working interest revenue is $622,000 from Kotaneelee which represents an extra month of revenue, also relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the conversion to a working interest during the year. Oil and natural gas liquids revenue rose 17% to $451,000 in 2004 from $384,000 in 2003. This increase is mainly due to the increase in product prices as production volumes were flat year-over-year.
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Average Sales Prices 2004 2003 % Change
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Natural gas
Working interest $/mcf 5.66 5.89 (4)
Carried interest $/mcf 5.76 5.76 -
Royalty interest $/mcf 6.01 6.05 (1)
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Total natural gas $/mcf 5.72 5.80 (1)
Oil and natural gas liquids $/bbl 39.24 34.23 15
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Combined (6:1) $/boe 34.43 34.77 (1)
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(1) The average sales price for "Carried interest" is calculated
before deducting the related carried interest royalties, lease
operating costs and capital.
The overall average price we received upon sale of our oil and gas products in 2004 was relatively unchanged from that which we received in 2003. A slight decrease in the natural gas price received for our working interest properties, $5.66 per mcf in 2004 versus $5.89 per mcf in 2003, was partially offset by higher oil prices. Royalties --------------------------------------------------------------------- --------------------------------------------------------------------- ($000s) 2004 2003 % Change --------------------------------------------------------------------- Crown royalties 1,223 1,005 22 Freehold and GORR 377 149 153 --------------------------------------------------------------------- Total 1,600 1,155 39 --------------------------------------------------------------------- --------------------------------------------------------------------- As % of working interest revenues 15% 24% (38) --------------------------------------------------------------------- --------------------------------------------------------------------- Total royalties increased 39% in 2004, totaling $1.6 million versus $1.2 million in 2003. Royalties as a percentage of working interest revenues, however, dropped from 24% in 2003 to 15% in 2004. The increase in royalty dollars, for crown and freehold Freehold, borough, United States Freehold, borough (1990 pop. 10,742), seat of Monmouth co., E central N.J.; settled c.1650, called Monmouth Courthouse (1715–1801), inc. as a town 1869, as a borough 1919. and gross overriding (programming) overriding - Redefining in a child class a method or function member defined in a parent class. Not to be confused with "overloading". royalty ("GORR GORR Gross Overriding Royalty "), and the decrease in the royalty rate are mainly a result of our conversion of the Kotaneelee carried interest to a working interest. The crown royalty rate for the Kotaneelee property is approximately 10%, which is lower than the rate for the balance of our working interest properties. Due to the significance of the Kotaneelee revenues and, therefore the royalties, this resulted in a lower overall corporate royalty rate. Also impacting the 2004 royalties was an additional $81,000 representing the extra month of Kotaneelee operations relating to the elimination of the one-month lag discussed above. A prior period crown royalty adjustment, recorded in 2004, contributed approximately 2% to the drop in the 2004 royalty rate. Lease Operating Costs --------------------------------------------------------------------- ($000s, except per boe) 2004 2003 % Change --------------------------------------------------------------------- Lease operating costs 1,548 1,258 23 Per working interest boe ($) 5.42 9.98 (46) --------------------------------------------------------------------- --------------------------------------------------------------------- Lease operating costs increased 23% from $1.3 million in 2003 to $1.5 million in 2004. Operating costs were higher in 2004 mainly due to the conversion of our interest at Kotaneelee to a working interest in May 2004. After the conversion, operating costs from this area were recorded in lease operating costs whereas before, they were recorded net of carried interest revenues. Lease operating costs attributable to Kotaneelee since the conversion amounted to $476,000. Also impacting the 2004 lease operating costs is an additional $69,000 representing the extra month of Kotaneelee operations relating to the elimination of the one-month lag discussed above. On a boe basis, lease operating costs dropped 46% in 2004 to $5.42 per boe from $9.98 per boe in 2003. This drop is also largely due to the conversion of Kotaneelee to a working interest, where the operating costs averaged $2.48 per boe in 2004. Interest and other income --------------------------------------------------------------------- ($000s) 2004 2003 % Change --------------------------------------------------------------------- Interest income 914 799 14 Other 321 20 1,504 --------------------------------------------------------------------- Total 1,235 819 51 --------------------------------------------------------------------- --------------------------------------------------------------------- Interest and other income increased 51% in 2004. Interest income increased 14% from $799,000 to $914,000 in 2004 as our average monthly balance of funds available for investment was higher in 2004 than in 2003 due to receiving the funds from settlement of the litigation in the last quarter of 2003. This was somewhat offset by slightly lower yields in 2004. Other income was significantly higher in 2004 as we received $300,000 in settlement of an outstanding issue relating to the carried interest revenues for the Buick Creek, Wargen and Clarke Lake properties from the year 2000. Seismic sales, which make up the balance of other income, were relatively unchanged year-over-year. General and Administrative --------------------------------------------------------------------- ($000s, except per boe) 2004 2003 % Change --------------------------------------------------------------------- General and administrative 2,802 2,327 20 Legal 539 727 (26) --------------------------------------------------------------------- Total 3,341 3,054 9 --------------------------------------------------------------------- --------------------------------------------------------------------- Per boe ($) 7.57 6.03 26 --------------------------------------------------------------------- --------------------------------------------------------------------- General and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. , inclusive of inclusive of prep. Taking into consideration or account; including. legal expenses, increased 9% in 2004 to $3.3 million from $3.1 million in 2003 primarily due to increased salaries and benefits and shareholder communication expenses. The addition of three new employees in 2004 increased our salary and benefits expense by 142%, finishing the year with a full-time full-time adj. Employed for or involving a standard number of hours of working time: a full-time administrative assistant. full staff of 6, compared to 3 full-time staff members at the end of 2003. As a result of the special shareholders meeting held late in the year, the related printing, mailing and proxy See proxy server. (networking) proxy - A process that accepts requests for some service and passes them on to the real server. A proxy may run on dedicated hardware or may be purely software. solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual costs added $111,000, or 44%, to shareholders communication expense over 2003. Legal expenses decreased 26% during 2004 to $539,000 compared to $727,000 in 2003. The drop is primarily due to decreased legal work relating to the settlement of the Kotaneelee litigation in late 2003. While legal costs related to the litigation have decreased due to the settlement, general corporate legal expenses increased over 2003 due to the update of corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. materials related to our continuance The adjournment or postponement of an action pending in a court to a later date of the same or another session of the court, granted by a court in response to a motion made by a party to a lawsuit. from Nova Scotia Nova Scotia (nō`və skō`shə) [Lat.,=new Scotland], province (2001 pop. 908,007), 21,425 sq mi (55,491 sq km), E Canada. Geography to Alberta, and new disclosure and corporate governance regulations that have been adopted in both Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. . We have been incurring in·cur tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. significant administrative, auditing and legal expenses with respect to new SEC and accounting rules adopted pursuant to the Sarbanes-Oxley Act See SOX. of 2002 (the "Act"). Canadian regulators are also commencing to adopt new rules. Such expenses will continue and may increase, particularly due to the requirements to document, test and audit our internal controls to comply with Section 404 of the Act, and rules adopted thereunder, that are anticipated to apply to us for the first time with respect to our annual report for the fiscal year ending December 31, 2006. No general and administrative expenses were capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. during the 2004 and 2003 periods. Depletion and Depreciation --------------------------------------------------------------------- ($000s, except per boe) 2004 2003 % Change --------------------------------------------------------------------- Depletion and depreciation 3,357 2,363 42 Per boe ($) 7.61 4.67 63 --------------------------------------------------------------------- --------------------------------------------------------------------- Depletion and depreciation expense increased 42% in 2004 to $3.4 million from $2.4 million in 2003. Depletion and depreciation are a high percentage (19%, or taking into account those items excluded from the depletion calculation, 32%), in comparison with our peers, of the net book value of oil and gas properties and equipment