Canada Southern Posts Third Quarter Profit.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. (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) (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) .LV) (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 September September: see month. 30, 2004 was $445,000 ($0.03 per share) on revenues of $3.3 million, compared to $14.9 million ($1.03 per share) (after the impact of the one-time 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. of $23.7 million) on revenues of $2.4 million for the third quarter last year. Net income for the nine months ended September 30, 2004 was $2.2 million ($0.15 per share) as compared with $17.5 million ($1.22 per share) in the same period last year. Highlights - Drilling of the Kotaneelee L-38 horizontal well continues on schedule; - Planning for this winter's drilling and pipeline construction activities in Northeast B.C. continues; - Special meetings of shareholders will be held on November 30 and December 15, 2004; - The company intends to file future Securities Exchange Commission (SEC) reports as a Foreign Private Issuer; - Third quarter results do not include any costs of the Kotaneelee L-38 well currently being drilled, which have been 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. ; - A significant asset 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. could result if the Kotaneelee L-38 well is not commercial; - The Company commenced taking its Kotaneelee production in-kind on November 1, 2004; and - A government audit of Company re-filed prior year income tax returns is expected to conclude during the fourth quarter and may add a positive increment To add a number to another number. Incrementing a counter means adding 1 to its current value. to fourth quarter earnings. Operations Update Sales volumes continue to decrease from existing producing properties as expected, due to natural production declines. For the three months ended September 30, 2004, total volumes were down 4% to 1,103 barrels of oil equivalent per day (boe/d) from the 1,145 boe/d recorded in the same period last year. For the nine-month period ended September 30, 2004, volumes declined 13% year-over-year from 1,389 boe/d to 1,209 boe/d. Kotaneelee sales volumes represent 61% of the Company's total sales volumes during the third quarter of 2004 versus 70% 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 the Town, 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. , Wargen, and Clarke Lake properties. Gross Kotaneelee well production for the month of September 2004 was 4.7 Mmcf per day from the B-38 well and 10.7 Mmcf per day from the I-48 well, compared to 9.0 Mmcf per day from B-38 and 14.8 Mmcf per day for I-48 in September 2003. Gross water production for the month of September 2004 was 1,346 bbls per day from the B-38 well and 632 bbls per day from the I-48 well, compared with 1,514 bbls per day for B-38 and 183 bbls per day for I-48 in September 2003. In an effort to extend the remaining life of the B-38 well, the operator investigated the installation of either a smaller diameter tubing string or a siphon string in the wellbore in order to lift the increasing amount of water. Canada Southern participated to the extent of its working interest in the operation of diagnosing the condition of the existing well's tubing string. The condition of this down-hole equipment was determined to be acceptable for the installation of the less expensive siphon string. The decision to proceed with the installation of the siphon string has been temporarily deferred by the operator. Based on the current gas flow rates and water influx, the operator estimates that the siphon string will not be required until the first quarter of 2005. This timing takes advantage of easier equipment access to the property via winter ice roads. If the installation is successful, the economic life of B-38 should be extended. Drilling of the Kotaneelee L-38 development well, which is currently underway, may extend the life of the field, if successful. This well commenced drilling on August 22, 2004, is expected to take 150 days, and to date is on schedule. Gross drilling costs 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. to November 8 are estimated to be $12.9 million ($3.9 million net to Canada Southern). If the drilling of the well is successful, it is estimated that a further $5.6 million ($1.7 million net) will be incurred to complete and tie-in the well. Canada Southern is currently preparing for the winter 2004/2005 drilling/construction season. The Company undertook a 25 square mile proprietary 3-D seismic program at Mike/Hazel in late 2003 and the geophysical ge·o·phys·ics n. (used with a sing. verb) The physics of the earth and its environment, including the physics of fields such as meteorology, oceanography, and seismology. interpretation has recently been completed. The Company has farmed in on additional lands in the area and has committed to drill a $2.2 million (estimated gross dry and abandoned cost) well during the 2004/2005 winter drilling season. The Company also intends to drill a 100% working interest well this winter drilling season in the area, for an estimated cost of $700,000 (dry and abandoned). Canada Southern has recently participated in the drilling of a development well in the Siphon area of Northeast 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 . Canada Southern participated to its 11.25% working