Prospectus re Admission to the Official List - Heritage Oil

HERITAGE OIL CORPORATIONCONSOLIDATED CASH FLOW STATEMENTSNine-month periods endedYears ended 31 December30 September2005 2006 2006 2007$ $ $ $(Unaudited)Cash provided by (used in)Operating activitiesNet loss from continuing operations for the period ..... (11,772,666) (40,816,945) (14,935,226) (67,482,482)Items not affecting cashDepletion, depreciation and amortisation .......... 738,630 1,351,987 948,477 1,306,131Finance costs—accretion expenses ............... — 647,453 453,025 1,293,845Foreign exchange losses (gains) ................. 480,253 422,648 314,022 (327,671)Share-based compensation .................... 1,082,112 1,417,044 441,254 25,055,502Loss on redemption of convertible bonds .......... — — — 7,155,622Loss on derivative financial liability .............. — 24,851,295 5,483,503 17,350,077Gain on disposal of subsidiaries ................. — — — (1,077,132)Gain on other financial assets .................. — (195,178) — (63,351)Impairment of property, plant and equipment ....... — — — 1,799,762(Increase) decrease in trade and other receivables .... (258,398) (972,251) 50,157 5,412,051(Increase) decrease in prepaid expenses ........... 1,921,678 (312,051) (296,676) 212,970(Increase) decrease in inventory ................. (98,878) 142,809 90,763 (54,946)Increase (decrease) in trade and other payables ...... 52,946 725,738 (880,692) 2,206,961Continuing operations ......................... (7,854,323) (12,737,451) (8,331,393) (7,212,661)Discontinued operations ....................... 4,034,035 3,748,853 4,403,572 —(3,820,288) (8,988,598) (3,927,821) (7,212,661)Investing activitiesProperty, plant and equipment expenditures .......... (2,568,064) (12,265,063) (6,100,791) (11,251,866)Intangible exploration expenditures ................ (9,204,297) (16,172,102) (5,814,624) (42,018,779)Intangible development expenditures ............... (174,359) (386,668) (159,487) (64,931)Investment in shares .......................... — — — (200,000)Continuing operations ......................... (11,946,720) (28,823,833) (12,074,902) (53,535,576)Discontinued operations ....................... 279,782 17,576,116 (3,393,977) —(11,666,938) (11,247,717) (15,468,879) (53,535,576)Financing activitiesShares issued for cash ......................... 1,423,011 1,318,945 602,193 198,926Convertible bonds ............................ — 60,000,000 60,000,000 165,000,000Convertible bonds issue costs .................... — (3,000,000) (3,000,000) (6,979,268)Redemption of convertible bonds ................. — — — (83,022,752)Long-term debt ............................. 8,577,350 — — —Purchase of Common Shares for cancellation(notes 19 a) and 20 b)) ...................... (876,217) — — —Repayment of long-term debt .................... (103,997) (287,759) (245,724) (116,834)9,020,147 58,031,186 57,356,469 75,080,072(Decrease) increase in cash and cash equivalents ...... (6,467,079) 37,794,871 37,959,769 14,331,835Cash and cash equivalents—Beginning of period ....... 16,235,523 8,583,321 8,583,321 46,861,146Foreign exchange (loss) gain on cash held in foreigncurrency ................................. (1,185,123) 482,954 308,481 701,730Cash and cash equivalents—End of period ........... 8,583,321 46,861,146 46,851,571 61,894,711Non-cash investing and financing activities (note 26)Supplementary informationThe following have been included within cash flows from continuing operations for theperiod under operating activitiesInterest received ........................... 397,640 1,665,998 1,235,166 2,354,886Interest paid .............................. 491,824 5,032,919 3,391,392 8,404,891180