First Calgary Petroleums Ltd. Reports Third Quarter Results
TSX: FCP LSE: FPL
CALGARY, Nov. 11 /CNW/ - First Calgary Petroleums Ltd. is pleased to
report financial results for the nine months ended September 30, 2004.
Report to Shareholders
First Calgary Petroleums Ltd. ("FCP" or the "Company"), an international
exploration company active in Algeria, operates Ledjmet Block 405b and
Yacoub Block 406a in the Berkine Basin. In this report, $ refers to the
U.S. dollar and C$ refers to the Canadian dollar.
During the third quarter FCP continued to achieve outstanding drilling
results. On Block 405b, the 2004 drilling programme moved west of the
MLE Field with discoveries at LEC-1, MZLN-1, LES-1, MZLS-1 and LEW-1. Drilling
operations commenced on LES-2 in late October. On Block 406a, the Company
tested the ZCH-1 discovery during the quarter and commenced a 613 km(2) 3D
seismic programme which will be integral to selecting 2005 drilling locations
on this Block.
Ledjmet Block 405b
On Block 405b, there are currently ten cased gas and condensate wells, of
which the Company has drilled nine. On a cumulative basis, the wells
production tested 176,309 barrels of oil equivalent per day (boe/d) consisting
of 765 million cubic feet of gas per day (mmcf/d), 35,236 barrels of
condensate per day (bbls/d) and 13,515 barrels of light oil per day (bbls/d).
The following is a summary of the wells and test results obtained to date:
----------------------------------------------
Normalized Rates
---------------------------------------
Total Gas Condensate Oil
(boe/d) (mmcf/d) (bbls/d) (bbls/d)
Well (1) (2) (2) (3) Category Status
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MLE-1 6,019 31 784 Exploration Cased & tested
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MLE-2 45,151 192 13,098 Appraisal Cased & tested
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MLE-3 24,743 127 3,643 Appraisal Cased & tested
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MLE-4 5,090 23 1,223 Appraisal Cased & tested
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MLE-5 8,546 42 1,596 Appraisal Cased & tested
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LEC-1 20,059 105 2,602 Exploration Cased & tested
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LES-1 21,105 31 2,427 13,515 Exploration Cased & tested
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MZLN-1 45,596 214 9,863 Exploration Cased & tested
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MZLS-1 Exploration Cased & logged
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LEW-1 Exploration Cased & logged
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LES-2 Appraisal Drilling
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TOTALS 176,309 765 35,236 13,515
---------------------------------------
FWHP - Flowing Wellhead Pressure
FBHP - Flowing Bottom Hole Pressure
(1) Using a conversion ratio of 6 thousand cubic feet of gas to 1 barrel
of oil equivalent
(2) Rate normalized to a FWHP of 2,000 psi
(3) Rate normalized to a FBHP of 2,000 psi
(4) Test rates are from multiple zones.
Readers are referred to the map of Block 405b which is available on the
Company's website at www.fcpl.ca.
Block 405b operations during, and subsequent to, the third quarter are
summarized below:
MLE Field - Development work is continuing with Sonatrach respecting
the commercialisation.
- Independent engineers are developing reservoir models.
- Conceptual engineering designs for facilities and pipelines
are in progress.
LEC-1 - Drilled to evaluate a structural high, separate from the
MLE Field.
- Production tests confirmed the continuation of the prolific
Devonian zones to the west of the MLE Field.
LES-1 - Drilled to evaluate an undrilled structure on the southern
part of the Block.
- Testing operations confirmed the extension of reserves in
the lower Devonian zones.
- Tested significant oil volume.
MZLN-1 - Drilled to evaluate the hydrocarbon pay identified in the
MZL-1 borehole and to explore for new reserves in
additional geological horizons.
- Testing operations confirmed the extension of reserves in
the lower Devonian zones.
MZLS-1 - Drilled to evaluate another separate structure and confirm
the westerly extension of the lower Devonian zones.
- Wireline logs indicated 51 metres of net hydrocarbon pay.
- Production testing anticipated to commence in November.
LEW-1 - Located over twenty kilometers west of the MLE Field, it is
the furthest westerly well drilled to date on the Block.
