Resolute Energy Announces 2003 Second Quarter Results.Business Editors 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--(BUSINESS WIRE)--Aug. 19, 2003 Resolute res·o·lute adj. Firm or determined; unwavering. [Middle English, dissolved, dissolute, from Latin resol Energy Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :RSE RSE Relative Standard Error RSE Responsabilidad Social Empresarial (Spanish) RSE Royal Society of Edinburgh (UK; also seen as TRSE) RSE Rear Seat Entertainment (Volvo) ) announced today financial and operating results for the three and six month periods ended June June: see month. 30, 2003. Indonesian operations, which were sold in July July: see month. , have been reclassified as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . Highlights: -- Sold Indonesian operations in July for US$18.0 million, resulting in net cash proceeds of C$23.5 million after transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). -- Increased production 20% from date of Equatorial equatorial /equa·to·ri·al/ (e?kwah-tor´e-al) 1. pertaining to an equator. 2. occurring at the same distance from each extremity of an axis. acquisition in June 2002, weighted 69% to natural gas -- Experienced management team in place -- Generated strong financial performance from 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. operations -- Drilled 32 (30.8 net) wells with a 97% success rate -- Increased undeveloped land base by 60,000 net acres and secured an additional 25,000 net acres under 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. lease option -- Completed $7.8 million property acquisition at Berry/Kirkpatrick -- Strengthened balance sheet - $8.9 million of net debt, including proceeds of sale, represents less than second quarter cash flow Brian The name Brian (sometimes spelled Bryan) comes from an Irish backround. It is of Celtic origin and its meaning may be "hill" or "strong, noble, and high"[1]. Lemke Lemke is a surname, and may refer to
This page or section lists people with the surname Lemke. , Resolute's President and Chief Executive Officer, commented, "In the year following the Equatorial transaction, Resolute has made considerable progress in our core objectives and business plan. The 'workout' associated with Equatorial is complete. Indonesia Indonesia (ĭn'dənē`zhə), officially Republic of Indonesia, republic (2005 est. pop. 241,974,000), c.735,000 sq mi (1,903,650 sq km), SE Asia, in the Malay Archipelago. has been monetized and the Company is delivering solid growth in our western Canadian operations."
Highlights
Three months ended Six months ended
June 30 June 30
2003 2002 2003 2002
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FINANCIAL ($000s, except
share amounts)
Gross oil and natural
gas revenue - Canada 19,435 1,893 42,212 1,893
Cash flow from Canadian
operations 9,799 132 22,110 (90)
Per share basic ($) 0.17 0.00 0.37 0.00
Per share diluted ($) 0.16 0.00 0.37 0.00
Net income from continuing
operations 4,815 (19,168) 9,768 (19,395)
Per share basic and
diluted ($) 0.08 (0.33) 0.16 (0.33)
Net (loss) income (1,532) (19,235) 3,706 (19,462)
Per share basic and
diluted ($) (0.03) (0.33) 0.06 (0.33)
Capital expenditures (net) 22,494 372 29,188 592
Bank debt and working capital (8,909) (16,693) (8,909) (16,693)
Shares outstanding (000s)
At period end 59,233 58,103 59,233 58,103
Weighted average during
period, basic 59,233 58,029 59,207 58,029
Weighted average during
period, diluted 59,766 59,592 59,751 59,582
OPERATING - CANADA
Production
Natural gas (mmcf/d) 22.6 2.9 22.3 1.5
Oil and natural gas
liquids (bbls/d) 1,689 265 1,674 133
Oil equivalent (boe/d) 5,448 754 5,382 379
Wellhead prices
Natural gas ($/mcf) 6.81 4.08 7.40 4.08
Oil and natural gas
liquids ($/bbl) 34.52 33.35 39.71 33.35
Oil equivalent ($/boe) 39.21 27.61 43.34 27.61
Wells drilled (gross/net)
Natural gas 25 / 24.8 1 / 1.0 30 / 29.8 1 / 1.0
Oil 6 / 5.0 - 6 / 5.0 -
Dry 1 / 1.0 - 3 / 3.0 -
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Total 32 / 30.8 1 / 1.0 39 / 37.8 1 / 1.0
Net success rate 97% 100% 92% 100%
Undeveloped land holdings
gross acres, 000s 312 250
net acres, 000s 214 165
1. The comparative 2002 figures include results of operations from
June 14, 2002 when the Company acquired Equatorial Energy Inc. The
Company did not have material operations prior to this date.
2. The financial and operating summary represents results of
continuing operations unless otherwise noted.
3. Comparative amounts have been restated to conform to current year
presentation.
