Prospectus re Admission to the Official List - Heritage Oil

no results of operations other than deferred development costs. At December 31, 2005, NTL had noassets, liabilities or operations.PreviousNet assets acquired before non controlling interest consolidation Acquired Total$ $ $Working capital ................................... 334,199 (330,708) 3,491Deferred development costs .......................... 265,803 531,608 797,411Note payable from the Corporation, without interest ........ (500,002) — (500,002)Note payable from other Shareholders ................... (100,000) (200,000) (300,000)— 900 900Non-controlling interest ............................. — (315) (315)585 585Cash consideration Acquired Total$ $Initial 33.3% interest acquired in 2003 ................................ 300 300Incremental 31.7% interest acquired in 2004 ............................ 285 285585 585At December 31, 2005, the Corporation had also directly incurred deferred development costs of$63,133. In 2005, NPWL incurred deferred development costs of $174,359.5. Asset retirement obligations:The effect of the change in accounting policy as outlined in note 2(a) has been recorded retroactivelywith restatement of prior periods. The effect of the adoption on the balance sheet and statement ofearnings is presented below as increases (decreases):Balance sheet At December 31, 2003$Asset retirement cost, included in property and equipment ............... 119,074Asset retirement obligations ..................................... 153,599Accumulated future abandonment and site restoration liability ............ (90,083)Retained earnings ............................................. 55,558The Corporation’s asset retirement obligations result from net ownership interests in petroleum andnatural gas assets including well sites and gathering systems. The Corporation estimates the totalundiscounted amount of cash flows required to settle its asset retirement obligations is approximately$695,050, which is expected to be incurred in 2010. A credit-adjusted risk-free rate of eight percentwas used to calculate the fair value of the asset retirement obligations.A reconciliation of the asset retirement obligations is provided below:2005 2004$ $Balance, beginning of year ...................................... 328,553 153,599Additions ................................................... — 82,138Revision ................................................... 80,012 80,528Accretion expense, included in depletion and depreciation ............... 26,284 12,288Balance, end of year ........................................... 434,849 328,553At December 31, 2005, estimated asset retirement obligation costs to be accreted over the remainingproved reserves were $255,202 (2004—$234,529).232