ANNUAL REPORT 2011 - Connacher Oil and Gas

AR 2011
PG 77
19. FINANCE Charges
For the year ended December 31
2011 2010
(Canadian dollar in thousands)
Interest expense on long–term debt:
Senior Notes $ 85,133 $ 91,922
Convertible Debentures 4,751 4,751
Revolving Credit Facility 275 72
Amortization of transaction costs relating to the Facility 427 752
Stand–by fees relating to the Facility 796 999
Bank charges and other fees 386 397
Unrealized loss on derivative financial asset (note 21) 152 2,237
Unwinding of discount on decommissioning liabilities (note 14) 1,658 2,103
Unrealized loss on remeasurement of convertible debentures (note 13.5) 2,015 4,502
Unrealized gain on foreign exchange contract (note 12) (5) –
95,588 107,735
Less: Interest capitalized on qualified assets – (38,290)
Finance charges $ 95,588 $ 69,445
Capitalized interest relates to the construction of the qualifying assets and has been included as a part of cost of upstream petroleum and natural gas
properties. Effective October 1, 2010, capitalization of interest ceased.
20. Foreign EXCHANGE (Gain) LOSS
For the year ended December 31
2011 2010
(Canadian dollar in thousands)
Unrealized foreign exchange loss (gain) on translation of:
U.S. denominated long–term debt $ 19,275 $ (42,552)
Foreign currency denominated cash balances 364 3,241
Other foreign currency denominated monetary items 3,341 (292)
Unrealized foreign exchange loss (gain) 22,980 (39,603)
Realized foreign exchange gain (note 13.3) (14,071) (2,038)
Foreign exchange loss (gain) $ 8,909 $ (41,641)
21. Gain (LOSS) On Disposition of Assets
The following table shows the gain (loss) on disposition of assets recognized:
For the year ended December 31
2011 2010
(Canadian dollar in thousands)
Gain on disposition of asset classified as held for sale (note 8.1) $ 28,357 $ –
Gain on disposition of exploration and evaluation assets (note 9) 17,361 366
Gain (loss) on disposition of property, plant and equipment (note 10) 2,345 (1,177)
Loss on sale of equity securities (4,606) –
Net gain (loss) on disposition of assets $ 43,457 $ (811)
Upon completion of the exchange of an investment in associate as described in note 8.2 in March 2011, the company acquired 3.3 million common
shares and 841,000 common share purchase warrants of Gran Tierra Energy Inc. The common shares and common share purchase warrants of
Gran Tierra Energy were listed on Toronto Stock Exchange. The investment in common shares was recorded at $25.7 million on the exchange with
subsequent fair value measurement changes of $9.1 million recorded in other comprehensive loss. The investment was sold in 2011 for net cash
proceeds of $21.1 million resulting in a loss of $4.6 million recorded in net earnings (loss), including the transfer of the $9.1 million from other
comprehensive loss. Each common share purchase warrant entitled the company to purchase one common share of Gran Tierra Energy for $9.62 per
common share. The common share purchase warrants expired unexercised in 2011, resulting in a loss of $152,000.
22. CAPITAL Management
The company is exposed to financial risks on its financial instruments and in the way it finances its capital requirements. The company works to
minimize its exposures to these risks through forward financial planning and with the use of financial derivatives. Connacher’s objectives in managing
its cash, debt and equity and its future capital requirements are to safeguard its ability to meet its financial obligations, to maintain a flexible capital