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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
First Calgary | LSE:FPL | London | Ordinary Share | CA3193843016 | COM SHS NPV |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 175.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
Attention Business/Financial Editors: First Calgary Petroleums Ltd. Third Quarter Report to Shareholders TSX: FCP LSE: FPL CALGARY, Nov. 28 /CNW/ - First Calgary Petroleums Ltd. ("FCP" or the "Company"), an international exploration company with principle activities in Algeria, operates the Ledjmet 405b and Yacoub 406a blocks in the Berkine Basin. The Company was recently honored by the London Stock Exchange (AIM) as the International Company of the Year and in September 2003 was included in the S&P/TSX Composite Index. Overview of Activities Financing In October 2003, FCP closed a $140 million prospectus offering in Canada and the United Kingdom resulting in the issuance of 35 million common shares priced at $4.00 (pnds stlg 1.79) per share. The issue was placed with Canaccord Capital (Europe) Limited, Canaccord Capital Corporation and Octagon Capital Corporation. With this financing completed, the Company is well positioned to accelerate its drilling and seismic activities in Algeria. Ledjmet Block 405b The independent engineering firm of DeGolyer and MacNaughton has estimated the Ledjmet Block 405b gross proved, probable and possible recoverable reserves to be 5.7 trillion cubic feet of natural gas equivalent (TCFe). Of this total, the estimated proved undeveloped reserves are 708 billion cubic feet of natural gas equivalent and the proved plus probable reserves are 2.4 TCFe. Since these reserve estimates were prepared, FCP has drilled two additional appraisal wells. During the quarter ended September 30, 2003, FCP completed the third successful gas well located on the Menzel Ledjmet East (MLE) field. The MLE-3 well, located 3.7 kilometres east of the MLE-2 appraisal well, was drilled and cased to a total depth of 4,497 metres encountering 121 metres of hydrocarbon net pay over multiple intervals. Production testing resulted in combined production flow rates of 24,743 barrels of oil equivalent per day, comprised of approximately 127 million cubic feet of gas per day and 3,643 barrels of condensate per day. The three MLE wells production tested to date have combined flow rates in excess of 77,000 barrels of oil equivalent per day. The drilling and testing results continue to exceed management's expectations. The Company then commenced the drilling of the MLE-4 appraisal well (located 4.9 kilometres southwest of the MLE-3 well) and reached total depth of 4,595 metres in the fourth quarter. The MLE-4 well encountered 56 metres of hydrocarbon net pay over multiple intervals and a testing unit is scheduled to move on location to commence production testing. FCP's interpretation of the MLE-3 and MLE-4 well data indicates the field extends southward from the current limits of proven and probable reserves. Moving forward with the MLE appraisal, the Company plans to commence drilling the MLE-5 well in December. After final results of the MLE-4 and MLE-5 wells are known, FCP expects to have completed the appraisal stage of the MLE field and anticipates moving to the development stage. Based upon the current DeGolyer and MacNaughton reserves estimate and the anticipated results of the MLE-4 and MLE-5 wells, FCP and Sonatrach, the Algerian National Oil Company, plan to jointly develop the MLE gas and condensate field. FCP's development planning is underway with respect to front-end engineering. The awarding of the engineering, procurement and construction contracts are anticipated in 2004 with first production targeted for 2007. The development plan currently includes the construction of a 650 million cubic feet per day plant for processing natural gas and natural gas liquids. The total cost of the project development, including development wells, field gathering, facilities and tie-ins is estimated to be in excess of U.S.