RNS Number:6462H
Caspian Energy Inc
14 August 2006
CASPIAN ENERGY INC.
ANNOUNCES SECOND QUARTER 2006 FINANCIAL RESULTS
TORONTO, August 11, 2006 -- Caspian Energy Inc. (the "Company" or "CEK") (TSX
and AIM: CEK) announced today its financial results for the three and six months
ending June 30, 2006. Its interim unaudited financial statements for the period
and related management's discussion and analysis ("MD & A") have been filed with
Canadian securities regulatory authorities and are available for viewing at
www.sedar.com.
For the three and six months ending June 30, 2006, CEK's net loss was $974,273
and $1,371,582, respectively. For the three and six months ending July 31, 2005,
CEK's net loss was $5,817,271 and $6,834,564, respectively. Large non-cash items
equal to $305,689 (2Q 2005 - $2,492,362) relating to stock-based compensation
charges and $702,564 (2Q 2005 - $(2,704,843)) pertaining to foreign exchange
gains contributed to the loss in 2Q 2006. During 2Q 2006, the Company recorded a
charge of $1,408,619 pertaining to future income taxes in the Republic of
Kazakhstan (2Q 2005 - $203,732).
CEK's operations generated $1,316,961 in cash during the three month period and
used $378,267 for the comparative quarter of 2005. Realized foreign exchange
gains of $1,150,430 in the current period (prior period - nil) are included in
these figures.
Oil revenues before transportation costs during 2Q 2006 were $1,358,550 and for
2Q 2005 were $575,965.
For the quarter ended June 30, 2006 operating costs were $331,185 and for the
2005 comparative period, operating costs were $413,731. Transportation expenses
were $12,796 and $5,331, respectively. Administrative expenses for the same
periods were $731,052 and $795,785, respectively.
Capital expenditures were $8,155,440 for 2Q 2006 and $2,978,545 for 2Q 2005.
Capital expenditures are composed of advances to Aral and the Company's share of
the expenditures incurred by Aral.
During 2Q 2006, Caspian closed an underwritten private placement of 19,609,000
common shares at a price of $2.55 per share for total gross proceeds of $50
million. Also, 50,000 common stock options were exercised during the period at
$1.75 per share, resulting in proceeds to CEK of $87,500.
CEK today filed on SEDAR interim uanaudited financial statements and MD&A with
respect to its June 30, 2006 second fiscal quarter.
The Company is an oil exploration and development corporation operating in the
Republic of Kazakhstan.
For further information contact:
Caspian Energy Inc.
William Ramsay
President and Chief Executive Officer
c/o Bell Pottinger Corporate & Financial
00 44 20 7861 3232
Bell Pottinger Corporate and Financial
Elizabeth Fievet
00 44 20 7861 3232
CAUTIONARY NOTE
Some of the statements and information contained in this news release may
include certain estimates, assumptions and other forward-looking information.
The actual performance, developments and/or results of the Company may differ
materially from any or all of the forward-looking statements, which include
current expectations, estimates and projections, in all or in part attributable
to general economic conditions, and other risks, uncertainties and circumstances
partly or totally outside the control of the Company, including oil prices,
imprecision of reserve estimates, drilling risks, future production of gas and
oil, rates of inflation, changes in future costs and expenses related to the
activities involving the exploration, development, production and transportation
of oil, hedging, financing availability and other risks related to financial
activities, and environmental and geopolitical risks. Further information which
may cause results to differ materially from those projected in the
forward-looking statements is contained in the Company's filings with Canadian
securities regulatory authorities. The Company disclaims any intention or
obligation to update or revise forward-looking information, whether as a result
of new information, future events or otherwise, except in accordance with
applicable securities laws.
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES.
BUSINESS PROSPECTS AND OUTLOOK
The Company has been successful in establishing itself as an operating entity in
the Republic of Kazakhstan and expects to generate future growth in value via
the execution of its strategy which focuses on the exploration for, and
production of, oil in the North Block located in the Kazakh pre-Caspian Basin.
Prior to the end of the fourth quarter 2005, exploration well EZ#301 was drilled
to a total depth of 4,846 meters and logged. The well was completed before the
drilling rig was moved to the EZ#302 location. The EZ#301 well was matrix
acidized and the two potentially productive hydrocarbon bearing zones were
flow-tested. The lower zone (KT-2) was tested at 2,532 barrels of oil per day
("bopd"). The upper zone (KT-1) had difficulty maintaining an independent flow.
It was therefore commingled with oil flowing from the lower zone and the well
was tied-in to the Zhagabulak production facility. Subsequently, production logs
were ran and it was determined that the KT-1 was producing around 100 bopd.