interest in drilling this well. The well has been cased and is currently awaiting completion and testing to determine if commercial quantities of hydrocarbons hydrocarbons (hīˈ·drō·kärˑ·b  nz),n. are present. The Company drilled and cased a 100% working interest development gas well at Siphon in late 2003. Several formations were completed and tested at various times during the first nine months of 2004. A pipeline application was recently submitted to the applicable regulatory authority Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities , and once the application is approved, Canada Southern intends to commence the construction of the pipeline to tie-in this well. The Company expects that this well will be on production by the end of the year with initial production rates expected to be approximately 450 mcf/d (75 boe/d). In the Buick Creek area, the Company participated to its 11.25% working interest in the drilling of a development well earlier this year. This well is expected to be tied-in tied-in a conformation defect in an animal in which a limb is perceptibly thinner at one point, e.g. tied-in below the knee, or below the hock. for production during the fourth quarter of 2004. Special Meetings of Shareholders On October 21, 2004, the Company filed with U.S. and 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. securities regulators its definitive proxy materials Proxy Materials Documents regulated by the Securities & Exchange Commission in which a public company outlines its methods and procedures. These documents are used to inform shareholders and solicit votes for corporate decisions, such as the election of directors and other relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc special meetings of the Company's shareholders that will be held on November 30, and December 15, 2004 in Calgary, Alberta. The two meetings will be held at the Plaza Room at The Metropolitan Centre, 333 - 4th Avenue S.W., Calgary, Alberta at 11:00 A.M. on these dates. Proxy materials may be obtained at www.sec.gov, www.sedar.com or on the company's website www.cansopet.com. As previously announced, the purpose of these meetings is to modernize mod·ern·ize v. mo·dern·ized, mo·dern·iz·ing, mo·dern·iz·es v.tr. To make modern in appearance, style, or character; update. v.intr. To accept or adopt modern ways, ideas, or style. the Company's 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. . Foreign Private Issuer Reporting Status On November 8, 2004, the Board of Directors adopted a resolution providing for the Company to commence filing with the SEC as a "Foreign Private Issuer" in satisfaction of its periodic reporting obligations under Section 13(a) of the Exchange Act of 1934. As a result, the Company will no longer file its 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. . Rather, the Company will file its future annual reports, beginning with the report for the fiscal year ending on December 31, 2004, on either Form 20-F or 40-F which are available to 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 that file reports with the SEC. Similarly, rather than filing quarterly reports on Form 10-Q, the Company will file on Form 6-K. As it has in the past, the company will continue 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 Natural gas revenue from working and 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. properties increased 338% to $3,023,000 in the third quarter of 2004 from $690,000 in the third quarter of 2003. There was a 242% increase in the working interest volumes sold and a 11% increase in the average sales price of working interest sales. The conversion of Kotaneelee to a working interest effective May 1, 2004 was the major component for both the volume and revenue increases. Natural gas sales include royalty income, which increased by 285% from $73,000 to $280,000. Royalty volumes sold increased by 268% and the natural gas royalty sales price increased 5% when compared with the third quarter of 2003. The increase in royalty volumes is attributable to production from new wells in the Town area of northeast British Columbia. Natural gas royalty expense was significantly higher in the third quarter of 2004 at $518,000, or 16% of natural gas working interest sales, compared to $241,000, or 28% of natural gas working interest sales, in the third quarter of last year. The increase in absolute amount of royalties and the decrease in the percentage was a direct result of the Kotaneelee royalty expense being included in working interest royalty expense subsequent to conversion. Prior to conversion of the Kotaneelee carried interest to a working interest, the royalty expense for that property was recorded as a reduction of carried interest gas sales. Royalty expense at Kotaneelee is at a lower percentage rate (of revenue) than the rates at the Company's other properties. On November 1, 2004, further to the decision toward direct management of its oil and gas assets, Canada Southern commenced taking its Kotaneelee production in-kind, rather than having its partners market its share of field production. This change enables the Company to collect its revenue more promptly than under the old method. As a result, the Company expects that it will record four months of net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight revenue for the Kotaneelee property during the fourth quarter of 2004. The additional one month of revenue recognition is expected to increase fourth quarter earnings and is considered to be a one-time event. Oil and natural gas liquid sales from working and royalty interests increased by 19% in the third quarter of 2004 to $79,000, compared to $66,000 in the third quarter of 2003. Proceeds from carried interests decreased significantly when compared with prior periods. The decrease is due to conversion of the Company's Kotaneelee carried interest to a working interest effective May 1, 2004. Interest and other income increased 23% in the third quarter of 2004 to $204,000 from $165,000 in the third quarter of 2003. Included as a reduction in other income in the third quarter of 2004 is $48,000 paid to certain former-employee holders of contingent interests 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. in the Kotaneelee litigation. 