ANNUAL REPORT 2011 - Connacher Oil and Gas

AR 2011
PG 70
The amount the company would contractually be required to pay at maturity was $1.5 million and $3.5 million more than the carrying amount as at
December 31, 2011 and 2010, respectively.
14. Decommissioning LIABILITIES
The following table summarizes the details of decommissioning liabilities:
For the year ended December 31
2011 2010
(Canadian dollar in thousands)
Balance, beginning of year $ 70,945 $ 53,729
Liabilities incurred 2,415 11,560
Liabilities acquired (note 10) 2,229 –
Liabilities settled (1,018) (647)
Liabilities disposed (10,483) (263)
Change in estimates 332 4,463
Unwinding of discount 1,658 2,103
Balance, end of year 66,078 70,945
Classified as held for sale – current portion (note 8) – (10,907)
Balance, non–current portion $ 66,078 $ 60,038
As a result of the analysis of the estimates of cash flows and timing to abandon and reclaim petroleum and natural gas properties and changes in
interest rates, the company recorded an increase in decommissioning liabilities of $0.3 million in 2011 (2010 : $4.5 million). At December 31, 2011,
the estimated total undiscounted amount at current cost required to settle the decommissioning liabilities was $67.6 million (2010 : $77.4 million).
These payments are expected to be made over the the next 8 to 25 years. This amount has been discounted using risk–free rates of interest ranging
between 1.66 percent to 2.42 percent, depending on the estimated time to abandon the asset.
15. RETIREMENT BENEFIT Obligation
The company maintains the following retirement/savings plans for its employees: a defined benefit pension plan for USA based employees and a
defined contribution savings plans for its USA and Canadian based employees.
15.1 Defined benefit pension plan for USA employees
The company’s USA subsidiary, MRCI, maintains a non–contributory defined benefit retirement plan (the “Defined Benefit Plan”) covering MRCI’s
employees. MRCI’s policy is to make regular contributions in accordance with the funding requirements of the United States Employee Retirement
Income Security Act of 1974, as determined by regular actuarial valuations. The company’s defined benefit obligation is based on the employees’
years of service and compensation, effective from and after, March 31, 2006, the date that Connacher acquired MRCI. The information relating to the
Defined Benefit Plan is as follows:
The amounts recognized in the balance sheet are as follows:
As at December 31
2011 2010
(Canadian dollar in thousands)
Present value of obligation $ 4,329 $ 2,607
Fair value of plan assets (1,620) (1,299)
2,709 1,308
Unrecognized actuarial loss (2,294) (1,115)
Liability recognized in balance sheet $ 415 $ 193
The amounts recognized in net earnings (loss) are as follows:
For the year ended December 31
2011 2010
(Canadian dollar in thousands)
Current service cost $ 603 $ 409
Interest on obligation 156 121
Expected return on plan assets (105) (93)
Net actuarial loss (gain) recognized 54 (11)
Total expense included in general and administrative expenses $ 708 $ 426
Actual return on plan assets $ (1) $ 133