Strong financial performance from Canadian operations Canadian operations delivered second quarter revenue of $19.4 million, 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 of $9.8 million ($0.16 per share) and net income of $4.8 million, or $0.08 per share. Net income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the included an income tax gain of $1.9 million, reflecting the reduction in future income tax rates for resource companies enacted during the period. A loss of $6.4 million was recorded with respect to discontinued operations, resulting in a net loss for the three-month period of $1.5 million, or $0.03 per share. For the year to date, revenue from continuing operations was $42.2 million, cash flow from operations was $22.1 million ($0.37 per share) and net income was $9.8 million, or $0.16 per share. Including a loss of $6.1 million from discontinued operations, net income was $3.7 million, or $0.06 per share, for the six-month period. In the 2002 period, the Company recorded a net loss of $19.5 million due to a ceiling test write down following the Equatorial transaction. Comparative operating results for 2002 were nominal Trifling, token, or slight; not real or substantial; in name only. Nominal capital, for example, refers to extremely small or negligible funds, the use of which in a particular business is incidental. NOMINAL. Relating to a name. since the Company had no material operations prior to the Equatorial transaction on June 14, 2002. Canadian production up 20% from 2002 Strong financial results were driven by continuing growth in oil and natural gas production and strength in commodity prices. After a relatively modest first quarter capital program, second quarter production averaged 5,448 boe/d, weighted 69% to natural gas. Production in May and June averaged over 5,500 boe/d, up more than 20% from rates at the time of the Equatorial transaction in June 2002. Wet spring conditions delayed our second quarter capital program. We anticipate steady gains in production volumes over the remainder of the year, fuelled by successful drilling in June and an active program through the second half. Commodity prices, although down from the exceptional levels of the first quarter, remained strong in the second quarter. Natural gas prices averaged $6.81/mcf for the three-month period and $7.40/mcf year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. , while oil and liquids realizations averaged $34.52/bbl for the second quarter and $39.71/bbl for the first half. As Resolute's production remains unhedged, the Company has received the full benefit of the high price environment in 2003. $50 million capital program accelerates in second quarter We accelerated our 2003 capital program in the second quarter and are on track to reach $50 million of capital expenditures for the year. Resolute invested $22.4 million in the second quarter, up from $6.7 million in the first quarter, bringing year-to-date capital expenditures to $29.1 million. Highlights of the second quarter capital program included: -- A $7.8 million property acquisition in the Berry/Kirkpatrick area in April, which added 300 boe/d of production and 987,000 boe of established reserves at a cost of $7.90/boe. The acquisition of 16,700 net acres of undeveloped land augmented our existing Berry Berry, former province, France Berry (bĕrē`), former province, central France. Bourges, the capital, and Châteauroux are the chief towns. core area and set up additional drilling and recompletion activity in the area over the remainder of 2003 and 2004. -- Land and seismic expenditures of $3.6 million to further augment aug·ment v. aug·ment·ed, aug·ment·ing, aug·ments v.tr. 1. To make (something already developed or well under way) greater, as in size, extent, or quantity: our significant inventory of exploration and development projects. -- Drilling 32 (30.8 net) wells, bringing the total for the six-month period to 39 (37.8 net) wells, with a 92% success rate. Second quarter drilling was concentrated in our southern core areas. At Berry/Kirkpatrick, we drilled three (3.0 net) successful Mannville gas wells. We are also using our position in the area as a springboard for new pool exploration generated from 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. leads and further defined by seismic activities. In the second half, we plan to drill 10-13 exploration wells for Mannville and Banff Banff, former county, Scotland Banff, former county, Scotland: see Banffshire. Banff (bămf, bănf), town (1991 pop. 5,688), SW Alta., Canada, in the Rocky Mts., on the Bow River and the Trans-Canada Highway. targets. The drilling phase of our 53-well 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. gas project at Winnifred was completed in July. The majority of the wells have been completed and are being tied in to our gathering system. In addition to the shallow gas project, we are drilling two deeper wells in Winnifred, targeting Bow Island gas, Mannville gas and Sawtooth saw-toothed adj. 1. Having teeth resembling the teeth of a saw: saw-toothed sharks. 2. often saw·tooth oil. Exploration activities in the second quarter yielded new discoveries in each of our focus areas, including light oil discoveries in the southern and northern regions and three natural gas discoveries in the central region. While our exploration programs are in their early stages, we are encouraged by the results to date. We plan to drill a further 10-15 exploration tests in these three focus areas during the second half, to depths of up to 2,400 metres. The main building block of our exploration strategy is land. We continue to aggressively build our undeveloped land base, with acquisitions of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 60,000 net acres in the first half. In addition, we secured 25,000 net acres of freehold land under option. In the third quarter, we plan to drill the first exploration well on the freehold option block in a new play area within the southern region. Indonesia sale completes exit from international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. On July 23, we successfully closed the sale of our Indonesian subsidiaries, receiving gross cash proceeds of US$18.0 million (C$24.8 million). The sale comprised the Company's Technical Assistance Contracts at Sembakung and Tanjung Lontar n. 1. A tall fan palm (Borassus flabellifer) of Africa and India and Malaysia yielding a hard wood and sweet sap that is a source of palm wine and sugar; the palmyra ltname>; - its leaves are used for thatching and weaving. Noun 1. , as well as associated working capital of approximately US$2.2 million. Estimated transaction costs of C$1.3 million for severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and other costs associated with selling the international operations have been accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. , resulting in net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of approximately $23.5 million and a loss on the sale of $6.8 million. No income taxes are payable with respect to the transaction. Except for certain accrued transaction costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our expatriate Expatriate An employee who is a U.S. citizen living and working in a foreign country. employees, Resolute has provided no surviving representations, warranties warranties, n.pl the details of a contract; considered less important than the conditions. Whereas the penalty for breach of conditions is the termination of the contract, the penalty for breach of warranties is payment of damages to the innocent party. or indemnities to the buyer. Most important, the sale results in a complete exit from Indonesia, fulfilling a key objective we identified at the time of the Equatorial transaction. We worked persistently per·sis·tent adj. 1. Refusing to give up or let go; persevering obstinately. 2. Insistently repetitive or continuous: a persistent ringing of the telephone. 