- Drilled to evaluate an undrilled structure and confirm the
westerly extension of the lower Devonian zones.
- Wireline logs indicated 67 metres of net hydrocarbon pay.
- Production testing anticipated to commence in November.
LES-2 - Drilling of this appraisal of the LES-1 exploration well
has commenced.
Yacoub Block 406a
During the third quarter, production testing of the ZCH-1 discovery well
was completed with a cumulative test rate of 8,545 barrels per day of
hydrocarbon liquids (comprised of 6,376 barrels of light oil and 2,169 barrels
of condensate) and 56.2 million cubic feet of natural gas per day from several
geological zones at various wellhead pressures.
Encouraged by the ZCH-1 test results, FCP commenced a 613 km(2) 3D
seismic programme on the Block to define both appraisal and further
exploration drilling locations. The acquisition, processing and initial
interpretation of this survey are expected to be completed early in 2005.
The ZCH-1 discovery on Block 406a is significant for the Company. With a
sizeable unexplored acreage position on this structural trend, it has the
potential to add materially to the Company's reserves. This discovery also
provides an excellent complement to the gas and condensate discoveries on
Ledjmet Block 405b.
Management's Discussion and Analysis
Management's discussion and analysis ("MD&A") should be read in
conjunction with the unaudited interim financial statements for the three and
nine month periods ended September 30, 2004 and 2003 and the audited financial
statements and MD&A for the year ended December 31, 2003.
Operations
FCP operates in Algeria where it has the rights to explore and appraise
two large acreage blocks, Ledjmet Block 405b and Yacoub Block 406a. The
Company's rights and obligations are set out in hydrocarbon agreements with
Sonatrach, the national oil company of Algeria, which represents the interest
of the state.
On Block 405b, FCP is party to a Production Sharing Contract (PSC) with
Sonatrach. The PSC allocates hydrocarbon production between FCP and Sonatrach
in accordance with a sliding scale formula based on such factors as production
levels, product prices and project investment. Pursuant to the formula, the
Company's annual share of production may range from 27.72% to 8.16%. All
Algerian state royalties and income taxes are paid by Sonatrach from its share
of hydrocarbon production.
On Block 406a, FCP has a Joint Venture Agreement (JV) with Sonatrach. The
JV allocates 49 percent of the hydrocarbon production or equivalent volume
thereof to the Company. FCP is responsible for paying Algerian state royalties
and income taxes on its share of production. A portion of the total
recoverable natural gas reserves will be considered strategic reserves and
excluded by Algerian law from the JV.
The hydrocarbon agreements require FCP to conduct certain drilling and
seismic activities over periods of time. The exploration and appraisal phases
of the agreements that extend for five years are divided into two periods with
each period containing a minimum work commitment. In each agreement, the first
period was for three years, and the Company then had the option to enter a
second exploration period of two years. Following the exploration and
appraisal phase of each agreement, the Company and Sonatrach will obtain
exploitation permits for any reserves determined to be commercial and all
lands not subject to an exploitation permit will be returned to the
government.
Ledjmet Block 405b
The Company is in the third year of the first exploration period of the
Block 405b hydrocarbon agreement and has satisfied all the work commitments
relating thereto. The first exploration period will end in December 2004 at
which time the hydrocarbon agreement requires 30% of the Block's acreage to be
relinquished. Based upon the drilling results obtained to date and the seismic
data on the Block, the Company is optimistic about the exploration potential
of the undrilled lands to the west of the MLE Field. Accordingly, FCP has
committed to the second exploration period. The remaining work commitment for
the two year second exploration period is to drill one exploration well by
December 31, 2006, estimated to cost $9 million. If the Company fails to
satisfy this work obligation, the rights, other than for which an exploitation
permit has been granted or requested, will be returned and the Company will be
liable to pay Sonatrach a penalty of $6.25 million.
As part of the Block 405b hydrocarbon agreement, FCP obtained the right
to appraise and develop the MLE reserves discovered with the MLE-1 well. FCP
has now drilled four MLE appraisal wells: MLE-2, MLE-3, MLE-4 and MLE-5. As
compensation for the right to access the MLE discovery, the Company is
committed to pay Sonatrach a reserve-based access fee of $0.25 per barrel of
oil equivalent calculated on the total estimated recoverable MLE reserves. The
access fee will be determined at the time the MLE reserves are declared
commercial by Sonatrach and will be payable as a deduction from Sonatrach's
share of the MLE development expenditures.