mainly due to the limited expected life of the proven reserves at the Kotaneelee field. In 2004, all costs incurred in drilling the Kotaneelee L-38 well were capitalized. We have not recorded any depletion expense for the drilling costs of the L-38 well that commenced on August 22, 2004. The well represents a major development project, and as the cumulative well costs to December 31, 2004 were $6.0 million (or approximately 34% of the net book value of capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) as at December 31, 2004), inclusion of the amounts for depletion purposes would not represent a fair matching of revenues with expenses. Had we included these costs in the depletable de·plete tr.v. de·plet·ed, de·plet·ing, de·pletes To decrease the fullness of; use up or empty out. [Latin d base, depletion for the fiscal year ended December 31, 2004 would have been $483,000 higher. Once drilling of the well is completed and the results are known, we will include all drilling costs in the depletable base. There is no assurance that the completion and testing of the L-38 well will result in a commercially viable well. Whether or not it is successful, because of the large capital investment, in combination with the rest of our drilling during the winter 2004/2005 drilling season, we expect to record higher depletion rates in the future. We could also experience a ceiling test impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. that would result in a material write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of our oil and gas properties and equipment, if the L-38 well does not encounter additional proven reserves. Asset Retirement Obligations Asset Retirement Obligations provide for future disposal of assets as required by SFAS 143 [1]. Firms must recognize the ARO liability in the period it was acquired, generally acquisition. Accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the Asset retirement obligations accretion expense In accounting, accretion expense is the expense created when updating the present value(PV) of a financial instrument. For example, if one originally recognizes the present value of a liability at $650, which has a future value (FV) of $1000, every year one must increase the increased by 135% to $240,000 in 2004 compared with the restated amount of $102,000 in 2003. The increase is mainly due to a full year's inclusion of related liabilities resulting from the settlement of the Kotaneelee litigation in September September: see month. 2003. In connection with the settlement, the Company agreed to be responsible for its share of abandonment abandonment, in law, voluntary, intentional, and absolute relinquishment of rights or property without conveying them to any other person. Abandonment also means willfully leaving one's spouse or children, intending not to return (see desertion). and reclamation Reclamation A claim for the right to return or the right to demand the return of a security that has been previously accepted as a result of bad delivery or other irregularities in the delivery and settlement process. liabilities at the Kotaneelee field when they occur. At the time of settlement, it was estimated that our 30.67% share of the abandonment liabilities amounted to approximately $2,400,000 (undiscounted). We have not included any asset retirement obligations for the Kotaneelee L-38 well that has recently been completed. The commercial success or failure of the well is not yet known but if the well is ultimately determined to be capable of production, sufficient information is expected to be available at that time to estimate the components of the asset retirement obligation. However, if the well is unsuccessful it would immediately be abandoned, with the related abandonment costs included in oil and gas property and equipment, subject to the ceiling test impairment mentioned above. Stock-based Compensation Stock-based compensation expense increased to $837,000 in 2004 compared to $253,000 in 2003 after retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a adoption of the Canadian Institute of Chartered Accountant's (CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) ) section 3870 (Stock-based Compensation and Other Stock-based Payments). The increase is due to the number of options granted and the timing of vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: this year compared to last year. In 2004, options granted to employees and directors totalled 325,000. During 2003, only 80,000 stock options were granted. Foreign Exchange A foreign exchange loss of $96,000 was recorded in 2004, compared to a loss of $536,000 in 2003 on our U.S. dollar investments. During the first half of 2004, the U.S. dollar was strong relative to the Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents , resulting in early foreign exchange gains. However, growth in the value of the Canadian dollar relative to the U.S. dollar during the last half of the year resulted in exchanges losses that more than offset the gains recorded during the first half. With the relative volatility Relative volatility is a measure