3. and diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d toward this objective over the past year and, in light of the difficult environment we faced in that country, we believe the net proceeds represent excellent value for our shareholders. Positioned for further growth Our exploration and development strategies are on track and generating positive results. We have a good balance in our portfolio of opportunities between exploration and development projects in each of our northern, central and southern focus areas. Our Canadian asset base is growing and we are benefiting from our concentration on natural gas. We expect to generate year-over-year production growth exceeding 20% in the second half of the year based on our current programs. The net proceeds from Indonesia provide a financial catalyst catalyst, substance that can cause a change in the rate of a chemical reaction without itself being consumed in the reaction; the changing of the reaction rate by use of a catalyst is called catalysis. for new opportunities to expand our Canadian assets, without shareholder dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. . At June 30, our debt, net of working capital, was $8.9 million. Our line of credit amounts to $50 million and can be comfortably increased to cover potential acquisition or developmental expenditures. Our management and professional team is in place and strongly aligned with our shareholders. The recent appointments of David Elgie as Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. and Dean Setoguchi as Chief Financial Officer complete our senior management group. At the same time, we want to express our sincere thanks to Mike Wilhelm Mike Wilhelm Mike Wilhelm is likely the greatest living unheralded guitarist of the 60s era. He started his career as the backup guitarist for the Chambers Brothers after having studied guitar with Brownie McGee. , our former Vice President Finance and Tony Edwards, Manager of International Exploration. Both of these gentlemen are leaving the Company to pursue new opportunities after providing critical experience and support over the past year in managing and selling Indonesia. Mr. Lemke concluded: "A year ago, we completed our first transaction - the Equatorial acquisition. Today, the challenges of the acquisition have been resolved. Our operations in 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 are growing and we have an expanding inventory of exploration prospects." 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 Management's discussion and analysis of financial condition and the results of operations ("MD&A") should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the unaudited interim financial statements for the three months and six months ended June 30, 2003 and related notes contained herein, as well as the Company's annual MD&A and audited consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge for the years ended December December: see month. 31, 2002 and 2001, together with the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. notes. These are contained on pages 14 through 36 of the Company's 2002 annual report. The calculation of barrels of oil equivalent (boe) is based on a conversion rate of six thousand cubic feet of natural gas per barrel barrel: see English units of measurement. of oil (6 mcf equals 1 bbl). The reader should be aware that historical results are not necessarily indicative indicative: see mood. of future performance. Comparability of Prior Period Results The comparable financial and operating results for 2002 include the 16-day period of operations from the closing date of the Equatorial Energy Inc. ("Equatorial") transaction on June 14, 2002. Prior to this time, Resolute did not have material assets or operations. Some variances between 2003 and 2002 reporting periods will appear disproportionate dis·pro·por·tion·ate adj. Out of proportion, as in size, shape, or amount. dis  pro·por due to the limited period of operations during the
first six months of 2002. The distorting effect on the comparative
analysis is common throughout the MD&A. Therefore, comparisons
against the prior periods are discussed only where they contribute to
the reader's understanding of the Company's operations since
the transaction. Comparisons between the first and second quarters of
2003 are made where the analysis is meaningful.Accounting for Sale of Indonesian Operations Current and comparative amounts have been restated to account for the sale of Indonesian operations ("Equatorial Energy (Indonesia) Inc.") as discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: and held for sale at June 30, 2003. The accompanying table provides a summary of the results of these discontinued operations for the periods ended June 30, 2003 and 2002. (Refer to note 3 of the consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: interim financial statements for further details of the transaction.)
Discontinued Operations - Three months ended Six months ended
Summary of Results June 30 June 30
2003 2002 2003 2002
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Production - oil (bbls/d) 2,139 281 2,296 141
Financial ($000s)
Revenue 7,180 926 17,661 926
Cash flow 1,685 535 3,944 535
Income (loss) 447 (67) 732 (67)
Capital expenditures 2,296 556 4,240 556
The focus of this MD&A is on providing a detailed analysis of the Canadian financial and operating results.
Continuing Operations - Canada
Production
Three months ended Six months ended
June 30 June 30
2003 2002 2003 2002
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Natural gas (mcf/d) 22,556 2,935 22,252 1,476
Oil (bbls/d) 1,434 219 1,440 110
NGLs (bbls/d) 255 46 234 23
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Total (boe/d) @ 6:1 5,448 754 5,382 379
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Following the Equatorial transaction in June 2002, production in that month averaged 4,600 boe/d. Successful drilling has contributed to a 20% increase in production volumes over the past year. Between the first and second quarters this year, production additions from drilling and the Berry acquisition contributed to the growth and offset natural declines for the quarter. Average production rose only modestly as most of the drilling and completion activity for the quarter was conducted in June after relatively long delays from spring break-up break-up noun 1. separation, split, divorce, breakdown, ending, parting, breaking, splitting, wind-up, rift, disintegration, dissolution, termination noun 2. . As a result, most of the production additions from successful drilling during the second quarter will not be on stream until the third and fourth quarters.
Oil and Natural Gas Revenue
Three months ended Six months ended
($000s) June 30 June 30
2003 2002 2003 2002
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Natural gas sales 13,973 1,068 29,824 1,068
Oil sales 4,546 658 10,385 658
NGL sales 698 146 1,518 146
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19,217 1,872 41,727 1,872
Royalty income 218 21 485 21
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Total P&NG sales 19,435 1,893 42,212 1,893
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Three months ended Six months ended
Average Sales Price June 30 June 30
2003 2002 2003 2002
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Natural gas ($/mcf) 6.81 4.08 7.40 4.08
Oil ($/bbl) 34.86 33.14 39.88 33.14
NGL ($/bbl) 30.08 34.59 35.85 34.59
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Total ($/boe) 39.21 27.61 43.34 27.61
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Oil and natural gas revenue was $19.4 million for the second quarter compared with $22.8 million in the first quarter of 2003. Production increases were more than offset by lower prices realized during the most recent quarter. Natural gas prices decreased to $6.81/mcf in the second quarter from $8.13/mcf during the first three months of the year while oil and natural gas liquids prices decreased to $34.52/bbl from $45.05/bbl between the first and second quarters this year. The softer oil prices were attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to lower benchmark A performance test of hardware and/or software. There are various programs that very accurately test the raw power of a single machine, the interaction in a single client/server system (one server/multiple clients) and the transactions per second in a transaction processing system. prices for crude oil and also a strengthened Canadian / U.S dollar exchange rate. Commodity prices are expected to trend lower during the second half of 2003, particularly for crude oil. Management also expects 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 to remain strong relative to its U.S. counterpart counterpart n. in the law of contracts, a written paper which is one of several documents which constitute a contract, such as a written offer and a written acceptance. , resulting in lower realized oil prices.
Royalties
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($000s) June 30 June 30
2003 2002 2003 2002
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Crown 3,094 333 6,560 333
Freehold, GORR 1,126 71 2,504 71
ARTC (90) (13) (178) (13)
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Total royalties 4,130 391 8,886 391
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Average Royalty Rate
(average % of sales)
Crown 16% 17% 16% 17%
Freehold, GORR 6% 4% 6% 4%
ARTC -1% -1% -1% -1%
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Total royalties 21% 20% 21% 20%
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Overall, the Company's average royalty rate has remained constant at
21% of revenues. Future royalty rates will depend on a number of
factors that include commodity prices, type of mineral lease (Crown
versus freehold), ARTC eligibility and level of gross overriding
royalties relating to farm-ins.