The second exploration well, EZ#302, was spudded on December 25, 2005. Acidizing
and testing of the well were performed following removal of the drilling rig.
The well showed all indications of the presence of hydrocarbons while drilling
and logging was taking place. However, subsequent stimulation efforts failed to
cause the well to flow naturally. The well is currently shut in until further
evaluations on the well can be made. The third well, EZ#303 is to be located
about 5.2 km southwest of EZ#302. This well was spudded on May 28, 2006 and is
currently drilling ahead. Total depth is expected to be reached near the end of
August 2006. We are currently investigating a well drilled during the Soviet
era, EZ#216, that was plugged and abandoned, as a potential candidate for
re-entry. Investigation of this well as a re-entry candidate will be performed
following the workover of well EZ#213. Rigs, like all other oil field equipment
and personnel remain in short supply and this factor will continue to influence
the execution of our strategy.
A major workover is planned for our original producing well, EZ#213, which was
drilled during the Soviet period. From logging results of EZ#301 and further
interpretation of the Zhagabulak 3-D seismic survey, additional potential
productive zones have been identified that were not opened in this well. This
work is expected to start in September 2006, but depends on rig availability.
We are in the process of making modifications to our processing plant in
Zhagabulak to increase its throughput and to improve its reliability and safety.
We expect that these modifications will be completed by August 2006.
Ongoing petrophysical analyses of all wells penetrating the below salt
reservoirs is being completed and correlations of these wells will aid in the
identification of future drilling locations in the North Block. Identification
and acquisition of well data within the extended territory will also be
evaluated for inclusion into this process.
The Baktygaryn 3-D seismic program was completed in early November 2005.
PGS-GIS, in Almaty, was awarded the processing contract. Due to the presence of
large salt bodies in the Baktygaryn Area, the 3-D data set was processed through
Pre-Stack Time Migration ("PSTM") and interpretation of this data is ongoing.
The acquisition of the regional 2-D seismic survey covering the west and north
areas of the North Block, which ties into the Zhagabulak and Baktygaryn 3-D
seismic surveys and was completed in March has also been processed and
interpretation is ongoing. We expect that interpretation of the Baktygaryn 3-D
survey and the regional 2-D survey will be completed by the end of August 2006.
Beginning in late February 2006, the Company began the acquisition of a
regional, strategically-placed, 367 km 2-D seismic program covering a widespread
area of the North Block. The knowledge gained from this 2-D acquisition program
will augment the results of a third 3-D seismic acquisition area currently
scheduled to begin in the second half of 2006, depending on equipment
availability and other ongoing activities. Drilling locations from the 3-D data
are expected to be identified in late 2006 to early 2007.
Interim Consolidated Balance Sheet (Unaudited)
June 30, December 31,
2006 2005
$ $
Assets
Current assets
Cash and cash equivalents 49,043,003 10,094,086
Accounts receivable 2,381,332 505,815
Prepaids and other deposits 1,651,177 420,879
Inventory (note 3) 3,297,807 887,617
-----------------------------
56,373,319 11,908,397
Restricted cash (note 2) 139,627 136,884
Property, plant and equipment (note 4) 89,634,716 68,331,221
----------------------------
146,147,662 80,376,502
============================
Liabilities
Current liabilities
Accounts payable and accrued liabilities 3,026,491 3,216,450
Loan payable (note 10) 6,636,582 6,872,279
----------------------------
9,663,073 10,088,729
Asset retirement obligation (note 5) 103,164 88,900
Future income taxes 1,514,887 51,629
Convertible debentures (note 6) 16,973,360 -
-----------------------------
28,254,484 10,229,258
-----------------------------
Shareholders' Equity
Share capital (note 7) 121,470,892 75,220,762
Warrants to purchase common shares (note 7) 1,439,941 667,738
Contributed surplus (note 9) 9,763,316 7,668,133
Deficit (14,780,971) (13,409,389)
------------------------------
117,893,178 70,147,244
------------------------------
146,147,662 80,376,502
==============================
See accompanying notes to consolidated financial statements.
