ANNUAL REPORT 2011 - Connacher Oil and Gas

AR 2011
PG 73
The provision for income taxes in net loss reflects an effective tax rate which differs from the expected statutory tax rate. These differences are
presented below:
For the years ended December 31
2011 2010
(Canadian dollar in thousands)
Loss before income taxes $ 114,129 $ 52,763
Applicable tax rate 26.51% 28.05%
Expected income tax expense recovery 30,256 14,800
Impact of reduction in Canadian tax rates (1,735) (1,609)
Impact of rate adjustment on US operations (2,576) (416)
Foreign taxes (280) (752)
Capital taxes (52) (437)
Non taxable portion of foreign exchange gains and other (4,680) 2,159
Impairment and dilution loss in associate (1,813) (2,772)
Non deductible stock–based compensation costs (915) (1,408)
Effect of unused tax losses not recognized as deferred tax assets (9,083) (1,471)
Non-deductible portion of refinancing costs (9,098) –
Total income tax recovery $ 24 $ 8,094
Applicable tax rate is the aggregate of the federal income tax rate of 16.5% (2010 : 18%) and provincial tax rate of 10.01% (2010 : 10.05%). The
reduction in provincial rates year over year are due to an increased allocation of income to Alberta which is taxable at 10%.
The following is the analysis of deferred tax liabilities and assets:
2011 Opening
balance
Recognized in
net loss
Recognized
directly
in equity
Recognized in
other compprehensive
Income (loss)
Foreign
exchange
loss
Recognized
in trade
and accrued
Payables
Deferred income tax liability
Property, plant and equipment $ 175,180 $ 37,819 $ – $ – $ 344 $ – $ 213,343
Long–term debt 8,164 517 – – – – 8,681
183,344 38,336 – – 344 – 222,024
Deferred income tax asset
Losses carried forward 127,836 43,891 – – – – 171,727
Financing and share issue costs 4,885 1,008 – – – – 5,893
Decommissioning liabilities 15,926 598 – – – – 16,524
Investment in Petrolifera 274 (274) – – – – –
Risk management contracts and others 7,231 (5,329) – – – – 1,902
156,152 39,894 – – – – 196,046
Net deferred income tax liability $ 27,192 $ (1,558) $ – $ – $ 344 $ – $ 25,978
Closing
balance
2010 Opening
balance
Recognized
in net loss
Recognized
directly
in equity
Recognized in
other compprehensive
Income (loss)
Foreign
exchange
loss
Recognized in
trade and
accrued
Payables
(note 17.1)
Deferred income tax liability
Property, plant and equipment $ 136,551 $ 37,033 $ – $ – $ (676) $ 2,272 $ 175,180
Long–term debt 3,472 4,692 – – – – 8,164
140,023 41,725 – – (676) 2,272 183,344
Deferred income tax asset
Losses carried forward 85,422 42,414 – – – – 127,836
Financing and share issue costs 7,871 (3,412) 426 – – – 4,885
Decommissioning liabilities 13,475 2,451 – – – – 15,926
Investment in Petrolifera (3,181) 2,779 – 676 – – 274
Risk management contracts and others 1,935 5,296 – – – – 7,231
105,522 49,528 426 676 – – 156,152
Net deferred income tax liability $ 34,501 $ (7,803) $ (426) $ (676) $ (676) $ 2,272 $ 27,192
Closing
balance