comparing the vapor pressures of the components in a liquid mixture of chemicals. This quantity is widely used in designing large industrial distillation processes. between the U.S and Canadian dollar, we expect to record further foreign exchange gains or losses in the future, but cannot predict either with certainty CERTAINTY, UNCERTAINTY, contracts. In matters of obligation, a thing is certain, when its essence, quality, and quantity, are described, distinctly set forth, Dig. 12, 1, 6. It is uncertain, when the description is not that of one individual object, but designates only the kind. Louis. . The value of the Canadian dollar was U.S. $.8303 at December 31, 2004 compared to U.S. $.7724 at December 31, 2003. Income Taxes The income tax provision decreased to $1.1 million in 2004 as compared to the income tax provision of $11.3 million in 2003. The large income tax provision in 2003 was attributable mainly to the taxable proceeds from settlement of the Kotaneelee litigation. During the year ended December 31, 2004, our effective tax rate was 25.6% as compared to 39.8% for the year ended December 31, 2003. During the first three quarters of the year ended December 31, 2004, the expected effective tax rate was 40%, down from 42% in 2003. During the fourth quarter of 2004, we determined that we could utilize certain successor 1. SuccessoR - A language for distributed computing derived from SR. ["SuccessoR: Refinements to SR", R.A. Olsson et al, TR 84-3, U Arizona 1984]. 2. successor - daughter tax pools that were previously thought to be unusable. As a result, we were able to access and utilize $1.9 million of successor tax pools that created a one time reduction of income tax expense of approximately $841,000, thereby reducing the effective tax rate for the year. In 2003, we re-filed our tax returns for the taxation years of 1994 to 2002 inclusive (theory) inclusive - In domain theory, a predicate P : D -> Bool is inclusive iff For any chain C, a subset of D, and for all c in C, P(c) => P(lub C) In other words, if the predicate holds for all elements of an increasing sequence then it holds for their least upper . On March 15, 2005, we received a preliminary audit adjustment letter from Canada Revenue Agency The Canada Revenue Agency (CRA) administers:
The process of re-determining the value of property or land for tax purposes. Notes: Property is usually reassessed on an annual basis. You may request a "reassessment" if you disagree with your assessment. . Should the Notices of Reassessment be consistent with the preliminary audit adjustment letter, the benefit to us will be approximately $850,000. This would result in a one time reduction of income tax expense. Liquidity and Capital Resources We recognize the need for a strong balance sheet in order to withstand volatile With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. natural gas prices and to be able to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. opportunities when or if they become available. At December 31, 2004, we continued to enjoy a strong balance sheet and had no bank debt with approximately $39.4 million of cash and cash equivalents. These funds are expected to be used for oil and gas exploration and development activities and for general corporate purposes. Net cash flow used in operating activities during 2004 was $617,000 compared to cash flow provided from operating activities of $32.7 million during 2003. The $33.3 million decrease in net cash flow from operating activities during 2004 is comprised of: --------------------------------------------------------------------- ($000's) --------------------------------------------------------------------- Decrease in cash flow from operations (14,168) Net changes in accounts receivable and other 1,121 Net changes in current liabilities (1,802) Net changes in current income taxes payable (18,488) --------------------------------------------------------------------- Decrease in net cash flow from operating activities (33,337) --------------------------------------------------------------------- --------------------------------------------------------------------- The oil and gas business is inherently risky and capital intensive and can require significant capital and cash resources to expand and develop the business. Our current cash flow from oil and gas operations is mainly derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from the Kotaneelee field. Net field level receipts from Kotaneelee represented approximately 66% of our total net field receipts for the year ended December 31, 2004, compared to 79% in the same period of 2003. Kotaneelee continues to experience a decrease in formation reservoir pressure, an increase in water production, and as a result, a decrease in gas production. There is a possibility that our cash flow from Kotaneelee could either be significantly reduced or terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: at any time in the future. In an effort to extend the remaining life of the B-38 well, during the spring of 2005, the operator is installing a siphon string in order to improve the