Yacoub Block 406a
The Company is in the second exploration period of the Block 406a
hydrocarbon agreement, which will end in November 2005. The remaining second
exploration period work commitment is the drilling of two exploration wells by
November 11, 2005. The cost of this commitment is currently estimated at
$15 million. If the Company fails to satisfy this work obligation, the rights,
other than for which an exploitation permit has been granted or requested,
will be returned and the Company will be liable to pay Sonatrach a penalty of
$12.75 million.
Capital Expenditures
Capital expenditures for the nine months ended September 30, 2004 totaled
$69.1 million compared to $28.6 million in the comparable period in 2003. Of
the 2004 expenditures, $58 million related to drilling, completion and testing
activities, $7.1 million was spent on seismic and $4 million related to
administrative and support services for the Algerian operations.
Capital expenditures for the three months ended September 30, 2004
totaled $30.6 million compared to $11 million in 2003. Of the third quarter
2004 expenditures, $27.5 million related to drilling, completion and testing
activities, $2.1 million was spent on seismic and $1 million related to
administrative and support services for the Algerian operations.
Liquidity and Capital Resources
FCP continues to rely on equity to fund its operations and capital
programmes. The Company had working capital of $19.9 million at September 30,
2004 compared to $83.1 million at December 31, 2003. Changes in the Company's
working capital are primarily a function of the timing and magnitude of its
equity financings and capital expenditures. The net reduction in working
capital in the nine months ended September 30, 2004 can be attributed to
$69.1 million of capital expenditures, $7.4 million in proceeds from the
exercise of options and warrants, $2.3 million to fund operations and a
positive foreign currency change of $0.8 million.
During the three months ended September 30, 2004, the $28.8 million net
reduction in the Company's working capital can be attributed to $30.6 million
of capital expenditures, $0.4 million in proceeds from the exercise of options
and warrants, $0.8 million to fund operations and a positive foreign currency
change of $2.2 million.
Subsequent to September 30, 2004, the Company entered into an agreement
with Canaccord Capital Corporation, whereby Canaccord has agreed to purchase
for resale to the public on a bought deal basis, 6,000,000 common shares of
FCP at a price of C$14.46 (pnds stlg 6.50) per share, resulting in gross
proceeds of approximately $72.4 million (pnds stlg 39 million). This financing
is subject to certain conditions, including normal regulatory approvals, and
is anticipated to close on or about December 2, 2004. Net proceeds of the
offering will be used to fund capital expenditures on Blocks 405b and 406a and
for working capital purposes.
The Company is listed on the Toronto Stock Exchange and on the AIM market
of the London Stock Exchange. During the nine months ended September 30, 2004
the Company received $7.4 million for the issuance of 2,506,058 common shares
from the exercise of stock options and warrants. For the three months ended
September 30, 2004, $0.4 million has been received from the issuance of 83,333
common shares pursuant to the exercise of stock options and warrants. In
October 2004, FCP issued 10,150,000 common shares to acquire a 5% net profits
interest held by a third party on the net future cash flow of Blocks 405b and
406a.
The fully-diluted number of shares outstanding at November 10, 2004,
September 30, 2004 and December 31, 2003 were as follows:
November 10, September 30, December 31,
2004 2004 2003
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Common shares 175,712,744 165,562,744 163,056,686
Employee stock options 8,877,668 8,877,668 9,018,401
Common share purchase warrants 154,549 154,549 1,913,209
Non-employee stock options 900,000 900,000 900,000
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Fully-diluted shares
outstanding 185,644,961 175,494,961 174,888,296
-------------------------------------------------------------------------
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Operating Results and Selected Quarterly Information
2004 2003
(000's of U.S.