Operating Expenses
Three months ended Six months ended
($000s, except per boe) June 30 June 30
2003 2002 2003 2002
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Operating expense (gross) 3,915 541 7,506 541
Overhead recoveries (1) (2) (1) (2)
Processing income (147) (5) (242) (5)
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Operating expense (net,
as reported) 3,767 534 7,263 534
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Operating expense
per boe (net) 7.60 7.79 7.46 7.79
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Operating costs operating costs npl → gastos mpl operacionales decreased to $7.60/boe from $7.79/boe in the second quarter last year. The lower operating cost profile reflects the growth of lower cost production from new drilling and the benefit of remedial maintenance A repair service that is required due to a malfunction of the product. Contrast with preventive maintenance. activities undertaken following the Equatorial acquisition. Management is evaluating and implementing strategies to further reduce unit operating costs, including increased control of facilities, developing new projects that have lower operating costs and rationalizing properties with high lifting costs. Management does not expect these strategies to have any significant impact on results until 2004.
General and Administrative Expense (G&A)
Three months ended Six months ended
($000s, except per boe) June 30 June 30
2003 2002 2003 2002
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G&A expense (gross) 2,019 800 3,978 1,132
Overhead recoveries (265) (3) (379) (24)
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1,754 797 3,599 1,108
Allocated to production expense (34) (8) (68) (8)
Allocated to capital projects (502) (64) (1,154) (64)
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G&A expense (net) 1,218 725 2,377 1,036
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G&A expense per boe (net) 2.46 10.58 2.44 15.11
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G&A expenses during the most recent quarter were $2.46/boe, relatively unchanged from the first quarter of 2003. While the sale of the Indonesian operations in July is expected to result in reduced administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. , the Company anticipates that G&A expenses for the second half of 2003 will be similar to the first half. Management remains focused on efforts to reduce G&A. Interest Expense Interest expense was $0.3 million during the second quarter of 2003, consistent with the first quarter of 2003. Net proceeds of $23.5 million from the sale of the Company's Indonesian operations in July were used to reduce debt. Thus, interest expense is anticipated to decline in the second half of the year.
Depletion, Depreciation and Amortization (DD&A)
Three months ended Six months ended
($000s) June 30 June 30
2003 2002 2003 2002
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Depletion and depreciation 4,266 813 8,555 819
Site restoration 311 78 505 78
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4,577 891 9,060 897
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Cost per boe
Depletion and depreciation 8.61 11.85 8.78 11.94
Site restoration 0.63 1.14 0.52 1.14
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9.24 12.99 9.30 13.08
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The DD&A expense for the second quarter of 2003 was $9.24/bbl, which is in line with first quarter rates of $9.37/bbl. The effect of the acquisition of Equatorial Energy Inc. resulted in an upward valuation adjustment of petroleum and natural gas interests of approximately $41.5 million. Due to very low natural gas prices at the end of June 2002, the Company determined that 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. had occurred and, accordingly, this impairment resulted in a property 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 $33.0 million before tax. Income Taxes For the three months ended June 30, 2003, Resolute recorded $0.2 (six months - $1.0) million in current income taxes, which includes $0.1 (six months - $0.2) million of large corporations tax and current income taxes of $0.1 (six months - $0.8) million. Given the current high commodity prices levels, it is expected that Resolute will earn significant taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. to require the payment of current income taxes. The level of current taxes that Resolute will pay in 2003 will depend on a number of factors including commodity pricing, production levels, corporate expense levels and both the type and amount of capital expenditures incurred during the year. The Company recorded a future income tax expense of $0.4 (six months - $3.3) million for the three months ended June 30, 2003. Future income taxes are relatively low for the quarter as a result of a $1.9 million adjustment to opening balances to reflect recently legislated lower corporate tax rates for resource companies. For the three and six month periods ending June 30, 2002, Resolute recorded a future income tax benefit of $14.6 million, which relates primarily to the tax benefit associated with the $33.0 million write-down of petroleum and natural gas assets in 2002. Net Income Net income from continuing operations was $4.8 million ($0.08/share diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ) and $9.8 million ($0.16/share diluted), respectively, for the three and six-month periods ended June 30, 2003. Net income includes a future tax benefit of $1.9 million, which reflects lower tax rates that were recently enacted. For the three and six month periods for 2002, losses from continuing operations in Canada were $19.2 and $19.4 million respectively. The losses in the previous periods arose from the $33 million write down in the book value of properties offset by a $14.5 million future tax benefit. Including discontinued operations, the Company recorded a loss for the quarter of $1.5 million and income of $3.7 million for the first half of the year. The loss and income for the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. periods include a $6.8 million loss on the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of Indonesia. This loss has been netted against income from discontinued operations. The corresponding losses for the three and six month periods in 2002 were $19.2 and $19.5 million, respectively. The amounts include a loss from discontinued operations of $0.07 million for both periods.
