ANNUAL REPORT 2011 - Connacher Oil and Gas

AR 2011
PG 63
10. PROPERTY, Plant and Equipment
(Canadian dollar in thousands)
Petroleum and natural
gas properties (Upstream)
Refining (Downstream) Corporate Total
Cost
Balance, January 1, 2010 $ 1,029,396 $ 105,789 $ 12,272 $ 1,147,457
Additions 207,219 8,575 2,128 217,922
Dispositions (4,036) – – (4,036)
Change in decommissioning liabilities (note 14) 16,023 – – 16,023
Foreign currency translation changes – (5,887) – (5,887)
Transferred to assets classified as held for sale
(59,679) – – (59,679)
(note 8.1)
Balance, December 31, 2010 1,188,923 108,477 14,400 1,311,800
Additions 115,946 18,653 1,454 136,053
Change in decommissioning liabilities (note 14) 4,976 – – 4,976
Dispositions (8,986) – – (8,986)
Foreign currency translation changes – 2,932 – 2,932
Balance, December 31, 2011 $ 1,300,859 $ 130,062 $ 15,854 $ 1,446,775
Accumulated depletion, depreciation and impairment
Balance, January 1, 2010 $ – $ 18,075 $ 5,468 $ 23,543
Depletion and depreciation 61,604 10,470 2,330 74,404
Impairment charge 4,476 – – 4,476
Dispositions (1,676) – – (1,676)
Foreign currency translation changes – (1,284) – (1,284)
Transferred to assets classified as held for sale
(5,331) – – (5,331)
(note 8.1)
Balance, December 31, 2010 59,073 27,261 7,798 94,132
Depletion and depreciation 82,905 9,278 1,859 94,042
Impairment charge 24,700 – – 24,700
Dispositions (1,590) – – (1,590)
Foreign currency translation changes – 857 – 857
Balance, December 31, 2011 $ 165,088 $ 37,396 $ 9,657 $ 212,141
Carrying amount
At January 1, 2010 $ 1,029,396 $ 87,714 $ 6,804 $ 1,123,914
At December 31, 2010 $ 1,129,850 $ 81,216 $ 6,602 $ 1,217,668
At December 31, 2011 $ 1,135,771 $ 92,666 $ 6,197 $ 1,234,634
In May 2011, the company acquired certain petroleum and natural gas properties for cash consideration of $9.7 million. The acquisition resulted in the
allocation of $11.9 million to upstream property, plant and equipment and $2.2 million to decommissioning liabilities.
In 2011, the company sold certain petroleum and natural gas properties relating to its conventional operations for the net proceeds of $9.7 million
and recorded a gain of $2.3 million.
Due to the reduction of reserves relating to its conventional petroleum and natural gas properties, the company performed an impairment test of
its Central Alberta CGU (part of upstream segment) as at December 31, 2011 and recognized an impairment charge of $24.7 million (included
in depletion, depreciation, amortization and impairment) based on the difference between the carrying amount and the recoverable amount. The
recoverable amount was determined using the value in use calculated using a 10% discounted cash flows.
Due to a substantial decrease in natural gas prices, the company performed an impairment test of its Northwest Alberta CGU (part of upstream
segment) as at December 31, 2010 and recognized an impairment charge of $4.5 million based on the difference between the carrying amount and
the recoverable amount. The recoverable amount was determined using the fair value less costs to sell which was derived from the sale price agreed
under the binding sale agreement with the third party.
The net carrying amount at December 31, 2011, includes $21.2 million (2010: $8.6 million) of Refining (Downstream) assets in the course of
construction and not subject to depreciation.
Property, plant and equipment with a carrying cost of $1,223 million (2010: $1,205 million) is collateralized to secure long–term debt. See note 13.