Interim Consolidated Statement of Loss and Deficit (Unaudited)
Three months Three months Six months Six months
ended ended ended ended
June 30, July 31, June 30, July 31,
2006 2005 2006 2005
$ $ $ $
Revenue
Oil and gas revenue, net 1,358,550 575,965 2,110,461 1,170,617
Interest 496,203 260,615 594,283 704,386
Other (6,663) - 565 -
---------------------------------------------------------
1,848,090 836,580 2,705,309 1,875,003
---------------------------------------------------------
Expenses
General and administrative 731,052 795,785 1,418,423 1,505,223
Accretion of convertible 83,101 - 111,975 -
debentures (note 6)
Interest 606,526 - 609,112 -
Operating 331,185 413,731 605,842 755,549
Transportation 12,796 5,331 18,355 9,249
Stock-based compensation (note
8) 305,689 2,492,362 611,378 2,916,440
Foreign exchange (gain) loss (702,564) 2,704,843 (804,200) 3,247,194
Depletion, depreciation and
accretion 45,959 38,067 97,387 73,893
---------------------------------------------------------
1,413,744 6,450,119 2,668,272 8,507,548
---------------------------------------------------------
Income (loss) before income
taxes 434,346 (5,613,539) 37,037 (6,632,545)
Future income taxes 1,408,619 203,732 1,408,619 202,019
---------------------------------------------------------
Net loss for the period (974,273) (5,817,271) (1,371,582) (6,834,564)
Deficit - Beginning of period (13,806,698) (6,018,748) (13,409,389) (5,001,455)
---------------------------------------------------------
Deficit - End of period (14,780,971) (11,836,019) (14,780,971) (11,836,019)
=========================================================
Statement of Earnings
=========================================================
Basic loss per share (note 7) (0.01) (0.07) (0.01) (0.08)
=========================================================
Diluted loss per share (note
7) (0.01) (0.07) (0.01) (0.08)
=========================================================
See accompanying notes to consolidated financial statements.
Interim Consolidated Statement of Cash Flows (Unaudited)
Three months Three months Six months Six months
ended ended ended ended
June 30, July 31, June 30, July 31,
2006 2005 2006 2005
$ $ $ $
Cash provided by (used in)
Operating activities
Net loss for the period (974,273) (5,817,271) (1,371,582) (6,834,564)
Items not affecting cash
Stock-based compensation 305,689 2,492,362 611,378 2,916,440
Unrealized foreign exchange
loss 447,866 2,704,843 826,000 3,247,194
Depletion, depreciation and
accretion 45,959 38,067 97,387 73,893
Accretion of convertible
debentures 83,101 - 111,975 -
Future income taxes 1,408,619 203,732 1,408,619 202,019
---------------------------------------------------------
1,316,961 (378,267) 1,683,777 (395,018)
Changes in non-cash working
capital balances (1,991,034) (298,708) (1,875,517) (253,122)
---------------------------------------------------------
(674,073) (676,975) (191,740) (648,140)
---------------------------------------------------------
Financing activities
Convertible debentures (87,289) - 18,345,190 -
Loan payable (263,268) (133,797) (235,697) (74,714)
Foreign exchange (447,866) (2,704,843) (826,000) (3,247,194)
Restricted cash (2,194) - (2,743) -
Issuance of common shares and
warrants 50,090,450 - 50,804,650 135,301
Share issue expenses (3,123,706) (287,032) (3,782,317) (290,817)
--------------------------------------------------------
46,166,127 (3,125,672) 64,303,083 (3,477,424)
--------------------------------------------------------
Investing activities
Acquisition of property, plant
and equipment (8,155,440) (2,978,545) (21,331,979) (6,133,691)
Asset retirement - 1,417 - 1,229
Changes in non-cash working
capital balances (2,513,220) 666,122 (3,830,447) (882,238)
--------------------------------------------------------
(10,668,660) (2,311,006) (25,162,426) (7,014,700)
--------------------------------------------------------
Increase (decrease) in cash
and cash equivalents 34,823,394 (6,113,653) 38,948,917 (11,140,264)
Cash and cash equivalents -
Beginning of period 14,219,609 38,039,859 10,094,086 43,066,470
-------------------------------------------------------
Cash and cash equivalents -
End of period 49,043,003 31,926,206 49,043,003 31,926,206
=======================================================
Interest paid and received
Interest paid - - - -
Interest received 496,203 169,368 580,490 613,139
-------------------------------------------------------
See accompanying notes to consolidated financial statements.
Notes to Interim Consolidated Financial Statements (Unaudited)
June 30, 2006
1 Nature of operations
Caspian Energy Inc. ("Caspian" or the "Company") is engaged in the exploration
for and development and production of oil and gas in the Republic of Kazakhstan.
Its primary operating activities are carried out through its wholly-owned
subsidiary, Caspian Energy Ltd. ("Caspian Ltd.").
Caspian's principal assets are a 50% interest in Aral Petroleum Capital LLP
("Aral"), held by Caspian Ltd. Through its interest in Aral, Caspian has the
right to explore and develop certain oil and gas properties in Kazakhstan, known
as the North Block, a 3,458 square kilometre area located in the vicinity of the
Kazakh pre-Caspian basin. The Company also has minor resource interests in
Canada.
