ANNUAL REPORT 2011 - Connacher Oil and Gas

AR 2011
PG 58
Financial Instruments - Presentation (“IAS 32”)
In December 2011, certain amendments to IAS 32 were issued which address inconsistencies when applying the offsetting criteria outlined in this
standard. These amendments clarify certain of the criteria required to be met in order to permit the offsetting of financial assets and financial liabilities.
These amendments are required to be adopted retrospectively for periods beginning January 1, 2014. The company is currently evaluating the impact
of this standard on its consolidated financial statements.
4. SEGMENT REPORTING
Management has segmented the company’s business based on differences in products and services and management responsibility. The company’s
business is conducted predominantly through two major operating segments – upstream in Canada and downstream in USA, through a wholly–owned
subsidiary, Montana Refining Company, Inc. (‘‘MRCI’’). Upstream includes exploration for and the development and production of bitumen, crude oil and
natural gas. Downstream includes refining of primarily crude oil to produce and market gasoline, jet fuel, diesel fuels, asphalt and ancillary products.
4.1 Segment revenue and results
Performance is measured based on segment operating income. This measure excludes interest and other income, gain (loss) on disposition of assets,
unrealized gain (loss) on risk management contracts, share-based compensation, employee benefit plan expense, finance charges, foreign exchange
gain (loss), depletion, depreciation, amortization and impairment, share of interest in and loss on disposition of associate, exploration and evaluation
expenses and costs of refinancing long–term debt.
The accounting policies of the segments are the same as the company’s accounting policies provided in note 3. Transfer prices between operating
segments are on an arm’s length basis in a manner similar to transactions with third parties.
Information regarding revenue and results of each reportable segment is presented below followed by the reconciliations:
Revenue, net of royalties
For the year ended December 31 2011 2010
(Canadian dollar in thousands)
Segment
revenue
Segment
revenue
Inter–
segment
revenue
Revenue
from
external
customers
Inter–
segment
revenue
Revenue
from
external
customers
Upstream – Canada $ 446,904 $ – $ 446,904 $ 270,033 $ – $ 270,033
Downstream – USA 441,143 (15,241) 425,902 334,165 (14,267) 319,898
Total $ 888,047 $ (15,241) $ 872,806 $ 604,198 $ (14,267) $ 589,931
Results
For the year ended December 31 2011 2010
(Canadian dollar in thousands)
Upstream Downstream Total Upstream Downstream Total
Canada
USA
Canada
USA
Segment operating income $ 90,180 $ 39,691 $ 129,871 $ 68,183 $ 24,023 $ 92,206
Depletion, depreciation, amortization and impairment $ 110,872 $ 9,278 $ 120,150 $ 67,042 $ 10,470 $ 77,512
In 2011 and 2010, the company recorded an impairment charge of $24.7 million and $4.5 million, respectively, within the upstream segment.
See note 10 for more details.
Reconciliation of depletion, depreciation, amortization and impairment
For the year ended December 31
2011 2010
(Canadian dollar in thousands)
Segment depletion, depreciation, amortization and impairment $ 120,150 $ 77,512
Corporate depreciation 1,859 2,330
Consolidated depletion, depreciation, amortization and impairment $ 122,009 $ 79,842