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. decreased 24% in the third quarter of 2004 to $789,000 from $1,039,000 in the third quarter of 2003 primarily because of decreases in consultants' expenses and directors' fees and expenses. Salaries and benefits increased 128% due to the addition of a Controller in March 2004 and a President and Chief Executive Officer in April 2004. Fees paid to consultants were lower because of decreased use compared to the same period in 2003. Directors' fees and expenses were lower in 2004 than in 2003 due mainly to the large number of Board meetings in the 2003 period relating to negotiating and settling the Kotaneelee litigation. No general and administrative expenses were capitalized during the period. The Company expects that investor relations Investor relations The process by which the corporation communicates with its investors. costs will increase in the fourth quarter of 2004 due to the proxy printing, mailing and 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 associated with the modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, of corporate governance to be considered by shareholders at special meetings to be held on November 30 and December 15, 2004. Overall legal expenses decreased, when compared with the third quarter of 2003, as a result of settling the Kotaneelee litigation in September 2003. Legal expenses for the second and third quarters would have been still lower, but for the Company's use of legal services legal services n. the work performed by a lawyer for a client. in conjunction with modernizing its corporate governance. The Company has 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). Such expenses will continue and may increase, particularly due to the requirements to document, test and audit the Company's internal controls to comply with Section 404 of the Act and rules adopted thereunder that will apply to the Company for the first time with respect to its annual report for the fiscal year ending December 31, 2005. Lease operating costs operating costs npl → gastos mpl operacionales increased 94% from $198,000 in the third quarter of 2003 to $383,000 in the third quarter of 2004. The increase was mainly due to the conversion to working interest at Kotaneelee effective May 1, 2004. 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 , depreciation and amortization expense increased 84% in the third quarter of 2004 to $796,000 from $433,000 in the third quarter of 2003. The increased depletion rate is mainly due to non- non- word element [L.]not . non- pref. Not: noninvasive. Kotaneelee capital expenditures incurred during the fourth quarter of 2003 and the nine months of 2004 without, as yet, corresponding booked increases in proven reserves. Through the end of the third quarter, all costs incurred in drilling the Kotaneelee L-38 well have been capitalized. Canada Southern has not recorded any depletion expense for the drilling costs of the Kotaneelee L-38 horizontal well that commenced on August 22, 2004. The Company believes that the well represents a major development project, and as the cumulative well costs to September 30, 2004 were $2,664,000 (or approximately 22% 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 September 30, 2004), inclusion of the amounts for depletion purposes would not represent a fair matching of revenues with expenses. Had Canada Southern 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 three and nine months ended September 30, 2004 would have been $557,000 higher. Once drilling of the well is completed, and the results are known, the Company will include all drilling costs in the depletable base. There is no assurance that the Kotaneelee L-38 horizontal well will be successful. If the well is unsuccessful, because of the large capital investment, the Company might 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 could result in a material write-down of its oil and gas properties and equipment. 