lifting of the increasing amount of water. We are participating to the extent of our working interest in the operation. As the project is not yet complete, we do not know if, or to the degree of which, it will be successful in extending the economic life of the well. Further development of the Kotaneelee field may assist with the recovery of the existing remaining reserves, and as well, identify additional reserves. However, future development of Kotaneelee is highly risky due to the geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. location, geological ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. complexity, depth and temperature of the producing formation, inherent risks of seismic interpretations and the costs of drilling. Effective May 1, 2004, we converted from a 30.67% carried interest in the Kotaneelee natural gas field to a 30.67% working interest. On May 3, 2004, we were served by the field operator with a notice to commence drilling the Kotaneelee L-38 development well in the third quarter of 2004. Subsequent to our technical evaluation The study and investigations by a developing agency to determine the technical suitability of material, equipment, or a system for use in the Military Services. See also operational evaluation. , we elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. to participate to our full 30.67% working interest. The notice from the operator to drill and case the proposed well included an estimated gross cost of $16.7 million, of which our share was to be approximately $5.1 million. The well reached total depth on March 10, 2005 and due to the technical and drilling challenges experienced by the operator, gross drilling costs are estimated to be $29.5 million ($9.0 million our share). The L-38 well was completed in late March 2005 with estimated gross completion costs of $4.9 million ($1.5 million our share). As part of the completion operation, the well was flowed for a short period of time. However, due to the warm weather in the area and the rapidly deteriorating ice bridges, the decision was made to suspend the flow and remove the drilling rig and test equipment to avoid paying standby charges. Otherwise, the equipment would need to remain on location until approximately June when the river is open for barging operations. While there is natural gas present, there is currently insufficient information to estimate expected flow rates or to estimate recoverable proven reserves. Testing will be performed after the well is tied in during the second quarter of 2005. Additional gross costs of $4.6 million ($1.4 million our share) are expected to be incurred for surface equipment and tie-in of the well for production. Total costs for the project are estimated to be $39 million ($11.9 million our share), of which approximately 50% was incurred prior to year end and reflected in the financial statements for the year ended December 31, 2004. We agreed with the operator's decision to remove the drilling and testing equipment, and to incur the cost and risk of tying in prior to testing. However, readers are cautioned that presently we do not have sufficient information to determine whether or not the well will be commercially successful. At this time we are not aware of, and do not expect, further drilling to occur in the Kotaneelee area in the near future. We believe that any such decision would only be considered subsequent to the receipt of positive production information from the L-38 well and a complete re-evaluation of our existing 2-D seismic data, or acquisition of new seismic data, in the area. In an effort to address the risks associated with our dependence on Kotaneelee, we have directed considerable resources toward other areas with the objective of diversifying our cash flow, production, and proven reserve base. This includes evaluating and acquiring new mineral leases in areas of interest, acquisition of either trade or proprietary 2-D and 3-D seismic and evaluating certain asset and corporate acquisitions. Given the high cost of acquisitions and their related reserves in the current market, we have concentrated our attention on growth through the drill bit. Our northeast British Columbia properties are not as risky as Kotaneelee, but cannot be considered low risk due to depth of drilling, limited period of access to surface locations, and related costs. We drilled two Company operated wells (one deep test and one shallow test) in the Mike/Hazel area of northeast British Columbia during the winter 2004/2005 drilling/construction season. As a result of three separate land transactions, we acquired additional mineral rights lands in the area. We are to pay 100% of the drilling and completion costs to earn 85% of the deep mineral rights on our deep test well. The drilling costs for the A-19-L/94-H-2 well are estimated to be approximately $3.9 million net to us, of which approximately 26% was incurred prior to year end and is included in capital costs for the year. We also drilled the shallower A-81-H/94-H-3 well in February 2005 on our 100% working interest lands at an estimated cost of $1.0 million. Both