dollars) Q3 Q2 Q1 Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Interest $ 251 $ 238 $ 415 $ 315 $ 81 $ 118 $ 124
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Expenses
General and
adminis-
trative 904 1,048 910 962 660 539 442
Stock-based
compen-
sation 975 1,375 1,389 3,579 233 214 653
Foreign
exchange
loss
(gain) (2,151) 1,137 292 (320) (192) 633 421
Write-off
Yemen
investment - - - 1,035 - - -
Earthquake
donation - - - - - 1,000 -
Other
expenses 109 92 90 290 34 97 8
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(163) 3,652 2,681 5,546 735 2,483 1,524
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Income (loss) 414 (3,414) (2,266) (5,231) (654) (2,365) (1,400)
Loss per
share 0.00 (0.02) (0.01) (0.03) (0.01) (0.02) (0.01)
Share
capital 172,895 172,376 171,897 165,181 62,463 62,295 62,194
Working
capital
(defic-
iency) 19,858 48,664 74,659 83,110 (1,150) 10,383 19,947
Capital
assets 137,911 107,267 82,886 68,708 52,106 41,061 29,085
Other
liabilities (239) (174) (151) (123) (92) (91) (61)
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Shareholders'
equity $157,530 $155,757 $157,394 $151,695 $ 50,864 $ 51,353 $ 48,971
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2002
(000's of U.S.
dollars) Q4
-----------------------
Interest $ 75
-----------------------
Expenses
General and
adminis-
trative 543
Stock-based
compensation 31
Foreign
exchange loss
(gain) (81)
Write-off
Yemen
investment -
Earthquake
donation -
Other
expenses 5
-----------------------
498
-----------------------
Income (loss) (423)
Loss per
share (0.01)
Share
capital 40,351
Working
capital
(defic-
iency) 6,640
Capital
assets 18,862
Other
liabilities (22)
----------------------
Shareholders'
equity $ 25,480
----------------------
The Company's interest income for the three and nine month periods ended
September 30, 2004, was higher compared with the 2003 comparable periods as a
result of higher average cash and term-deposit balances during 2004.
The Company's general and administrative expenses were $2.9 million for
the nine months ended September 30, 2004 compared with $1.6 million in the
comparable 2003 period. For the three months ended September 30, 2004 and
2003, the general and administrative expenses were $0.9 and $0.7 million,
respectively. The increased expense during 2004 is attributed to additional
resources required for the operation of the Algeria petroleum and natural gas
projects (including employee levels and administrative support), professional
fees and annual public company listing fees.
Stock-based compensation expense was $3.7 million for the nine months
ended September 30, 2004 compared with $1.1 million in the comparable 2003
period. For the three months ended September 30, 2004 and 2003, the stock-
based compensation expense was $1 and $0.2 million, respectively. The
increased 2004 expense is primarily attributed to the vesting of options
granted in the fourth quarter of 2003 and to higher estimated option fair
values.
The Company recorded a net foreign exchange gain of $0.7 million for the
nine months ended September 30, 2004, of which $2.2 million was incurred
during the third quarter. The gain primarily resulted from the effects of the
weakening U.S. dollar against Canadian dollar deposits held. A $0.9 million
loss was recorded in the comparable 2003 period due primarily from foreign
exchange rate changes on British pound holdings generated from the February
2003 public share offering. The Company changed its functional currency in the
fourth quarter of 2003 from the Canadian dollar to the U.S. dollar. The
functional currency is the unit of reference by which all foreign currency
transactions are measured and foreign exchange gains or losses determined.
Business Risks and Uncertainties
The MD&A for the year ended December 31, 2003 includes an overview of
certain of the business risks and uncertainties facing the Company. Those
risks remain in effect as at September 30, 2004.
Outlook
The Company has an active exploration and appraisal programme planned for
the remainder of 2004. Interpretation and analysis of the 3D seismic programme
on Block 405b is ongoing and the Company has identified a number of drillable
locations. In addition, reservoir modeling and conceptual facilities
engineering work is continuing respecting the MLE development. Acquisition and
interpretation of the 3D seismic programme on Block 406a is ongoing and will
be used to identify 2005 drilling locations.