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 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 109% to $60,000 in the third quarter of 2004 compared with the restated amount of $29,000 in the third quarter of 2003. The increase is mainly due to the addition of liabilities resulting from the settlement of the Kotaneelee litigation. In connection with the settlement, the Company agreed to be responsible for its share of abandonment 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 the Company's 30.67% share of the abandonment liabilities amounted to approximately $2,400,000 (undiscounted). Canada Southern has not included any asset retirement obligations for the Kotaneelee L-38 horizontal well that is currently drilling. The commercial success or failure of the well will be unknown at least until such time as the drilling has been completed. If the well is 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 option expense increased to $230,000 in the third quarter of 2004 compared to $4,000 for the comparable period 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 during the first nine months of this year compared to last year. In 2004, options have been granted to two new employees and two directors, for a total of 230,000 stock options. During the first nine months of 2003, only 50,000 stock options were granted. A foreign exchange loss of $105,000 was recorded in the third quarter of 2004, compared to a gain of $15,000 in the third quarter of 2003 on the Company's U.S. dollar investments. Recent growth in the value of 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 relative to the value of the U.S. dollar requires the company to recognize this exchange loss on its U.S. dollar balances during the third quarter. The Company expects to record further foreign exchange losses or gains during the year, but cannot predict either with certainty. The value of the Canadian dollar was U.S. $.7724 at December 31, 2003 compared to U.S. $.7875 at September 30, 2004. An income tax provision of $503,000 was recorded in the third quarter of 2004, compared to an income tax provision of $9,546,000 during the third quarter of 2003. In 2003, the Company re-filed certain prior year income tax returns. Federal taxation authorities are currently completing their audit of the re-filings, and have not notified the Company of their formal determination. Canada Southern expects that the audit process will be finalized See finalization. during the fourth quarter of 2004, and expects the final outcome of the audit may result in a material increase to fourth quarter earnings. The Company's quarterly report on Form 10-Q for the period ended September 30, 2004 has been filed today with the U.S. Securities and Exchange Commission (SEC) and the Canadian Securities Administrators' 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). This document may be obtained at the SEC's website address of www.sec.gov or at www.sedar.com. A link to the Company's SEC and SEDAR 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 limited voting Limited voting is a voting system in which electors have fewer votes than there are positions available. The positions are awarded to the candidates who receive the most votes absolutely. shares are traded on the NASDAQ SmallCap Market and the Pacific Exchange, Inc. under the symbol "CSPLF," on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. under the symbol "CSW.LV" and on the 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. Any statements in this release that are not historical in nature are intended to be, and are hereby identified as "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. " for purposes of the "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement" under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. Among these risks and uncertainties are uncertainties as to the costs, pricing and production levels from the properties in which the Company has interests, the extent of the recoverable reserves at those properties, and the significant costs associated with the exploration and development of the properties in which the Company has interests, particularly the Kotaneelee field. The Company undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise. The Company does caution, however, that results in 2004 will be significantly lower than in 2003, which were favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. affected by settlement of the Kotaneelee litigation. Comparative, unaudited results for the three and nine-month periods ended September 30, 2004 and 2003 are shown in the following condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. income statement, statement of cash flows, and supplementary information on oil and gas producing activities. Certain figures relating to the three and nine months ended September 30, 2003 have been restated to incorporate changes resulting from the adoption of certain accounting policies. All figures are expressed in Canadian dollars.
CANADA SOUTHERN PETROLEUM LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (DEFICIT)
(Expressed in Canadian dollars)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------------------------------
2004 2003 2004 2003
------------------------------------------------
restated restated
Revenues:
Natural gas sales $3,022,585 $ 689,642 $5,734,203 $2,474,564
Oil and liquid sales 78,922 66,101 220,382 229,615
Proceeds from
carried interests 5,786 1,442,593 3,481,580 7,420,792
Interest and other
income 203,729 165,182 986,644 486,409
------------------------------------------------
Total revenues 3,311,022 2,363,518 10,422,809 10,611,380
------------------------------------------------
Costs and expenses:
General and
administrative 788,846 1,039,126 2,438,495 2,222,142
Lease operating
costs 383,297 197,694 1,044,718 877,299
Depletion,
depreciation and
amortization 796,000 432,644 2,418,000 1,470,424
Asset retirement
obligations
accretion expense 60,000 28,645 180,000 60,303
Stock option
expense 229,500 4,155 496,600 199,645
Foreign exchange
(gain) loss 105,439 (14,648) 9,804 422,166
------------------------------------------------
Total costs and