Netbacks
Three months ended Six months ended
($/boe) June 30 June 30
2003 2002 2003 2002
---------------------------------------------------------------------
Sales price 38.77 27.30 42.84 27.30
Royalty income 0.44 0.31 0.50 0.31
---------------------------------------------------------------------
Total sales 39.21 27.61 43.34 27.61
Royalties (8.34) (5.70) (9.13) (5.70)
Operating expenses (7.60) (7.79) (7.46) (7.79)
---------------------------------------------------------------------
Operating netback 23.27 14.12 26.75 14.12
Administrative costs (2.46) (10.58) (2.44) (15.11)
Interest (net) (0.58) 0.17 (0.54) 1.49
Current income taxes (0.47) (1.80) (1.07) (1.81)
---------------------------------------------------------------------
Corporate netback 19.76 1.91 22.70 (1.31)
---------------------------------------------------------------------
---------------------------------------------------------------------
Operating netbacks Operating Netback A measure of oil and gas sales net of royalties, production and transportation expenses. This is a non-GAAP measure used specifically in the oil and gas industry as a benchmark to compare performance between time periods, operations and competitors. for the three and six months ended June 30, 2003 were substantially higher than the $14.12/boe netback net·back n. Linkage of the price of crude oil to the market price of products refined from it. realized for the comparative periods in 2002, as a result of higher commodity prices to date in 2003. Corporate netbacks were significantly higher than the previous periods due to high per barrel administrative costs in the prior periods. In 2002, full year administrative costs were allocated over a shortened short·en v. short·ened, short·en·ing, short·ens v.tr. 1. To make short or shorter. 2. 16-day period of operations and when expressed on a barrel of oil equivalent The barrel of oil equivalent (bboe, sometimes BOE) is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU [1]. 5. basis are high.
Capital Expenditures
Three months ended Six months ended
($000s) June 30 June 30
2003 2002 2003 2002
---------------------------------------------------------------------
Land 2,997 72 4,418 227
Geological and geophysical 642 30 1,591 35
Drilling & completions 8,091 162 10,993 172
Facilities and equipment 2,278 52 2,731 52
Other 652 24 1,571 74
Property acquisitions 7,834 32 7,884 32
---------------------------------------------------------------------
22,494 372 29,188 592
---------------------------------------------------------------------
---------------------------------------------------------------------
Resolute continued to build its undeveloped land position with a $3.0 million investment made during the most recent quarter, primarily through successful bidding at Crown land sales. In addition to significant farm-in option lands, the Company acquired 34,430 net acres of land at Crown sales for the quarter and over 60,000 net acres year to date. Drilling and completions were relatively slow during April and May due to spring break-up in our core areas, however, in June drilling activity picked up significantly. Resolute drilled a total of 32 (30.8 net) wells during the quarter with a 97% success rate. The drilling program resulted in 25 (24.8 net) gas wells, six (5.0 net) oil wells and one (1.0 net) dry and abandoned well. The Company also invested $7.8 million to acquire land, production, facilities and reserves, which are complementary to the Berry core area located in southern Alberta Southern Alberta is a region located in the Canadian province of Alberta. As of the year 2004, the region's population was approximately 272,017[1][2]. . No properties were disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. of during the periods. Liquidity and Capital Resources The Company's debt and working capital position improved significantly with the sale of the Indonesian operations on July 23, 2003, for net cash proceeds of $23.5 million. At June 30, 2003, Resolute had net debt of $8.9 million (net of disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of proceeds), which was less than cash flow from operations in the second quarter. The Company's $50 million credit facility held with major Canadian chartered banks Chartered Bank A financial institution whose primary roles are to accept and safeguard monetary deposits from individuals and organizations, and to lend money out. The details vary from country to country, but usually a chartered bank in operation has obtained government permission will not be affected by the disposition of Indonesian operations. Capital expenditures in Canada, excluding further acquisitions, are expected reach $50-55 million for the year. The second half capital program will be funded primarily from cash flow, leaving significant financial capacity through unutilized credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities . Notice of Conference Call Resolute will host a conference call to discuss these results on Wednesday Wednesday: see week. , August 20, 2003 at 11:00 a.m. ET, 9:00 a.m. MT. Participants may access the call, toll-free at 1-877-888-4483 or direct at 416-695-9702, reservation A clause in a deed of real property whereby the grantor, one who transfers property, creates and retains for the grantor some right or interest in the estate granted, such as rent or an Easement ,a right of use over the land of another. number T438954E. This call will also be webcast and can be accessed from Resolute's website. A telephone replay of the call will be available through November November: see month. 20, 2003 by dialing toll-free at 1-866-518-1010 or 416-252-1143. 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. The information contained herein contains forward looking statements and assumptions, such as those relating to results of operations and financial condition, capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. , financing sources, commodity prices, costs of production and the magnitude magnitude, in astronomy, measure of the brightness of a star or other celestial object. The stars cataloged by Ptolemy (2d cent. A.D.), all visible with the unaided eye, were ranked on a brightness scale such that the brightest stars were of 1st magnitude and the of oil and gas reserves. By their nature, forward-looking statements are subject to numerous risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, actual results may differ materially from those predicted. The forward-looking statements contained herein are as of August 19, 2003 and are subject to change after this date. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise im·pre·cise adj. Not precise. im pre·cise ly adv. and, as such, undue
reliance should not be placed on forward-looking statements. Resolute
disclaims any intention or obligation to update or revise these
forward-looking statements, whether as a result of new information,
future events or otherwise.Non-GAAP Measures Cash flow, which is expressed before changes in non-cash working capital, is used by the Company to analyze an·a·lyze v. 1. To examine methodically by separating into parts and studying their interrelations. 2. To separate a chemical substance into its constituent elements to determine their nature or proportions. 3. operating performance, leverage and liquidity. Income from operations, which represents net income excluding gains or losses on foreign currency translation and on disposal of assets, is used by the Company to evaluate operating performance. Operating netback, which is calculated as average unit sales unit sales Sales measured in terms of physical units rather than dollars. Unit sales data are often used by financial analysts when evaluating the health of a company. price less 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. and 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. , and corporate netback, which deducts administrative and interest expense and current income tax, represent the cash margin for every barrel of oil equivalent sold. Cash flow, income from operations and netback do not have any standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. meaning prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). by Canadian Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) and therefore may not be comparable with the calculation of similar measure for other companies. About Resolute Resolute Energy Inc. is a growing, independent oil and gas company, actively pursuing petroleum and natural gas exploration, development and production in western Canada
Western Canada, commonly referred to as the West . Based in Calgary, 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. , Resolute's common shares (RSE) trade on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. .