of these wells were drilled and cased, however as a result of an unusually short winter drilling season due to early warm weather, we were unable to gain the necessary access for well completion and production testing programs. We are currently examining the alternatives to test the two wells as soon as possible. During the year ended December 31, 2004, we expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. $11.5 million on capital additions as summarized below: --------------------------------------------------------------------- Capital Expenditures ($000s) 2004 2003 % Change --------------------------------------------------------------------- Land and acquisitions 896 850 5 Geological and geophysical 1,151 1,789 (36) Drilling and completion 8,749 1,850 373 Facilities and equipment 679 417 63 Other 31 74 (58) --------------------------------------------------------------------- Total capital expenditures 11,506 4,980 131 Dispositions - - - --------------------------------------------------------------------- Net capital expenditures 11,506 4,980 131 --------------------------------------------------------------------- --------------------------------------------------------------------- During the first quarter of 2005, further capital expenditures for land, seismic, drilling, workovers, equipment, and other activities are expected to be up to $11.1 million. We have budgeted $16 million of capital expenditures on oil and gas activities during 2005. Any management requests for additional capital in excess of this amount would acquire Board of Directors approval on an individual project basis. In the near term, we expect to rely on internally generated cash flows and current cash on hand to fund our annual capital expenditure program. Contractual Obligations We do not use off-balance sheet arrangements. We are committed to an operating lease Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. for our office space and the future minimum rental RENTAL. A roll or list of the rents of an estate containing the description of the lands let, the names of the tenants, and other particulars connected with such estate. This is the same as rent roll, from which it is said to be corrupted. payments and estimated operating costs to the end of lease are as follows: --------------------------------------------------------------------- --------------------------------------------------------------------- Year ($000's) --------------------------------------------------------------------- 2005 88 2006 91 2007 61 --------------------------------------------------------------------- Total contractual obligations 240 --------------------------------------------------------------------- --------------------------------------------------------------------- New Accounting Standards Asset retirement obligations Effective January January: see month. 1, 2004, we have retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin adopted the Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. ("CICA") Handbook
This article is about reference works. For the subnotebook computer, see .
Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. long-lived long-lived adj. 1. Having a long life: a long-lived aunt. 2. Lasting a long time; persistent: a long-lived rumor. 3. assets be recorded when the obligation is incurred, with a corresponding increase to the carrying amount of the related assets. This corresponding increase to capitalized costs is amortized to earnings on a basis consistent with depletion of the underlying assets. Subsequent changes in the estimated fair value of the asset retirement obligations will be capitalized and amortized over the remaining useful life of the underlying asset. The asset retirement obligation liabilities are carried on the consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. at their discounted present value and are accreted over time for the change in their present value. This standard was adopted retroactively and prior period amounts were restated. Stock-based compensation We have adopted the CICA Handbook section 3870, "Stock-based Compensation and Other Stock-based Payments", which requires the use of the fair value method for valuing stock option grants. Under this method, compensation cost attributable to stock options granted to employees and directors is measured at fair value at the grant date and expensed over the vesting period with a corresponding increase to contributed surplus. Upon the exercise of the stock options, consideration paid is recorded as an increase to total capital. This standard was adopted retroactively on January 1, 2004 and prior period amounts were restated. Pursuant to the transition rules, the expense recognized applies to stock options granted on or after January 1, 2002. Full cost accounting Effective January 1, 2004, we adopted the CICA Accounting Guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. AcG-16 "Oil and Gas Accounting - Full Cost". Under the new guideline, future net revenues from total proven reserves used in the ceiling test calculation are estimated using expected future product prices