$700 million. As part of the development planning, Sonatrach and FCP have agreed to jointly secure markets and Sonatrach has further agreed to allocate sufficient pipeline capacity to deliver the product. In addition to the drilling success experienced to date on Block 405b, FCP has completed the acquisition of 600 square kilometres (km2) of 3D seismic immediately adjacent to and west of the MLE field. While the seismic interpretation is ongoing, the Company presently has eight exploration and appraisal drilling locations identified and intends to accelerate the drilling activity by contracting a second drilling rig in January 2004. Yacoub Block 406a On the Yacoub Block 406a, FCP drilled and abandoned its first exploration well, YCB-1, during the first quarter of 2003. Subsequently, FCP acquired 240 kilometres of 2D seismic data extending over the central and eastern portions of the Block where reservoir thicknesses appear to increase and the seismic data indicates faulting and prospective structures. Encouraged by the seismic, the Company has elected to enter into the second exploration period through to November 10, 2005. FCP was initially required to drill a second exploration well by November 11, 2003, the end of the first exploration period. However, in conjunction with the election to commit to the second exploration period, the drilling of this exploration well has been deferred to 2004. The Company plans to conduct a 470 km2 3D seismic acquisition program commencing during the first quarter of 2004. Block 43, Yemen In Yemen, DNO ASA drilled and abandoned the Zaboon-1 well in the second quarter of 2003. Being the first of three wells scheduled to be drilled on Block 43, the well was funded and operated by DNO ASA pursuant to a farm out concluded in 2001. The second exploration well, Meshat-1, is planned to commence drilling in December 2003. A six month extension of the exploration period through to August 2004 has been granted by the Yemen Ministry of Oil and Minerals. DNO ASA has recently announced it has farmed out a portion of its interest in the Block to Oil Search Limited, an Australian based oil company. Management's Discussion and Analysis Management's discussion and analysis ("MD&A") should be read in conjunction with the unaudited interim consolidated financial statements for the nine months ended September 30, 2003 and 2002 and the audited consolidated financial statements and MD&A for the year ended December 31, 2002. Capital Expenditures and Operating Results Capital expenditures in Algeria for the nine months ended September 30, 2003 totaled $40.6 million. Of this total, $29.0 million related to drilling, completion and testing activities, $9.3 million to seismic, $1.8 million to administrative and support services for the Algeria operations and $0.5 million to annual training bonuses. During the third quarter ended September 30, 2003, capital expenditures in Algeria totaled $15.1 million of which approximately $10.1 million related to drilling, completion and testing activities, $4.6 million to seismic and $0.4 million to administrative and support services. The Company's operating loss for the nine months ended September 30, 2003 was $4.8 million compared with $3.0 million for the 2002 period. The increased loss in 2003 is attributable to an earthquake relief donation pledged to the Government of Algeria, a foreign exchange loss and Canadian capital taxes. For the quarter ended September 30, 2003, FCP incurred an operating loss of $0.6 million versus $1.5 million for the comparable period in 2002. The improvement in the 2003 third quarter operating loss results from a reduction in AIM related costs, a foreign exchange gain and reduced stock-based compensation expense. The Company's general and administrative expenses were $2.3 million for the nine months ended September 30, 2003 compared with $2.4 million for the 2002 period. For the three months ended September 30, 2003 and 2002, the general and administrative expenses were $0.9 million and $1.2 million respectively. The 2003 totals reflect increases in the Company's personnel, travel, professional fees and office-related costs. The 2002 totals include approximately $0.9 million of non-recurring AIM admission costs. During the nine months ended September 30, 2003, the Company recorded a foreign exchange loss of $1.3 million, including a gain of $0.3 million in the third quarter. The year to date loss is attributable to the strengthening of the Canadian dollar vis-a-vis the Company's holding British pounds received from its equity financing as well as holding U.S. dollars to fund the Company's U.S. dollar capital expenditures. The third quarter foreign exchange gain principally related to U.S. denominated accounts payable. Liquidity and Capital Resources During the nine months ended September 30, 2003 the Company received $36.0 million ($33.4 million net of costs) in exchange for 16.5 million common shares issued pursuant to the February prospectus offering, exercise of share purchase warrants and employee stock options. Substantially all of the proceeds were derived from a $35 million prospectus offering in Canada and the U.K. priced at $2.35 (pnds stlg 0.95) per share. In October 2003, the Company received $139.1 million ($130.1 million net of costs) in exchange for 35 million common shares pursuant to a prospectus offering in Canada and the U.K. priced at $4.00 (pnds stlg 1.79) per share. In