Aral's exploration and development rights to the North Block were granted
pursuant to the terms of an exploration contract between the government of
Kazakhstan and Aral (the "Exploration Contract"). The initial three-year term of
the Exploration Contract has been extended for a two-year period (expiring in
December 2007) and is subject to a further extension of two years thereafter, in
accordance with the terms of the contract.
Under the terms of the Exploration Contract, Aral was obligated to spend at
least US$20.8 million under a minimum work program in respect of the North Block
during the initial three-year term of the contract. The expenditures include
processing and reinterpretation of geological and geophysical data of prior
years, two dimensional and three dimensional seismic shoots and surveys,
drilling exploration wells, well reactivations and well surveys and testing. As
of December 31, 2005, Aral's financial obligation under the minimum work program
had been discharged.
Under terms of a shareholders' agreement dated June 25, 2004, among Caspian
Ltd., Azden Management Limited ("Azden") and Aral, Caspian was committed to fund
Aral's US$20.8 million obligation under the initial work program. This financial
commitment was satisfied, in full, by the Company. In addition, Caspian Ltd. has
undertaken, on a best efforts basis, to raise financing of US$84.0 million to
fund Aral's operations pursuant to the Exploration Contract.
On November 30, 2005, Caspian announced a change in its fiscal year end date
from January 31 to December 31 commencing with the year starting February 1,
2005. Accordingly, the comparative figures presented in these financial
statements are for the three and six months ended July 31, 2005.
2 Significant accounting policies
The consolidated financial statements of Caspian are stated in Canadian dollars
and have been prepared in accordance with Canadian generally accepted accounting
principles.
The preparation of financial statements in conformity with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents are comprised of cash and short-term investments with
an initial maturity date of three months or less.
Inventory
Inventory is recorded at the lower of cost calculated using the weighted average
method, and net realizable value. Cost comprises direct materials and where
applicable direct labour costs and those overheads which have been incurred in
bringing the inventories to their present location and condition. Net realizable
value represents the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing, selling and distribution.
Joint ventures
The Company's oil and gas exploration and development activities are conducted
mainly in Kazakhstan through its 50% interest in Aral and, accordingly, these
consolidated financial statements reflect only the Company's proportionate
interest in such activities.
Property, plant and equipment
a) Capitalized costs
The Company follows the full cost method of accounting for oil and natural gas
operations, whereby all costs related to the acquisition, exploration and
development of petroleum and natural gas reserves are capitalized. Such costs
include lease acquisition costs, geological and geophysical costs, carrying
charges on non-producing properties, costs of drilling both productive and
non-productive wells, the cost of petroleum and natural gas production equipment
and overhead charges directly related to exploration and development activities.
Proceeds from the sale of oil and gas properties are applied against capital
costs, with no gain or loss recognized, unless such a sale would change the rate
of depletion and depreciation by 20% or more, in which case, a gain or loss
would be recorded.
b)Depletion, depreciation and amortization
The capitalized costs are depleted and depreciated using the unit-of-production
method based on proven petroleum and natural gas reserves, as determined by
independent consulting engineers. Oil and natural gas liquids reserves and
production are converted into equivalent units of natural gas based on relative
energy content on a ratio of six thousand cubic feet of gas to one barrel of
oil. Significant development projects and expenditures on exploration properties
are excluded from calculation of depletion prior to assessment of the existence
of proved reserves.
Other property, machinery and equipment are recorded at historical cost.
Depreciation is calculated on a straight-line basis at the following annual
rates:
Buildings 8%
Machinery and equipment 8%
Vehicles 7%
Other fixed assets 10%
c) Ceiling test
The Company follows the Canadian accounting guideline on full cost accounting.
In applying the full cost guideline, Caspian calculates its ceiling test for
each cost centre by comparing the carrying value of oil and natural gas
properties and production equipment to the sum of undiscounted cash flows
expected to result from Caspian's proved reserves. If the carrying value is not
fully recoverable, the amount of impairment is measured by comparing the
carrying value of oil and gas properties and production and equipment to the
estimated net present value of future cash flows from proved plus probable
reserves using a risk-free interest rate and expected future prices. Any excess
carrying value above the net present value of the future cash flows is recorded
as a permanent impairment.
d) Unproved property
Costs of acquiring and evaluating unproven properties are initially excluded
from costs subject to depletion, until it is determined whether or not proved
reserves are attributable to the properties or, in the case of major development
projects, commercial production has commenced, or impairment has occurred.