Consolidated Balance Sheets
($000s) June 30 December 31
2003 2002
---------------------------------------------------------------------
(unaudited) (restated note 3)
Assets
Current
Cash 169 1,539
Accounts receivable 9,960 9,345
Assets held for sale (note 3) 47,368 55,191
---------------------------------------------------------------------
57,497 66,075
Petroleum and natural gas
interests (note 4) 132,724 112,156
---------------------------------------------------------------------
190,221 178,231
---------------------------------------------------------------------
---------------------------------------------------------------------
Liabilities
Current
Accounts payable and
accrued liabilities 17,278 15,942
Liabilities related to assets
held for sale (note 3) 23,870 25,267
---------------------------------------------------------------------
41,148 41,209
Long-term debt (note 5) 25,258 20,775
Future income taxes (note 9) 13,796 10,514
Site restoration and abandonment 3,563 3,122
Shareholders' equity
Share capital (notes 6 and 7) 118,348 118,209
Deficit (11,892) (15,598)
---------------------------------------------------------------------
106,456 102,611
---------------------------------------------------------------------
190,221 178,231
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes.
Consolidated Statements of Operations and Deficit
(unaudited)
($000s, except per Three months ended Six months ended
share amounts) June 30 June 30
2003 2002 2003 2002
---------------------------------------------------------------------
Continuing Operations - Canada (restated (restated
note 3) note 3)
Revenue
Gross oil and natural
gas revenue 19,435 1,893 42,212 1,893
Royalties (4,130) (391) (8,886) (391)
---------------------------------------------------------------------
15,305 1,502 33,326 1,502
---------------------------------------------------------------------
Expenses
Operating 3,767 534 7,263 534
Administrative 1,218 725 2,377 1,036
Interest - long term debt 287 85 535 85
Depletion, depreciation and
amortization 4,577 891 9,060 897
Write-down of petroleum and
natural gas interests - 33,000 - 33,000
Interest income - (97) (6) (187)
---------------------------------------------------------------------
9,849 35,138 19,229 35,365
---------------------------------------------------------------------
Income (loss) before
income taxes 5,456 (33,636) 14,097 (33,863)
Income taxes
Current income taxes 234 124 1,047 124
Future income taxes (note 9) 407 (14,592) 3,282 (14,592)
---------------------------------------------------------------------
641 (14,468) 4,329 (14,468)
---------------------------------------------------------------------
Net income (loss) from
continuing operations 4,815 (19,168) 9,768 (19,395)
Discontinued Operations
Loss from discontinued
operations (note 3) (6,347) (67) (6,062) (67)
---------------------------------------------------------------------
Net (loss) income (1,532) (19,235) 3,706 (19,462)
Deficit, beginning of period (10,360) (279) (15,598) (52)
---------------------------------------------------------------------
Deficit, end of period (11,892) (19,514) (11,892) (19,514)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income (loss) per share from
continuing operations - basic
and diluted (notes 3 and 8) 0.08 (0.33) 0.16 (0.33)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net (loss) income per share
- basic and diluted (note 8) (0.03) (0.33) 0.06 (0.33)
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes.
Consolidated Statements of Cash Flow
(unaudited)
($000s) Three Months Six Months
Ended June 30 Ended June 30
2003 2002 2003 2002
---------------------------------------------------------------------
(restated (restated
note 3) note 3)
Cash flows from the following:
Operating activities
Net income (loss) for
the period (1,532) (19,235) 3,706 (19,462)
Items not affecting cash:
Write-down of petroleum and
natural gas interests - 33,000 - 33,000
Depletion, depreciation
and amortization 4,577 891 9,060 897
Future income taxes 407 (14,592) 3,282 (14,592)
Loss from discontinued
operations (note 3) 6,347 67 6,062 67
---------------------------------------------------------------------
Cash flow from operations 9,799 131 22,110 (90)
Changes in non-cash
working capital 6,816 1,068 722 939
---------------------------------------------------------------------
16,615 1,199 22,832 849
---------------------------------------------------------------------
Financing activities
Issue of common shares
(net of issue expenses) - 39,269 139 39,438
Long-term debt - drawdown of
loan facility 6,130 - 4,483 -
Repayment of Equatorial
bank facility - (37,900) - (37,900)
(Advances to) repayments from
discontinued operations (243) - 364 -
---------------------------------------------------------------------
5,887 1,369 4,986 1,538
---------------------------------------------------------------------
Investing activities
Purchase of Equatorial
Energy Inc. - (18,296) - (18,296)
Petroleum and natural
gas expenditures (22,494) (372) (29,188) (592)
---------------------------------------------------------------------
(22,494) (18,668) (29,188) (18,888)
---------------------------------------------------------------------
Net increase (decrease) in cash 8 (16,100) (1,370) (16,501)
Cash, beginning of period 161 17,607 1,539 18,008
---------------------------------------------------------------------
Cash, end of period 169 1,507 169 1,507
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes.