The development of the Block 405b reserves through to commercial
production is a unique opportunity that will require significant capital. In
October, FCP retained Lehman Brothers as a financial adviser and Canaccord
Capital (Europe) Limited as a strategic adviser to assist the Company in
seeking and evaluating strategic alternatives. The review of strategic
alternatives may include the consideration of a number of transactions,
including an outright sale of the Company, a strategic partnership for the
development of Blocks 405b and 406a as well as potential capital markets
opportunities.
Advisory Regarding Forward-Looking Statements
Certain information with respect to the Company contained in this report
contains forward-looking statements. These forward-looking statements are
based on assumptions and are subject to numerous risks and uncertainties, some
of which are beyond FCP's control, including the impact of general economic
conditions, industry conditions, volatility of commodity prices, currency
exchange rate fluctuations, reserve estimates, environmental risks,
competition from other explorers, stock market volatility and the ability to
access sufficient capital. FCP's actual results, performance or achievement
could differ materially from those expressed in, or implied by, these forward-
looking statements and, accordingly, no assurance can be given that any events
anticipated by the forward-looking statements will transpire or occur.
November 10, 2004
FIRST CALGARY PETROLEUMS LTD.
Consolidated Balance Sheets
(Expressed in thousands of U.S. dollars)
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September 30 December 31
2004 2003
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(Unaudited) (Audited)
Assets
Current assets:
Cash and short-term deposits (note 3) $ 41,648 $ 95,185
Accounts receivable 114 144
Deposits and prepaid expenses 239 326
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42,001 95,655
Property, plant and equipment 137,911 68,708
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$ 179,912 $ 164,363
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities
(note 4) $ 22,143 $ 12,544
Asset retirement obligations 239 124
Shareholders' equity:
Capital stock (note 5) 172,895 165,181
Contributed surplus (note 5) 8,236 4,849
Cumulative translation adjustment 6,502 6,502
Deficit (30,103) (24,837)
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157,530 151,695
Operations and commitments (note 1)
Subsequent events (note 7)
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$ 179,912 $ 164,363
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See accompanying notes to interim consolidated financial statements.
FIRST CALGARY PETROLEUMS LTD.
Consolidated Statements of Operations and Deficit
(Expressed in thousands of U.S. dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
(Unaudited) 2004 2003 2004 2003
-------------------------------------------------------------------------
(Restated (Restated
see note 2) see note 2)
Revenue:
Interest $ 251 $ 81 $ 904 $ 323
-------------------------------------------------------------------------
Expenses:
General and administrative 904 659 2,862 1,642
Stock-based compensation
(note 5) 975 233 3,739 1,100
Foreign exchange loss (gain) (2,151) (192) (722) 861
Algerian earthquake relief
donation - - - 1,000
Capital taxes 89 23 232 111
Depreciation 16 10 51 23
Accretion of asset retirement
obligations 4 2 8 5
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(163) 735 6,170 4,742
-------------------------------------------------------------------------
Income (loss) for the period 414 (654) (5,266) (4,419)
Deficit, beginning of period (30,517) (18,951) (24,837) (15,186)
-------------------------------------------------------------------------
Deficit, end of period $(30,103) $(19,605) $(30,103) $(19,605)
-------------------------------------------------------------------------
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Loss per share (note 5) $ 0.00 $ (0.01) $ (0.03) $ (0.04)
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See accompanying notes to interim consolidated financial statements.
FIRST CALGARY PETROLEUMS LTD.
Consolidated Statements of Cash Flows
(Expressed in thousands of U.S. dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
(Unaudited) 2004 2003 2004 2003
-------------------------------------------------------------------------
(Restated (Restated
see note 2) see note 2)
Operating activities:
Income (loss) for the period $ 414 $ (654) $ (5,266) $ (4,419)
Items not involving cash:
Stock-based compensation 975 233 3,739 1,100
Foreign exchange loss
(gain) (2,110) - (770) -
Depreciation 16 10 51 23
Accretion of asset retirement
obligations 4 2 8 5
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(701) (409) (2,238) (3,291)
Change in non-cash working
capital 33 748 (160) 489
-------------------------------------------------------------------------
(668) 339 (2,398) (2,802)
Financing activities:
Proceeds from issuance of
shares - - - 23,121
Proceeds from exercise of
warrants 188 101 6,523 408
Proceeds from exercise of
options 196 67 853 305
Issue costs - - (14) (1,722)
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384 168 7,362 22,112
Investing activities:
Capital expenditures (30,599) (11,030) (69,147) (28,583)
Change in non-cash working
capital 8,940 (588) 9,876 824
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(21,659) (11,618) (59,271) (27,759)
-------------------------------------------------------------------------
Decrease in cash and short-
term deposits (21,943) (11,111) (54,307) (8,449)
Effect of exchange rate
fluctuations on cash and
short-term deposits 2,110 (294) 770 2,992
Cash and short-term deposits,
beginning of period 61,481 18,370 95,185 12,422
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Cash and short-term deposits,
end of period $ 41,648 $ 6,965 $ 41,648 $ 6,965
-------------------------------------------------------------------------
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See accompanying notes to interim consolidated financial statements.