Impairment occurs whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. When proven reserves are determined or
the property is considered to be impaired, the cost of the property or the
amount of the impairment is added to the costs subject to depletion for that
country's cost centre.
e) Asset retirement obligation
Caspian records the fair value of asset retirement obligations ("ARO") as a
liability in the period in which it incurs a legal obligation to restore an oil
and gas property, typically when a well is drilled or other equipment is put in
place. The associated asset retirement costs are capitalized as part of the
carrying amount of the related asset and depleted using a unit-of-production
method over the life of the proved reserves. Subsequent to initial measurement
of the obligations, the obligations are adjusted at the end of each reporting
period to reflect the passage of time and changes in estimated future cash flows
underlying the obligation. Actual costs incurred on settlement of the ARO are
charged against the ARO.
Income taxes
Income taxes are calculated using the liability method of tax accounting.
Temporary differences arising from the difference between the tax basis of an
asset or liability and its carrying value amount on the balance sheet are used
to calculate future income tax assets and liabilities. Future income tax assets
and liabilities are calculated using tax rates anticipated to apply in the
periods that the temporary differences are expected to reverse.
Stock-based compensation
The Company grants options to purchase common shares to employees and directors
under its stock option plan. Under this standard, future awards are accounted
for using the fair value of accounting for stock-based compensation. Under the
fair value method, an estimate of the value of the option is determined at the
time of grant using a Black-Scholes option-pricing model. The fair value of the
option is recognized as an expense and contributed surplus over the vesting
period of the option. Proceeds received on exercise of stock options, along with
amounts previously included in contributed surplus, are credited to share
capital.
Revenue recognition
Revenue from the sale of oil and natural gas is recognized based on volumes
delivered to customers at contractual delivery points and rates. The costs
associated with the delivery, including operating and maintenance costs,
transportation, and production-based royalty expenses will be recognized in the
same period in which the related revenue is earned and recorded.
Measurement uncertainty
The amounts recorded for depletion and depreciation of property, plant and
equipment, the provision for asset retirement obligations and the amounts used
for ceiling test calculations are based on estimates of reserves and future
costs. The Company's reserve estimates are reviewed annually by an independent
engineering firm. The amounts disclosed relating to fair values of stock options
issued are based on estimates of future volatility of the Company's share price,
expected lives of options, and other relevant assumptions. By their nature,
these estimates are subject to measurement uncertainty.
Earnings (loss) per share
Basic per share amounts are calculated using the weighted average number of
shares outstanding during the period. Diluted per share amounts are calculated
based on the treasury stock method whereby the weighted average number of shares
is adjusted for the dilutive effect of options. The Company applies the treasury
stock method for the calculation of diluted net income (loss) per share whereby
the effect of the "in the money" instruments such as stock options and warrants
affect the calculation. The treasury stock method assumes that the proceeds from
the exercise are used to repurchase common shares of the Company at the weighted
average market price during the year.
Financial instruments
Fair values
The fair values of accounts receivable, accounts payable and accrued
liabilities, and loan payable approximate their carrying values due to their
short-term maturity.
Credit risk
Substantially all of the Company's accounts receivable are due from companies in
the oil and gas industry and are subject to the normal industry credit risks.
The carrying value of accounts receivable reflects management's assessment of
the associated credit risks.
Foreign currency
All operations are considered financially and operationally integrated. Results
of operations are translated to Canadian dollars, using average rates for
revenues and expenses, except depreciation which is translated at the rate of
exchange applicable to the related assets. Monetary items denominated in foreign
currency are translated to Canadian dollars at exchange rates in effect at the
balance sheet date and non-monetary items are translated at rates of exchange in
effect when the assets were acquired or obligations incurred. Foreign exchange
gains and losses are recorded in the statement of loss.
Restricted cash
Under the terms of the Exploration Contract, Aral has accrued 1% of the capital
costs of exploration (the "Liquidation Fund") in an amount of US $249,309 and
US $235,600 as of June 30, 2006 and December 31, 2005, respectively (Cdn.
$139,627 and Cdn. $136,884, respectively) and deposited the cash in a restricted
bank account. It is anticipated that the Liquidation Fund will be used to
finance the restoration of the License Area upon expiration of the Exploration
Contract, unless a production contract is awarded.
3 Inventory
June 30, December 31,
2006 2005
$ $
Drilling materials 2,905,688 752,163
Oil inventory 64,205 39,651
Fuel 106,873 5,081
Construction materials 3,205 2,126
Spare parts 1,745 1,165
Other materials 216,091 87,431
----------------------------
3,297,807 887,617
============================
4 Property, plant and equipment
June 30, December 31,
2006 2005
$ $
Petroleum and natural gas assets 87,799,288 67,414,481
Other assets 2,215,765 1,186,085
----------------------------
90,015,053 68,600,566
Accumulated depletion and depreciation (380,337) (269,345)
----------------------------
89,634,716 68,331,221
=============================
Excluded from the depletable base of oil and gas assets at June 30, 2006 are
unproved properties of $57,796,916 (December 31, 2005 - $35,869,797).