Notes to Consolidated Financial Statements
(unaudited)
For the Three and Six Month Periods Ended June 30, 2003 and 2002
(tabular amounts in thousands of dollars, except share data
information)
1. Description of business Resolute Energy Inc. and its subsidiaries (the "Company") is in the business of exploration, development and production of petroleum and natural gas interests. On November 14, 2002, the name of the Company was changed from Equatorial Energy Inc. ("Equatorial") to Resolute Energy Inc. On June 14, 2002, Equatorial acquired all of the shares of Resolute Investments Inc. ("Resolute"), a private corporation for shares. The transaction has been accounted for as a reverse takeover A reverse takeover occurs when a publicly-traded smaller company acquires ownership of a larger company. It typically requires reorganization of capitalization of the acquiring company. ("the Equatorial acquisition"). Accordingly, the results of operations include those of Equatorial for the 16-day period ending June 30, 2002 and the six month period ending June 30, 2003. 2. Significant accounting policies and basis of presentation The consolidated interim financial statements are presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian generally accepted accounting principles and are expressed in Canadian dollars. On July 23, 2003, the company completed the sale of its Indonesian subsidiary. Accordingly, these consolidated financial statements include the accounts of the Company and its remaining wholly-owned subsidiaries, Resolute Investments Inc., Equatorial Energy (International) Inc., and Equatorial Energy Trading Corp. The financial position and results of operations of the Indonesian subsidiaries previously as reported in the Company's annual audited consolidated financial statements for the years ended December 31, 2002 and 2001 and previous unaudited quarterly statements are included in discontinued operations. In all other respects these interim financial statements and the notes thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. have been prepared on the same basis as the Corporation's audited consolidated financial statements for the years ended December 31, 2002 and 2001, and should be read in conjunction with those statements, as contained on pages 24 through 36 of the Company's 2002 annual report. 3. Discontinued operations and subsequent event The Company has made a strategic decision to focus its growth plans in western Canada. Consistent with this strategy, the Company undertook the sale of its Indonesian operations. On July 23, 2003, the Company completed the sale of the shares of its Indonesian subsidiary, Equatorial Energy (Indonesia) Inc. for gross proceeds of $24.8 million less $1.3 million of estimated transaction costs for net cash proceeds of $23.5 million. As a result, the Company realized a $6.8 million loss on the sale of shares, which was recorded at June 30, 2003. Gross sales proceeds (US$18 million) 24,835 Transaction costs (1,337) --------------------------------------------------------------------- Net proceeds 23,498 Book value of Indonesia 30,292 --------------------------------------------------------------------- Loss on sale of Indonesian subsidiary (6,794) --------------------------------------------------------------------- The net proceeds were used to repay the Company's revolving bank facility in Canada. The Company restated its current and prior period financial statements to reflect the Indonesian net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. as 'held for sale' and to separately classify clas·si·fy tr.v. clas·si·fied, clas·si·fy·ing, clas·si·fies 1. To arrange or organize according to class or category. 2. To designate (a document, for example) as confidential, secret, or top secret. the operating results of these operations and the loss indicated by the subsequent sale of those assets from the operating results of continuing operations. Details of the Indonesian assets held for sale and the restated liabilities are as follows:
June 30 December 31
2003 2002
---------------------------------------------------------------------
Current assets 10,510 17,778
Petroleum and natural gas interests 36,858 37,413
---------------------------------------------------------------------
Total assets held for sale 47,368 55,191
---------------------------------------------------------------------
---------------------------------------------------------------------
Current liabilities 14,490 14,305
Future income taxes 9,380 10,962
---------------------------------------------------------------------
Total liabilities held for sale 23,870 25,267
---------------------------------------------------------------------
---------------------------------------------------------------------
The loss from discontinued operations disclosure in the Consolidated
Statement of Operations and Deficit includes the following:
Three months ended Six months ended
June 30 June 30
2003 2002 2003 2002
---------------------------------------------------------------------
Revenue 7,180 926 17,661 926
---------------------------------------------------------------------
---------------------------------------------------------------------
Income (loss) before income taxes 1,174 1 2,464 1
Income taxes 727 68 1,732 68
---------------------------------------------------------------------
Net income (loss) from
discontinued operations 447 (67) 732 (67)
Loss on subsequent sale of
Indonesian operations (6,794) - (6,794) -
---------------------------------------------------------------------
Loss from discontinued operations (6,347) (67) (6,062) (67)
---------------------------------------------------------------------
---------------------------------------------------------------------
The loss on sale of Indonesian operations represents a capital loss for tax purposes. The possible future tax benefit has not been recognized. The Indonesian operations, which have been disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). as assets held for sale and restated as discontinued operations, comprised the Indonesian segment. Continuing operations include the Canadian segment only.
4. Petroleum and natural gas interests
Accumulated
Depletion and
June 30, 2003 Cost Depreciation Net Book Value
---------------------------------------------------------------------
Canadian petroleum and natural
gas interests 181,988 (49,743) 132,245
Other assets 732 (253) 479
---------------------------------------------------------------------
182,720 (49,996) 132,724
---------------------------------------------------------------------
---------------------------------------------------------------------
December 31, 2002
Canadian petroleum and natural
gas interests
(restated note 3) 152,897 (41,324) 111,573
Other assets 699 (116) 583
---------------------------------------------------------------------
153,596 (41,440) 112,156
---------------------------------------------------------------------
---------------------------------------------------------------------
As at June 30, 2003, unproved Canadian properties with 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. costs of $16,500,000 (December 31, 2002 - $12,000,000) were not subject to 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 . Also at June 30, 2003, the Company had provided for $3,563,000 of approximately $11,700,000 in future dismantlement dis·man·tle tr.v. dis·man·tled, dis·man·tling, dis·man·tles 1. a. To take apart; disassemble; tear down. b. and site restoration costs (December 31, 2002 - $3,122,000 and $10,488,000, respectively). The Company capitalized overhead expenses of $1,154,000 and $64,000 relating to petroleum and natural gas exploration and development activities for the six-month periods ended June 30, 2003 and 2002, respectively. 5. Long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. As at June 30, 2003, the Company has drawn $24,742,000 (December 31, 2002 - $20,775,000) on a revolving $50,000,000 loan facility with a syndicate Syndicate organized crime unit throughout major cities of the United States. [Am. Hist.: NCE, 2018] See : Gangsterism of Canadian chartered banks.