expenses 2,363,082 1,687,616 6,587,617 5,251,979
------------------------------------------------
947,940 675,902 3,835,192 5,359,401
Settlement of
litigation - 23,727,078 - 23,727,078
------------------------------------------------
Income before income
taxes 947,940 24,402,980 3,835,192 29,086,479
Income taxes (503,000) (9,546,284) (1,664,000)(11,546,242)
------------------------------------------------
Net Income 444,940 14,856,696 2,171,192 17,540,237
Retained earnings
(deficit)
- beginning of
period 2,104,623 (13,988,206) 378,371 (16,671,747)
------------------------------------------------
Retained earnings
- end of period $2,549,563 $ 868,490 $2,549,563 $ 868,490
------------------------------------------------
------------------------------------------------
Net income per share:
Basic $ 0.03 $ 1.03 $ 0.15 $ 1.22
------------------------------------------------
------------------------------------------------
Diluted $ 0.03 $ 1.03 $ 0.15 $ 1.22
------------------------------------------------
------------------------------------------------
Average number of
shares outstanding:
Basic 14,417,770 14,417,770 14,417,770 14,417,770
------------------------------------------------
------------------------------------------------
Diluted 14,425,599 14,431,766 14,421,472 14,423,368
------------------------------------------------
------------------------------------------------
CANADA SOUTHERN PETROLEUM LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Canadian dollars)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------------------------------
2004 2003 2004 2003
------------------------------------------------
restated restated
Cash flows from
operating activities:
Net income $ 444,940 $14,856,696 $ 2,171,192 $17,540,237
------------------------------------------------
Adjustments to
reconcile net income
to net cash provided
from (used in)
operating activities:
Depletion
depreciation, and
amortization 796,000 1,970,644 2,418,000 3,008,424
Future income tax
expense (recovery) 39,000 (873,716) 404,000 576,242
Asset retirement
obligations
accretion expense 60,000 28,645 180,000 60,303
Asset retirement
expenditures (339) (3,070) (1,218) (169,023)
Stock option expense 229,500 4,155 496,600 199,645
------------------------------------------------
Funds provided from
operations 1,569,101 15,983,354 5,668,574 21,215,828
Change in current
assets and
liabilities:
Settlement receivable - (26,157,030) - (26,157,030)
Accounts receivable (929,146) 1,068,841 (22,724) 575,202
Other assets (198,137) (475,137) (81,603) (332,021)
Accounts payable 96,608 32,172 (1,971,730) (164,557)
Accrued liabilities 2,148,333 (1,582,225) 1,098,396 (396,910)
Accrued income taxes
payable 889,416 10,821,303 (8,257,884) 10,821,303
------------------------------------------------
Net cash provided
from (used in)
operations 3,576,175 (308,722) (3,566,971) 5,561,815
------------------------------------------------
Cash flows used in
investing activities:
Additions to oil and
gas properties (3,037,892) (189,150) (5,093,334) (1,281,768)
------------------------------------------------
Net cash used in
investing activities (3,037,892) (189,150) (5,093,334) (1,281,768)
------------------------------------------------
Increase (decrease)
in cash and cash
equivalents 538,283 (497,872) (8,660,305) 4,280,047
Cash and cash
equivalents at the
beginning of period 39,883,798 24,232,372 49,082,386 19,454,453
------------------------------------------------
Cash and cash
equivalents at the
end of period $40,422,081 $23,734,500 $40,422,081 $23,734,500
------------------------------------------------
------------------------------------------------
CANADA SOUTHERN PETROLEUM LTD.
Supplementary Oil and Gas Data
(unaudited)
Nine-month period ended September 30,
Total Sales Volumes ------------------------------------------
(before royalties) 2004 2003 Change % Change
------------------- ----------- ---------- --------- ---------
Natural gas (mcf) 1,174,603 534,248 640,355 120%
Oil and liquids (bbls) 7,776 7,700 76 1%
Carried interest (mcf) 765,278 1,694,506 (929,228) (55%)
Carried interest (bbls) 125 99 26 26%
boe (6 mcf = 1 boe) 331,214 379,258 (48,044) (13%)
boe per day 1,209 1,389 (180) (13%)
mcfe (1 bbl = 6 mcfe) 1,987,287 2,275,548 (288,261) (13%)
mcfe per day 7,253 8,335 (1,082) (13%)
Sales mix:
----------
Natural gas (mcf) 98% 98% - -
Oil and natural gas liquids
(mcfe) 2% 2% - -
Netback analysis for working
and royalty interest sales:
Working and royalty
interests (per mcfe)
Sales $ 5.80 $ 6.13 (.33) (5%)
Royalties (.92) (1.47) .55 (37%)
----------- ---------- ---------
Net Sales 4.88 4.66 .22 5%
Lease operating expenses (.86) (1.51) .65 (43%)
----------- ---------- ---------
Field netback $ 4.02 $ 3.15 .87 28%
----------- ---------- ---------
----------- ---------- ---------
Netback analysis for
carried interest sales:
------------------------
Carried interests (per mcfe)
Sales $ 5.83 $ 6.07 (.24) (4%)
Royalties (.62) (.78) .16 (21%)
Transportation (.37) (.55) .18 (33%)
----------- ---------- ---------
Net Sales 4.84 4.74 .10 2%
Lease operating expenses (.29) (.36) .07 (19%)
Carried interest capital - - - -
----------- ---------- ---------
Field netback $ 4.55 $ 4.38 .17 4%
----------- ---------- ---------
----------- ---------- ---------
Definition of Terms
-------------------
boe = barrel of oil equivalent mcfe = thousand cubic feet
mcf = thousand cubic feet of equivalent
natural gas bbl = barrel of oil
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