The Company applied the ceiling test to its capitalized assets at June 30, 2006
and determined that there was no impairment of such carrying costs.
During the six month period ended June 30, 2006, the Company capitalized
$123,626 (July 31, 2005 - $nil) of general and administrative expenses related
directly to exploration and development activities.
5 Asset retirement obligation
The Company records the fair value of asset retirement obligations as a
liability in the period in which it incurs the legal obligation.
The asset retirement obligation results from net ownership interests in
petroleum and natural gas assets including well sites, gathering systems and
processing facilities. The Company estimates the total undiscounted amount of
cash flows required to settle its asset retirement obligations at June 30 ,2006
is approximately $123,933, which will be incurred between 2014 and 2019. A
credit-adjusted risk-free rate of 12.2% was used to calculate the fair value of
the asset retirement obligations, and an inflation factor of 7.6%.
A reconciliation of the asset retirement obligation is provided below:
June 30,
2006
$
Balance - December 31, 2005 88,900
Liabilities incurred 9,638
Accretion 4,626
----------
Balance - June 30, 2006 103,164
===========
Under the terms of the Exploration Contract (note 1), the Company is required to
create a fund to finance actual future restoration costs, equal to 1% of the
capital costs of exploration. At June 30, 2006 and December 31, 2005, $139,627
and $136,884 respectively have been placed in a restricted bank account related
to the funding requirement.
6 Convertible debentures
On March 1, 2006, the Company received US $16 million and issued 10% per annum,
convertible debentures in a like amount. The debentures mature on March 2, 2011
and are convertible at any time and from time to time into common shares of the
Company at a conversion price of $2.45 per share. The Company may repay the
principal amount of the debentures, in whole or in part, or require conversion
into common shares of the Company if the volume-weighted average trading price
of the common shares, for 40 consecutive trading days, is at least $4.08.
Carrying
Face amount Discount Interest value
$ $ $ $
Debentures issued 18,432,479 (1,483,805) - 16,948,674
Accretion of discount - 111,975 - 111,975
Translation adjustment (690,112) - - (690,112)
Interest accrual - - 602,823 602,823
------------------------------------------------------
Balance - June 30, 2006 17,742,367 (1,371,830) 602,823 16,973,360
======================================================
7 Share capital
Authorized
Unlimited number of voting common shares, without stated par value
Issued
Number of Amount
shares $
Common shares
Issued and outstanding as at December 31, 2005 84,327,163 75,220,762
Exercise of warrants (i) 357,100 888,505
Private placement (ii) 19,609,000 49,056,442
Exercise of options (iii) 50,000 87,500
Share issue costs (iv) - (3,782,317)
------------------------------
Issued and outstanding as at June 30, 2006 104,343,263 121,470,892
==============================
i) During the period, 357,100 broker warrants were exercised. The
warrants had an exercise price of $2.00 per common share.
ii) On April 5, 2006, a private placement of 19,609,000 common shares
were issued at $2.55 per share.
iii) On April 10, 2006, 50,000 common shares at $1.75 per were issued
pursuant to the Company's stock option plan.
iv) Share issue costs have not been tax-effected.
Stock options
The Company has a stock option plan (the "Plan") under which it may grant
options to directors, officers and employees for the purchase of up to 15% of
the number of common shares from time to time. Options are granted at the
discretion of the board of directors. The exercise price, vesting period and
expiration period are also fixed at the time of grant at the discretion of the
Board of Directors in accordance with terms of the Plan.
Changes to the Company's stock options are summarized as follows:
Number of Weighted
options average
option price
$
Balance - December 31, 2005 9,166,499 1.72
Granted - -
Exercised (50,000) 1.75
Expired - -
---------------------------
Balance - June 30, 2006 9,116,499 1.72
===========================
Exercisable - June 30, 2006 7,654,294 1.72
===========================
The following is a summary of stock options outstanding and exercisable as at
June 30, 2006:
Options outstanding Options exercisable
Range of exercise Options Weighted Weighted Options
price outstanding average average exercisable
remaining exercise
contractual price
life in years
$0.75 2,079,090 3.7 $0.75 1,683,181
$1.61 843,271 4.2 $1.61 843,271
$1.75 1,100,000 4.2 $1.75 983,333
$2.00 1,050,000 3.9 $2.00 525,000
$2.15 4,044,138 3.7 $2.15 3,619,509
------------- ----------- ------------
9,116,499 $1.72 7,654,294
============= =========== ============
Per share amounts
The weighted average number of common shares outstanding during the period ended
June 30, 2006 of 103,907,429 (July 31, 2005 - 84,327,163 shares) was used to
calculate loss per share amounts.