6. Share capital
(a) Authorized:
Unlimited number of common shares
Unlimited number of preferred shares
(b) Issued:
Number Consideration
000s $000s
---------------------------------------------------------------------
Balance December 31, 2002 59,155 115,404
Issued for cash:
Exercise of stock options 78 139
---------------------------------------------------------------------
Balance June 30, 2003 59,233 115,543
Share purchase warrants:
Balance June 30, 2003 and December 31, 2002 3,715 2,805
---------------------------------------------------------------------
Balance - common shares and warrants
June 30, 2003 118,348
---------------------------------------------------------------------
---------------------------------------------------------------------
The share purchase warrants were issued in connection with the Equatorial acquisition, have an exercise price of $2.08 per common share and an expiry date expiry date expire n → date f d'expiration; (on label) → à utiliser avant ... expiry date expire n → Ablauftermin m of December 14, 2005. (C) Performance warrants: The performance warrants were issued to certain Resolute founding shareholders as part of its initial capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. in 2001. These warrants expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. on December 10, 2008. Performance warrants outstanding at June 30, 2003 were as follows:
Number of Exercise
Warrants Price
----------------------
266,525 2.16
266,525 2.70
399,786 3.24
533,050 3.78
666,309 4.32
----------------------
2,132,195 3.51
----------------------
----------------------
7. Stock based compensation (a) Stock option plan The Company has established a stock option plan whereby officers, directors, employees and service providers may be granted options to purchase Common Shares at a fixed price not less than the market value of the stock on the day preceding the grant date. Initial grants vest at the rate of one-third per year after the first year. Subsequent to initial grants, an annual allotment A portion, share, or division. The proportionate distribution of shares of stock in a corporation. The partition and distribution of land. ALLOTMENT. Distribution by lot; partition. Merl. Rep. h.t. is determined and this vests after 3 years. All options expire two years after the date 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: to a maximum term of six years. At June 30, 2003, shareholders have authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: 5,093,375 stock options or 8.6% of common shares outstanding at the end of the period, of which 3,467,998 are outstanding and 1,004,875, are available for issuance.
The following tables summarize information about the Company's stock
options outstanding at June 30, 2003:
Weighted
Number of Average
Options Exercise Price
---------------------------------------------------------------------
Outstanding at December 31, 2002 3,551,878 2.16
Granted 664,000 2.29
Cancelled/Expired (669,880) 2.22
Exercised (78,000) 1.77
---------------------------------------------------------------------
Outstanding at June 30, 2003 3,467,998 2.18
---------------------------------------------------------------------
---------------------------------------------------------------------
Exercisable at June 30, 2003 924,589 2.04
---------------------------------------------------------------------
---------------------------------------------------------------------
Remaining
Options Contractual Life Options
Exercise Price Outstanding (Years) Exercisable
---------------------------------------------------------------------
1.40 - 1.85 182,250 1.2 182,250
2.10 - 2.16 1,951,748 4.5 693,589
2.20 - 2.33 733,250 4.0 45,000
2.35 - 2.50 600,750 4.0 3,750
---------------------------------------------------------------------
1.40 - 2.50 3,467,998 4.1 924,589
---------------------------------------------------------------------
---------------------------------------------------------------------
(b) Share appreciation rights (SARs SARS or severe acute respiratory syndrome, communicable viral disease that can progress to a potentially fatal pneumonia. The first symptoms of SARS are usually a high fever, headache and body aches, sore throat, and mild respiratory symptoms; ) plan Share appreciation rights were issued by Equatorial prior to the Equatorial acquisition. The Company presently has no intention to grant additional rights. Each right entitles the participant Participant A party of a funding. It usually refers to the lowest rank or smallest level of funding. to receive from the Company an amount equal to the positive difference, if any, obtained by subtracting the assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. amount from the simple average of the closing trading price Trading price The price at which a security is currently selling. of the common shares on the TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). for up to 20 trading days In Business, the trading day is the time span that a particular stock exchange is open. For example, the New York Stock Exchange is, as of 2006, open from 09:30AM to 4:00PM. Trading days never take place on weekends. immediately preceding the date of exercise. As a result of the Equatorial acquisition, all of the Company's share appreciation rights became vested vested adj. referring to having an absolute right or title, when previously the holder of the right or title only had an expectation. Examples: after 20 years of employment Larry Loyal's pension rights are now vested. (See: vest, vested remainder) and are fully exercisable.
SARs Remaining
Number Contractual Life SARs
Base Value Outstanding (Years) Exercisable
---------------------------------------------------------------------
1.40 - 1.45 121,250 2.1 121,250
2.30 - 2.90 265,000 3.2 265,000
---------------------------------------------------------------------
386,250 2.9 386,250
---------------------------------------------------------------------
---------------------------------------------------------------------
(C) Stock based compensation expense
Had the Company applied the fair value method for options and
warrants issued or modified since January 1, 2002, pro-forma results
using the Black Scholes method would be as follows:
Three months ended Six months ended
June 30 June 30
2003 2002 2003 2002
---------------------------------------------------------------------
Stock based compensation 153 93 300 183
Pro-forma net (loss)
income (1,685) (19,328) 3,406 (19,645)
Pro-forma net (loss)
income per share:
Basic and diluted (0.03) (0.33) 0.06 (0.33)
Black-Scholes assumptions:
Risk-free interest
rate 3.08%-3.69% 4.54% 3.08%-4.04% 4.54%-4.72%
Expected life 3 years 5 years 3 years 5 years
Volatility 38% 42.17% 38-39% nil - 42.17%
Dividend yield 0% 0% 0% 0%
8. Net income per share
Net income per share figures have been calculated using the treasury
stock method. The following reconciles the number of shares used in
the basic and diluted net income per share calculations:
Three months ended Six months ended
Common shares June 30 June 30
2003 2002 2003 2002
---------------------------------------------------------------------
Weighted average basic 59,232,700 58,028,924 59,207,054 58,028,924
Dilutive securities:
Stock options 177,498 923,674 187,910 923,674
Warrants 340,668 565,942 340,668 565,942
Performance warrants 15,130 63,032 15,130 63,032
---------------------------------------------------------------------
Weighted average diluted 59,765,996 59,581,572 59,750,762 59,581,572
---------------------------------------------------------------------
---------------------------------------------------------------------
In 2002, the diluted per share amounts are the same as the basic per share amounts. The effect of dilutive securities on 2002 income is anti-dilutive. Prior to the Equatorial acquisition on June 14, 2002, Resolute was a private company and accordingly did not disclose net income per share amounts. 9. Income Taxes During the three-month period June 30, 2003, the Federal and Alberta taxation authorities substantially enacted reductions in income tax rates for resource companies for the current and future years. The Company recorded the expected benefit of such lower rates in the current period. The benefit amounted to $1.9 million and is included in future income taxes in the statement of Income and Deficit. |
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