and costs. Prior to adopting this new standard, constant dollar pricing was used to test impairment. There is no impact on our reported financial results for the year ended December 31, 2004 as a result of adopting this guideline. The Company's audited financial statements, management discussion and analysis, and AIF for the period ended December 31, 2004 has been filed today with the Canadian Securities Administrators' System for Electronic Document Analysis and Retrieval (SEDAR). The Company's annual report on Form 40-F for the year ended December 31, 2004 was also filed with the U.S. Securities and Exchange Commission (SEC). These documents may be obtained at SEDAR's website address of www.sedar.com or at the SEC's website address of www.sec.gov. A link to the Company's SEDAR and SEC filings can also be found on the Company website address of www.cansopet.com. Canada Southern Petroleum Ltd. is an independent energy company based in Calgary, Alberta, Canada. The Company is engaged in oil and gas exploration and development, with its primary interests in producing properties in the Yukon Territory Yukon Territory, territory (2001 pop. 28,674), 207,076 sq mi (536,327 sq km), NW Canada. Geography and Climate The triangle-shaped Yukon territory is bordered on the N by the Beaufort Sea of the Arctic Ocean, on the E by the Northwest Territories, and British Columbia, Canada. The Company's common shares are traded on the NASDAQ SmallCap Market and the Pacific Exchange, Inc. under the symbol "CSPLF," and on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. and Boston Stock Exchange The Boston Stock Exchange (BSE) is a regional stock exchange located in Boston, Massachusetts. The third-oldest stock exchange in the United States, it was founded in 1834. On October 2nd, 2007 Nasdaq agreed to acquire BSE for $61 million. under the symbol "CSW". The Company has 14,417,770 shares outstanding. This document contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. relating, but not limited, to operations, financial performance, business prospects and strategies of the Company. Forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend" or similar words suggesting future outcomes or statements regarding an outlook on, without limitation, commodity prices, estimates of future production, the estimated amounts and timing of capital expenditures, anticipated future debt levels and royalty rates, or other expectations, beliefs, plans, objectives, assumptions or statements about future events or performance. Shareholders are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information of the Company involves numerous assumptions, inherent risks and uncertainties both general and specific that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. These factors include, but are not limited to: the pricing of natural gas and oil; the effects of competition and pricing pressures; risks and uncertainties involving the geology geology, science of the earth's history, composition, and structure, and the associated processes. It draws upon chemistry, biology, physics, astronomy, and mathematics (notably statistics) for support of its formulations. of natural gas and oil; operational risks in exploring for, developing and producing natural gas and oil; the uncertainty of estimates and projections relating to production, costs and expenses; the significant costs associated with the exploration and development of the properties on which the Company has interests, particularly the Kotaneelee field; shifts in market demands; risks inherent in the Company's marketing operations; industry overcapacity o·ver·ca·pac·i·ty n. Too great a capacity for production of commodities or delivery of services in relation to actual need: the problem of overcapacity in many large industries. ; the strength of the Canadian economy in general; currency and interest rate fluctuations; general global and economic and business conditions; changes in business strategies; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserves estimates; various events which could disrupt operations, including severe weather conditions, technological changes, our anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, of and success in managing the above risks; potential increases in maintenance expenditures; changes in laws and regulations, including trade, fiscal, environmental and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. laws; and health, safety and environmental risks that may affect projected reserves and resources and anticipated earnings or assets. See also the information set forth under the heading "Information Concerning the Oil and Natural Gas Industry" in our 2004 Annual Information Form. Statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. We caution that the foregoing list of important factors is not exhaustive. We undertake no obligation to update publicly or revise the forward-looking information provided in this document, whether as a result of new information, future events or otherwise, or the foregoing list of factors affecting this information.
CANADA SOUTHERN PETROLEUM LTD.