In computing diluted loss per share, no shares were added to the weighted
average number of common shares outstanding during the period ended June 30,
2006 (July 31, 2005 - nil) as they are anti-dilutive. The fully-diluted number
as at June 30, 2006 was 127,553,295 shares (July 31, 2005 - 94,861,662).
Warrants
1,599,170 broker warrants are outstanding at June 30, 2006 and all have vested.
1,010,900 warrants entitle the holder to purchase one common share at a price of
$2.00 until September 20, 2006. 588,270 warrants entitle the holder to purchase
one common share at a price of $2.77 until April 5, 2008. 357,100 broker
warrants were exercised during the period. The fair value of the outstanding
warrants using the Black-Scholes method was $1,439,941.
8 Stock-based compensation
Options granted to both employees and non-employees are accounted for using the
fair value method. The fair value of common share options amortized in the
period ended June 30, 2006 was estimated to be $611,378 (period ended July 31,
2005 - $2,492,362) as at the grant date using a Black-Scholes option-pricing
model and the following assumptions:
Risk free interest rate 3%
Expected life 5 year average
Expected volatility 72%
Expected dividend yield 0%
The estimated fair value of the options is amortized to expense and credited to
contributed surplus over the option vesting period on a straight-line basis.
9 Contributed surplus
June 30, December 31,
2006 2005
$ $
Balance - Beginning of period 7,668,133 3,629,436
Stock options issued to employees, officers and 611,378 4,038,697
directors
Fair value of debentures conversion option 1,483,805 -
------------------------------
Balance - End of period 9,763,316 7,668,133
==============================
The term and vesting conditions of each option may be fixed by the board when
the option is granted, but the term cannot exceed 5 years from the date upon
which the option is granted.
The options granted to directors, officers and employees may be exercised over
five years from the date of granting and expire from time to time to June 2010.
The debentures are convertible into common shares of the Company at a price of
$2.45 per share and mature on March 31, 2011.
10 Loan payable
Aral is indebted to Azden, which holds the other 50% interest in Aral, in the
amount of $6,636,582 (December 31, 2005 - $6,872,279). The amount is unsecured
and is non-interest bearing and was to be repaid prior to January 1, 2006.
Caspian is obligated to fund Aral's operations. During November 2005, Aral
agreed to defer the repayment obligation of this loan to third quarter 2006.
11 Commitments
In accordance with the shareholders' agreement in respect of Aral, Caspian was
obligated to fund the initial work program of Aral pursuant to the Exploration
Contract. The minimum work program was US $20.8 million and matured at the end
of calendar 2005. As at December 31, 2005, this obligation was fully discharged.
The work program extension to December 2007 includes drilling three wells to a
combined total of 8,500 metres with a monetary obligation of US $20.6 million.
No additional seismic is required. The Company's calendar 2006 minimum work
program with the Republic of Kazakhstan has been approved for US $12.2 million
and was discharged during this fiscal period. US $8.4 million is the minimum
commitment for calendar 2007.
12 Financial instruments
Caspian's financial instruments included in the consolidated balance sheet are
comprised of cash and cash equivalents, accounts receivable, other deposits,
accounts payable and loan payable. The fair values of these financial
instruments approximate their carrying amounts due to the short-term nature of
the instruments. A substantial portion of Caspian's accounts receivable are with
customers in the oil and gas industry and are subject to normal industry credit
risks.
13 Foreign exchange risk
A substantial portion of Caspian's activities are settled in foreign currencies
and consequently, the Company is subject to fluctuations in currency translation
rates.
14 Segmented information
The Company's activities are conducted in two geographic segments: Canada and
Kazakhstan. All activities relate to exploration for and development of
petroleum and natural gas.