conjunction with this financing, 1,750,000 common share purchase warrants were issued to the financial agents exercisable at $5.00 per share and expiring April 20, 2005. Proceeds from this financing will be used to continue the appraisal and development of the MLE field, drill a number of exploration wells on Block 405b and continue the exploration seismic and drilling activities on Block 406a. As at November 24, 2003, the Company's issued common shares totaled 160.9 million and outstanding stock options and warrants to purchase common shares were 10.9 million and 2.7 million respectively. In Algeria, the Company is required to complete certain minimum work commitments over specified periods of time. On Yacoub 406a, the Company has a remaining first exploration period work commitment to drill one exploration well. FCP has elected to enter into the second exploration period thereby committing to drill two additional exploration wells by November 2005. In conjunction with this election, FCP has deferred the drilling of the first exploration period well to 2004. While Sonatrach has agreed in principle to the election and the deferment, the parties need to amend the joint venture agreement. On Ledjmet 405b, FCP is required to drill one exploration well prior to December 2004. FCP continues to operate in an exploration and development stage. The recently completed equity financing enables the Company to maintain active drilling and seismic programs on the Ledjmet 405b and Yacoub 406a blocks relating to both the minimum work commitments and the appraisal/development of the Block 405b reserves. The planned MLE development through to commercial production is projected to cost in excess of U.S.$700 million. To complete the development, the Company will require additional financing in the form of project debt financing, joint ventures, equity or some combination thereof. Pending Accounting Change The Company uses stock options as part of its remuneration package for employees and does not currently recognize compensation expense on the issuance thereof. During the fourth quarter of 2003, the Company is planning to change its accounting policy, effective January 1, 2003, to recognize stock-based compensation as an expense. This accounting policy change will reduce future net earnings. Outlook The Company continues to focus on its major initiatives. The Ledjmet Block 405b reserves provide the foundation for developing a significant gas and condensate production base. Drilling activity to appraise and delineate the existing reserve base and explore new prospects on Block 405b is being accelerated. In addition, planning for the reserves development through to production is underway. The Company remains optimistic about the hydrocarbon potential of Block 406a and looks forward to exploring the block over the next two years. Consolidated Balance Sheets September 30 December 31 2003 2002 (Unaudited) (Audited) ASSETS Current assets: Cash and short-term deposits (note 2) $ 9,427,515 $ 19,587,570 Accounts receivable 87,214 91,067 Deposits and prepaid expenses 160,176 143,180 ------------------------------------------------------------------------- 9,674,905 19,821,817 Property, plant and equipment 70,449,800 29,744,160 ------------------------------------------------------------------------- $ 80,124,705 $ 49,565,977 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities (note 3) $ 11,232,166 $ 9,351,460 Provision for future site restoration costs 35,491 35,491 Shareholders' equity: Capital stock (note 4) 97,052,877 63,664,285 Contributed surplus (note 4) 719,631 636,432 Deficit (28,915,460) (24,121,691) ------------------------------------------------------------------------- 68,857,048 40,179,026 ------------------------------------------------------------------------- Operations and commitments (note 1) Subsequent events (note 6) ------------------------------------------------------------------------- $ 80,124,705 $ 49,565,977 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. Consolidated Statements of Operations and Deficit Three Months ended Nine Months ended September 30 September 30 (Unaudited) 2003 2002 2003 2002 ------------------------------------------------------------------------- Revenue: Interest and other income $ 111,484 $ 131,802 $ 464,484 $ 148,700 ------------------------------------------------------------------------- Expenses: General and administ- rative 909,718 1,160,935 2,333,201 2,422,127 Earthquake relief donation - Algeria - - 1,347,500 - Stock-based compensation (note 4) 17,333 334,833 83,199 587,899 Capital tax 32,225 - 154,696 - Foreign exchange loss (gain) (265,021) 93,624 1,307,619 93,986 Depreciation 13,249 6,497 32,038 17,952 ------------------------------------------------------------------------- 707,504 1,595,889 5,258,253 3,121,964 ------------------------------------------------------------------------- Loss for the period (596,020) (1,464,087) (4,793,769) (2,973,264) Deficit, beginning of the period (28,319,440) (21,992,891) (24,121,691) (20,483,714) ------------------------------------------------------------------------- Deficit, end of the period $ (28,915,460) $ (23,456,978) $ (28,915,460) $ (23,456,978) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Loss per share (note 4) $ (0.01) $ (0.02) $ (0.04) $ (0.04) ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. Consolidated Statements of Cash Flows Three Months ended Nine Months ended September 30 September 30 (Unaudited) 2003 2002 2003 2002 ------------------------------------------------------------------------- Operating activities: Loss for the period $ (596,020) $ (1,464,087) $ (4,793,769) $ (2,973,264) Foreign exchange loss (gain) (265,021) - 1,307,619 - Items not involving cash: Depreci- ation 13,249 6,497 32,038 17,952 Stock- based compen- sation expense 17,333 334,833 83,199 587,899 ------------------------------------------------------------------------- (830,459) (1,122,757) (3,370,913) (2,367,413) Change in non-cash working capital 1,263,542 (295,864) 964,135 (56,568) ------------------------------------------------------------------------- 433,083 (1,418,621) (2,406,778) (2,423,981) Financing activities: Proceeds from issuance of shares - 25,676,016 34,946,889 25,676,016 Proceeds from exercise of warrants 139,250 - 603,764 4,180,000 Proceeds from exercise of options 92,806 22,001 439,189 93,834 Issue costs - (2,576,051) (2,601,250) (2,802,620) ------------------------------------------------------------------------- 232,056 23,121,966 33,388,592 27,147,230 ------------------------------------------------------------------------- Investing activities: Capital expend- itures (15,215,402) (926,185) (40,737,678) (5,994,612) Change in non-cash working capital (811,303) (354,273) 1,204,714 (707,934) ------------------------------------------------------------------------- (16,026,705) (1,280,458) (39,532,964) (6,702,546) ------------------------------------------------------------------------- Increase (decrease) in cash and short-term deposits (15,361,566) 20,422,887 (8,551,150) 18,020,703 Cash and short-term deposits, beginning of period 24,754,690 2,042,046 19,587,570 4,444,230 Effect of exchange rate changes on cash and cash equivalents 34,391 - (1,608,905) - ------------------------------------------------------------------------- Cash and short-term deposits, end of period $ 9,427,515 $ 22,464,933 $ 9,427,515 $ 22,464,933 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. Notes to Consolidated Financial Statements Nine months ended September 30, 2003 (unaudited) 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. These interim consolidated financial statements have been prepared following the same accounting policies as the consolidated financial statements for the fiscal year ended December 31, 2002. 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 consolidated financial statements and the notes thereto in the Company's annual report for the year ended December 31, 2002. 1 OPERATIONS AND COMMITMENTS The principal operations include oil and gas exploration in Algeria and Yemen. The Company has contracts with Sonatrach, the national oil company of Algeria, to explore and develop two blocks, Yacoub Block 406a and Ledjmet Block 405b. The Company also holds an interest in a contract with the Yemen Ministry of Oil and Minerals to explore and develop Block 43. These contracts 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. Failure to satisfy its minimum work commitments on a timely basis could cause the Company to forfeit its interest in some or all of its properties and subject it to financial penalties. The Company has sufficient working capital to complete its minimum work obligations following the recent equity financing (see note 6). The development of the Ledjmet Block 405b reserves through to commercial production will, however, require additional funding in the form of equity, debt, joint ventures or some combination thereof. (a) Algeria In 2000 the Company entered into a joint venture agreement with Sonatrach to explore Yacoub Block 406a in the Berkine Basin. At September 30, 2003, the remaining first exploration period minimum work obligation is to drill one exploration well at an estimated cost of U.S.$5,000,000. The Company has elected to enter the second exploration period extending the exploration rights for two years through to November 2005. The minimum work obligation for the second exploration period is to conduct a seismic program and drill two exploration wells. The estimated cost of this work is U.S.