FIRST CALGARY PETROLEUMS LTD.
Notes to Interim Consolidated Financial Statements
Nine months ended September 30, 2004 (unaudited)
(Expressed in thousands of U.S. dollars unless otherwise indicated)
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The interim consolidated financial statements of First Calgary Petroleums
Ltd. ("the Company") have been prepared by management in accordance with
accounting principles generally accepted in Canada and following the same
accounting policies as the annual consolidated financial statements for the
year ended December 31, 2003. The disclosures included below are incremental
to those included with the annual consolidated financial statements. The
interim consolidated financial statements should be read in conjunction with
the annual consolidated financial statements and the notes thereto in the
Company's annual report for the year ended December 31, 2003.
1. Operations and commitments:
The Company's operations are in Algeria where it has the rights to
explore, appraise and develop two acreage blocks, Yacoub Block 406a
("Block 406a") and Ledjmet Block 405b ("Block 405b"). The Company's
rights and obligations in each Block are set out in hydrocarbon
agreements with Sonatrach, the national oil company of Algeria. These
hydrocarbon agreements are structured such that the Company has
committed to conduct certain minimum exploration activities over a
period of time and in return earns an interest in commercial
discoveries.
(a) Block 406a:
In 2000 the Company entered into a joint venture agreement with
Sonatrach to explore Block 406a in the Berkine Basin. The Company
is in the second exploration period which expires in November
2005. The remaining work obligation for the second exploration
period is to drill two exploration wells, estimated to cost
$15 million. If the Company fails to satisfy the work
obligations, the rights, other than for areas for which an
exploitation permit has been granted or requested, could be
forfeited and the Company will be liable to pay Sonatrach a
penalty of $12.75 million. In addition to the work commitments,
the Company is obligated to pay an annual training bonus in the
amount of $150 thousand for the duration of the contract.
(b) Block 405b:
In 2001 the Company entered into a production-sharing contract
with Sonatrach to explore and appraise Block 405b in the Berkine
Basin. The Company has fulfilled its first exploration period
work obligations and has elected to enter into the second
exploration period which expires in December 2006. The remaining
work obligation for the second exploration period is to drill one
exploration well. The estimated cost of this work is $9 million.
Should the Company fail to satisfy the work obligation, the
rights, other than for areas for which an exploitation permit has
been granted or requested, could be forfeited and the Company
will be liable to pay Sonatrach a penalty of $6.25 million. In
addition to the work commitments, the Company is obligated to pay
an annual training bonus in the amount of $150 thousand for the
duration of the contract.
The contract provides the Company with the right to appraise and
develop the MLE reserves discovered with the MLE-1 well. As
compensation for the right to access the MLE discovery, the
Company is committed to pay Sonatrach a reserve-based access fee
of $0.25 per barrel of oil equivalent calculated on the total
estimated recoverable MLE reserves. The access fee will be
determined at the time the MLE reserves are declared commercial
by Sonatrach and will be payable as a deduction from Sonatrach's
share of the MLE development expenditures.
The Company's current financial resources combined with the
proceeds expected from the planned equity financing (see note 7)
will be sufficient to meet its required work commitments,
however, these resources may be directed to other optional
capital programmes and other opportunities which become available
to the Company. In addition, the development of the Block 405b
reserves through to commercial production will require additional
funding in the form of equity, debt, joint ventures or some
combination thereof.