Canada Kazakhstan Total
$ $ $
Revenue 618,833 2,086,476 2,705,309
Expenses 4,244,896 (1,576,624) 2,668,272
Net income (loss) (717,098) 2,254,481 (1,371,582)
Capital expenditures - 21,331,979 21,331,979
Depletion, depreciation and accretion 2,500 94,887 97,387
Interest and other revenue 594,283 565 594,848
Current assets 48,341,672 8,031,647 56,373,319
Restricted cash - 139,627 139,627
Property, plant and equipment, net 103,341 89,911,712 90,015,053
Total assets 48,445,013 97,701,649 146,147,662
Current liabilities 466,366 9,196,707 9,663,073
Total liabilities 17,439,726 10,814,758 28,254,484
15 Reconciliation of International Financial Reporting Standards
Accounting practices under Canadian GAAP and International Financial Reporting
Standards ("IFRS") are, as they affect these financial statements, substantially
the same except for the following:
Property and equipment
Under Canadian GAAP, an impairment loss should be recognized when the carrying
amount of a cost centre is not recoverable and exceeds its fair value. The
carrying amount is not recoverable if the carrying amount exceeds the sum of the
undiscounted cash flows expected to result from its use and eventual
disposition. Unproved properties and major development projects are included in
this recoverability test. A cost centre impairment loss should be measured as
the amount by which the carrying amount of assets capitalized in a cost centre
exceeds the sum of:
* the fair value of proved and probable reserves; and
* the costs (less any impairment) of unproved properties that have been subject
to a separate test for impairment and contain no probable reserves
IFRS requires (i) an impairment to be recognized when the recoverable amount of
an asset (cash generating unit) is less than the carrying amount, rather than
when there is a significant or prolonged decline in value below the carrying
amount; (ii) the impairment loss to be determined as the excess of the carrying
amount above the recoverable amount (the higher of fair value less costs to sell
and value in use, calculated as the present value of future cash flows from the
asset), rather than the excess of the carrying amount above the undiscounted
future cash flows of the asset; and (iii) the reversal of an impairment loss
when the recoverable amount changes. IFRS 6, which has been adopted effective
January 1, 2005, provides limited guidance on the financial reporting for
exploration for, and evaluation of, mining resources. Upon adoption of IFRS 6,
continued application of an entity's existing policy is permitted with modified
procedures on impairment tests.
In the absence of specific guidance on the applicability of full cost accounting
under IFRS, the Company continues to apply the full cost method for IFRS
purposes. A ceiling test based on cash generating units did not reveal the need
for an impairment charge.
This difference in accounting policy had no impact on these financial
statements.
Impairment of long-lived assets
Under Canadian GAAP, a long-lived asset should be tested for recoverability
whenever events or changes in circumstances indicate that its carrying amount
may not be recoverable. An impairment loss should be recognized when the
carrying amount of a long-lived asset is not recoverable and exceeds its fair
value. Under IFRS, the carrying amounts of the Company's assets, other than oil
and gas properties, inventories and deferred tax assets, are reviewed at each
balance sheet date to determine whether there is any indication of impairment.
If any such indication exists, the assets' recoverable amounts are estimated. An
impairment loss is recognized when the carrying amount of an asset exceeds its
recoverable amount. Impairment losses, if any, are recognized in the income
statement. This difference in accounting policy has no impact on these financial
statements.
Under Canadian GAAP, the carrying amount of a long-lived asset is not
recoverable if the carrying amount exceeds the sum of the undiscounted cash
flows expected to result from its use and eventual disposition. This assessment
is based on the carrying amount of the asset at the date it is tested for
recoverability, whether it is in use or under development. Under IFRS, the
recoverable amount of the Company's assets other than oil and gas properties is
the greater of their net selling price and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflect current market assessments of the time
value of money and the risks specific to the asset. For an asset that does not
generate cash inflows largely independent of those from other assets, the
recoverable amount is determined for the cash-generating unit to which the asset
belongs. This difference in accounting policy has no impact on these financial
statements.
In respect of impairment of assets other than oil and gas properties, under
Canadian GAAP, an impairment loss is not reversed if the fair value subsequently
increases. For IFRS, an impairment loss may be reversed if there has been a
change in the estimates used to determine the recoverable value.
An impairment loss, on assets other than oil and gas properties, is only
reversed to the extent that the asset's carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or
amortization, if no impairment loss had been recognized. This difference in
accounting policy has no impact on these financial statements.
Asset retirement obligation
In re-measuring an asset retirement obligation for the passage of time, Canadian
GAAP requires re-measurement based on the risk-free rate that existed when the
liability was initially measured. IFRS requires the use of current market
assessed interest rates in each estimate. This difference did not result in a
material reconciling item.
Inventory
Under Canadian GAAP, the Company measures its supplies inventory at the lower of
historical cost or net replacement cost. Under IFRS, the lower of cost or net
realizable value principle would apply. This difference did not result in a
material reconciling item.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SFSFMLSMSEDA
Caspian Energy (LSE:CEK)
Gráfica de Acción Histórica
De May 2024 a Jun 2024
Caspian Energy (LSE:CEK)
Gráfica de Acción Histórica
De Jun 2023 a Jun 2024