$11,000,000. In conjunction with this election, the Company has deferred the drilling of the first exploration period well to 2004. While Sonatrach has agreed in principle to the election and the deferment, the parties need to amend the joint venture agreement. If the Company fails to satisfy the minimum work obligations, the right, other than for areas for which an exploration permit has been granted or requested, could be forfeited and the Company will be liable to pay Sonatrach penalties. The penalties for failure to complete the first or second exploration period work obligations are U.S.$18,250,000 and U.S.$12,750,000, respectively. In addition to the minimum work commitments, the Company is obligated to pay an annual training bonus in the amount of U.S.$150,000 for the duration of the contract. In 2001 the Company entered into a production-sharing contract with Sonatrach to explore and appraise Ledjmet Block 405b in the Berkine Basin. At September 30, 2003 the remaining minimum work obligation is to drill one exploration well at an estimated cost of U.S.$7,000,000. This work must be completed prior to December 2004, the end of the first exploration period. If the Company fails to satisfy the minimum work obligation, the rights, other than for areas for which an exploitation permit has been granted or requested, will be forfeited and the Company will be liable to pay Sonatrach a penalty of U.S.$20,000,000. In addition, the contract provides the Company with the right to appraise and develop the MLE field previously discovered on the block. Should the Company exercise this right, a reserve-based access fee of U.S.$0.25 per barrel oil equivalent will be owed to Sonatrach on the commercialization of the field. The contract also provides the Company with the option to enter a second exploration period that would extend through to December 2006. The minimum work obligation for the second exploration period is to conduct a seismic program and drill one exploration well. The estimated cost of this work is U.S.$8,000,000. In addition to the minimum work commitments, the Company is obligated to pay an annual training bonus in the amount of U.S.$150,000 for the duration of the contract. (b) Yemen In 1998 the Company entered into a production-sharing contract with the Yemen Ministry of Oil and Minerals to explore Block 43 in Yemen. The Company completed the first exploration work commitments through a farmout. In 2001 the Company entered a farmout with another industry partner and the companies have entered the second exploration period which, as amended, extends to August 2004. The minimum expenditure commitment is U.S.$7,500,000 for the second exploration period and pursuant to a 2002 revision, includes a seismic program and the drilling of three exploration wells. As at September 30, 2003, the operator had drilled the first of the three well commitment. The production- sharing agreement requires an irrevocable letter of credit be lodged in the amount of U.S.$7,500,000. Pursuant to the farmout, the partner assumed operatorship of the block and is responsible for funding all exploration expenditures until such time as it has incurred U.S.$7,500,000 in expenditures or made a commercial discovery. In addition to the work commitment, the production-sharing contract requires bonus payments totaling U.S.$600,000 per annum during the second exploration period and U.S.$500,000 per annum for the duration of the contract. 2 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 cash equivalents. The major components of cash and cash equivalents are as follows: September 30 December 31 2003 2002 ------------------------------------------------------------------------- Cash on deposit Canadian dollars $ 71,774 $ 156,709 British pounds 710,285 259,992 U.S. dollars - 27,955 Algerian dinars 335,820 368,064 Bank term deposits at rates of interest varying between 0.5% and 1.95% Canadian dollars 1,731,897 4,710,500 British pounds - 6,550,545 U.S. dollars 6,577,739 7,513,805 ------------------------------------------------------------------------- $ 9,427,515 $ 19,587,570 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 3 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES September 30 December 31 2003 2002 ------------------------------------------------------------------------- Trade payables U.S. dollars $ 7,040,050 $ 6,489,579 Algerian dinars 558,393 101,320 Canadian dollars 378,308 359,880 British pounds 80,592 100,903 Capital accrual U.S. dollars 3,120,613 2,069,350 Algerian dinars 54,210 230,428 ------------------------------------------------------------------------- $ 11,232,166 $ 9,351,460 