CONSOLIDATED BALANCE SHEETS
(in Canadian dollars)
---------------------------------------------------------------------
As at December 31,
2004 2003
---------------------------------------------------------------------
restated
Assets
Current assets
Cash and cash equivalents $ 39,353,717 $ 49,082,386
Accounts receivable 2,495,678 3,138,465
Other assets 370,011 400,643
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42,219,406 52,621,494
Oil and gas properties and equipment 17,570,085 9,420,903
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Total assets $ 59,789,491 $ 62,042,397
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---------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 3,627,644 $ 2,947,763
Accrued liabilities 2,810,263 1,709,889
Accrued income taxes payable 1,016,419 9,752,303
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7,454,326 14,409,955
Future income tax liability 2,569,864 2,221,864
Asset retirement obligations 2,675,743 2,436,986
---------------------------------------------------------------------
Total liabilities 12,699,933 19,068,805
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Commitments and contingencies
Shareholders' equity
Share capital 14,417,770 14,417,770
Contributed surplus 29,014,151 28,177,451
Retained earnings 3,657,637 378,371
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Total shareholders' equity 47,089,558 42,973,592
---------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 59,789,491 $ 62,042,397
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CANADA SOUTHERN PETROLEUM LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (DEFICIT)
(in Canadian dollars)
---------------------------------------------------------------------
Years ended December 31,
2004 2003 2002
---------------------------------------------------------------------
restated restated
Revenues
Petroleum and natural
gas sales $ 10,812,457 $ 4,769,500 $ 2,775,973
Royalties (1,600,117) (1,154,518) (734,185)
Carried interest 3,380,781 8,749,422 7,469,587
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12,593,121 12,364,404 9,511,375
Interest and other income 1,234,898 818,713 425,355
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13,828,019 13,183,117 9,936,730
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Expenses
Lease operating costs 1,547,908 1,257,827 778,586
General and administrative 3,340,864 3,053,803 2,575,815
Depletion and depreciation 3,357,000 2,363,025 2,398,358
Asset retirement
obligations accretion 240,000 101,915 56,100
Stock-based compensation 836,700 252,798 652,820
Foreign exchange losses 96,281 535,521 376
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9,418,753 7,564,889 6,462,055
---------------------------------------------------------------------
Income from operations
before settlement of
litigation and income taxes 4,409,266 5,618,228 3,474,675
Settlement of litigation - 22,727,078 -
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Income before income taxes 4,409,266 28,345,306 3,474,675
Income tax expense (1,130,000) (11,295,188) (1,626,000)
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Net income 3,279,266 17,050,118 1,848,675
Retained earnings
(deficit) - beginning
of year 378,371 (16,671,747) (18,520,422)
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Retained earnings
(deficit)
- end of year $ 3,657,637 $ 378,371 $(16,671,747)
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---------------------------------------------------------------------
Net income per share:
Basic $ 0.23 $ 1.18 $ 0.13
Diluted $ 0.23 $ 1.18 $ 0.13
Average number of
shares outstanding:
Basic 14,417,770 14,417,770 14,417,770
Diluted 14,435,234 14,423,667 14,417,770
CANADA SOUTHERN PETROLEUM LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in Canadian dollars)
---------------------------------------------------------------------
Years ended December 31,
2004 2003 2002
---------------------------------------------------------------------
restated restated
Cash flow from operating
activities:
Net income $ 3,279,266 $ 17,050,118 $ 1,848,675
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depletion and depreciation 3,357,000 3,901,025 2,398,358
Asset retirement
obligations accretion 240,000 101,915 56,100
Asset retirement
expenditures (1,243) (171,900) (5,362)
Stock-based compensation 836,700 252,798 652,820
Future income tax expense 348,000 1,094,188 1,629,000
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Cash flow from operations 8,059,723 22,228,144 6,579,591
Change in non-cash
working capital (8,676,831) 10,491,383 237,147
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Cash flow from (used in)
operating activities (617,108) 32,719,527 6,816,738
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Cash flow from investing
activities:
Additions to oil and gas
properties and equipment (11,506,182) (4,979,566) (474,151)
Change in non-cash
working capital 2,394,621 1,887,972 7,200
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Cash flow used in
investing activities (9,111,561) (3,091,594) (466,951)
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Cash flow from
financing activities: - - -
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Increase in cash and
cash equivalents (9,728,669) 29,627,933 6,349,787
Cash and cash equivalents
at the beginning of year 49,082,386 19,454,453 13,104,666
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Cash and cash equivalents
at the end of year $ 39,353,717 $ 49,082,386 $ 19,454,453
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Canada Southern Petroleum Ltd. (TSX:CSW) (NASDAQ:CSPLF) |
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