2. Changes in accounting policies and restatement of prior periods:
In the fourth quarter of 2003, the Company adopted three new
accounting policies which required restatement of the previously
reported 2003 interim financial statements. The new accounting
policies were the change to the U.S. dollar as the Company's
reporting currency, the recognition of compensation expense for stock
options granted to employees after January 1, 2003 and the new
accounting standard for asset retirement obligations.
3. Cash and short-term deposits:
The Company considers deposits in banks, certificates of deposit and
short-term investments with original maturities of three months or
less as cash and short-term deposits. The components of cash and
short-term deposits are as follows:
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September 30 December 31
2004 2003
---------------------------------------------------------------------
Cash on deposit:
U.S. dollars $ 32,868 $ 50,912
Algerian dinars 1,189 50
Canadian dollars 66 791
British pounds - 286
Bank term deposits:
Canadian dollars 7,021 42,644
U.S. dollars 504 502
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$ 41,648 $ 95,185
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4. Accounts payable and accrued liabilities:
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September 30 December 31
2004 2003
---------------------------------------------------------------------
Trade payables:
U.S. dollars $ 7,709 $ 8,312
Algerian dinars 3,558 711
Canadian dollars 557 536
British pounds 106 55
Capital accrual:
U.S. dollars 10,213 2,930
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$ 22,143 $ 12,544
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5. Capital stock:
(a) Issued share capital:
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Number of
Shares Amount
---------------------------------------------------------------------
Common shares:
Outstanding, December 31, 2003 163,056,686 $ 165,181
Issued on exercise of share purchase
warrants(i) 1,758,660 6,523
Issued on exercise of stock options 747,398 853
Transfer from contributed surplus on
exercise of stock options and warrants - 352
Share issue costs - (14)
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Outstanding, September 30, 2004 165,562,744 $ 172,895
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(i) During the nine months ended September 30, 2004, 1,758,660
common shares were issued pursuant to the exercise of the
following common share purchase warrants: 44,681 at C$2.60
per share and 1,713,979 at C$5.00 per share.
(b) Employee stock options:
Pursuant to the Stock Option Plan, the Company has 13,464,397
common shares reserved for issuance at September 30, 2004. Stock
options granted under the plan have a term of five years and
vesting terms are at the discretion of the Board. The exercise
price of each option is equal to the closing market price of the
shares on the date preceding the date of grant. The following
table summarizes the changes in stock options outstanding:
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Weighted
Average
Number of Exercise
Options Price
---------------------------------------------------------------------
Outstanding, December 31, 2003 9,018,401 C$ 2.47
Granted 840,000 9.54
Exercised (747,398) 1.51
Cancelled (233,335) 6.55
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Outstanding, September 30, 2004 8,877,668 C$ 3.11
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---------------------------------------------------------------------
The following table summarizes information about the options
outstanding and exercisable at September 30, 2004:
---------------------------------------------------------------------
---------------------------------------------------------------------
Options
Options Outstanding Exercisable
---------------------------------------------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Contractual Exercise Exercise
Exercise price Options Life Price Options Price
---------------------------------------------------------------------
C$0.50-0.85 2,175,000 2.0 years C$ 0.63 2,175,000 C$ 0.63
C$0.95-1.06 425,000 0.2 years 1.05 425,000 1.05
C$1.23-1.90 1,730,334 1.7 years 1.28 1,713,667 1.27
C$2.36-2.95 1,062,334 3.4 years 2.60 669,001 2.60
C$4.72-6.00 2,525,000 4.1 years 4.72 838,335 4.72
C$7.45-8.00 525,000 4.4 years 7.67 175,000 7.67
C$10.95-12.05 435,000 4.7 years 11.28 76,667 11.10
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8,877,668 2.9 years C$ 3.11 6,072,670 C$ 1.96
---------------------------------------------------------------------
---------------------------------------------------------------------
(c) Common share purchase warrants:
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted
Average
Number of Exercise
Options Price
---------------------------------------------------------------------
Outstanding, December 31, 2003 1,913,209 C$ 4.70
Exercised (1,758,660) 4.94
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Outstanding, September 30, 2004 154,549 C$ 2.02
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---------------------------------------------------------------------
At September 30, 2004, all of the 154,549 common share purchase
warrants outstanding are exercisable; 36,021 expire on April 19,
2005 and the remaining 118,528 expire on June 9, 2007.