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 4 CAPITAL STOCK (a) Issued share capital Number of shares Amount ------------------------------------------------------------------------- Common shares: Balance, December 31, 2002 108,629,726 $ 63,664,285 Issued on public offering (i) 14,893,620 34,946,889 Issued on exercise of share purchase warrants (ii) 924,472 603,764 Issued on exercise of stock options 634,466 439,189 Share issue costs (2,601,250) ------------------------------------------------------------------------- Balance, September 30, 2003 125,082,284 $ 97,052,877 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (i) In February 2003, the Company issued 14,893,620 common shares for gross proceeds of $34,946,889 (10,807,620 common shares at $2.35 per share and 4,086,000 common shares at pnds stlg 0.95 per share) pursuant to a public offering of its shares in Canada and the U.K. In conjunction with the financing, the Company issued to the agents 893,617 common share purchase warrants exercisable at a purchase price of $2.60 per share until February 12, 2004. (ii) The Company issued 924,472 common shares pursuant to the exercise of 768,000 share purchase warrants at $0.56 per share and 156,472 share purchase warrants at $1.11 per share. (b) Employee stock options Pursuant to the Stock Option Plan, the Company can reserve for issuance and grant stock options to a maximum of 11,162,261 common shares on a cumulative basis. Stock options granted under the plan have a term of five years and generally vest one-third on the date of grant and one-third on each of the first and second anniversary dates of the grant. The exercise price of each option is equal to the market price of the shares on the date of the grant. At September 30, 2003 the Company had employee stock options outstanding to purchase 7,568,867 common shares at prices ranging from $0.50 to $2.95 per share. The options expire at various times from September 2004 to July 2008. Number of Weighted average Options exercise price ------------------------------------------------------------------------- Outstanding, December 31, 2002 7,110,033 $ 0.88 Granted 1,280,000 2.59 Exercised (634,466) 0.69 Cancelled (186,700) 1.04 ------------------------------------------------------------------------- Outstanding, September 30, 2003 7,568,867 $ 1.18 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Exercisable, September 30, 2003 5,806,646 $ 1.02 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The following table summarizes information about the employee stock options outstanding and exercisable at September 30, 2003: Options outstanding Options exercisable ------------------------------------------------------------------------- Weighted Average Weighted Weighted Remaining average average Range of Common contractual exercise Common exercise exercise prices shares life price shares price ------------------------------------------------------------------------- $0.50-0.65 1,602,666 3.1 years $0.51 1,127,111 $0.52 $0.67-0.85 1,911,201 2.5 years 0.75 1,844,534 0.75 $0.95-1.06 925,000 1.2 years 1.04 925,000 1.04 $1.23-1.90 1,850,000 2.7 years 1.29 1,483,333 1.28 $2.36-2.95 1,280,000 4.4 years 2.59 426,668 2.59 ------------------------------------------------------------------------- 7,568,867 2.8 years $1.18 5,806,646 $1.02 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (c) Common share purchase warrants At September 30, 2003 the Company had 1,687,145 common share purchase warrants outstanding exercisable into an equal number of common shares as follows: Warrants Outstanding Exercise Price Expiry Date ------------------------------------------------------------------------- 600,000 $ 0.56 December 13, 2003 893,617 2.60 February 12, 2004 193,528 1.11 June 9, 2007 ------------------------------------------------------------------------- 1,687,145 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (d) Stock-based compensation and payments In January 2002, the Company entered into agreements with two consultants to provide services relating to its ongoing operations. Pursuant to the agreements, the Company granted the consultants options to acquire 900,000 common shares at a price of $0.70 per share. The fair value of the options was estimated at the time of the grant to be $0.52 per share. The options vest as to one-third on each of January 24, 2002, 2003 and 2004 and expire January 24, 2007. The Company recognized $83,199 of stock-based compensation expense in the nine months ended September 30, 2003 ($17,333 in the three months ended September 30, 2003) with a corresponding increase in contributed surplus. The expense represents the estimated fair value of the securities that have vested and the value for the unvested securities accrued over