ANNUAL REPORT 2011 - Connacher Oil and Gas

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AR 2011 PG 80 26. Commitments Capital expenditure commitments As at December 31 2011 2010 (Canadian dollar in thousands) Commitments relating to the acquisition of property, plant and equipment $ – $ 1,566 Service and maintenance commitments The company is also contractually committed under certain contracts for the service and maintenance of facilities and equipment. The following table provides the details of these commitments: As at December 31 2011 2010 (Canadian dollar in thousands) No later than 1 year $ 8,487 $ 4,104 Later than 1 year but no later than 5 years 20,584 12,171 Later than 5 years 16,800 38,702 Total commitments $ 45,871 $ 54,977 The primary service and maintenance commitment of the company included above relates to power infrastructure costs of $31.8 million as at December 31, 2011. 27. First TIME ADOPTION of IFRS As described in note 2, these are the company’s first consolidated financial statements prepared in accordance with IFRS. As a result, these consolidated financial statements have been prepared in accordance with IFRS 1, “First–time Adoption of International Financial Reporting Standards”. IFRS 1 requires the presentation of comparative information as at the January 1, 2010 (the “transition date”) and subsequent comparative periods using the consistent and retrospective application of IFRS accounting policies. However, to assist with the transition, the provisions of IFRS 1 allow for certain mandatory exceptions and optional exemptions from the requirement of retrospective application of accounting policies and standards on first–time adoption of IFRS. Accordingly, these consolidated financial statements were prepared using the accounting policies stated in note 3 of the consolidated financial statements and were retrospectively and consistently applied except where specific IFRS 1 mandatory exceptions and optional exemptions required or permitted an alternative treatment upon transition to IFRS for first–time adopters. The significant mandatory exceptions and optional exemptions applied under IFRS 1 in preparing these consolidated financial statements are set out below: Deemed cost election for petroleum and natural gas properties Under previous GAAP, the company followed the “full cost” method of accounting for petroleum and natural gas activities under which all costs directly associated with the acquisition of, the exploration for, and the development of petroleum and natural gas reserves were capitalized on a country– by–country cost centre basis. The company had one cost centre, Canada, for the upstream segment. Costs accumulated within this one cost centre were depleted using the unit–of–production method based on proved reserves determined using estimated future prices and costs. Upon transition to IFRS, the company was required to adopt new accounting policies for upstream activities, including the segregation of exploration and evaluation costs and petroleum and natural gas properties. Under IFRS, exploration and evaluation costs are those expenditures for which technical feasibility and commercial viability has not yet been determined, are presented separately on the balance sheet as exploration and evaluation assets and may or may not be amortized based on the company’s accounting policy. Petroleum and natural gas properties include those expenditures where technical feasibility and commercial viability has been determined, are presented as a part of property, plant and equipment on the balance sheet and are depleted and depreciated on a segregated basis based on the company’s accounting policy. The company adopted the IFRS 1 exemption whereby the company deemed its January 1, 2010 IFRS upstream asset costs to be equal to its previous GAAP historical upstream property, plant and equipment net book value. Accordingly, exploration and evaluation costs were deemed equal to the unproved properties balance and the petroleum and natural gas properties costs were deemed equal to the remaining upstream full cost pool balance. The petroleum and natural gas property costs were allocated for depletion, depreciation and impairment testing purposes on a pro rata basis using proved reserves values at the transition date. Leases The company elected not to reassess whether an arrangement contained a lease under IFRIC 4, “Determining whether an Arrangement contains a Lease”, for contracts that were assessed under previous GAAP. Business combinations IFRS 3, “Business Combinations” was not applied to business combinations that occurred before the transition date. Borrowing costs Borrowing costs directly attributable to the acquisition or construction of qualifying assets were not retrospectively restated prior to the transition date.