(d) Non-employee stock options:
In 2002 the Company granted consultants options to acquire
900,000 common shares at a price of C$0.70 per share. At
September 30, 2004, all of these options remain outstanding, are
fully vested and expire January 24, 2007.
(e) Stock-based compensation expense:
For the nine months ended September 30, 2004, the Company
recorded $3.7 million ($1 million for the three months ended) as
stock-based compensation expense with a corresponding increase in
contributed surplus. The weighted average fair value of the
options granted in the nine months ended September 30, 2004 was
estimated to be C$5.20 per option using the Black-Scholes option
pricing model with the following assumptions: expected volatility
of 81%, risk-free interest rate of 3.8% and expected lives of
3 years.
Had options granted to employees in 2002 been accounted for using
the fair value method, the net loss for the nine months ended
September 30, 2004 would have been higher by $0.1 million (2003 -
$0.2 million). The pro forma fair values were determined using
the Black-Scholes option pricing model with the following
assumptions: expected volatility of 95%, risk-free interest rate
of 5% and expected lives of 5 years.
(f) Contributed surplus:
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Balance, December 31, 2003 $ 4,849
Options granted 3,739
Options and warrants exercised (352)
---------------------------------------------------------------------
Balance, September 30, 2004 $ 8,236
---------------------------------------------------------------------
---------------------------------------------------------------------
(g) Per share amounts:
The loss per share is based on the weighted average shares
outstanding for the period. The weighted average shares
outstanding for the three and nine month periods ended
September 30, 2004 were 165,527,237 and 164,892,695, respectively
(2003 - 124,867,108 and 122,066,578).
6. Segmented information:
The Company's activities are conducted in two geographic segments:
Canada and Algeria. All activities relate to exploration and
development of petroleum and natural gas in Algeria. The entire
Algerian activities are in support of the exploration operations, and
as a result, are capital in nature. All revenues, expenses and losses
for the periods presented are related to operations in Canada.
Three months ended
September 30 Canada Algeria Yemen Total
---------------------------------------------------------------------
2004
Capital expenditures $ 10 $ 30,589 $ - $ 30,599
---------------------------------------------------------------------
---------------------------------------------------------------------
2003
Capital expenditures $ 60 $ 10,970 $ - $ 11,030
---------------------------------------------------------------------
---------------------------------------------------------------------
Nine months ended
September 30 Canada Algeria Yemen Total
---------------------------------------------------------------------
2004
Capital expenditures $ 16 $ 69,131 $ - $ 69,147
Assets $ 40,889 $ 139,023 $ - $ 179,912
---------------------------------------------------------------------
---------------------------------------------------------------------
2003
Capital expenditures $ 112 $ 28,471 $ - $ 28,583
Assets $ 7,085 $ 51,388 $ 781 $ 59,254
---------------------------------------------------------------------
---------------------------------------------------------------------
7. Subsequent events:
(a) In October 2004, FCP issued 10,150,000 common shares to acquire a
5% net profits interest held by a third party on the net future
cash flow of Blocks 405b and 406a.
(b) In November 2004, the Company agreed to issue, on a bought deal
basis, 6,000,000 common shares at a price of C$14.46
(pnds stlg 6.50) per share. The share issue costs are estimated
to be $4 million, including the agent's commission. This
financing is subject to certain conditions, including normal
regulatory approvals, and is anticipated to close on or about
December 2, 2004.
For further information: contact Kenneth C. Rutherford, Vice President,
Finance & Chief Financial Officer, First Calgary Petroleums Ltd., Suite 900,
520 - 5 Avenue SW, Calgary, AB T2P 3R7, tel: (403) 264-6697,
email: info(at)fcpl.ca, fax: (403) 264-3955, web site: www.fcpl.ca.
European contacts: Jim Joseph, COLLEGE HILL, Tel: +44 (0) 207 457 2020;
Carina Corbett, 4C COMMUNICATIONS LTD., Tel: +44 (0) 207 907 4761
(FPL)
END
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