the vesting period. The Company continues with its policy of not recognizing compensation expense on the issuance of employee stock options and recording consideration received from employees or directors on the exercise of stock options as a capital transaction. If the Company had elected to use the fair value method of accounting for employee stock options, the Company's loss and loss per share would have been the pro forma amounts indicated below: Three Months ended September 30 2003 2002 ------------------------------------------------------------------------- Loss for the period As reported $ (596,020) $ (1,464,087) Pro forma (1,007,254) (1,880,773) Loss per share (basic and fully diluted) As reported (0.01) (0.02) Pro forma (0.01) (0.02) ------------------------------------------------------------------------- Nine Months ended September 30 2003 2002 ------------------------------------------------------------------------- Loss for the period As reported $ (4,793,769) $ (2,973,264) Pro forma (6,648,131) (3,466,141) Loss per share (basic and fully diluted) As reported (0.04) (0.04) Pro forma (0.05) (0.04) ------------------------------------------------------------------------- The fair value of each option grant is estimated on the date of grant 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. The average fair value of the employee options granted during the nine months ended September 30, 2003 was $1.90 (2002 - $0.86) per option. (e) Per share amounts The loss per share is based on the weighted average number of shares outstanding for the periods as follows: Three Months ended September 30 Nine Months ended September 30 2003 2002 2003 2002 ------------------------------------------------------------------------- 124,867,108 97,751,428 122,066,578 84,283,273 ------------------------------------------------------------------------- The warrants and options had no dilutive effect for the periods. 5 SEGMENTED INFORMATION The Company's activities are conducted in three geographic segments: Canada, Algeria and Yemen. All activities relate to exploration and development of petroleum and natural gas. Three Months ended September 30, 2003 Canada Algeria Yemen Total ------------------------------------------------------------------------- Revenue $ 111,484 $ - $ - $ 111,484 Expenses $ 677,504 $ 30,000 $ - $ 707,504 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Loss for the period $ (566,020) $ (30,000) $ - $ (596,020) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital expenditures $ 82,322 $ 15,133,080 $ - $ 15,215,402 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Nine Months ended September 30, 2003 Canada Algeria Yemen Total ------------------------------------------------------------------------- Revenue $ 464,484 $ - $ - $ 464,484 Expenses $ 3,820,753 $ 1,437,500 $ - $ 5,258,253 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Loss for the period $ (3,356,269) $ (1,437,500) $ - $ (4,793,769) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital expenditures $ 157,410 $ 40,580,268 $ - $ 40,737,678 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Assets $ 9,590,821 $ 69,476,509 $ 1,057,375 $ 80,124,705 ------------------------------------------------------------------------- ------------------------------------------------------------------------- At September 30, 2003 petroleum and natural gas properties include costs of proven and unproven properties of $69,140,690 in Algeria and unproven properties of $1,057,375 in Yemen. In the nine months ended September 30, 2003 the Company capitalized $1,875,266 (three months ended September 30, 2003 - $433,333) of overhead charges relating directly to the exploration and development activities in Algeria. 6 SUBSEQUENT EVENTS In October 2003 the Company issued 35 million common shares for gross proceeds of $139.1 million (13,838,500 common shares at $4.00 per share and 21,161,500 common shares at pnds stlg 1.79 per share). The share issue costs are estimated to be $9.0 million, including the agents' 6% commission. In conjunction with the financing, the Company issued to the agents 1,750,000 common share purchase warrants exercisable at a purchase price of $5.00 per share until April 20, 2005. In addition, subsequent to September 30, 2003, the Company issued 860,394 common shares for a total cash consideration of $726,809 pursuant to the exercise of 600,000 common share purchase warrants at $0.56, 75,000 common share purchase warrants at $1.11, 84,894 common share purchase warrants at $2.60 and 100,500 employee stock options at prices ranging from $0.67 to $1.06 per share. For further information: First Calgary Petroleums Ltd., Tel: (403) 264-6697 (FCP.) END
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