AR 2011 PG 81 Estimates Hindsight was not used to create or revise estimates and accordingly, the estimates made by the company under previous GAAP are consistent with their application under IFRS. Additional exemptions applied The company applied additional exemptions for cumulative foreign currency translation differences, share-based compensation, asset retirement obligations/decommissioning liabilities and accounting for its investment in associate, which are explained in notes 27.4, 27.5, 27.6 and 27.7, respectively. The following reconciliations present the adjustments made to the company’s previous GAAP financial results of operations and financial position to comply with IFRS 1. A summary of the significant accounting policy changes and applicable exemptions are discussed following the reconciliations. Reconciliations include the company’s consolidated balance sheets as at December 31, 2010 and January 1, 2010 and the consolidated statements of operations and comprehensive loss for the year ended December 31, 2010. Reconciliation of Consolidated Balance Sheet As at January 1, 2010 (Canadian dollar in thousands) IFRS Adjustments Previous E&E Impairment Foreign Compen– ARO Associate Taxes Debt IFRS GAAP Currency sation ASSETS Notes 27.1 27.2 27.4 27.5 27.6 27.7 27.8 27.9 CURRENT ASSETS Cash $ 256,787 $ – $ – $ – $ – $ – $ – $ – $ – $ 256,787 Trade and accrued receivables 43,067 – – – – – – – – 43,067 Inventories 36,871 – – – – – – – – 36,871 Other assets 17,774 – – – – – – – – 17,774 Deferred tax assets 2,348 – – – – – – (2,348) – – 356,847 – – – – – – (2,348) – 354,499 NON–CURRENT ASSETS Other assets 708 – – – – – 2,711 – – 3,419 Investment in associate 50,379 – – – – – (2,139) – – 48,240 Exploration and evaluation assets – 96,162 – – – – – – – 96,162 Property, plant and equipment 1,230,256 (96,162) (10,180) – – – – – – 1,123,914 Goodwill 103,676 – (103,676) – – – – – – – 1,385,019 – (113,856) – – – 572 – – 1,271,735 $ 1,741,866 $ – $ (113,856) $ – $ – $ – $ 572 $ (2,348) $ – $ 1,626,234 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Trade and accrued payables $ 105,620 $ – $ – $ – $ (816) $ – $ – $ – $ – $ 104,804 Risk management contracts 4,520 – – – – – – – – 4,520 110,140 – – – (816) – – – – 109,324 NON–CURRENT LIABILITIES Long–term debt 876,181 – – – – – – – 3,558 879,739 Decommissioning liabilities 32,848 – – – – 20,881 – – – 53,729 Retirement benefit obligation 1,066 – – – (722) – – – – 344 Deferred income taxes 50,043 – (2,545) – – (5,237) 72 (7,832) – 34,501 960,138 – (2,545) – (722) 15,644 72 (7,832) 3,558 968,313 SHAREHOLDERS’ EQUITY Share capital 590,845 – – – – – – 2,274 – 593,119 Equity component of convertible 16,817 – – – – – – – (16,817) – debentures Contributed surplus 30,560 – – – 480 – – – 31,040 Retained Earnings (Deficit) 49,544 – (111,311) (16,178) 1,058 (15,644) 1,127 3,210 13,259 (74,935) Accumulated other comprehensive loss (16,178) – – 16,178 – – (627) – (627) 671,588 – (111,311) – 1,538 (15,644) 500 5,484 (3,558) 548,597 $ 1,741,866 $ – $ (113,856) $ – $ – $ – $ 572 $ (2,348) $ – $ 1,626,234
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ANNUAL REPORT 2011 WELL POSITIONED
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AR 2011 PG 1 02 HIGHLIGHTS 05 LETTE
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AR 2011 PG 3 Years ended December 3
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AR 2011 PG 5 Volatility in the oil
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AR 2011 PG 7 “Thanks to our liqui
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AR 2011 PG 9 Review of Operations I
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AR 2011 PG 11 proposals helped to p
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AR 2011 PG 13 reservoir description
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AR 2011 PG 15 Connacher Oil and Gas
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AR 2011 PG 17 the movement of wildl
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AR 2011 PG 19 MANAGEMENT’S DISCUS
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AR 2011 PG 21 reduced interest rate
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AR 2011 PG 23 Connacher’s bitumen
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AR 2011 PG 25 OPERATING COSTS (1) T
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AR 2011 PG 27 SALES PRODUCT MIX (%)
Page 31 and 32: AR 2011 PG 29 Depletion expense is
Page 33 and 34: AR 2011 PG 31 NEW NOTES We issued U
Page 35 and 36: AR 2011 PG 33 Compensation of key m
Page 37 and 38: AR 2011 PG 35 ACCOUNTING POLICIES A
Page 39 and 40: AR 2011 PG 37 The company classifie
Page 41 and 42: AR 2011 PG 39 Management is respons
Page 43 and 44: AR 2011 PG 41 The production outloo
Page 45 and 46: AR 2011 PG 43 QUARTERLY HIGHLIGHTS
Page 47 and 48: AR 2011 PG 45 Independent Auditor
Page 49 and 50: AR 2011 PG 47 Consolidated Statemen
Page 51 and 52: AR 2011 PG 49 Consolidated Statemen
Page 53 and 54: AR 2011 PG 51 Impairment of assets
Page 55 and 56: AR 2011 PG 53 Goodwill is allocated
Page 57 and 58: AR 2011 PG 55 3.11 Leases Agreement
Page 59 and 60: AR 2011 PG 57 IAS 1 Presentation of
Page 61 and 62: AR 2011 PG 59 Reconciliation of seg
Page 63 and 64: AR 2011 PG 61 8.1 Petroleum and nat
Page 65 and 66: AR 2011 PG 63 10. PROPERTY, Plant a
Page 67 and 68: AR 2011 PG 65 Accounts receivable a
Page 69 and 70: AR 2011 PG 67 December 31, 2010 - C
Page 71 and 72: AR 2011 PG 69 13.3 Refinancing of l
Page 73 and 74: AR 2011 PG 71 Changes in present va
Page 75 and 76: AR 2011 PG 73 The provision for inc
Page 77 and 78: AR 2011 PG 75 The following table s
Page 79 and 80: AR 2011 PG 77 19. FINANCE Charges F
Page 81: AR 2011 PG 79 Compensation of key m
Page 85 and 86: AR 2011 PG 83 Reconciliation of Con
Page 87 and 88: AR 2011 PG 85 27.3 Asset and Liabil
Page 89 and 90: AR 2011 PG 87 The following table s
Page 91 and 92: CORPORATE INFORMATION Board of Dire
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